Do You Want to be a "Trusted Trader"? C-TPAT is No Longer Enough

U.S. Customs and Border Protection (CBP) recently published the long awaited Federal Register Notice, dated June 16, 2014, discussing the "Announcement of Trusted Trader Program Test." This new "Trusted Trader" program is big news for U.S. and non-resident Canadian importers, and if implemented will combine the Customs-Trade Partnership Against Terrorism (C-TPAT) and Importer Self Assessment (ISA) programs, making ISA extinct.  CBP is currently recruiting test companies that have to be willing to go through an 18 month program test.
What is the Trusted Trader Program?

• CBP will unify C-TPAT and ISA programs into a new "Trusted Trader" program.  Companies will still have the option to apply for C-TPAT and opt out of the Trusted Trader Program, but, the ISA program will be replaced by the Trusted Trader program.  CBP aims to align the Trusted Trade program with Authorized Economic Operator (AEO) programs, which focus on a combined trade and security compliance model.
• CBP is collaborating with the U.S. Consumer Product Safety Commission (CPSC) and the U.S. Food and Drug Administration (FDA), to develop the new "Trusted Trader" program aims to "streamline the process through which importers can establish to CBP that they strive to secure their supply chains and strengthen their internal controls for compliance with the existing laws and regulations administered or enforced by CBP." The 3 government agencies will collaborate, share information, streamline the application and validation process; and increase the efficiencies in the existing trade programs.
• CBP plans to utilize the Centers of Excellence and Expertise (CEE's) to manage trusted trader accounts - which will assure CBP has a high level of industry product knowledge and further refine account-based processing
• CBP is putting additional incentives on the table, not currently offered to C–TPAT and ISA members.

What Will the Additional "Trusted Trader" Incentives be? The same C-TPAT and ISA benefits discussed in those sections below, as well as these additional benefits:

1. (For FDA Importers) - Reduced FDA targeting/examination risk score;
2. A penalty offset upon request (part of a CBP penalty mitigation decision);
3. (For Reconciliation Participants) - authorization to flag and unflag entries for reconciliation retroactively after the entry summary is filed up to 60 days prior to the date for which liquidation of the underlying entry summary has been set. This would include retroactive flagging for the following four reconcilable issues, or ‘‘flag types:’’ (1) Value; (2) classification (only if under protest or subject to a court case); (3) 9802, Harmonized Tariff Schedule of the United States (HTSUS); and (4) the post importation claims;
4. CBP will reduce the number of Foreign Trade Zone (FTZ) on-site inspections;
5. (For Drawback claimants) - exempt from on-site visits from Drawback Specialists; Full desk reviews, conducted pursuant to 19 CFR 191.61, will be limited to no more than one (1) per year for drawback claimants;
6. CBP will exempt test participants from random Non-Intrusive Inspections (NIIs);
7. Where a Chemical Abstracts Service (CAS) number is required pursuant to 19 CFR 141.89 for a chemical compound classified in Chapters 27, 28, and 29 of the HTSUS, CBP will allow a quarterly submission of the CAS number, the use, and the description for the chemical compound in advance of the calendar year quarter;
8. CBP will process Post-Entry Amendments (PEA) on unliquidated entries within a ninety (90)-day timeframe.
9. Ability to choose an exam location, other than the port of arrival;
10. If you file an entry in ACE or ACS for merchandise arriving by vessel in multiple containers and a portion but not all of the merchandise covered by that entry is selected for examination, you will receive a release message and will be allowed to take possession of all merchandise except the merchandise subject to further examination.
11. (For CPSC Importers) -  CPSC will provide the participants with a product-specific CPSC point of contact; provide access to the participants with special training concerning product safety compliance, internal controls, and CPSC audit trails; allow the participants the opportunity to apply for external participation coverage of multiple business units (multiple IOR numbers); consider expansion of benefits to all products of approved participants if the entry line(s) contains all the applicable NEISS product code(s); reduce product safety tests on goods imported by the participants; CPSC laboratories will grant priority ‘‘front of the line testing’’ to participants when product safety testing is conducted; CPSC may allow products to be destroyed by participants in lieu of requesting redelivery to CBP of the product.
12. Additional benefits may be added as the program commences.

What is C-TPAT? The C–TPAT program is a voluntary government-business initiative to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. To apply, businesses must fill out a company profile as well as a detailed security profile - which is then reviewed, approved, and validated in person by CBP.  Many companies must make internal improvements to meet the required security standards the C-TPAT program entails.  CBP encourages participation by providing incentives to participants meeting or exceeding the program requirements. As a result, the program helps CBP achieve its twin goals of improving security while facilitating the flow of global trade. Businesses eligible to apply for C–TPAT membership include:

• U.S. importers of record;
• U.S./Canada highway carriers;
• U.S./Mexico highway carriers;
• Air, rail and sea carriers;
• Licensed U.S. customs brokers;
• U.S. marine port authority/terminal operators;
• Third party logistics providers;
• U.S. freight consolidators;
• Ocean transportation intermediaries and non-vessel operating common carriers (NVOCCs);
• Mexican and Canadian manufacturers; and
• Mexican long-haul highway carriers.

C–TPAT importers enjoy certain incentives based on their tier status within a three tier structure. Tier I incentives are afforded to those importer partners that have been certified; Tier II level to those that have been certified and validated; and Tier III incentives to those that go above and beyond - and have exceeded the program’s requirements - exhibiting best practices. The big question that has been asked by C-TPAT participants is - after going through the extensive security profile, making internal improvements, and being visited and validated by CBP domestically and internationally - are C-TPAT (and other voluntary partners with CBP) members now not "Trusted Traders"?  This was a question raised by the Advisory Committee on Commercial Operations of Customs and Border Protection (COAC) in their last meeting held in Miami.  In it's report, COAC reported "the term “Trusted Trader” in itself instills within the trade community a new approach to establishing trusted trader status. The COAC is concerned that many in the trade community believe they are considered as being a trusted trader by being members of voluntary programs such as C-TPAT, or ISA and others." What are the Benefits of Joining C-TPAT? It's important to note that there have been cost/benefit studies conducted discussing the vast effort a company must go through to be part of the program and whether the benefits offered were worthwhile.  Currently, the benefits offered are:

• Most important  is a reduced examination rate (since everyone knows examination rates have increased significantly since 2001);
• Access to the Free and Secure Trade (FAST) Lanes—Expedited border crossing privileges are granted to those C–TPAT highway carrier partners who are certified/validated;
• Exemption From Stratified Exams for importer partners—C–TPAT Tier III importer partners and C–TPAT Tier II importer partners that also participate in the ISA program are exempt from stratified exams;
• Front of the Line—C–TPAT shipments subject to examination receive ‘‘front of the line’’ treatment. To the extent possible and practicable, C–TPAT shipments are moved ahead of any non-C–TPAT shipments;
• In the event of a significant disruption/delay in CBP cargo processing operations, actions are taken to maintain communication and coordination with C–TPAT partners and foreign government stakeholders for business resumption; and
• Penalty mitigation offered for the late submission of data required under the Importer Security Filing requirements.

Two benefits not listed, but, have been instrumental in my client's being part of the C-TPAT program are:

• Ability to obtain additional business from C-TPAT validated companies who would not do business with you if you are not part of the program;
• Assignment of a CBP Supply Chain Security Specialist, who vetted your company, and can assist if you have any CBP issues (and importantly, will respond to your calls and emails).

What is ISA? ISA is a voluntary program, open to both U.S. and Canadian importers, based on the premise that companies with strong internal controls achieve the highest level of compliance with customs laws and regulations. In order to get into the ISA program, you have to already be a C-TPAT participant. As part of the ISA program, importers are responsible for monitoring their own compliance (self-policing and self reporting to CBP yearly) in exchange for benefits (the biggest one being CBP taking you off the list for Focused Assessments).  On October 5, 2012, CBP expanded the ISA program by creating an expedited path to ISA for importers who successfully have undergone a CBP Focused Assessment (FA) audit. A detailed synopsis of program application requirements and benefits may be found here. Who Can be Part of the Trusted Trader Program Test? Only 10 (or less) companies will get the honor of testing this program.  CBP wants (at least) 1 importer currently in C-TPAT, 1 currently not in C-TPAT (or any partnership program), and 1 or 2 who import items regulated by CPSC and FDA.  Do you qualify so far? If you're thinking about being part of the test group - here are all of the boxes you need to check:

1. Must be an active U.S. importer or Non-Resident Canadian Importer
2. Have written policies and procedures pertaining to its import process;
3. Have a business office staffed in the United States or Canada;
4. Have an active Importer of Record (IOR) number or a CBP-assigned number;
5. Possess a valid continuous importation bond filed with CBP;
6. Have at least two (2) years of importing history;
7. Conduct an assessment of its supply chain based on C–TPAT’s security criteria ;
8. Implement and maintain security measures and supply chain security practices meeting security criteria established in the C–TPAT Importer Security Criteria document;
9. Have a designated company officer who will be the primary cargo security officer responsible for C–TPAT;
10. Create and provide CBP with a C–TPAT security profile, which identifies how the importer meets C–TPAT’s Importer Security Criteria;
11. Maintain books and records to establish compliance with the laws and regulations administered or enforced by CBP, including but not limited to, records sufficient to ascertain the correctness of any entry and to determine the duties, taxes and fees that may be due; and
12. Applicants requesting consideration for the Product Safety (CPSC benefits) must concurrently complete the product safety portion of the application.

What do you think about the proposed "Trusted Trader" program?  Do you think the new benefits included are worth the pain points of C-TPAT and ISA?  Do you think the name "Trusted Trader" is misleading or dismissive of the vast efforts companies currently involved in C-TPAT and ISA have implemented?  Are you ready to apply to be one of the less than 10 test companies?