P ORTER W RIGHT M ORRIS & A RTHUR LLP A t t o r n e y s & C - - PDF document

PORTER WRIGHT MORRIS & ARTHUR LLP

A t t o r n e y s & C o u n s e l o r s a t L a w Leslie A. Glick (202) 778-3022 lglick@porterwright.com 1919 Pennsylvania Avenue N.W. Suite 500 Washington, DC 20006-3434 Facsimile: 202-778-3063 Toll Free: 800-456-7962

November 17, 2005 AMERICAN BAR ASSOCIATION SECTION OF ADMINISTRATIVE LAW AND REGULATORY PRACTICE 2005 ADMINISTRATIVE LAW CONFERENCE WASHINGTON, D.C. PRESENTATION OF LESLIE ALAN GLICK, ESQ.∗ CUSTOMS TRADE PARTNERSHIP AGAINST TERRORISM AND CUSTOMS RESPONSE TO SEPTEMBER 11, 2001. I. INTRODUCTION TO C-TPAT AND EVENTS FOLLOWING SEPTEMBER 11, 2001

• A. Customs Trade Partnership Against Terrorism (C-TPAT)
• 1. A “voluntary” partnership between customs and importers and exporters.

Companies sign a contract with Customs agreeing to review and improve their

• security. In exchange, C-TPAT members receive fewer inspections, and

inspections they do receive are less intrusive (e.g., x-ray versus unloading your trailer).

• 2. Customs is putting pressure on more companies to join by asking existing

members to use suppliers that are C-TPAT certified (soon to be compulsory).

• 3. Membership has doubled in this past year. Now there are over 8,000 in C-TPAT.

∗ Mr. Glick is a graduate of Cornell Law School and has focused his practice on international trade law, customs

law and Food and Drug law for more than 25 years. He is the author of several books, including Understanding the North American Free Trade Agreement (2nd edit.) and Guide to United States Customs and Trade Laws (2nd edit.). He is also the author of Chapter 4, “Legal Aspects of Trade with Mexico” in the multivolume treatise Doing Business in Mexico. Mr. Glick is Chairman of the Customs and International Trade Law Committee of the Administrative Law and Regulatory Practice Section of the American Bar Association.

• 4. Membership is open to U.S. importers, truckers, freight forwarders, customs

brokers and Mexican exporters.

• a. The longer you wait to apply for C-TPAT, the longer it takes to be approved.

More and more companies are applying. Until you are approved, you cannot

• btain C-TPAT benefits.
• b. Among the benefits are membership in the FAST (Free And Secure Trade)

program: Only C-TPAT members can join FAST FAST port of entry exist or are under construction on the US- Mexican and US-Canadian borders FAST is an expedited clearance program for low-risk cargo

• 5. What is involved in applying for C-TPAT?
• a. Companies have not taken full advantage of C-TPAT for several reasons:
• Lack of knowledge that they are eligible
• Lack of understanding about what they need to do
• Concerns about cost
• Language barrier
• b. Cost of not joining can be greater. Customs has said that non-C-TPAT

members are “unknown entities.” Your customers may exclude you as a supplier. If you have a seizure or a problem, you will face costly fines and penalties, while a C-TPAT member might not.

• c. FAST has actually shown to save money through better utilization of

equipment. II. NEW SECURITY CRITERIA UNDER C-TPAT EFFECTIVE MARCH 25, 2005

• A. New Minimum Security Criteria Now in Effect
• 1. Existing C-TPAT members will have more time to address these new criteria in a

three-stage phase-in.

• 2. New members will have to meet these new standards before acceptance.
• B. Phase I — Hardening of Physical Supply Chain
• 1. Must be implemented within 60 days of March 25, 2005.

• a. Container Security – Container integrity must be maintained to protect against

the introduction of unauthorized cargo or persons. At point of loading, procedures must be in place to properly seal and maintain the integrity of the shipping containers. A high-security seal must be affixed to all loaded cargo bound for the U.S. All seals must meet or exceed the current ISO 17712 Standard for security seals.

• i. Container Inspection – Procedures must be in place to verify the physical

integrity of the container structure and the reliability of the locking mechanisms on the doors. A seven-point inspection process is recommended to include front wall, left side, right side, floor, ceiling/roof, inside/outside doors, and outside/undercarriage.

• ii. Container Seals – Written procedures must stipulate how seals are to be

controlled and affixed to containers as well as include procedures for recognizing and reporting compromised seals and/or containers to U.S. Customs and Border Protection (CBP). Only designated employees should distribute container seals.

• iii. Container Storage – Containers must be stored in a secure area to prevent

unauthorized access and possible manipulation. Procedures must be in place for reporting and stopping unauthorized entry into containers or container storage areas.

• b. Physical Security – Cargo handling and storage facilities must have barriers

and deterrents that guard against unauthorized access. These include:

• i. Fencing – Perimeter fencing should enclose the areas around cargo

handling and storage. Interior fencing within a cargo-handling structure should be used to segregate domestic, international, high value, and hazardous cargo. All fencing must be regularly inspected for integrity and damage.

• ii. Gates and Gatehouses – Gates through which vehicles and/or personnel

enter or exit must be manned and/or monitored. The number of gates should be kept to the minimum necessary for proper access and safety.

• iii. Parking – Private passenger vehicles should be prohibited from parking in
• r adjacent to cargo handling and storage areas.
• iv. Building Structure – Buildings must be constructed of materials that resist

unlawful entry. The integrity of structures must be maintained by way of periodic inspection and repair.

• v. Locking Devices and Key Controls – All external and internal windows,

gates and fences must be secured with locking devices. Management or security personnel must control the issuance of all locks and keys.

• vi. Lighting – Adequate lighting must be provided inside and outside the

facility, including the following areas: entrances and exits, cargo handling and storage areas, fence lines and parking areas.

• vii. Alarm Systems & Video Surveillance Cameras – Alarm systems and video

surveillance cameras should be utilized to monitor premises and prevent unauthorized access to cargo handling and storage areas.

• c. Physical Access Controls – Access controls prevent unauthorized entry to

facilities, maintain control of entry visitors and protect company assets. Access controls must include positive identification of all employees, visitors and vendors at the point of entry.

• i. Employees – An employee ID system must be in place to give positive

identification for control purposes. Employees should only be given access to those secure areas necessary for the performance of their duties. Company management or security personnel must adequately control the issuance and removal of employee, visitor and vendor badges. Procedures for issuance, removal and changing of access devices (e.g., key cards, etc.) must be documented.

• d. Visitors – Visitors must present photo ID for documentation purposes upon

arrival and should be escorted. ID badges must be visibly displayed.

• e. Deliveries – Proper vendor ID must be presented for document check upon

arrival of all vendors. Arriving packages and mail should be periodically inspected before being disseminated.

• f. Challenge and Removal of Unauthorized Persons – Procedures should be in

effect to identify, challenge and remove unauthorized persons.

• C. Phase II — Internal Supply Chain Management Practices
• 1. Must be implemented within 120 days of March 25, 2005.
• a. Personnel Security – Processes must be in place to screen prospective

employees and to periodically review current employees.

• i. Pre-employment Verification – Application information, employment

history and references must be checked and verified prior to employment.

• ii. Background Checks – Consistent with local, federal and state laws,

background investigations should be conducted for prospective

• employees. Once employed, reinvestigations should be performed based
• n cause and/or the level of the employee’s position.
• iii. Termination – Companies must have procedures in place to remove

identification and access cards for terminated employees.

• b. Procedural Security – Security measures must be in place to ensure the

integrity and security of property during transportation, handling and storage in the supply chain.

• i. Document Processing – Procedures must be in place to ensure that all

information used in clearing merchandise/cargo is legible, complete, accurate and protected against the exchange, loss or introduction of erroneous information. Documentation control must include safeguarding computer access and information.

• ii. Manifest Procedures – Procedures must ensure that information received

from business partners is reported accurately.

• iii. Shipping and Receiving – Arriving cargo should be reconciled against the

information on the cargo manifests and should be accurately described. Weights, labels, marks and piece counts should be verified. Departing cargo should be verified against the purchase or delivery order. Drivers delivering or receiving cargo must be positively identified before cargo is released.

• iv. Cargo Discrepancies – All shortages, overages and other significant

discrepancies or anomalies must be investigated appropriately. Customs and/or other appropriate law enforcement agencies must be notified if illegal or suspicious activities are detected.

• c. Information Technology Security
• i. Password Protection – Automated systems must use individually assigned

accounts that require a password. IT security policies, procedures and standards must be in place and available to employees as part of their training.

• ii. Accountability – A system must be in place to identify the abuse,

including improper access or the alteration of business data, of IT. All system violators must be subject to appropriate disciplinary actions for abuse.

• d. Security Training and Threat Awareness
• i. A threat awareness program should be established and maintained by

security personnel to recognize and foster awareness of the threat posed by terrorists at each point in the supply chain.

• ii. Employees must be made aware of the procedures the company has in

place to address a situation and how to report it.

• iii. Additional training should be provided to employees in the shipping and

receiving areas, as well as those receiving and opening mail. iv, Specific training should be offered to assist employees in maintaining cargo integrity, recognizing internal conspiracies, and protecting access controls.

• v. These programs should offer incentives for active employee participation.
• D. Phase III — Business Partner Requirements
• 1. Existing member importers will be afforded 180 days from the March 25,

2005 effective date to address the Business Partner Requirement elements.

• 2. Importers must have written and verifiable processes for the selection of business

partners, including manufacturers, product suppliers and vendors.

• 3. They must also have documentation substantiating that business partners

throughout their supply chain are meeting C-TPAT security criteria or equivalent supply chain security program criteria administered by a foreign customs administration.

Disclaimer: This outline is intended to provide general information for clients or interested individuals and should not be relied upon as legal advice. Please consult your attorney for specific advice regarding your particular situation. If you do not have an attorney, you may contact

• Mr. Les Glick at (202) 778-3022 or lglick@porterwright.com.