Why Comply?

Understanding the latest CBP programs and requirements involves homework and headaches. So…


Compliance Programs: How to Qualify

The U.S. government is taking unprecedented steps to protect national security, and nowhere is the impact of that effort felt more than at the country’s entry points. For global shippers, this heightened security consciousness presents myriad challenges when it comes to clearing goods through U.S. Customs and Border Protection (CBP), which requires more and allows for less than ever before.

Failing to understand and comply with the latest CBP requirements can cost shippers and importers serious time and money. A spot inspection can delay the movement of material for several hours; a hold can delay it for several days.

The good news is that CBP offers new tools and programs to help shippers and importers meet its new, stringent requirements.

If shippers had to choose one action that would help expedite the movement of goods through Customs, it’s to become certified under the Customs-Trade Partnership Against Terrorism (C-TPAT) program.

CBP launched the C-TPAT initiative in an effort to help it work more closely with businesses to improve border security. To qualify for C-TPAT certification, shippers and importers must meet a variety of requirements in several categories, ranging from business practices and record-keeping to facility security and developing working relationships with supply chain partners on security issues.


Once certified, shippers can expedite many Customs processes, receive priority processing, and be subject to fewer inspections. CBP also assigns a supply chain security specialist to work with each C-TPAT-certified company. This expert advises the company on enhancing its own security procedures and those of its supply chain partners.

C-TPAT-certified companies particularly benefit from the supply chain security specialist’s suggestions covering both broad supply chain issues and specific questions about how companies should conduct themselves in particular global regions.

Some certified companies also qualify for CBP’s Importer Self-Assessment Program, which trains companies to police their own security issues rather than being subjected to CBP audits.

“The first step any importer should take is to become C-TPAT-certified and validated,” advises Terry McCracken, a Customs compliance consultant with Supply Chain Solutions Inc., a Grand Rapids, Mich.-based consulting firm. “C-TPAT’s goal is to establish a cooperative relationship between government and business to strengthen and improve overall supply chain and U.S. border security.

“Importers who belong to the C-TPAT program receive more expeditious clearance and better treatment all the way down the line,” McCracken says. “In a national emergency where the borders are threatened, they will be the first people served.

“Certification also makes companies eligible to attend many security training seminars,” McCracken adds. “This training is very important. In the past, some importers have been nonchalant about attendance, but I recommend they make it a priority in 2009.”


C-TPAT does not adhere to stringent, one-size-fits-all compliance standards. While that flexibility can help companies comply with certain regulations, it can also make the requirements harder to pin down.

“Shippers ultimately have to show CBP that their supply chain is secure,” says Susanne Cook, attorney and director of the International Business Group at Pittsburgh-based business law firm Cohen & Grigsby.

Given the many different kinds of import activity, it’s impossible for Customs to apply a uniform standard.

“Some small companies import from one supplier located just across the Canadian border, using the same trucking firm. Other multinational firms trade with Singapore, employing numerous carriers and supply chain partners,” Cook says. “How could CBP apply just one set of standards?”

Whether their global operations are simple or complicated, C-TPAT participants all have to achieve the same primary objective: demonstrating that their facilities are secure.

Importers are also advised to ensure that their freight forwarders and customs brokers are C-TPAT certified. Many other countries employ C-TPAT-equivalent programs, and suppliers in those countries need to document their certification in writing to show U.S.-based importers that they are compliant, according to Megan Finkelstein, a U.S. Customs specialist at Cohen & Grigsby.


In effect since Jan. 25, 2008, Import Security Filing (ISF)—or 10+2—is a new security filing requirement for seabound (including the Great Lakes) vessels. 10+2 requires importers or their agents and carriers to transmit additional data to CBP for non-bulk cargo prior to vessel lading. The filing got its name because it imposes 10 requirements on importers and two on carriers.

The 10 data elements importers must now report are:

  1. Manufacturer name and address
  2. Seller name and address
  3. Container stuffing location
  4. Consolidator name and address
  5. Buyer name and address
  6. Ship-to name and address
  7. Importer of record number
  8. Consignee number
  9. Country of origin of the goods
  10. Commodity harmonized tariff schedule number

The two data elements carriers must transmit to CBP are:

  1. The vessel stow plan
  2. Status messages


Non-compliance with 10+2 can result in penalties—including containers not being allowed to load at shipping origin, or significant inspection delays at destination. In the case of a default, merchandise can be liquidated to pay damages.

“Non-compliance with the 10+2 rule will raise line costs and increase delivery time,” McCracken warns.

CBP will not begin strict enforcement of 10+2 until it has been in effect for one year, and will offer opportunities for public comment during that period.

In addition, CBP may offer incentives to importers who combine all their required information into a single filing, notes Amy Magnus, a Customs compliance consultant for Kewill, a Chelmsford, Mass.-based global trade and logistics software provider.

“If importers opt for uniform filing—submitting 10+2 information at the same time they file release and summary data—CBP gets the benefit of having all the information surrounding a particular transaction 24 hours prior to the vessel lading,” Magnus explains. “That gives it time to vet the information to see if it needs to screen that particular shipment.”


Here are some additional steps importers can take to ensure Customs compliance:

  1. Establish a Customs compliance department. Companies that can do so should create an import department with a heavy emphasis on Customs compliance, recommends McCracken. This department would form a close relationship with CBP to gather information necessary to stay in compliance.

    “This kind of relationship is also referred to as informed compliance,” McCracken adds. “It simply means that CBP has made available all the information necessary to equip the importer to transact Customs business lawfully and accurately.”

  2. Provide compliance training. Reviewing compliance information with key employees is crucial to achieving a successful relationship with CBP.

    “Companies both large and small need to start with an entire review of informed compliance training, including a detailed list of employee and import team leader responsibilities,” McCracken says. “Training should start before a purchase order is ever written. Factor in all the Customs data elements employees need to know before they order the goods.”

  3. Apply the Harmonized Tariff Code. One of the most important data elements is applying Harmonized Tariff System codes—six-digit import/export codes for general categories. Training the compliance department to apply these codes should occur as part of a process in which importers work closely with brokers, carriers, CBP officials, and, especially, foreign suppliers.
  4. Establish compliance manuals. While CBP does not mandate that shippers and importers keep internal compliance manuals, it might as well.

If you can manage to stay in compliance without consulting a manual, good for you. But if you run into the slightest problem—especially one resulting in an audit—the lack of a compliance manual will fix the blame on you.

“There is a real disconnect between CBP and industry on the use of compliance manuals,” Cook says. “There is no regulation that requires a written manual or procedure book. And that’s fine, as long as the correct procedures are followed. But, if CBP finds one small incorrect item, it holds the absence of a manual against you.”

Any company choosing to operate without a manual will likely find itself doing otherwise after an audit. “I cannot imagine anyone coming out of an audit without requiring a written compliance manual to bring the company up to speed,” Cook says.

A compliance manual is even more important for companies striving to meet C-TPAT certification requirements.


Complying with CBP regulations can be complex and confusing, laying the groundwork for errors. Here’s a rundown of some common compliance mistakes:

  1. Failing to do what you’re supposed to do. “For example, while many companies say they conduct quarterly self-audits, and review their classification and shipments, they actually don’t do it,” Finkelstein notes.
  2. Failing to understand actual responsibilities. “Most companies want to comply with the requirements, but they don’t understand that they are responsible for each bit of information that is being submitted to CBP,” Cook says. “It’s the equivalent of a taxpayer saying, ‘Oh, my accountant handles that,’ even though it’s the taxpayer’s responsibility.”
  3. Relying solely on one transportation mode. Another mistake importers make is believing they can rely solely on one mode of transportation, and don’t need to know the nuances of using the others. That is just not feasible today, according to Cook.
    “For years, I’ve dealt with Canadian importers who have always moved goods into the United States via truck or rail, and didn’t care to understand the differences or nuances of ocean transportation,” Cook says. “But today, so many Canadian companies source overseas that they are confronted with having to shore up their global supply chain.
    “All shippers need to understand how to use air freight,” she adds. “They will always have to deal with a last-minute piece of equipment or part, or some type of new style apparel that was late in manufacturing and has to reach stores by a certain date. I don’t see a time anymore when an importer can rely on only one transportation mode.”
  4. Misinterpreting the meaning of trade deals such as the North American Free Trade Agreement (NAFTA). “Many importers are not familiar with all the rules and regulations surrounding NAFTA, so they make a lot of compliance mistakes in that area,” Finkelstein says. “When CBP initiates an audit, the companies are not sure what they have to do to be in compliance.”
    Maintaining a complete inventory is always an importer’s best defense against inspections, audits and delays.

“Importers must take complete inventory of all the items they intend to ship into the United States, classify them fully to the 10-digit level, and determine if any agency has an issue with the goods,” Cook says. “Importers also need to know if any goods fall under the Consumer Product Input Safety Act, which has its own set of specific requirements.”


For each of the three international transport modes—air, ocean, and ground—certain steps are particularly important for ensuring C-TPAT compliance.

Air Transport: Airfreight shippers need to be especially careful to follow procedures under the new Automated Manifest System.

“The carrier, not the importer, determines the information, but the shipper must make sure it is filed properly,” says Georgette Brady, compliance officer for RF International, a division of Dublin, Ohio-based Pacer Global. “Customs compliance via air is all about ensuring the documentation is correct—that you have your commercial invoice and packing list, and that you can clear goods through Customs quickly.”

Air carriers must submit the air manifest to CBP prior to the aircraft’s departure.

To help keep air shipments in compliance, Kewill offers the following three recommendations:

Importers should provide EDI information to brokers in order to expedite clearance, reduce errors, and ensure that goods are classified properly.

Importers should manage a Web-based parts database, which allows all parties access to data required for appropriate classification, and helps ensure that goods are classified—and duties paid—using the same information.

Importers need the right visibility tools to view their air transactions. They might find it helpful to work with a broker who provides strong visibility and notification tools to keep them apprised of their shipments. Importers especially need full visibility to the shipment, and automatic notification as the shipment moves through the supply chain.

Ocean Transport: For importers shipping via ocean, the most important requirement is 10+2 compliance, which will change how some of them operate. For instance, “ocean shippers can no longer tell their vendors, ‘Just ship my merchandise,'” Brady says.

Within these new requirements, confidentiality is crucial.

“One of the important issues concerning 10+2 is the confidentiality of the information CBP needs,” Brady says. “Customs brokers are bound by law to keep confidential all documents of any type.”

Ground Transport: For ground shippers, a key requirement involves a new computer system developed by CBP: Automated Commercial Enforcement (ACE), which requires an electronic manifest for trucks.

“Before trucks reach the border, drivers transmit their manifests electronically,” Brady explains. “CBP border officers then scan the bar code on the manifest, and the truck quickly moves across the border.”

Shippers and importers need to boost the effectiveness of their data coordination to keep up with ACE.

“ACE requires coordinating the data filed for the manifest with data filed for release and entry,” Magnus says. “For shipments to be in compliance, those data submissions must be matched up and complete.”

Under ACE, the time period for data transmission is one hour prior to arrival of the truck or train. The rewards of successful compliance are substantial.

“If the data is filed correctly and on time, the physical goods can move seamlessly across the border,” Magnus says. “If the data is not accurate, complete, or timely, many issues arise—a delay, or a cargo inspection, for example. The common bottom line for the importer is increased costs.”

Such inspections could be even more expensive for air or ocean shippers, however, because CBP generally needs to use special facilities to conduct inspections of these modes.

“There could be a hold on the cargo, which some shippers do not realize,” Magnus says. “Customs doesn’t work alone; many agencies participate in the arrival of data. For example, the Food and Drug Administration and the Consumer Products Safety Commission work with Customs and look at the information that’s transmitted prior to arrival. And more federal agencies are applying for the authority to look at the data.”


Beyond these major categories, shippers and importers dealing with Customs need to be aware of a variety of issues that are often overlooked.

Assists. “Assists are when either domestic or foreign articles, such as tools, are purchased for the purpose of producing parts,” explains McCracken. “They are often not amortized within the product price, but are paid for separately and never mentioned or thought of. But those articles are dutiable upon the first importation. It’s a complex area that is often missed, and it leaves the importer in a vulnerable position.”

Special requirements. Some goods, including bearings, steel, and textiles, have unique requirements. Importers need to determine if their products warrant special documents.

Importers also need to be aware of anti-dumping laws, as well as trademark and copyright restrictions. “Importers should also consider buying and selling commissions, third-party transactions, royalties, and terms of sale,” McCracken says. “They need to know what the exporter and shipper are responsible for. It’s all basic, but important, information.”

While it may seem that no shipper or importer could ever master all the details necessary to remain in consistent compliance, the consequences of noncompliance are simply too daunting to risk. The best advice is to start gathering information, employ whatever help you need, and pay attention as things change. The resulting smooth sailing—or flying, or driving—will prove worth the effort.


What’s really involved in achieving C-TPAT certification? Two furniture importers share their experiences.

When its containers began to be pulled aside by CBP, and customers suffered as a result, furniture importer American Woodcrafters, High Point, N.C., committed to making the necessary security upgrades to achieve C-TPAT certification. The company imports fully assembled furniture, mostly via ocean but occasionally by air, and resells it in the United States.

The C-TPAT certification process involved two main imperatives for American Woodcrafters—internal security upgrades and documentation upgrades, says Sandra Taylor, administrations manager for the 30-employee company. “Many of the required processes were already in place, but not in a formal manner,” she notes.

For guidance, the company turned to third-party logistics provider Globe Express, Charlotte, N.C. Globe started the C-TPAT certification process by helping American Woodcrafters identify its security vulnerabilities.

“Many non-employees were walking in the front door every day, no one carried ID, and the doors were not locked,” recalls John Dellenger, corporate broker for Globe Express.

Some employees initially balked at the security enhancements. “Because we’re a small company, some employees thought the extra security was unnecessary,” Taylor says.

While Taylor says she understood their initial resistance, she has explained to her colleagues why the benefits of C-TPAT certification justify the changes. They slowly came around, and have now adjusted.

While its internal security processes required some tweaking, American Woodcrafters was already ahead of the curve on container security—using the proper seals and paperwork—and merely needed to document its practices to achieve C-TPAT certification.

But the company did have to impose some requirements on its overseas suppliers for the first time.

“We had to send questionnaires to the companies we work with overseas, documenting that they followed specific container security procedures,” says Taylor.

Achieving C-TPAT certification was a two-year process for High Point, N.C.-based Huntington Furniture Industries, which imports fully assembled furniture via ocean from China and Vietnam.

One early challenge was getting executive management on board with the need for C-TPAT certification, says Dellenger, who also helped Huntington through the process.

“If company executives do not have buy-in, it won’t work,” Dellenger says.

Like American Woodcrafters, a major task for Huntington was documenting procedures already in place. To that end, the company began the process of installing a new video surveillance system.

“Globe Express helped determine the correct locations for surveillance cameras,” says Holly Surratt, import traffic customs brokerage analyst for Huntington. “By securing the entrances and warehouse, we stemmed unauthorized access.”

Huntington also had to get suppliers in China and Vietnam to implement a CBP-mandated container seal checklist procedure. With the correct security procedures followed at the point of origin, the process becomes more simple at Huntington’s end.

“We conduct ongoing security training for new employees, and use the container checklist when goods arrive at the warehouse,” Surratt says.

For Huntington, the key to C-TPAT success was getting employees to take ownership of the security measures. “Containers were sitting in the warehouse with the door open,” Dellenger says. “Today, security processes have closed up potential breaches.”

Compliance Programs: How to Qualify

U.S. Customs and Border Protection and the Department of Homeland Security offer a variety of programs to help shippers and importers comply with federal security regulations. Here are some tips to ease the certification process, from Bill Anderson, group director of global security for Ryder, a third-party logistics provider based in Miami, Fla.

  • Read and understand the program. Each agency sponsoring a program provides online information, as well as a variety of training seminars and professional conferences where security personnel can boost their knowledge.
  • Get to know your supply chain, including the origins of your raw materials and the goods you import, as well as the destination of your exports.
  • Be familiar with your supply chain’s business partners and their status in the program or programs that interest you.
  • Assess the security of your domestic operations and foreign consolidation points, and develop a plan to close any gaps.
  • Develop documented standards for supply chain security processes.
  • Provide a copy of your standards to your key supply chain business partners.
  • Include minimum security requirements or program participation requirements in your contracts with business partners.
  • Determine what kind of certification you want to pursue (importer, manufacturer, land carrier, 3PL) and determine whether you want to hold one certification or split the certifications per country or business unit.
  • Complete applications and file with agencies.
  • Consult with your assigned agency representative.

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