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CNS Research StorySecuring and Facilitating Trade:
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In response to concerns about maritime security, U.S. Customs and Border Protection (CBP) developed and implemented a series of domestic measures to bolster port and shipping security, including the 24-Hour Advance Manifest Rule, the Container Security Initiative (CSI) and the Customs-Trade Partnership Against Terrorism (C-TPAT). However, the United States can not secure the international trading system on its own, so CBP has pushed to strengthen international maritime security by internationalizing these U.S. programs.
The adoption of the Framework of Standards to Secure and Facilitate Global Trade by the members of the World Customs Organization (WCO) in June 2005 marked a major success for U.S. efforts to internationalize its domestic maritime security policies. The Framework's adoption followed the adoption of the International Ship and Port Facility Security Code (ISPS Code) at the International Maritime Organization (IMO) in 2002. CBP Commissioner Robert Bonner stated that the WCO Framework will be the key to the future of international trade security and called on the world community to "implement the framework broadly and expeditiously."[2] However, the new measures are voluntary and so successful implementation will likely be hindered by limited WCO authority and the lack of appropriate enforcement measures to ensure compliance. Therefore, much greater cooperation between businesses and customs departments throughout the world will be required to ensure secure international trade. Successful cooperation will also depend upon meeting the needs of the developing world where the economic incentives of trade often trump security concerns. This threatens to sideline the security aspects of the Framework and may well reduce focus on the threats to international security that the Framework was intended to counter.
Background[3]
The Framework of Standards to Secure and Facilitate Global Trade was originally conceived as a trade facilitation measure, and developed out of efforts to standardize customs procedures. Even before the September 2001 terrorist attacks in the United States, the WCO had begun developing international standards for the submission of electronic manifest information to facilitate the movement of goods across borders. With international attention increasingly focused on vulnerabilities in the transport and shipping industries following the 2001 attacks and the Gioia Tauro incident, the WCO passed the "Resolution of the Customs Cooperation Council on Security and Facilitation of the International Trade Supply Chain" during its June 2002 meeting. Under that resolution, a task force, including senior customs officers from 50 countries, representatives from intergovernmental organizations, and private sector experts, was created to standardize the data elements necessary to identify high risk cargo and to facilitate the exchange of information between exporting and importing countries.[4]
The task force completed the first draft of the document that would become the Framework in June 2003, which was subsequently adopted during the December 2004 WCO Policy Commission meeting in Amman, Jordan. The first version of the Framework, however, was criticized by the private sector for being too complex. Industry representatives subsequently helped to redraft and streamline the Framework in March and April 2005, cutting seventeen pages and deleting a number of appendices.[5]
The Framework,
as ultimately finalized in June 2005, paralleled many initiatives by the U.S.
government aimed at improving maritime security. The WCO's adoption of
these measures essentially internationalizes U.S. policy in this area.
Washington's approach to maritime security has centered on four core
programs, along with the wide-spread use of enhanced detection technology. These
programs are:
Speaking before
customs officials from 22 countries on April 21, 2005, Robert Bonner, head of
U.S. Customs and Border Protection, outlined the importance of
internationalizing U.S. cargo standards. According to Bonner, while the U.S.
government has "better secured the movement of cargo to the U.S. in ways
that have improved the efficiency of trade .... these same principles
can--and should--be applied wherever in the world that trade moves,
whether it is from Pakistan to the U.K.--or North Africa to the ports of
Italy." Bonner continued that "private sector companies should have
one set of standards to comply with, not multiple and differing
standards."[7]
The Framework of Standards to Secure and Facilitate Global Trade was unanimously adopted by the 166 members of the World Customs Organization during its June 2005 session in Brussels, Belgium. (Since June, three additional states--the Kingdom of Tonga, El Salvador and Honduras--have acceded to the WCO, which brings the number of members to 169 as of December 2005.) The Framework is based on four principles that mirror the U.S. initiatives listed above, namely:
The WCO Framework was
built around a "customs-to-customs" pillar designed to enhance
cooperation and communication between customs agencies, and a
"customs-to-business" pillar that encourages businesses to adopt
voluntary security measures in exchange for expedited service at borders. Under
the Framework, advance cargo declarations have been streamlined to 17 common
data units that can then be used to assess the risk of the shipment being
compromised by terrorists.[9]
Promoting the Framework
Supply chain experts have consistently pointed to the trade benefits and efficiencies in customs procedures under the new WCO measures.[10] U.S. companies have expressed optimism about the new regulations and the possibility of streamlined customs and security measures. In an effort to convince both companies and WCO countries to adopt the Framework, IBM released its own study outlining "collateral benefits" that businesses could accrue through voluntary investment in supply chain security, including the possibility of eliminating much of the US$50 billion lost to theft each year by businesses around the world.[11] In a separate statement, Theo Fletcher, IBM's Vice President for Import Compliance, said that when IBM implements the new measures, "it will create efficiencies for us around the world, with fewer inspections and quicker clearance through international customs."[12]
Despite the positive feedback from companies, WCO adoption of the Framework is only the first hurdle for institutionalizing U.S. maritime efforts internationally. While 52 WCO members (including the EU) immediately submitted declarations of their intent to implement the Framework at the Brussels meeting in June 2005, the majority of WCO members were more reticent. In the months since the Framework's adoption, both governmental and private sector supporters have actively lobbied internationally to increase implementation of the new measures.[13] Officials from the United States, Japan and the EU have strongly promoted the Framework, and as of December 5, 2005, 122 of the total 169 WCO member states had signed letters of intent to implement the Framework.[14] In addition, members of Asia-Pacific Economic Cooperation (APEC) forum began work on their own "Framework for the Security and Facilitation of Global Trade" for the Asia-Pacific region based on the WCO Framework. Although proponents of the Framework were successful in getting countries as diverse as Iran, Paraguay and Lesotho to commit to the Framework within the first month of its adoption, other major trading nations such Chile and Thailand are still uncommitted.[15]
Framework supporters have combined three strategies to encourage the cooperation of governments and companies in implementing the new standards. First, in order to address the concerns of developing nations, the Framework has been interpreted broadly enough to tackle both the threats of international terrorism as well as other security issues important to countries in the developing world. In particular, U.S. officials have stressed how the Framework will be useful for detecting illegal trade in basic commodities, and for enabling participating countries to increase their customs revenue. This increase in revenue should help to offset the costs of implementing the Framework, and thereby deflect criticism that the measures only meet the security interests of the developed world by pushing the cost of maritime security onto exporting nations.
Second, developing countries often have limited capacity to implement measures such as the WCO Framework, so major trading countries, including the United States, have pledged to provide technical assistance and funding when necessary. According to one U.S. official, Washington plans to give up to US$20 million to developing nations in order to improve information technology infrastructure and telecommunication equipment for implementing the Framework.[16] The newly-developed Capacity Building Division within the CBP Office of International Affairs will direct this assistance. Canada, the EU, Japan, Australia, and New Zealand have all pledged to provide financial and technical assistance to participating states. [17] The WCO also intends to establish a monitoring committee that will help member states secure assistance from the World Bank and the International Monetary Fund for improving infrastructure related to the implementation of the Framework, as well as directing funds and needed expertise to participating developing countries.[18]
As part of the third strategy aimed at promoting the Framework internationally, proponents have touted the Framework's tangible benefits to businesses. Todd Owen, director of the U.S. government's C-TPAT program, predicted that as the standards are adopted, companies will choose to use ports in countries adhering to the Framework and will avoid countries that fail to adopt the standards. According to Owen, this tendency is already evident in the CSI and C-TPAT programs. Under these programs, the rate of inspection for containers from certified companies has fallen to one-sixth of the previous levels and inspection costs have dropped. Owen added that "some companies say, 'We spent $500,000 on C-TPAT compliance, but we got millions of dollars in savings in reduced inspection costs as a result,'" and that shippers avoid "environments they know are less secure. Participation in CSI has become a marketing tool that helps ports build their business. Companies and ports see participation as differentiators."[19]
Challenges to Implementation of the Framework
No set timetable has been mandated for implementation of the WCO standards, but most countries are expected to phase in the Framework over the next four years. However, countries are likely to run into a number of problems before achieving effective, broad implementation and enforcement of the Framework. Furthermore, many of the security benefits may not be realized if the quality of implementation varies greatly across countries.
Insufficient Legal Authority and Problems with Domestic Legislation
Adoption of the Framework is voluntary so a secure trade environment is dependent upon countries choosing to adopt and enforce the measures. The WCO has no enforcement mechanism to assure uniform compliance with the Framework. Compliance therefore depends on the political will of the participating states. In order to assure that states cooperate and that workable standards are implemented internationally, the United States and other Framework supporters will need to forge consensus between both the public and private sectors, and continue to consider the needs of the developing world.
Domestic political and legal issues will affect the Framework's implementation in each participating state. Many nations will need to update national legislation to allow the exchange of confidential trade information with customs offices in other countries.[20] Participating governments will need to recognize the authority of customs agencies in other countries, and abide by the designations of Authorized Economic Operators.[21] The capacity of domestic systems may be stretched as customs agencies begin to take on the added responsibility of monitoring exports along with imports. Additionally, the success of the business-to-customs plank of the Framework will depend upon the ability of industry to communicate openly with customs agencies about import and export shipments. Strengthening this relationship will be difficult as customs agencies are also charged with collecting customs revenue from these same businesses.[22]
Corruption in customs agencies will likely be the greatest obstacle to implementing the WCO Framework in the developing world. Stressing the scope of the problem, one former U.S. Customs official opined, "How many customs administrations are corrupt? I would say as a rule of thumb, all of the developing nations."[23] Rampant corruption makes effective enforcement of customs regulations impossible, and could ultimately doom the new Framework. The WCO and developed countries have pledged to provide technical and financial assistance, but this assistance is contingent upon the elimination of corruption in customs agencies--something very difficult to determine.[24]
Future of the Framework: Will Trade Facilitation Trump Security?
If customs agencies adopt uniform policies and drop complex reporting requirements, the WCO Framework likely will facilitate trade. However, assuming that the problems noted above can be resolved, the most important question remaining is whether the Framework will ultimately enhance the security of the international trading system and prevent terrorist attacks. The answer is not yet clear.
U.S. programs that provided the basis for the Framework have recently come under scrutiny for their lack of effectiveness. In a March 2005 report, the Government Accountability Office (GAO) raised concerns about insufficient personnel as well as the lack of adequate standards for the process used by CBP to validate the security practices of C-TPAT participants.[25] Two months before the report was released, two containers containing 32 smuggled Chinese immigrants were discovered by port personnel at the Port of Los Angeles; the container had been shipped by NYK Lines, a C-TPAT participant.[26] In a separate report in May 2005, the GAO also criticized CSI for insufficient overseas staffing and a lack of technical requirements for inspection equipment. As of September 2004, a total of 4,013 out of 14,356 containers (28 percent) referred by CSI staff to host country officials for inspection had not been inspected overseas.[27] As former Coast Guard Commander Stephen Flynn stated before the U.S. Senate Homeland Security and Governmental Affairs Committee in May 2005, "The voluntary nature of C-TPAT and CSI translates into it being a 'trust, but don't verify' system."[28]
The problems with insufficient capacity and varying standards in the C-TPAT and CSI programs will increase exponentially as the Framework extends internationally, especially to developing countries. As a result, the Framework might create new vulnerabilities that ironically open up maritime trade wider to the threat of terrorism. Without effective monitoring and inspection regimes in place, this new Framework could actually offer expedited service to terrorists who are able to use a "validated" company to ship WMD-related equipment and materials into the United States.
The manner in which the Framework has been presented to the international community will also affect how it is evaluated. Supporters of the new standards are promising countries and businesses that the Framework will bring significant benefits through trade facilitation. This assertion plays upon the needs of governments and customs authorities that have the dual responsibilities of encouraging trade and enhancing security in order to ensure the ability to trade. In many developing countries, the focus on encouraging trade and the revenue it generates far outweighs the focus on security. Additionally, if the gains in factors such as supply chain efficiency are not realized in a timely manner, many in the private sector will begin to abandon the program. Companies and customs authorities will then be more likely to side with trade facilitation over trade security when the two come into conflict.
Another concern about the Framework is how it will affect the way companies balance their responsibilities for trade security. The rewards for businesses that strengthen internal shipping security under the Authorized Economic Operator program may crowd out other security concerns. With limited budgets, companies may focus on the tangible rewards of enhanced shipping security and choose to shirk their responsibilities in other areas, such as export control compliance. This can be avoided if countries are encouraged to fuse physical shipping security and other security measures such as export control compliance under their domestic Authorized Economic Operator internal compliance programs.
In order to counter many of the problems arising from conflicting interests, experts have recommended promoting third-party inspections to alleviate both concerns over corruption and the inherent conflict of interest between the trade facilitation and security goals of customs agencies.[29] The hope is that the members of the WCO will acknowledge the necessity for concrete procedures to verify secure practices. Currently, few nations appear willing to open their customs procedures to international scrutiny, so the necessary consensus for this type of measure will be difficult to achieve.
Governments and the
private sector must understand that no single program will ever be entirely
sufficient to prevent terrorists from using trade networks for their objectives.
Measures that facilitate trade by providing predictable customs procedures and
regularity in the shipping system also create new
vulnerabilities.[30] Encouraging companies to
alter security practices in exchange for preferential treatment at the border,
without a corresponding change in the private sector's mindset, is
unlikely to improve defenses against terrorism. Dynamic threats must always be
countered with dynamic thinking and dynamic policies. The greatest potential
security benefit from the WCO Framework may be the creation of communication
networks among customs agencies and between government and business. Assuming
all parties share a desire to protect shipping, these networks can be great
tools for exchanging timely information and for preventing illicit use of the
international shipping system.
Sources:
[1] On October 18, 2001, port workders
accidentally discovered the stowaway as he was attempting to widen ventilation
holes in the container. After his arraignment and release on bond, he
disappeared before authorities were able to establish his identity. For more
information, see Organization for Economic Co-operation and Development,
Maritime Transport Committee, Security in Maritime Transport: Risk Factors
and Economic Impact, July 2003, pp. 7-8.
[2] R.G. Edmonson, "Bonner Praises
Trade Partnership," Journal of Commerce, November 3, 2005, pg. 1,
in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[3]
Most of this section is derived from Randall Beisecker, "World Customs
Organization Adopts Standards for Secure Trade," International Export
Control Observer, Issue 1, October 2005, pp.
12-13.
[4] John Frittelli, "Port and
Maritime Security: Background and Issues for Congress," Congressional
Research Service Report to Congress, December 5, 2003,
<http://www.fas.org/sgp/crs/homesec/RL31733.pdf>.
[5]
R. G. Edmonson, "Safe and Sound; World Customs Organization Drafts New
Guidelines that Facilitate Trade in a Secure Environment," Journal of
Commerce, May 16, 2005, pg. 14, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[6]
For a discussion of each of the programs, see Robert Bonner, "Remarks by
Robert C. Bonner: CBP Trade Symposium," November 3, 2005,
<http://www.cbp.gov/xp/cgov/newsroom/commissioner/speeches_statements/11032005_trade.xml>.
[7]
Robert Bonner, "Remarks by Robert C. Bonner, Supply Chain Security in a
New Business Environment, Miami, Florida," April 21, 2005,
<http://www.customs.gov/xp/cgov/newsroom/commissioner/speeches_statements/apr21_2005_miami.xml>.
[8]
World Customs Organization, Framework of Standards to Secure and Facilitate
Global Trade, June 2005,
<http://www.wcoomd.org/ie/En/en.html>.
[9]
The seventeen data elements include the names of the exporter, the consignor,
carrier, importer, consignee, notification party, delivery destination,
transshipment country(ies), agent, tariff code of the goods, United Nations
Dangerous Goods number, type of package, total gross weight, equipment
identification number, container seal number, total invoice amount and a unique
consignment reference number.
[10]
"WCO Adopts Framework to Secure and Speed Global Trade,"
Manufacturing Business Technology, August 1, 2005, pg. 48. The Integrated
Supply Chain Management Program at the Massachusetts Institute of Technology
released a study outlining trade benefits for companies, including improved
process efficiencies and consistency, loss reduction and faster cycle times. As
MIT Professor Jim Rice stated, "The benefits will apply to any
manufacturer moving goods across borders. They will be dealing with a limited
set of practices, and customs clearances will become more efficient.
Ultimately, countries that don't adopt the framework are going to be at a
disadvantage."
[11] "World
Customs Organization to Approve New Guidelines for Trade Security,"
Baltimore Sun, June 24, 2005, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[12]
Jacqueline Emigh, "Pending Security Policy May Unkink Global Supply
Chain," CIO Insight, June 2, 2005,
<http://www.cioinsight.com/article2/0,1397,1823392,00.asp>.
[13]
Alan Field, "Companies Lobby for WCO Standards; IBM Urges Governments to
Enact Framework for Supply-Chain Security," Journal of Commerce,
July 11, 2005, pg. 17, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
For example, in the week following the adoption of the Framework, IBM's
Theo Fletcher traveled to 12 countries considered essential to the
company's supply chain to lobby governments to commit to the new
measures.
[14] As of December 5, 2005, the
following countries had expressed their intention to implement the Framework
(arranged by WCO regional groupings): South America, North America,
Central America and the Caribbean: Argentina, Bermuda, Bolivia, Brazil,
Canada, Cuba, Dominican Republic, Ecuador, Guatemala, Jamaica, Mexico,
Nicaragua, Panama, Paraguay, St. Lucia, Trinidad and Tobago, United States;
Far East, South and South East Asia, Australasia and the Pacific
Islands: Afghanistan, Australia, Cambodia, China, Hong Kong (China),
India, Indonesia, Iran, Japan, Korea (Republic of), Macao (China), Malaysia,
Maldives, Mongolia, Myanmar, Nepal, New Zealand, Papua New Guinea, Philippines,
Singapore, Sri Lanka, Vietnam; East and Southern Africa: Angola,
Botswana, Burundi, Comoros, Ethiopia, Kenya, Lesotho, Madagascar, Mauritius,
Mozambique, Rwanda, South Africa, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe;
Europe: Albania, Azerbaijan, Croatia, Former Yugoslav Republic of
Macedonia, Israel, Kazakhstan, Kyrgyzstan, Moldova, Norway, Russian Federation,
Serbia and Montenegro, Turkey, Ukraine, Member States of the European Union;
North of Africa, Near and Middle East: Bahrain, Egypt, Jordan,
Kuwait, Morocco, Qatar, Saudi Arabia, Sudan, Tunisia, United Arab Emirates,
Yemen; West and Central Africa: Benin, Burkina Faso, Cameroon,
Cape Verde, Congo (Republic of the), Côte d'Ivoire, Democratic
Republic of the Congo, Gabon, Ghana, Guinea, Mali, Mauritania, Niger, Nigeria,
Senegal, Sierra Leone, Togo. Communication Service of the World Customs
Organization, e-mail correspondence with the author, received December 12,
2005.
[15] R. G. Edmonson, "Potential
Barrier; Corruption in Some Countries Could Thwart Goals Set in WCO Framework
for Supply-Chain Security," Journal of Commerce, July 11, 2005, pg.
16, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[16]
Angela Greiling Keane, "Implementing WCO Standards," Traffic
World, June 28, 2005, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[17]
Robert Bonner, "Remarks by Robert C. Bonner: CBP Trade Symposium,"
November 3, 2005,
<http://www.cbp.gov/xp/cgov/newsroom/commissioner/speeches_statements/11032005_trade.xml>.
[18]
R. G. Edmonson, "WCO's Challenge to Customs Agencies; Bonner Says
Nations Must Take Bold Steps to Implement Reforms," Journal of
Commerce, July 4, 2005, pg. 40, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[19]
Alan Field, "Companies Lobby for WCO Standards; IBM Urges Governments to
Enact Framework for Supply-Chain Security," Journal of Commerce,
July 11, 2005, pg. 17, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[20]
Alexander Mineyev, "WCO Framework of Standards to Help Customs Fight
Terrorism," ITAR-TASS News Agency, May 10, 2005, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[21]
Courtney Tower, "WCO Trade Regime Faces Hurdles," Journal of
Commerce Online, May 13, 2005, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[22]
R. G. Edmonson, "Safe and Sound; World Customs Organization Drafts New
Guidelines that Facilitate Trade in a Secure Environment," Journal of
Commerce, May 16, 2005, pg. 14, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[23]
R. G. Edmonson, "Potential Barrier; Corruption in Some Countries Could
Thwart Goals Set in WCO Framework for Supply-Chain Security," Journal
of Commerce, July 11, 2005, pg. 16, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[24]
As one WCO official noted, "you don't send out a questionnaire to
ask, 'Do you accept bribes?" R. G. Edmonson, "Potential
Barrier; Corruption in Some Countries Could Thwart Goals Set in WCO Framework
for Supply-Chain Security," Journal of Commerce, July 11, 2005, pg.
16, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[25]
U.S. Government Accountability Office, "Cargo Security: Partnership
Program Grants Importers Reduced Scrutiny with Limited Assurance of Improved
Security," Report GAO-05-404, March 2005,
<http://www.gao.gov/new.items/d05404.pdf>.
[26]
Toby Eckert, "Customs Commissioner Says He's Improving Port
Security," Copley News Service, May 26, 2005,
<http://www.signonsandiego.com/news/nation/terror/20050526-1325-cnsports.html>.
[27]
Richard Stana, "Homeland Security: Key Cargo Security Programs Can Be
Improved," U.S. Government Accountability Office, Report GAO-05-466T, May
26, 2005,
<http://www.gao.gov/new.items/d05404.pdf>,
p. 21.
[28] Toby Eckert, "Customs
Commissioner Says He's Improving Port Security," Copley News
Service, May 26, 2005,
<http://www.signonsandiego.com/news/nation/terror/20050526-1325-cnsports.html>.
[29]
R. G. Edmonson, "Potential Barrier; Corruption in Some Countries Could
Thwart Goals Set in WCO Framework for Supply-Chain Security," Journal
of Commerce, July 11, 2005, pg. 16, in Lexis-Nexis,
<http://www.lexis-nexis.com>.
[30]
CBP has identified "certainty and predictability at a global level"
as one of the primary benefits of the Framework. U.S. Customs and Border
Protection, "World Customs Organization Framework of Standards to Secure
and Facilitate Global Trade: Implementation and the Role of the Private
Sector," presentation for the Fifth Trade Symposium Globalizing Trade
Security and Facilitation--Realizing the Promise of the WCO Framework,
November 3, 2005, powerpoint slides available at
<http://www.cbp.gov/linkhandler/cgov/import/communications_to_trade/trade_2005/panel_1_wco_framwork.ctt/panel_1_wco_framework.pps#259,5,Four Core Elements>.
View previous Research Stories.
Author(s): Randall Beisecker
Related Resources:
Terrorism,
Research Story
Date Created: December 22, 2005
Date Updated: -NA-
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