Supply Chain Security: Tapping Into C-TPAT

Many companies embrace C-TPAT in the fight against supply chain security threats, but just as many shun it. What is C-TPAT? How does it work? What benefits—if any—does it bring shippers and carriers? Here’s a closer look.


Getting With the Programs
CBP Goes Into the Woods

Federal security initiatives have become an integral part of supply chain management. While it’s important to keep abreast of all these programs, it’s the Customs-Trade Partnership Against Terrorism (C-TPAT) that still raises the most questions.

The program continues to generate discussion and controversy years after its introduction by U.S. Customs—now the U.S. Customs and Border Patrol (CBP)—in the weeks after the Sept. 11, 2001, terrorist attacks.

Though voluntary, companies must adhere to mandated guidelines to stay in the program. What started with seven member companies—dubbed the “Magnificent Seven” by former CBP Commissioner Robert C. Bonner—has grown to 9,800 applications for membership as of October 2005.

C-TPAT aims to prevent terrorists from using supply chain resources to bring weapons of mass destruction into the United States. The concept is simple: to join C-TPAT, a business promises to take responsibility for security through its entire supply chain. In return, CBP promises faster processing for C-TPAT members at border crossings and other checkpoints.

This is only a bare outline of C-TPAT, which Bonner describes as “the largest, most successful government/private sector partnership to arise out of Sept. 11.”

While C-TPAT’s traffic lane rewards are controversial—some say they don’t exist—membership has become a reward in itself, a symbol of business responsibility and best practices. Why a voluntary program instead of formal rules?

“Even if we wanted to, the U.S. government does not have the ability to effectively enforce regulations deep into the supply chain to ensure point-of-origin security all the way back to a foreign manufacturer’s loading docks,” Bonner says.

U.S.-based importers, Bonner explains, have the leverage to require foreign vendor compliance. But compliance is anything but easy.

“Every participant in a supply chain brings a different perspective to the table. A consignee, for example, knows the process from the foreign port of exit to its distribution center,” says Tom Lloyd, vice president, marketing and sales for Global Maritime Transportation Services Inc., Coral Springs, Fla.

“An overseas vendor knows what happens from the place of manufacture to various consolidation points and to the port, but may know little from there. And a company’s corporate office may have a totally different perspective on what happens,” adds Lloyd, who is also a principal in Sea and Land Security, a company that provides web-based solutions for gathering, monitoring, and updating supply chain security information.

How it Works

Companies might have different perspectives on the supply chain, but they all must follow the same steps to apply for C-TPAT membership.

The first step is completing the Supply Chain Security Profile, an exhaustive audit of an applicant’s entire supply chain. The audit helps CBP get a better idea of each piece of a company’s supply chain process.

“The manufacturing process, for example, doesn’t always take place within four walls in a well-lit, well-insulated, guarded facility. Very often components are put together in various foreign locations,” Lloyd says.

In the Supply Chain Security Profile an applicant documents—and vouches for—operational procedures, hiring criteria, and security practices for every supply chain element including the primary overseas manufacturer, component suppliers, and carriers that move components and final products between manufacturing points and ports.

CBP reviews the application and if it passes muster, the applicant receives C-TPAT certification, the first level of membership. To date, more than 5,300 companies have been certified, according to CBP. Nearly half that number have had their C-TPAT compliance validated, which is the last hurdle for full membership.

In the validation process, CBP officials meet with company representatives and visit selected sites to verify that the Supply Chain Security Profile is accurate, and that the company follows the procedures it describes.

“Companies moving hazardous cargo or high-value merchandise have done the best job understanding and profiling their supply chains. They have a vested interest in keeping track of their cargo and who touches it,” Lloyd says.

As with any major government-sponsored program, C-TPAT has its share of critics. Some claim that C-TPAT membership at the certification level actually creates security gaps because it provides a false sense of security. In 2005, the U.S. General Accounting Office (GAO) issued a report saying C-TPAT certification is essentially a paper-only process; CBP takes the applicant’s word that security measures are in place.

But C-TPAT-certified importers include companies such as General Motors, Target, and Wal-Mart—large companies that understand that misrepresentations in a C-TPAT Supply Chain Security Profile may result in criminal charges, says CBP’s Bonner in response to the criticism.

After the GAO report and the publicity it generated, CBP devoted more resources to the validation process and the number of validated C-TPAT members continues to grow.

Other objections to C-TPAT center around its constraints for certain types of shippers.

“C-TPAT is a good step, but it misses a lot of companies that use the global transportation system,” claims Boris Poluloh, director of programs and education at the Household Goods Forwarding Association of America.

“The way C-TPAT is set up right now, it only benefits companies such as Wal-Mart and Target that have recurring shipments, containing the same items that are easily scanned,” he explains.

Do Benefits Exist?

Another complaint is that C-TPAT’s benefits are considerably less than advertised. Indeed, some claim they don’t exist at all.

A survey released in September by business services provider IOMA, however, indicates otherwise. IOMA polled customers who were also members of C-TPAT, and found half of the respondents noticed efficiency gains where CBP is involved.

The results are significant, says IOMA, because one-third of the companies polled had been certified for one year or less—a short time for C-TPAT benefits to become apparent.

Regardless of results or opinions about its efficiency, C-TPAT criteria continue to grow more rigorous. A mandatory seven-point, pre-loading inspection of shipping containers, as well as stricter hiring practices, went into effect between March and September 2005. The requirements apply to overseas supply chain trading partners as well as to U.S. facilities.

Companies now applying for C-TPAT membership must meet the new requirements for certification, while earlier applicants have three years to comply with the new regulations.

Schneider National Gets with the Program

Importers are not the only members of C-TPAT. Membership is also open to motor, rail, maritime, and air carriers, licensed brokers, foreign manufacturers, and others.

Schneider National is one carrier that has benefited from being C-TPAT-compliant, says John Ferguson, general manager for Schneider National’s Canadian group, headquartered in Guelph, Ontario. The truckload and logistics giant, based in Green Bay, Wis., conducts a bustling business in both directions across the border with Canada, serving the automotive, newsprint, paper products, and consumer goods industries.

The company became C-TPAT certified in 2003. “Schneider has always been active with customs on both sides of the border,” Ferguson says. “C-TPAT helps provide protection against trade delays.”

This protection holds plenty of meaning for those who recall the tension at border crossings in the days after Sept. 11, when the need for C-TPAT first arose. “During that time, everyone was concerned about another border shutdown,” Ferguson explains.

When C-TPAT was introduced a few months later, many of the big players in U.S.-Canada trade got onboard. Plenty was at stake in the new initiative—both for the United States and Canada, and for individual companies.

“One U.S./Canada border crossing alone may conduct more than $400 million a day in trade. A significant volume of goods flow between the countries,” Ferguson says.

C-TPAT has had a significant impact on Canadian exporters reliant on U.S. markets, according to Ferguson. Those companies have invested in becoming C-TPAT certified.

“They want their trade-chain partners, including their carriers, to be C-TPAT certified,” Ferguson says. Largely for this reason, Schneider never questioned full participation in C-TPAT.

“Security trumps trade,” Ferguson says. “Security has become the priority when crossing borders.”

To qualify for C-TPAT, Schneider had to “document our processes—including those related to our terminals and drivers, among others—and demonstrate to CBP that we are a secure trading company, a secure part of the supply chain,” he says.

The effort was conducted in large measure by Schneider’s cross-border trade management group, which includes cross-border specialists and trade regulatory experts.

Was C-TPAT certification worth the effort?

“C-TPAT offers some obvious benefits: expedited release of cargo, shorter examinations at the border, and reduced fines,” says Ferguson. “It also gives us a ‘stamp of approval’ from CBP. That goes a long way with the trading community.

“It’s similar to an ISO standard, where a company documents its processes, and demonstrates its quality. In our case, we showed that we trade securely across borders,” he explains.

Schneider is also enrolled in other border security programs, including Partners in Protection, the Canadian equivalent of C-TPAT.

“Because we’re involved with both the U.S. and Canadian security initiatives, we’re able to take advantage of the latest expedited customs release programs, which often include electronic data transmission of trade document information,” Ferguson says.

The C-TPAT certification also helps Schneider meet the needs of cross-border shippers. “Major shippers expect C-TPAT compliance from their carriers,” says Ferguson.

Getting With the Programs

C-TPAT is hardly alone among supply chain security programs that are top-of-mind for shippers and carriers today. A variety of government programs exist, aimed at curbing security threats while helping speed the flow of global trade.

Container Security Initiative (CSI)
CSI is run by the U.S. Customs and Border Patrol (CBP) in concert with foreign governments. The program allows CBP to station officers at select foreign ports to monitor containers bound for the United States. CSI uses intelligence and automated data to identify questionable containers, which are then searched. The host country determines who pays for the cost of screening and unloading containers. CSI is currently operational or in the set-up process in 40 major world ports.

Free And Secure Trade (FAST)
This CBP program applies only to U.S. trade with Mexico and Canada, and is open only to C-TPAT-certified companies. Participants receive expedited processing at specific border crossings, as long as the carrier is C-TPAT certified, and the truck driver has a FAST Commercial Driver Registration ID card and is hauling for a C-TPAT-certified importer. To qualify for FAST at the Mexican border, freight must be coming from a C-TPAT-certified manufacturer that is compliant with CBP high-security seal requirements.

FAST uses bar-code and wireless communication technology to pre-process and give quick clearance to recognized cargo. The program is operational at 18 Canadian border crossings from Maine to Washington, and 14 Mexican crossings from the Gulf of Mexico to the Pacific.

The 24-Hour Rule
CBP’s 24-Hour Advance Vessel Manifest rule is exactly that—a rule, not a voluntary program. It requires maritime carriers to submit a cargo declaration to CBP 24 hours before cargo is loaded onto a vessel with a scheduled port of call in the United States. The advanced notice enables CBP to evaluate content before a container is loaded. The agency can allow loading or order the container held for further processing.

The rule also applies to non-vessel-operating common carriers (NVOCCs) that book space on steamships in volume and sell it to shippers in smaller quantities. NVOCCs often pack shipping containers with cargo consolidated from various customers.

Automated Commercial Environment (ACE)
ACE is a voluntary CBP program that enables companies to submit documents to CBP using EDI, the long-time standard for electronic communications among commercial trading partners and carriers. The program was piloted in 2004, and became active last year at a number of border crossings.

Participants can submit electronic truck manifests to ease paperwork delays at the border. ACE companies can also pay duties and fees electronically on a monthly, rather than shipment-by-shipment, basis.

For additional information on these programs, visit CBP’s web site,

CBP Goes Into the Woods

It’s not only supply chain security initiatives such as C-TPAT that keep the U.S. Customs and Border Patrol (CBP) busy. In September 2004, CBP authorities began enforcing a regulation that prohibits certain kinds of wood—often used for pallets and packing braces—from entering the United States. The rule was promulgated by the Animal and Plant Health Inspection Service (APHIS), a Department of Agriculture agency.

The regulation is part of a worldwide effort to control the spread of destructive pests as described in the International Standards for Phytosanitary Measures—Guidelines for Regulating Wood Packaging Materials in International Trade. Because the effort is international, it impacts both exporters and importers.

CBP officers now check pallets and other wood—the pieces used to brace heavy machinery, for example—looking for brand-like stamps that indicate the wood is compliant with standards.

Until Jan. 31, 2006, APHIS will enforce what it calls “informed compliance.” In this phase, companies bringing in non-compliant wood will receive a warning letter, says Michael Berzon, Mar-Log Inc., a supply chain consulting company in North East, Md.

During the second phase, in effect from Feb. 1 through July 4, CBP will enforce the rule at its discretion, but is likely to be strict, ordering some non-compliant shipments to turn around.

“Phase three is total compliance. Everything non-compliant will be re-exported,” Berzon says.

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