Review of 2017 ITRAC/ACE Data

Dear Friends:

Just a quick note to remind you that one element of an effective internal customs compliance program involves a review of the company’s import data on (at least) an annual basis.  This is the time to review the 2017 data. 

The goal of internal controls is to effectively mitigate the risk associated with the company’s activities.  Thus, the starting point is understanding the company’s risk profile.  One way to do that from a customs perspective is to review the company’s import data (the same data that U.S. Customs and Border Protection looks at to select audit candidates).  The import data (whether ITRAC data obtained from CBP HQ, or ACE reports you are able to download).  This data includes general entry information, such as tariff classifications, values, preferential tariff programs used, etc.; as well as information regarding CBP’s review of a company’s import shipments (e.g., whether a CBPF-28 or CBPF-29 was issued).  It also identifies each of the links in the company’s international supply chain (i.e., foreign manufacturers, carriers, customs brokers and sureties).  In short, the import data is a useful tool for monitoring the effectiveness of your import compliance program, identifying areas of potential cost and duty savings, customs valuation reconciliation and identifying links in the international supply chain for security purposes (i.e., C-TPAT-related information). 

Given how useful this information is, we recommend that all companies obtain their import data and review it (at least) annually.  Due to the volume of data involved, and the way it is presented by CBP, we have developed simple macros that can extract the most relevant data and summarize it in a table format so that trends, issues and opportunities can be more easily identified.  If you would like to have us run your data through those macros and provide the summaries, please let us know.  If not, no problem, but please review it yourself and confirm that your controls are working effectively (e.g., your data does not know show the use of unapproved brokers, unauthorized preference claims, incorrect tariff classifications, etc.).  The business is always evolving.  You need to make sure your controls are keeping pace!

We hope this this helpful. 

Best regards,



GAO Report on C-TPAT

Dear Friends,

The U.S. Government Accountability Office (GAO) recently released a report on the U.S. Customs and Border Protection (CBP) Customs-Trade Partnership Against Terrorism (C-TPAT) program that we thought you might find to be of interest.  In conducting this review, the GAO sought to assess the extent to which (1) CBP is meeting its security validation responsibilities, and (2) C-TPAT members are receiving the benefits promised by CBP for participation. 

While the full report is worth a quick read (available here), the GAO concluded that problems with the data management system (i.e., the Portal) have led to problems with C-TPAT validations (e.g., incorrect tier levels being reflected in the system, incorrect dates for profile updates/reviews, lack of standardized guidance from CBP HQ, etc.) and that CBP cannot determine the extent to which C-TPAT members are actually receiving benefits because of these data problems.  On this latter point, GAO stated:

Since 2012, CBP has compiled data on certain events or actions it has taken regarding arriving shipments—such as examinations, holds, and processing times—for both C-TPAT and non-C-TPAT members through its C-TPAT Dashboard.20 However, based on GAO’s preliminary analyses of data contained in the Dashboard, and data accuracy and reliability concerns cited by C-TPAT program officials, we concluded that CBP staff are not able to determine the extent to which C-TPAT members are receiving benefits, such as reduced likelihood of examinations of their shipments and expedited shipment processing, compared to non-members.

We conducted preliminary analyses of C-TPAT program data from the Dashboard to understand, for example, how the examination rates of C-TPAT members’ shipments compared with those of non-C-TPAT members across different modes of transportation (air, truck, vessel, and rail) for each year from fiscal year 2011 through fiscal year 2015. The results of our analyses showed that C-TPAT members’ shipments did not consistently experience lower examination and hold rates and processing times compared to non-members’ shipments across the different modes of transportation.

Report at 18. 

While the findings of this report many not come as much of a surprise to the companies that participate in the program, it is good to see the government auditing the program and trying to make it better. 

If you have any questions about the report, or C-TPAT more generally, please let us know.

Best regards,


Update to CBP Security Procedures for Bonded Facilities & FTZs

Dear Friends,

For those of you who utilize bonded facilities and/or foreign-trade zones (i.e., subzones or usage driven sites), or are contemplating doing so, the attached document may be helpful.  As you will see, earlier this year, U.S. Customs and Border Protection updated the security guidelines applicable to bonded facilities and foreign-trade zones.

The update is meant to replace the prior guidance on this topic, which was found in a Treasury decision from 1972 (T.D. 72-56).  Those utilizing bonded facilities and/or foreign trade zones should familiarize yourself with the attached, so you do not run into any surprises with CBP.  The updated guidance will look familiar to C-TPAT members, as much of the updated guidance appears to be borrowed from that program.

Since the updated guidance does not appear to be available on-line, we thought it was worth circulating.  We hope you find this helpful.

Best regards,


C-TPAT for Exporters

Dear Friends, 

We are writing to make sure you are aware of a development regarding the Customs-Trade Partnership Against Terrorism (“C-TPAT”) program.  U.S. Customs and Border Protection (“CBP”) will begin accepting applications through its web portal from exporters wishing to join the program later this month. 

While we encourage all companies to take responsibility for the security of their international supply chains, we have had a number of issues with the C-TPAT program over the years (e.g., the program is not governed by statute of regulation, the obligations on importers have increased without much notice or warning, many of the stated benefits of participating in the program have failed to materialize, etc.).  That said, we believe that all companies that export articles from the United States to countries which have signed supply chain security mutual recognition arrangements (“MRAs”) with CBP should consider applying.   

CBP has signed MRA’s with 10 jurisdictions thus far (i.e., Canada, the European Union, Israel, Japan, Jordan, Korea, Mexico, New Zealand, Singapore and Taiwan).  These MRAs are based on a determination that C-TPAT and the foreign supply chain security program are compatible in theory and practice (e.g., standards, audit procedures, etc.), and the exchange of information between the CBP and the foreign Customs Administration.  Historically, the fact that a U.S. company participated in C-TPAT as an importer provided little benefit (if any) when that company exported goods to an MRA-partner country.  Stated differently, when a Customs Administration in the EU looks at an import shipment and sees it is from a U.S. company accepted into the C-TPAT program as an importer, that is interesting, but not particularly relevant to the question of whether that U.S. company has appropriate security procedures in place over its exports.  This development is meant to close this gap.  Companies that participate in the C-TPAT programs as exporters will be more likely to have their shipments receive targeting score benefits in the MRA-partner countries.  This could be a meaningful benefit (particularly if the importing entity is an AEO participant). 

For your reference, we have included a link to CBP’s exporter entity eligibility requirements and criteria here.  As you will see, these requirements/criteria are substantially similar to those for importers (e.g., have a documented export security program that identifies the links in the supply chain and works to make them as secure as possible).  

If you have any questions about C-TPAT for exporters, or would like to discuss whether the program would be beneficial for your company, please let us know. 

Best regards, 


The State of Trade

Dear Friends,

U.S. Customs and Border Protection Commissioner R. Gil Kerlikowske spoke at the U.S. Chamber of Commerce earlier this week and his remarks contained a number of interesting points, particularly with regard to increased trade enforcement.

The Commissioner’s remarks were entitled “The State of Trade:  Commissioner’s First Year and Look Ahead” and contain the usual bevy of statistics (e.g., in FY2014, CBP cleared $2.5 trillion in imports, $1.6 trillion in exports, processed approx. 26 million cargo containers, etc.).  The remarks also tout CBP’s efforts to modernize and streamline the import/export process.  The remarks are worth a quick read (copy available here).

One of the comments of particular note was the reference to CBP’s “trusted trader” programs.  As you know, CBP is merging the C-TPAT and ISA programs into a single program.  This will save CBP resources, as well as align the U.S. program more closely with other countries’ AEO programs (which generally include both supply chain security and trade compliance already).  Importers who participate in C-TPAT, or in C-TPAT and ISA should be aware of (and be tracking) this development.  Since neither program is governed by statute or regulation, CBP is free to modify the rules regarding participation at any time and without any advance warning.  Given CBP’s history of actually doing so, participants should be expecting changes sometime in 2015.

Another comment of interest related to the agreements reached with Canada and Mexico, respectively, on supply chain issues.  The agreement with Mexico provides reciprocity between the C-TPAT program and Mexico’s NEEC program.  This agreement could help expedite shipments both ways across the border.  Similarly, the agreement with Canada holds the promise of expediting shipments, by allowing all clearance-related checks to occur in the country of export (i.e., clearing the goods for import before they actually get to the border).  While the ‘devil is in the details,’ these are potentially significant developments.

Finally, the comments touch on trade enforcement issues.  As you know, CBP does not publish individual commercial penalties and stopped regularly publishing annual trade enforcement statistics a couple of years ago.  As a result, it was somewhat surprising to learn that trade penalty assessments increased 140% between FY2011 and FY2014.  According to the Commissioner, CBP issued $385.4 million in penalties in FY2011 and $925.9 million in penalties in FY2014 (interestingly, he does not mention how much of either amount CBP actually collected).  He also specifically mentioned increased collection/enforcement of antidumping & countervailing duty orders.  Given Commissioner Kerlikowske’s enforcement background, and the fact he specifically mentioned it in his brief remarks to the Chamber, it means that we are likely to see this upward enforcement trend continue for the foreseeable future.

We hope this is helpful.  If you have any questions, please let us know.

Best regards,


C-TPAT for Exporters

Dear Friends:

As some of you may already know, US Customs has decided to open its Customs-Trade Partnership Against Terrorism (C-TPAT) program to eligible exporters.   While US Customs has not yet specified how participating exporters would benefit from this program, the expectation is that participants will have fewer export shipments examined by US Customs and will be provided a US Customs account manager (i.e., a “go-to” person in the event a problem arises with a shipment).  Another potential selling point is that participating exporters will  enjoy the benefits of reciprocal “trusted trader” programs around the world, such as AEO in the EU.  (In theory, exports from a C-TPAT-approved company are less likely to be scrutinized when imported into countries with whom the United States has signed a mutual recognition agreement.)

US Customs recently released the exporter eligibility requirements for participation in C-TPAT.  The source document is available here.

In short, in order to qualify for the program, the exporter must meet certain eligibility requirements.

First, the entity must be an “Exporter,” as that term is defined by the program, and comply with the following requirements:

  1. Be an active U.S. Exporter.
  2. Have a business office staffed in the U.S.
  3. Have an Employer Identification Number (EIN), or Dun & Bradstreet (DUNS) number.
  4. Have a documented export security program and a designated officer or manager who will act as the C-TPAT program main point of contact. Additionally the participant should have an alternate point of contact should the designated point of contact be unavailable.
  5. Commit to maintaining the C-TPAT supply chain security criteria as outlined in the C- TPAT Exporter agreement.
  6. Create and provide US Customs with a C-TPAT supply chain security profile that identifies how the Exporter will meet, maintain, and enhance internal policy to meet the C-TPAT Exporter security criteria.
  7. Have an acceptable level of compliance for export reporting for the latest 12-month period and be in good standing with U.S. regulatory bodies such as:  Department of Commerce, Department of State, Department of Treasury, Nuclear Regulatory Commission, Drug Enforcement Administration, and Department of Defense.

Second, the entity must comply with certain minimum security criteria requirements (e.g.,  container inspection and storage protocols; conveyance tracking and monitoring procedures; physical access controls to cargo facilities; etc.).

Should You Join?

As we have advised in the past, all importers/exporters should take steps to secure their international supply chains.  Doing so is the right thing to do and often provides meaningful benefits to the business.  That being said, we have a number of concerns with the C-TPAT program, which also apply to this new exporter-focused variation of the program.

The fact that there is no legislation, or even regulation, governing the program means US Customs is more or less free to modify the program at will.  As a result, the requirements imposed on importers participating in the program have steadily increased over the years; while the tangible benefits US Customs has promised have failed to materialize for most participants.  The same is likely to be true on the export side.  Indeed, the benefits that US Customs will likely offer participating exporters appear to be even less tangible than those offered to importers (e.g., US Customs cannot guarantee that the shipments of a participating exporter will be subject to less scrutiny abroad).  As a result, based on our experience with the import program, participating in the export program will subject exporters to US Customs supply chain security “validations” (they do not want to call them audits) which will often produce unrealistic security “recommendations” in exchange for some potential benefit to a shipment’s targeting score.

In sum, while securing your international supply chain is the right thing to do for a variety of reasons, whether to join a voluntary supply chain security program like C-TPAT is a separate determination.  It is important to understand the costs involved in participating in such a program and to weigh those costs against the potential benefits.  To date with the import version of C-TPAT, the costs have been real (and constantly evolving); whereas the benefits have been ethereal.  We expect the same to be the case with the export variation of the program.

If you have any questions about participating (or withdrawing) from the C-TPAT program, please let us know.

We hope this is helpful.

Best regards,


Another Customs-Related Qui Tam Action

Dear Friends:

I am writing to let you know about another customs-related qui tam action.

Last week, the U.S. Department of Justice announced that an Ohio-based company had agreed to pay $1.1 million to resolve allegations that it had intentionally filed false customs declarations to avoid the payment of antidumping and countervailing duties on Chinese-origin aluminum extrusions.  The announcement states that DOJ is also pursuing claims against 4 other companies and two individuals for similar violations.  A copy of DOJ’s press release can be found here.

The defendants are alleged to have transshipped Chinese-origin aluminum extrusions through Malaysia to hide the true country of origin (China) and avoid the payment of ADD/CVD upon importation into the United States (as many of you know, aluminum extrusions from China are subject to ADD/CVD rates of well over 100%).

The case was originally filed by a whistleblower under the qui tam provisions of the False Claims act.  The whistleblower (known as the “relator” under the False Claims Act) is entitled to a meaningful portion of any recovery from this action (including the $1.1 million collected thus far).

This case is part of a larger trend we have been seeing develop over the last couple of years – namely, that private parties are increasingly turning to the False Claims Act to address potential trade compliance violations by others (e.g., competitors, employers, etc.).  In addition to the obvious financial incentives (again, whistleblowers under the False Claims Act are entitled to a meaningful percentage of any recovery the government makes as a result of the case), government enforcement efforts in this area are viewed as increasingly resource-constrained, inefficient and/or ineffective.  In contrast, local U.S. Attorney Offices are showing strong interest in prosecuting these types of violations (particularly those involving government procurement, such as “buy America” violations, and antidumping/countervailing duty issues).  We expect to see this trend continue for some time.

The rise of private party-initiated trade compliance actions should incentivize all companies to review their internal controls over this area and ensure that they are working effectively.   Otherwise, companies may find themselves embroiled in expensive enforcement actions, like those described above and below.  Similarly, if you are aware of non-compliance by others that is unfairly tilting the playing field (e.g., a competitor not paying antidumping/countervailing duties rightfully owed, or misstating the origin of their products, to get a competitive advantage), there are steps you can take to address it, even if the responsible government agency has not done so.

We hope that this is helpful.  We have significant experience advising clients on how to test (and improve, when necessary) trade-related internal controls.  We also are advising several clients on how best to address potential non-compliance by competitors/others.  If you have any questions, or if you would like to discuss these issues further, please let us know.

Best regards,