C-TPAT, AEO and MRA - Benefits and Drawbacks to Security Arrangements

The first major post 9-11 security program adopted by U. S. Customs was the voluntary program known as the Customs – Trade Partnership Against Terrorism (C-TPAT). This program was developed under then Customs Commissioner Robert C. Bonner in part to leverage the knowledge that importers and subsequently other supply chain providers have about their own suppliers and operations; in part to give U. S. companies a way to demonstrate their concern with import security issues; and in part to demonstrate to Congress that methods other than 100% cargo inspections could be devised to secure America’s imports. C-TPAT quickly grew to include several thousand certified members, mostly but not exclusively larger companies. Membership allowed these companies to consider themselves a part of the 9-11 security response, and demonstrate their commitment to security to Customs and other agencies. As the program expanded to include customs brokers, carriers, and other service providers, it became a selling tool for such companies seeking business from C-TPAT certified importers as part of an integrated secure supply chain.

C-TPAT also served as the template for the development by the World Customs Organization of the SAFE Framework of Standards to Secure and Facilitate Global Trade. A major component of the SAFE Framework is the Authorized Economic Operator (AEO) concept, including the use of Mutual Recognition Agreements (MRA) between countries implementing such programs. AEO programs are required to be full-fledged operations, with strong validation and security components

built in, to qualify for MRA participation. AEO programs have been adopted by dozens of countries, some using their own program names (Partners in Protection in Canada, the Secure Export Scheme in New Zealand, the Golden List in Jordan), with Japan, Korea, Taiwan, Singapore, Israel, and all of the European Union included. As of December 2014, the U. S. has entered into MRA agreements with all of those jurisdictions, and is working toward agreements with China and Switzerland.

In the decade plus since the institution of the C-TPAT Program, membership grew to over 10,000 certified partners, but has stagnated at that level over the past several years despite plans by Customs to at least quadruple the size. (C-TPAT partners do import over 50% of the total value of U.S. imports, while constituting less than 1% of the total number of importers.) As the program developed and Customs gained more experience, the minimum security criteria and the information required from participants – particularly sometimes difficult to obtain data regarding foreign suppliers; and the formality of presentation – all electronic submission through a web Portal; increased. Validations have sometimes seemed to use mandatory checklists with limited applicability, such as questions relating to production facilities applied to office locations, or to container operations for bulk cargo like steel, with little opportunity to explain the differences or non-applicability. More validations are also being conducted in expensive, difficult locations, including those with limited volumes of trade.

A number of companies have begun to question continued participation as the costs and difficulty of maintaining certification increase, and the benefits seem more distant or elusive. Although Customs statistics show that C-TPAT participants undergo fewer cargo examinations, for many companies the actual reduced number has not been too significant. “Front of the line” exam processing and expedited trade processing by Centers for Excellence and Expertise (CEEs) have (at least yet) also not been found particularly helpful or necessary. The possibility of expedited treatment in any trade disruption is seen as (at least so far) an illusory benefit.

There are some meaningful benefits. For carriers, participation allows access to the FAST lanes (highway carriers) and penalty mitigation (maritime carriers for late ISF data). Importer participation is required to join the Importer Self Assessment (ISA) program, and to secure Partnership level processing from the CEEs.  Importers with large numbers of entries receive greater benefits from reduced inspections. The inclusion of other government agencies, such as the FDA and TSA, results in benefits to companies regulated by such agencies.

MRAs with AEO countries reduce the time and cost for C-TPAT importers when their suppliers are part of the exporting country AEO program – both verification and validation is done by accepting the other country’s approvals. (This does mean that U.S. validations of foreign suppliers will be of non-AEO companies and countries.) The addition of a C-TPAT for exporters module means that exporters qualified and validated by U.S. Customs can be accepted as validated suppliers in the importing country’s AEO program without necessitating a second set of documentation and/or verification.

It remains to be seen whether the increasing costs and complexity of participating in C-TPAT will lead to continued lack of growth or even reduction in numbers, or the benefits from full implementation of the CEEs, improved administration from the consolidation of the trusted trader programs, and expansion of the number of MRAs will trigger greater interest in becoming a member. Customs continues to direct significant resources to the program and push new companies to apply and current members to maintain membership.


Mutual RecognitionofAEOs = China, Japan, Norway, Switzerland, USA

Country	Date Launched	Program Title	Type	Number
Argentina	2006	Customs System of Reliable Operators (SAOC)	Export	7
Canada	1995 Revised 2002, 2008	Partners in Protection (PIP), Customs Self-Assessment (CSA), Free and Secure Trade (FAST), Partners in Compliance (PIC)	PIP - Import/export CSA, FAST, PIC - Import	1,535
Colombia	2011	AEO	Import / Export	NA
Costa Rica	2001	PROFAC	Export	1
China	2008	Classified Management of Enterprises	Import / Export	2,174
Dominican Republic	2012	AEO	Import / Export	NA
EU (27 countries)	2008	AEO	Import / Export	13,885
Guatemala	2011	AEO	Import / Export	2
Hong  Kong, China	2012	Hong Kong AEO	Import / Export	15
India	2012	AEO	Import / Export	4
Israel	2011	AEO	Import / Export	8
Japan	2006	AEO	Import / Export	518
Jordan	2005	Golden List	Import / Export	44
Kenya	2010	AEO	Import / Export	38
Korea	2009	AEO	Import / Export	292
Malaysia	2010	AEO	Import / Export	48
Mexico	2012	NEEC	Export	41
New Zealand	2004	Secure Exports Scheme (SES)	Export	123
Norway	2009	AEO	Import / Export	32
Peru	2012	UAC-OEA	Export	NA
Singapore	2007	Secure Trade Partnership (STP)	Import / Export	110
Switzerland	2011	AEO	Import / Export	14
Taiwan	2010	AEO	Import / Export	292
Thailand	2011	AEO	Import / Export	111
Turkey	2013	AEO		6
Uganda	2012	AEO	Import / Export	NA
USA	2001	Customs-Trade Partnership against Terrorism (CTPAT)	Import Export program in development	11,201

The following are developing or have developed AEO programmes

Country	Program Title	Type
Botswana	Trans Kalahari Accreditation Scheme	Import / Export
Chile	AEO Pilot	Export
Ecuador	AEO	Export
El Salvador	AEO	Import
Former Yugoslav Republic of Macedonia	AEO	Import / Export
Indonesia	AEO	Export
Morocco	AEO	Import / Export
Serbia	AEO	Import / Export
Seychelles	AEO	Import / Export
Tunisia	AEO	Import / Export
Uruguay	Qualified Economic Operator	Import / Export

 

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