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Out of Touch? Or Worse?

Published Sep 26, 2011 10:25 AM by The Maritime Executive

By: Dr. Jim Giermanski, Chairman Powers Global Holdings, Inc.

No one doubts the use of the international supply chain as a means to attack the United States and/or deliver illegal cargo of all types into the commerce of this country.  Customs and Boarder Protection (CBP) claim that its Automated Commercial Environment (ACE) program will serve to protect us against this possibility.   CBP clearly states this belief in answering questions about ACE:

...Citizens will be better protected from health and safety risks posed by terrorist activities and the influx of narcotics, illegal products, and unsafe goods.  ...Government agencies with the border enforcement and regulatory responsibilities will be better able to share information, which will improve analysis to better target and analyze goods coming into the country. (1)

Initially begun in 2004 with the deployment of the truck manifest and the activation of a secure data portal for transmission of the manifest and related information such as the identity of the entity entering the data, the ACE program or system came into being. 

The Automated Commercial Environment is the commercial trade processing system being developed by U.S. Customs and Border Protection to facilitate trade while strengthening border security.... The ACE Secure Data Portal, essentially a customized Web page, connects CBP, the trade community and participating government agencies by providing a single, centralized, online access point for communications and CBP information. (2)

As of May, 2011, there were more than 17,000 ACE portal accounts, including more than 3,000 importer and broker accounts and more than 14,000 carrier accounts, including air, rail, sea, and truck carriers.  Although the importer, broker, and carrier accounts make up the major number of users, the ACE application form lists other categories of users to include: Facility Operator, Foreign Trade Zone Operators, Cartman, Lighterman, Service Providers such as Software Vendors, Service Bureaus, Centers, Port Authorities, Preparers and Surety Agents. (3)  Essentially, the ACE system employs a "single window" concept, the result of the UN Economic Commission For Europe's  Recommendation 33, (Approved September, 2004), which is the Single Window through which …trade-related information and/or documents need only be submitted once at a single entry point to fulfill all import, export, and transit-related regulatory requirements. (4) This concept is an essential one in this age of electronic communication, globalization, and the role of the global supply chain in particular.  Additionally, it conforms to the requirements of the U.S. International Trade Data System (ITDS) established in 1995 and transferred to Customs in 1999.  The ITDS was a program established initially in the Department of the Treasury to oversee a federal government information technology initiative to implement an integrated, government-wide system for the electronic collection, use, and dissemination of international trade data, providing a single window through which the trade community would submit its commercial data, promising to create a government that works better and costs less by:

  • Reducing the cost, and burden of processing international trade transactions for both the private trade community and the government
  • Improving the enforcement of and compliance with government trade requirements (e.g., public health, safety, export control, etc.)
  • Providing access to more accurate, thorough, and timely international trade data and information. (5)

Trusted Agent/Contractor

In most cases, ACE seems to meet the need for a fast, efficient, holistic system to expedite and facilitate trade and cargo movement through our ports.  While the Department of Homeland Security (DHS) and its agency CBP should be applauded for the creation of a single window program for the United States, it appears that these agencies have distorted the concept and purpose of a single window by superimposing on it a role of security.  However, ACE cannot accommodate the essential core need for enhancing supply chain security: the need to know the contents or cargo in the container.  In essence, DHS and CBP have taken a "how to" or "means" concept, the single window, and tout it as a security program by coining the name "trusted agent" to all those entities allowed to use it.  The trusted agent concept comes from The Federal Information Management Act and is connected to the issue in Information Technology (IT) security, not supply chain security which involves accurate cargo identification, its corresponding logistics elements and the monitoring of container/trailer access and movement.  In the Inspector General's Report-04-41, even DHS admits that it ...cannot rely totally on the information reported by the organizational components in Trusted Agent FISMA, which impacts overall security program management. (6) That trusted agent concept, according to a senior DHS manager, has been around since 2006 (actually since 2004 indicated by the Inspector General's Report, something you would think a DHS manager would know) and as he pointed out in his recent e-mail, it ...is very broad, in that it can be other DHS government agents, Other country customs or regulatory agents, could be a Security Officer for Shipper, Person that is submitting the cargo data to ACE, (Custom broker Freight forward etc), even the person closing the door and arming the devices as your email indicates.   Essentially, DHS and CBP are accepting the word of the Customs Broker or importer, carrier or other qualified participant as listed on the ACE application form as to the container's cargo.  It should be noted that the shipper is not listed.  If there is risk assessment, it's on the background and history of those who fall within the ACE categories of trusted agents, of which there is no shipper category.

Unfortunately, this trusted agent has no clue as to the contents of the container or trailer unless it loads or opens and inspects it.  So what is being trusted?  It appears that the trust is in the person providing the information, not in the accuracy of the information provided.  While the trusted agents' honesty may be beyond reproach, his knowledge is quite limited with respect to actual cargo contained in the conveyance.  The problem is that the trusted agent cannot know the contents unless the ACE trusted agent opens and inspects the cargo carried in the container/trailer or the trusted agent is an employee of the shipper, identified and designated to verify the cargo when the container or trailer is sealed after being loaded at origin.  However, ACE does not include the authorized person or agent verifying the cargo at stuffing as a specific category in its application form.  In effect, ACE is no more than a trade processing system of cargo information about which the trusted agent knows little to nothing.

This idea of an authorized or trusted person is already established by the World Customs Organization (WCO) and recognized by the European Union and many nations in Asia.  However, except for the United States, the authorized person concept is linked to the hands-on control of the supply chain as one would control evidence in a "chain-of-custody" system that begins at origin (the stuffing of the container for shipment) and ends at the opening and removal of the cargo at destination.   As recently as June 2011, Kunio Mikuriya, Secretary General of the WCO, discussed the importance of "physical" inspection of the cargo and the "authorized person" concept which aids in knowing what actual cargo is contained in the container. (7)  Additionally, in the 2010 report of the European Committee for Standardization (CEN), the proposed protocols for container security require an "authorized" opening and closing.  This would be accomplished by an authorized person or trusted person. (8)  For the WCO, the EU, Asia, and more, the Customs' concept of a trusted person is linked to the persons who can verify the cargo at origin and destination, not just the entity that submits the information to Customs administrations.   

However, in the United States, the ACE program does not allow an authorized agent to be the identified, vetted person or independent contractor whose job it is to inspect international cargo at the time of sealing the container at origin.   The Department of Homeland Security must recognize what the rest of the world has recognized for some time, the importance of the human element or "authorized person" in the supply chain as interpreted by the World Customs Organization.  The WCO concept of a trusted agent is especially important and necessary when treating the global supply chain as an international "chain-of-custody."    DHS, to the contrary, is still tied to the concept of "trusted agent" as the person or entity that submits information based on another person's or firm's statement of what cargo the container is carrying.  In essence, CBP's trusted agents are merely reporting what is the container or trailer is said to contain, no different than the former trade acronyms, STC (Said to Contain) or SLC (shippers load and count).    How can CBP ban the use of STC and SLC in the its Container Security Initiative (CSI), while mandating a trusted agent in its ACE system to use the essence of the STC SLC terms, since those trusted agents are taking the word of others as to what in the container?

Views Provided by ACE Trusted Agents

If there is any remaining doubt about what CBP knows of the cargo coming into this country through information supplied by approved ACE trusted agents, I asked only 6 questions of a small sample of trusted agents dealing with both sea and land shipments into the United States.  The sample included only two categories of trusted agents, U.S. Customs Brokers and national motor carriers who communicate through ACE.    Since no trusted agent in the ocean-borne cargo area responded, the following is a summary of responses to the questions of ACE-qualified U.S. Customs Brokers and carriers handling land shipments across our borders.

1. How do you know what is in a container or trailer if you never opened it to inspect the cargo? (Unless loading themselves, all brokers and carriers responded that they do not know trailer/container contents.  An LTL carrier stated that when receiving full trailers, it relies on the documentation with respect of knowing content.)

Examples of Responses:  We really don't know and neither does CBP.  We rely on information provided by the shipper.  When receiving a full trailer load, we rely on the shippers load and count and/or annotated on the bill of lading.  If the trailer is pre-loaded and sealed at a shipper, we have no way of knowing if there is anything in the trailer....

2.     If you do inspect the cargo and find a discrepancy compared to the bill of lading or  manifest, or other documentation, do you report the discrepancy as a discrepancy?  (Some  report, some do not report.  One LTL carrier always reports and another carrier says it depends)

Examples of Responses:  Yes, at times when we receive discrepant cargo at our DC (distribution center), and we report it.  Sometimes when we do report, CBP says, it has cleared, why are you telling us about it? or It has cleared and we are not concerned with it.  Yes we report the discrepancy to U.S. Customs.  No, we don't report since we don't inspect the cargo, we cannot report a discrepancy.   As a carrier we have very specific rules in handling shortages and overages.  We do report discrepancies.  Another carrier said ...we would not report the discrepancy other than re-manifest the shipment through ACE....If there is contraband then yes, we would report it.

3.     If there is a discrepancy, do you transmit the actual cargo and quantity information  through ACE or by some other means and to whom? (Some call, some write, some don't report, No  one uses ACE to report.  After obtaining documentation, a carrier sends its verified piece count to brokers for  entry.)

Example of Responses: Not usually because unless it comes to our DC, we may not be advised of any discrepancy from the Customer's DC or destination.  If we are advised, we already have submitted the entry (Customs Entry), so we then have to first get permission from the Importer to file a post entry amendment (PEA), and then we file the PEA.   Other respondents said that they call Customs or write to Customs.  

4.     Do you assume the veracity of the documentation accompanying the cargo? (All said  that they simply depend on documentation provided including carrier drivers and respondents.) 

Examples of Responses:   Yes,  we are led to believe that the information provided by the exporter is accurate.  We assume the veracity and rely on the information provided.  We also perform verification of piece counts, but we do take the counts on the BOL (bill of lading).  We can only go on what the drivers transmit....


5.     How do you treat "in-bonds" with respect to ACE? (All do not use ACE for in-bonds. It appears that it may depend on whether the crossing is through the Northern or Southern border determining who uses ACE depending on circumstances.  

Examples of Responses: If there is a discrepancy, CBP  would asked to allow the filing of an amended In-Bond.  Sometimes they will and sometimes they will not allow us to file an amended 7512 form.   As a bonded carrier (we have) the authority to manifest "in-bonds" through ACE. 

6.     Tell me what you want to tell me, if anything, about ACE. (Most respondents had in one way  or another criticism of ACE and limit, when possible, the use of ACE since it is not preferred.)

Examples of Responses: ACE is not user-friendly and getting reports is difficult.  ACE is still NOT synchronized with ABI, so most brokers prefer to file with ABI until CBP can get their act together.   There is a lot of training that remains to be done with the field inspectors.  For example, if they release a trailer from the import lot and do not do the correct function key for release, it shows up in our files as not being released.  We then tell them we called the carrier and the carrier has confirmed that they got it.  CBP then comes up with the "CRAPPY" request to get them a copy of the Mexico "pedimento" which shows that it left Mexico.  They won't take our word that it has been released by them?????!!!! What a crock because it takes us time and expense (and no one pays us for this) to get the MX (Mexican) Pedimento and then they release the shipment in their records.  This also messes up things because if (we) actually put the real release date, then we may 'late' file the entry and charge the late entry fine to the Importer and now we have to again file paper work to show them it was their fault, originally, for not releasing the shipment timely.  Again, so much is spent on these, when they should have just accepted our word for it. 

Another said that there are still too many holes left to patch, too many basic needs left to fulfill, and not enough money in the CBP budget to complete everything in a timely manner.  CBP is pushing too far ahead with new pieces in ACE when leaving many problems unresolved.

Conclusion

Whatever one thinks of ACE, it is not a cargo security system or program as it is advertised to be for public consumption.  It's a Single Window, IT program which reveals nothing about real cargo to CBP.   Unlike the growing international movement to embrace a chain-of-custody system by other Customs administrations which embodies the need for verification of cargo at the time of stuffing at origin, DHS in all of its so-called security programs has no chain-of-custody system for the supply chain.  Only the Customs Trade Partnership Against Terrorism (C-TPAT) even mentions the intent to begin security at origin and maintain it until destination, and that only applies to those who volunteer to participate in C-TPAT.   Either DHS lacks an understanding of real-world supply chain security, is incompetence, makes decisions on politically correctness, or is in denial of what is really needed.  At best, it seems DHS is simply out of touch, or at worse, it is ignorant of modern comprehensive supply chain security developments and available off-the-shelf technology that would not only improve the bottom line of the user, but also solve the cargo knowledge issue which DHS demonstrates it is incapable of solving.

Citations: 

  1. Frequently Asked Questions for Automated Commercial Environ.ent,  ACE Frequently Asked Questions, July 2011, http://www.cbp.gov/linkhandler/cgov/trade/automated/modernization/ace/ace_faq.ctt/ace_faq.pdf
  2. ACE At a Glance Fact Sheet, Customs and Border Protection, http://www.cbp.gov/xp/cgov/newsroom/fact_sheets/trade/ace_factsheets/ace_glance_sheet.xml
  3. Frequently Asked Questions for Automated Commercial Environ.ent,  ACE Frequently Asked Questions, July 2011,
    http://www.cbp.gov/linkhandler/cgov/trade/automated/modernization/ace/ace_faq.ctt/ace_faq.pdf
  4. Recommendations and Guideline on Establishing a Single Window, Recommendation 33, Economic Commission for Europe, United Nations Centre for Trade Facilitation and Electronic Business, 2005, http://www.unece.org/cefact/recommendations/rec33/rec33_trd352e.pdf
  5. What is ITDS, ITDS e-newsletter, http://www.itds.gov/xp/itds/toolbox/background/background.xml
  6. Evaluation of DHS’ Information Security Program for Fiscal Year 2004, Office of Information Technology OIG-04-41, September, 2004, p.7.
  7. Kunio Mikuriya, Customs and business, equally reaping rewards from trade facilitation, WCO news, June 2011, pp. 10-11.
  8. Business Plan for a CEN Workshop Container Security & Tracking Devices’ technical characteristics and Security Messages’ standardization, SEVENTH FRAMEWORK PROGRAMME THEME 7 Transport including Aeronautics, May 18, 2010, p. 7. 

MarEx does not necessarily endorse any opinions herein.