Issues Discussed At August 3, 2006 COAC Meeting

On August 3, 2006, the Departmental Advisory Committee on Commercial Operations of U.S. Customs and Border Protection (COAC), held its quarterly meeting at the Ronald Reagan International Trade Center in Washington, D.C.

The COAC, which is comprised of top Departmental and CBP officials, and select representatives from the trade community, is tasked with providing advice to DHS, Treasury, and CBP on matters pertaining to the commercial operations of CBP. The following trade and border security matters were discussed.

Possible New Data Elements To the
Advanced Manifest Requirements

CBP Assistant Commissioner Jayson Ahern noted that there is a proposal to add 10 new data elements to the 17 existing elements now in place regarding the filing of advanced manifests. The new advance data elements, still under consideration, would further port security said Ahern. Although he was unwilling to list the ten new targeting elements under consideration, Mr. Ahern noted that CBP is seeking for more information regarding the supply chain at its earliest stages. Examples of some of the questions CBP has included: What is the actual country of origin (not just what the manifest says)? Who else is involved in the transaction besides the buyer and seller? CBP says it also needs to be aware of discrepancies on manifests of goods entering the U.S. If a container shows up on a discrepancy report, this is significant Ahern noted.

Mr. Ahern stated that CBP would continue to work with the trade in developing the final advance data requirements, but that at some point the agency will need to “separate” from the trade and move forward to implement those new data elements it feels it needs.

Deputy Commissioner Deborah Spero stated that the process is taking so long because CBP is trying to “get it right.” How soon? Once the CBP decides what the elements will be, the package will probably go to a proposed rulemaking stage.

C-TPAT

Todd Owen, CBP Executive Director for Cargo Security and Conveyance, provided an update of C-TPAT achievements for 2005-2006. Among the relevant statistics are the following:

On January 1, 2005, there were 4,615 Certified Partners; on August 1, 2006, there were 6,081 Certified Partners .
On January 1, 2005, there were 38 Supply Chain Security Specialists and 4 Field Offices; as of August 1, 2006, there were 125 Supply Chain Security Specialists and 5 Field Offices (and interviews are underway, with a goal of 156 Specialists by late summer).
On January 1, 2005, 403 Validations had been completed (8%) and 518 were in progress; as of August 1, 2006, 3,067 Validations had been completed (50.4%) and it is projected that 65% will be completed by the end of CY06. Blitz operations are continuing and Indonesia, Philippines, Singapore, Malaysia, Vietnam and Cambodia should be completed by the end of 2006.
On January 1, 2005, there were 32 suspensions/removals; as of August 1, 2006, there were a total of 164 suspensions/removals.

Also, in January of 2005 one standard benefits package was in place. There is now a tiered benefits structure commensurate with security enhancements and the best practices catalog. There are now 198 Tier 3 Importers. The secure portal monitor has been in place since June 1, 2006. Security profile submissions are due by October 1, 2006. There will be no further delays.

The trade raised questions regarding 1) bond reductions (recommendations still coming in), 2) whether inspections could be eliminated completely (no), 3) whether background checks could be expedited (not in CBP's control—an Immigration and Customs Enforcement issue), and 4) whether membership in the program could be considered a mitigating factor in a penalty case (maybe—each case will be considered individually).

Supply Chain Security Developments At The WCO

E. Keith Thompson, Assistant Commissioner, Office of International Affairs, provided an update on recent developments in supply chain security at the World Customs Organization (“WCO”). Mr. Thompson indicated that there was a WCO policy meeting in Brussels in June of 2006 at which the following actions were taken:

Authorized Economic Operator (AEO) Guidelines — The WCO issued a resolution adopting the AEO guidelines. The AEO standards are set forth in a document called the SAFE Framework of Standards, which was adopted by the WCO Council at its 2005 session. An AEO is defined as “a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration complying with WCO or equivalent supply chain security standards.” AEOs by definition include importers, manufacturers, exporters, brokers, carriers, consolidators, ports, airports, terminal operators, integrated operators, warehouses and distributors. The benefits of being an AEO include 1) reduced inspection, 2) less paperwork, 3) possible reduced tariffs, and 4) faster movement of commerce.

Generally, to qualify as an AEO, the entity must: 1) demonstrate compliance with Customs requirements, 2) maintain a satisfactory system for management of commercial records, and 3) be financially viable. Some members of the trade expressed concern regarding the first requirement, “demonstrated compliance with Customs requirements.” The issue—what constitutes demonstrated compliance?

Capacity Building — This program was also affirmed in the June 2006 resolution passed by the WCO in Brussels. Although the Framework of Standards passed unanimously, a number of developing countries indicated they needed assistance with their current customs practices and procedures. CBP is currently assisting ten countries with their customs processes. CBP has already done diagnostics in eight countries and actual customs training in three counties.

TSA—Domestic Cargo (Seals)

TSA is teaming with DOD to develop a manual for tamper-evident security seals for domestic cargo. The basic premise is that no matter what kind of technology is developed to control the supply chain, it really comes down to the people involved in the system. The draft domestic cargo security manual will complement, and be based on, existing C-TPAT guidelines. DOD will host a symposium on security seals for domestic cargo next year in Oakland, California.

HSPD 13 Subcommittee on National Security

On December 21, 2004, President Bush signed National Security Presidential Directive 13, which called for the development of a national strategy to protect U.S. interests in the maritime domain that includes proper roles and responsibilities for state, local, and private sector entities. CBP and the trade presented an update on the CBP initiatives, including the Maritime Infrastructure Response Plan (MIRP).

Trade Perspective: Hank White of International Container Lessors noted that there needs to be a regular exchange of information between the trade and DHS/CBP regarding MIRP, and that the Coast Guard needs to become more involved. He also noted that it is essential that communications be sufficient throughout the country, and that better response planning and procedures are needed in case of a terrorist-related emergency at one of the ports.
CBP Perspective: Tom Bush, CBP Office of Anti-Terrorism, noted that the agency has a policy against completely shutting down the ports in the event of a transportation/security incident. CBP wants to keep the commerce moving. Then, moving beyond the initial emergency event, CBP will focus on the forensics – Was it an accident? Will it happen again? . In response to a concern raised by the trade that the government speak with one voice, Mr. Bush stated that there will a “National Response Coordination Center”. Also, if there is an event at a port creating a national emergency, waivers and exemptions to certain transportation-related statutes may be granted in order to facilitate the movement of commerce (i.e., Jones Act waivers may be granted).

Trade Enforcement Initiatives

Wood Packing Material — CBP discussed how it expects to handle abandoned property in the future. The agency is considering a procedure similar to that used by USDA – if the goods are abandoned, CBP will either destroy or export the wood products and bill the party-in-interest for the expenses.
Free Trade Agreements (FTAs) — CBP noted that more FTAs are on the way. Agreements with Peru and Bahrain appear to be next. A general Andean Agreement was in the works, but it appears that it is not going to pass, so we will have bilateral agreements with each South American country involved. There is a CBP website which sets forth excellent information regarding each FTA to which the U.S. is a party. The website states who has to provide documents, discusses “origin” requirements, and provides other practical information. CBP noted that currently 22% of the preferences claimed are for textiles, and, accordingly, the administration's position is that there should be a separate textile chapter for each FTA. The administration also requires that U.S. officials be able to go on-site to foreign factories for verification purposes. One problem is that some foreign manufacturers do not keep adequate records. The trade raised the question as to why there is often no “lag time” when trade agreements go into effect so that companies can anticipate the changes and plan accordingly. CBP responded that the process normally starts with a presidential proclamation and that often the language is changed at the last minute and it is necessary to go back to “square one.”
E-Manifests for Trucks — Kim Santos, CBP Cargo Verification Director, noted that in July of 2006, 8,000 e-manifests were sent directly to the portal. 269 companies are currently approved to participate in the program.

The next COAC meeting is scheduled for Thursday, November 9, 2006.

If you have any questions or would like more information as to how the matters discussed above may affect your company, please contact our office at (415) 986-8780 or via email.

The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

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