Changes in C-TPAT Security Criteria

July 18, 2005

U.S. Customs and Border Protection (“CBP”) Commissioner Bonner announced recently that the C-TPAT security criteria for importers are being amended to establish more concrete baseline levels of security measures and give more concrete expectations of the C-TPAT program. For importers this means that there will be additional requirements! The new baseline security measures will be phased-in over three time segments.

The first phase, “Hardening of the Physical Supply Chain,” became effective as of May 26, 2005, meaning that all current and future C-TPAT members are bound to comply with these new requirements. These enhanced criteria require importers to increase their security standards related to container security, physical security and physical access controls.
The second phase, “Internal Supply Chain Management Practices,” becomes effective as of July 26, 2005. This phase requires C-TPAT members and applicants to maintain personnel security (i.e. screening for security clearance), procedural security and information technology security. In addition, each C-TPAT member must have established and implemented a Security and Threat Awareness Training program.
The third phase, “Business Partner Requirements,” must be implemented by all current C-TPAT members and all applicants by September 26, 2005. The “Business Partner Requirement” phase requires C-TPAT members to ensure that their business partners are C-TPAT members or are operating under security measures comparable to the C-TPAT security criteria for the specified business group.

The addition of these new requirements currently applies only to importers that are C-TPAT members. CBP plans to institute similar requirements for other C-TPAT members (i.e. brokers, air/sea/rail carriers, freight consolidators, warehouses, manufacturers, terminal operators, etc.) at a later date. According to the C-TPAT program coordinators, the next phase of new requirements is expected to target C-TPAT carrier members/applicants.

Current C-TPAT members are not required to submit additional information to Customs regarding their updates; however, it is strongly recommended that importers update their C-TPAT security plans in writing to comply with the new requirements no later than the respective effective dates. New C-TPAT applicants will be required to meet the phased-in requirements immediately upon application to the C-TPAT program. Customs is continuing to invest in the C-TPAT program by hiring C-TPAT program coordinators and C-TPAT validators. Every C-TPAT member should anticipate a C-TPAT validation within three years of admission to the program!

The Cohen & Grigsby Customs Group recommends that current C-TPAT members update their C-TPAT security programs to comply with the new C-TPAT requirements no later than their respective effective dates and document these changes/additions in writing. When implementing these additional requirements, special attention should be paid to the “Security Training and Threat Awareness” requirement in Phase 2 and the Phase 3 requirements. The Security and Threat Awareness training must be specifically tailored to an importer’s operations and the security issues raised by such operations.

The Phase 3 “Business Partner Requirements” require importers to maintain written and accountable processes for verifying that their “business” partners (i.e. manufacturer, suppliers/vendors, etc.) are in compliance with C-TPAT security criteria for the specific business functions performed by such business partner. Phase 3 is somewhat troubling in that it imposes requirements that are not entirely under the control of the C-TPAT member. If business associates are not C-TPAT members, importers must ensure that their associates are meeting the equivalent supply chain security criteria administered by a foreign Custom’s equivalent security program. Importers must document and have written methods of verification that their business partners are complying with these security measures. For accountability purposes, the Cohen & Grigsby Customs Group recommends that importers maintain in their recordkeeping system a file of certifications issued by their business partners certifying compliance with applicable security measures. This process is relatively straightforward if such business partner is a C-TPAT member; however, if such business partner is not a C-TPAT member, compliance with these external security requirements becomes much more difficult. In this situation, compliance with this requirement could be documented by entering into a written contract that imposes the obligation to adhere to the security requirements under the C-TPAT program.

The Cohen & Grigsby Customs Group strongly recommends that all importers and eligible international businesses become C-TPAT members. Although the program is voluntary by regulatory standards, participation in the program helps to expedite merchandise release from Customs and assist Customs with its mission of guarding U.S. borders. According to CBP, C-TPAT members are six times less likely to undergo a security-related cargo examination and four times less likely to be the subject of a trade-related exam than non-C-TPAT members.

The Customs Group is available to assist importers and other international businesses with all aspects of the new C-TPAT requirements/updates, along with all other aspects pertaining to Customs compliance and Customs regulatory issues. For more information, please contact your Cohen & Grigsby attorney or Cohen & Grigsby’s Customs Group at 412.297.4900.