Intermodal Supply Chain Security

Introduction

The effectiveness and efficiency of the supply chain system has been a historic and fundamental matter of concern both for the government and business organizations. This is because supply chains are vulnerable to various disruptions such as operational difficulties, accidents and natural disasters. However, the emergency of international crimes and terrorism against developed countries underscores the vulnerability of supply chains in the modern global society (World Customs Organization, 2005). Accordingly, the approach to supply chain security has transformed from being an objective of either the private or the public to a joint objective of the two sectors. The underlying principle behind this new approach is that it is increasingly important to utilize the potential of both the private and public sectors in order to ensure cost effectiveness and reliable supply chain security (Blanchard, 2010). This paper compares two of the nine public–private joint security programs notably the Customs Trade Partnership against Terrorism (C-TPAT) and the Authorized Economic Operator (AEO). In doing so, the other seeks to provide adequate understanding of the two security programs so that intermodal supply chain companies can make informed and sound decisions on the best program to adopt.

Definition

The Customer- Trade Partnership Against Terrorism (C-TPAT) is a joint business-government initiative established in November 2001 after the 9/11 terrorist attack with an aim of protecting the US from terrorism and hence safeguard its economic viability and that of the world at large (World Customs Organization, 2005). According to the available literature, the program was established on a humble beginning with seven major supply chain companies in 2008 and expanded to accommodate over 8,200 partners ranging from sea, rail and highway carriers to custom brokers, marine port operators and manufacturers in the US and its neighbors (Peterson & Treat, 2008).

On the other hand, the Authorized Economic Operator (AEO) is a supply chain security program developed by the World Customs Organization under the framework of Security Standards to secure and facilitate global trade (SAFE framework) and was adopted in 2005 (World Customs Organization, 2005). The program provides a number of standards to be adopted by all operators with an aim of improving security and subsequently reduce the risks for the importation and exportation of illegal materials. The program also strives to eliminate potential accidents which could cause tremendous damages to cargos irrespective of the type of materials contained in the containers (Blanchard, 2010). Simply put, the main objective of AEO is to improve world trade by enhancing mutual recognition between the AEO programs in different nations.

Similarities

Both C-TPAT and AEO strives to accomplish the common goals of ensuring supply chain security management which ranges from the management of facilities and cargo to human resource, information and business network and company management. Available literature from Customs Border Protection (CBP), supply chain companies are required to meet several requirements in order to qualify to be members of C-TPAT. Top on the list is that they should ensure that consolidated procedures are put in place to protect the shipment of illegal materials (Gutierrez & Hintsa, 2006). A series of appropriate measures are recommended by C-TPAT including but not limited to extremely supervised loading and offloading of materials in shipment areas, counting, marking, weighing, and verification of container seals and documentation of cargo containers.

Secondly, C-TPAT holds that all rail facilities and buildings should be made of materials which offer resistance to the entry of unlawful materials. This requirement helps to protect external attack on properties such as rail yards and buildings and hence eliminating the probability of criminal attacks on the communications infrastructure.

Still, C-TPAT underscores the importance of sound human resources management in this industry as a key measure of ensuring supply chain security. Evidently, supply chain companies are required to screen all the employees and interview them to identify their background and subsequently verify their application documents (Peterson & Treat, 2008). This has the implication that C-TPAT recognizes the fact that employees in the supply chain industries can be utilized or manipulated by criminals and terrorist to threaten security. To further eliminate these risks, companies should have in place procedures to deny former employees or suspected employees the opportunity to access any facility and subsequently withdraw their securities (Blanchard, 2010).

Employee training and development is another area of concern in C-TPAT because it ensures that they have the necessary skills and knowledge to enhance their ability to detect security threats, uphold the integrity of cargos and ensure authorized access to facilities (Caldwell, 2009). In furtherance of this, assessing business partners should be grounded on written security procedures and agreements.

In addition to this, any proposal made to the customs should be accurate and complete and should be submitted via an automated means deemed more secure by the program before the arrival of the materials for inspection (World Customs Organization, 2005). This is because any inconsistencies between the submitted manifestos and the information gathered during the inspection process will be deemed as a threat to the security and this may call for further investigation leading to congestion, location of extra resources and disruption of operations. Available research findings show that such problems have far reaching negative impacts both to the business organization and the government at large (Peterson & Treat, 2008).

Still to be mentioned here is that communication and information systems should be utilized in the supply chain industry and protected by assigning passwords to all individuals (Caldwell, 2009). To enhance this measure, C-TPAT holds that the passwords should be subject to change and a mechanism should be put in place to detect unauthorized access to sensitive data. Additionally, all companies should ensure and uphold the physical integrity of transportation of the materials (Gutierrez & Hintsa, 2006). Since security systems under C-TPAT focus much on the shipment terminals, companies should ensure that containers which have been approved from the country of origin reach the intended terminal safely.

In a research conducted by the Customs and Border Protection agency shows that members of C-TPAT enjoy up to eight times fewer inspections as compared to non members. This has the implication that there is reduced cost imposed by CBP in releasing the goods (Thomas, 2010). It is also noted in the report that in cases where more inspections are required, the container is maintained at the front of the inspection line. Fewer inspections of containers also results from the elimination of random check ups and frequent inspections on containers belonging to the members.

Although the requirements for the qualification of AEO in the European Union depend not only on the type of certificate obtained but also on the business activities carried by the applicant, they lie within and beyond the scope of C-TPAT (Sherman et al., 2009). According to the SAFE framework of standards, companies are required to have strong financial standing which is sufficient enough to ensure commitment to the SAFE framework standards with respect to the type of business (Danet, 2005). Secondly, the applicant should not have been involved in any crime over a given period of time which is determined by the AEO program in that nation (United Nations, 2008). Thirdly, the applicants should have in place a mechanism of keeping records which will enable auditing of materials by customs as well as to have sound control system to enable internal access of records by the customs consistently with the requirements of the nation programs (Blanchard, 2010).

Still to be mentioned here is the need to have officials in local areas to ensure that early detection and notification of any suspected cargo to the customs and to protect the confidentiality of any information which is deemed sensitive to security by the customs (Sherman et al., 2009). The AEO recognizes the importance of human resource management in enhancing security and therefore it requires applicants to screen employees and to periodically identify their back grounds in order to detect and deal with any unauthorized person (United Nations, 2008). Accordingly, employees should be trained to enhance their skills in detecting potential security threats involved in international supply of goods as well as learning how to work in unusual environment. Further to this, buildings and rail yards should be constructed with materials which are resistant to the entry of unauthorized individuals (Danet, 2005).

Another worthy noting requirement is that applicants should develop security guide manuals which are in line with the WCO SAFE framework on security as well as to ensure that seals which are used by all business partners meets the existing standards set by ISO requirements and that only authorized personnel are allowed to distribute and inspect the seals using advanced electronic systems (Ireland, 2009).

Differences

Based on the definition and requirements of C-TPAT and AEO security programs, it can be appreciated that there are major differences between the two. One of the key differences is that the requirements of AEO go beyond the scope of C-TPAT. Evidently, C-TPAT is strongly rooted on the complex US legal system which is obligatory and still contained in the requirements of AEO and this explains why the AEO is not incorporated in C-TPAT (Danet, 2005). Just to illustrate, the AEO requires applicants to have local officials to assist in early notification and identification of suspected containers. The requirement is obligatory in USA as evidenced in the Bio-Terrorism Act.

Secondly, it can be noted that there are requirements in AEO which are neither available in the USA laws nor in C-TPTA. This has indeed being a source of controversy to the agreement on mutual recognition between the two programs (Sherman et al., 2009). Evidently, AEO requires that applicants should have strong financial standing sufficient enough to ensure compliance and commitment to the program. This requirement is neither included in C-TPAT nor in the laws of US.

Another worthy noting difference is that AEO is much focused on implementing requirements related to customs (Thomas, 2010). Markedly, the implementation of AEO in the European Union is grounded on SAFE framework developed by WCO whose main objective is to promote world trade by harmonizing customs standards hence ensuring more secure internal movements of goods. This has the implication that custom services in different member nations must meet a certain standard criteria as long as it does not affect the country’s exports. On the contrary, C-TPAT is established on the US legislation and does not impose any customs requirement which is outside the framework of the nation’s legislation (Ireland, 2009).

Another major difference is that AEO in the context of WCO Framework of Security Standards to secure and facilitate global trade provides a unique opportunity for each nation to establish its own AEO program which is consistent with its customs and extends it in its own pace to connect with other AEO programs in other nations (Thomas, 2010). This serves the purpose of enhancing confidence in products available in that region while improving the quality of the products, strengthening security policies and promoting international trade exchange within the region. On the other hand, C-TPAT pays less attention to harmonizing world trade customs since it does not involve exports to other countries but rather on imports to the US (Ireland, 2009). It is therefore much concerned with anti terrorism laws in US and that is why all requirements are within the framework of US legislation.

Further to this and according to the WCO Director for Compliance and Facilitation, Michael Schmitz, the AEO provides minimum requirements which are not rooted in any nation’s legislation and therefore member nations are given the opportunity to exploit their creativity and potential while still complying with the requirements (United nations, 2008). Member discretion is strongly grounded on this point because member nations implement AEO program at their own sustainable pace while exercising the individual common sense to ensure compliance with the SAFE framework of standards. This point is evidenced when the Policy Commission and Council endorsed the High Level Strategic Group to evaluate the character and size of small and medium sized business organizations as a requirement to join AEO programs, an opportunity which otherwise could have been impossible without altering the SAFE framework standards (Blanchard, 2010). On the contrary, the requirements of C-TPAT are supreme and cannot be altered or manipulated in any way to accommodate unqualified businesses because changes to the requirements will bring about a change to national laws.

Conclusion

All things considered, it can be appreciated that both programs have common goals in ensuring supply chain security management which ranges from the management of facilities and cargo to human resource, information, business network and company management. However, the security measures taken by the two programs in order to achieve the common goals differ in one way or another. The major difference noted was the fact that C-TPAT is much focused on anti terrorism efforts and imports to the US and thus its requirements are within the framework of US legislation. On the contrary, AEO is much focused in harmonizing world trade customs and therefore it provides an opportunity for every nation to develop an AEO program at its own sustainable pace and interconnect the system with other nations’ AEO program in the region

References

Blanchard, D. (2010). Supply Chain Management Best Practices. New York: John Wiley and Sons.

Caldwell, S. C. (2009). Supply Chain Security: CBP Works with International Entities to Promote Global Customs Security Standards and Initiatives, But Challenges Remain. San Francisco: Diane Publishing.

Danet, M. (2005). SAFE Framework of Standards to Secure and Facilitate Global Trade. World customs Organization. Retrieved on 10^th Dec, 2011 from http://ec.europa.eu/taxation_customs/resources/documents/customs/policy_issues/customs_security/normes_wco_en.pdf

Gutierrez, X & Hintsa, J. (2006). Voluntary Supply Chain Security Programs: A Systematic Comparison. Cross-Border Research association. Retrieved on 10^th Dec, 2011 from http://www.cross-border.org/pdf/lyon2006-voluntaryscs-gutierrez-etal-may2006.pdf

Ireland, R. (2009). The WCO SAFE Framework of Standards: Avoiding Excess in Global Supply Chain Security.  World customs Organization Research Paper. Retrieved on 10^th Dec, 2011 from http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/research/safe_framework3.pdf

Peterson, J & Treat, A. (2008). The Post-9/11 Global Framework for Cargo security. Journal of International commerce and Economics. Retrieved on 10^th Dec, 2011 from http://usitc.gov/publications/332/journals/cargo_security.pdf

Sherman, M. D., Jarreau, J. S & Brew, J. B. (2009). U.S. customs: a practitioner’s guide to principles, processes, and procedures. Chicago: American Bar Association.

Thomas, A. R. (2010). Supply chain security: international practices and innovations in moving goods safely and efficiently. California: ABC-CLIO.

United Nations. (2008). Review of Maritime Transport 2008. New York: United Nations Publications.

World Customs Organization. (2005). Framework of Standards to Secure and facilitate Global Trade. Retrieved on 10^th Dec, 2011 from http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Press%20releases/Framework_of_standards_brochure_eng.pdf

.