Carrot and Stick: Selling Security to Shippers

The federal government wants to enlist the help of importers and exporters in protecting ports.

U.S. Customs Commissioner Robert Bonner is trying to fight terror with a stick and a carrot.

Hes telling business leaders to batten down their supply chains, meeting standards set by Customs to secure every aspect of the way they process cargo—from manufacturing facilities to warehouses to people.

The stick is C-TPAT, short for Customs-Trade Partnership Against Terrorism, a program that government officials, businesses and analysts expect will become mandatory, at least in some form, as early as next year.

"We will be more focused on where your product originated," Bonner informed a group of 450 government and business leaders at the U.S. Customs Trade Symposium in Washington, D.C., in late 2001. That includes "the physical security and integrity of your plants or those of your suppliers; the background of personnel; the means by which you transport goods; who you have chosen to bring those goods into the country; those companies overall security; and the routes your shipments travel."

The wood in the stick is the cargo exam. If businesses dont maintain the information systems and surveillance that give Customs and Border Protection the answers it wants, agents can hold up cargo for a thorough examination. That can take several days, with storage and other costs piling up for shippers. Companies that are found to be intentionally misleading can be removed altogether from membership in the program.

The carrot is special treatment of cargo. Businesses that meet the standards of the program are labeled "low-risk," meaning their cargo is screened faster and less likely to sit for a day or more in ports or at border crossings, racking up storage charges, interest payments and other costs.

Tom OBrien, former director, office of field operations, Bureau of Customs and Border Protection in San Francisco, cites one importer who was examined for bringing in 20 containers from a brand new supplier and lost his entire profit in a single day—paying $20,000 in storage charges.

At stake is the security of approximately 7 million containers that arrive at U.S. seaports each year. Historically, Customs has screened 2% of them, and the agency cannot possibly screen every one, even when it increases the number of its security specialists next year from 10 to more than 160. Also, a program that mandates security is much harder to enforce—and potentially more damaging to the economy—than one with which businesses are cooperating by assessing and fixing their own supply chains.

Next page: Small businesses not on board with compliance.