June 16, 2010

N.Y. lawmaker takes up 3PL fight for C-TPAT eligibility

U.S. Rep. William Owens says barring non-asset-based 3PLs from participation in security program ignores realities of how business functions.

By Mark B. Solomon

For more than 18 months, the group representing the nation's third-party logistics service providers (3PLs) has waged a lonely and futile battle to convince the U.S. Bureau of Customs and Border Protection (CBP) that non-asset-based 3PLs should be allowed to join the Customs-Trade Partnership Against Terrorism (C-TPAT), one of the agency's primary tools to fight terrorism while facilitating the flow of commerce.

Now the battle has been joined on Capitol Hill.

Rep. William L. Owens (D-N.Y.), whose district spans the state's northernmost region and sits adjacent to the U.S-Canadian border, has taken up the industry's cause. In a May 6 letter to Customs Commissioner Alan Bersin, Owens said CBP's policy to limit C-TPAT participation to 3PLs that own transport and warehousing assets is a "disservice to the safety of our citizens" because millions of trucks cross U.S. borders each year under the direction of 3PLs who don't own or operate the assets.

Owens also took issue with CBP's decision to exclude non asset-based 3PLs from C-TPAT while allowing customs brokers, non-vessel operating common carriers, ocean freight forwarders, and cargo consolidators to join. It makes no sense that a customs broker that may own no assets and is not controlling the physical load can enroll in C-TPAT while a 3PL cannot, the lawmaker said in his letter to Bersin.

"It appears to me that [the policy] does not take into account how business actually functions but rather tends to impede how business functions," said Owens, who before being elected to Congress in November 2009 spent most of his career as an attorney in northern New York. Among his clients were firms that did cross-border trade with Canada.

In early June, CBP notified Owens' office that it had received his letter and was determining how to proceed. The Transportation Intermediaries Association (TIA), which represents the nation's 3PLs and has been lobbying CBP for its members to be included in C-TPAT, is expected to meet with Bersin by the end of June, according to an official close to the situation.

Under the eligibility requirements for 3PLs that went into effect on Jan. 1, 2009, intermediaries that only do business in the domestic U.S. trade are also excluded from C-TPAT participation. In addition, 3PLs must prove they are licensed or bonded by the Department of Transportation, the Federal Maritime Commission, the Transportation Security Administration, or CBP. They must also maintain a staffed office in the United States, and cannot contract out a service if the contractor then plans to outsource the work to a company not enrolled in C-TPAT.

Under C-TPAT, which was developed following the 9/11 terrorist attacks, companies submit plans to CBP showing they have acceptable security measures in place throughout their supply chains. Those that pass an audit of their security standards and procedures receive expedited clearance of cargo entering U.S. commerce.

CBP has said its eligibility requirements for C-TPAT are designed to prevent companies with bare-bones operations such as a computer, a desk, and a phone from joining the program. The agency also wants to restrict C-TPAT enrollment to providers who engage in international commerce because international origin points are considered the most vulnerable nodes of the supply chain.

There are approximately 16,000 3PLs operating in the United States, according to TIA estimates. Many of them are pure intermediaries and own no assets at all, it said. U.S.-based 3PLs generate about $130 billion in annual revenue, according to estimates from consulting firm Armstrong & Associates.

More articles by Mark B. Solomon

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