Border-jumping opportunity: new U.S. Customs program opens up fast lane to low-risk importers.

Imagine a box of shirts covered with anthrax being opened at a crowded Wal-Mart in America's heartland or a dirty bomb crossing the border under the hood of a hot-off-the-assembly-line sedan.

These nightmare scenarios have been batted about in the media and in security circles ever since the Sept. 11 attacks, and the U.S. Department of Homeland Security is enlisting the help of the private sector to ensure terrorists don't hitch a ride on the back of an everyday business venture.

C-TPAT, or the Customs-Trade Partnership Against Terrorism, focuses on the entire supply chain of an importer to the United States and gives Customs officials access to corporate information, allows on-site visits and basically gives U.S. government officials working abroad a look at the inside of private-sector operations.

In return for their cooperation and proven diligence in policing their own infrastructure, participating companies will receive benefits that include fast-track passage across the border and low-risk status with U.S. Customs.

"Pre-screen. Let's stop it at the first port," U.S. Customs attache in Mexico, Luis Alvarez, said at a recent meeting with private-sector security experts. "[Top Homeland Security officials] Asa Hutchinson and Tom Ridge are reaching out to the trade community. We can't do this alone."

It all sounds great--companies get favored status at the border for essentially making the world a safer place. However, many insiders doubt the notoriously bureaucratic Customs Department (now part of the DHS) can pull off a project that requires sending inspection teams to all comers of the world--from inspecting trucks in Honduras to eyeballing cargo being loaded onto a ship in the Philippines.

PRIVATE-SECTOR SKEPTICISM

The event featuring Alvarez was organized by AMCHAM/MEXICO to promote CTPAT and help companies get a handle on this new program, and it was attended by leaders of industry from around the country--Proctor & Gamble, Kroll, IBM, DaimlerChrysler and General Motors were among the participants.

In an open discussion, several industry experts complained about the lack of response to their initial queries and expressed skepticism about Customs being able to monitor its CTPAT members effectively and dedicate the manpower necessary to make it work.

However, they all recognized the fundamental value of a program, which is a move by the Bush administration to further weave economic and homeland security into the same cloth.

"This is something companies should be doing on their own anyway," said Jon French, the managing director of risk consulting firm IPSA International de Mexico.

And that is how most industry insiders approached the plan--as an opportunity to improve their own internal security, which struggles against a range of problems from petty theft to drug traffickers using a firm's infrastructure to move their product.

Kevin O'Brien, the director of security services group of Kroll Mexico, has made several trips to Central American facilities recently to audit the supply chain for various companies. His contracted firms are interested in either coming on board with C-TPAT or simply monitoring their own operations to avoid being associated with a potential terrorist attack.

"A lot of companies say, 'This is one way to put a closer eye on that shipping company that we use,'" he said.

SERPENTINE SUPPLY CHAIN

Using the example of a Honduras-based company, O'Brien broke down the supply chain, noting how a product moves from a corporate plant to the Port of Cortes, where it then passes local inspection. Then the shipping company assumes responsibility, and they may hold it overnight depending on the availability of shipping, and then the cargo is off to Miami from where it is distributed by a truck company. "There are a lot of people that have their hands in this," said the Miami-based O'Brien. "And it is in the corporation's best interest to check everything."

For Mexican-based operations, the problem most cited by security experts is ground or rail transportation from the plant to the border, and many companies have served as an unwitting carrier for massive drug shipments in the past. The worry now, of course, is that they might be unknowingly shipping something much more dangerous.

"There are so many issues with transportation. Narcos using your own infrastructure, for instance," said Ulla Pentinpuro, the associate director of corporate investigations for Control Risks Group, which represents the interests of various Fortune 500 companies.

Pentinpuro said most of her security issues deal with extortion, kidnapping and fraud, but transportation compromise has been turning up more and more often. "Say we discover that 200 kilos of cocaine are arriving at one of our plants in a shipment with scrap metal," she said. "Who has the responsibility?"

SHARED PROBLEM

This blurring of corporate and governmental responsibility is at the core of C-TPAT, and the U.S. government ever since the Sept. 11 attacks has repeatedly stressed the importance of approaching economic and homeland security from the same perspective. U.S. officials openly admit needing help securing the border and ports that serve as potential entry points for terrorists and their weapons, and leading importers to the United States have expressed their dream of dealing with one, efficient entity while crossing the border. And ideally, C-TPAT would do that--streamline the often hassle-littered process of getting from International Point A to International Point B and lower the risk of a deadly shipment crossing into the United States.

"This is not to say that you won't be scrutinized, but you will get less inspections, even in a red alert, when there is 100% inspection," Alvarez said in outlining some of the benefits to low-risk importers.

Although efforts to get the trade partnership off the ground were delayed with the Iraq invasion, deadlines remain in place to open the first CTPAT fast lane in El Paso, Texas, on Sept. 30. [Detroit on the U.S.-Canada border already is operating as a CTPAT crossing].

By January, seven C-TPAT crossings are expected to be in place along the Mexico-U.S. border. An office will be set up to oversee the program, which will be in either McAllen or Laredo, Texas. "This only started here in April. It is a work in progress," said Alvarez.

PATIENCE URGED

While some companies have expressed frustration with this "work in progress" and claimed their long-filed applications had not yet been answered, Alvarez urged patience with the project. Most of the insiders in the daunting field of international trade understood the trouble in getting a program of this magnitude in place.

"Right now it is conceptually very strong, but we have to devote the resources for it to be a success," said Garrick Taylor, the director of policy development for the Border Trade Alliance, a nonprofit organization based in Phoenix that works to facilitate trade between Nafta partners (see related story, p. 48). "Until that happens you will continue to hear frustration from the private sector. This is not a matter of filling out a postcard and mailing it in, not when we are talking about security."

And while the program is advertised as a responsible, civic-minded move on the part of corporations to prevent becoming an unwitting accomplice to terror, the growing private-sector interest for the program can largely be traced to control-minded companies' desire to get a handle on their own supply chains.

In this regard, C-TPAT serves as an impetus to ensure shipments will not be tainted with drugs and that no warehousing foreman has sticky fingers--colloquially known within security circles as "loss prevention."

"In reality, a lot of companies are interested in the program because it improves overall security and exposes, for example, internal theft," said O'Brien. "In a loss-prevention manner, these C-TPAT recommendations are great."

* How to Join C-TPAT

1. Review internal security. This self-assessment must be made in light of C-TPAT security recommendations jointly developed by U.S. Customs and the trade community.

2. Complete a supply chain security questionnaire.

3. Submit a signed agreement to Customs, confirming commitment to C-TPAT and its rules.

4. Check with application instructions (broken down according to where the applicant is in the supply chain) listed on the Customs web site, www.customs.gov.

Matthew Brayman is editor of BUSINESS MEXICO.