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C-TPAT and Cargo Security: Sea Change

In an effort to prevent terrorists from turning container and cargo ships into weapons, Customs is counting on big business to goad partners into improving security through initiatives like C-TPAT.

But at DaimlerChryslerwhich is a C-TPAT charter member, along with BP America, Ford, General Motors, Motorola, Sara Lee and Targetthe debate is over. The program is becoming a requirement. By FY03, DaimlerChrysler will require trucking companies that transport its products across the U.S. and Canadian border to join C-TPAT.More Than Lip Service?That's just what Customs wants to hear. The problem is that right now, Customs is just rubber-stamping applications that look good. As of July, of the 2,400 companies that have applied for the program, Customs went onsite to validate only about 20 companies' security processes. Fifteen of those companies were importers, and it's widely assumed that about half of those were charter membersthe very companies that helped Customs hammer out the guidelines in the first place.

"We're in a very queasy period," the Council on Foreign Relations' Flynn says. "The challenge for C-TPAT is to move from a trust-based system to a trust-but-verify system. We have to get more policing."

To do that, the program needs more funding than the $8.3 million it currently has. Customs has asked for an additional $12 million in C-TPAT funding for FY04 and is working on hiring more than 100 additional staff members, whose responsibilities will include helping the 30 who are currently plodding through the validations. Perez says 120 validations are in the pipeline and that he is aiming to have at least 100 done by November.

That may seem a pittance, but observers point out that the number of completed validations may be less important than the companies chosen for validation. "If the validations are done of 100 of the biggest companies, or the first 100 who sign up, then that's not a valid sample," says Stuart Seidel, a partner with law firm Baker & McKenzie, who has been helping clients interpret the guidelines. "If it's an assortment of companies, then that goes a long way to validating the program, plus it keeps people on guard. I don't think [the small number of validations is] a problem right now because the companies that have applied for participation probably are trying to do a good job of security. The problem is going to come in the future. If Customs can't check on the filings, a lot of additional companies that may not be as responsible will try to get into the program without adopting the security procedures."

Perez, not surprisingly, won't comment on which companies are being validated, except to say that the first 100 validations will include more than importers.