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New US ‘trusted trader’ programs likely to be mandatory
American Shipper
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New technology may provide the expedited cargo clearance US importers say trusted trader programs like the Customs-Trade Partnership Against Terrorism (C-TPAT) have failed to deliver, but the trade-off will be mandatory participation.

US importers have long hoped that the federal government would be able to balance the need to screen inbound cargo with trade facilitation efforts that reward their consistent compliance, but the industry may soon find itself drawn into an environment of compulsory self-regulation.

“The days of voluntary cooperation are drawing to a close,” Altana AI CEO Evan Smith said during the virtual JOC LogTech20 conference in late October. “While this will impose new cost to service providers, it’s also going to unlock a transformative business opportunity. And that’s automatic customs pre-clearance.”

Smith’s company, which works with customs authorities, logistics integrators, and shippers and received a $7 million funding round in November, believes the next iteration of C-TPAT and other trusted trader programs will not be built around the private sector participating of its own volition in programs that provide elusive benefits. Rather, that next version of this concept will see the public sector requiring private entities, such as importers, sellers, and the logistics intermediaries upon which they rely, to directly share in the responsibility of mitigating cross-border trade risk.

Importers have long been disillusioned with C-TPAT, seeing the compliance burden it places on them as not commensurate with the expedited cargo benefits they expect to receive.

De minimis growth
E-commerce shipments have spiked in 2020 as the coronavirus disease 2019 (COVID-19) induced consumers to shop from home, making the lack of perceived benefits from trusted trader programs more acute. Much of that growth has come in the form of sub-$800 shipments that are not dutiable and allow overseas sellers to legitimately sidestep US Customs and Border Protection’s (CBP) most rigorous screening efforts.

“C-TPAT is still alive,” Amy Magnus, chairman of the National Customs Brokers and Forwarders Association of America and director of customs affairs and compliance at A.N. Deringer, told The Journal of Commerce. “The minimum security standards are revised and in place, the portal is up and running, C-TPAT reviews are being done remotely due to COVID. And the trusted traders are still looking for more benefits.”

Magnus’ perspective echoes concerns importers have voiced to The Journal of Commerce about a lack of expedited clearance for goods in accordance with their participation in C-TPAT. Recent congestion in US ports only exacerbated the issue.

But there may be a more constructive path forward for CBP and the private sector.

“Trade compliance oversight obligations will be shared between customs agencies and the trading community,” said Smith. “This environment for service providers will come to resemble the current requirements of financial service providers. That is, governments will increasingly ext legal oversight duties to the service providers of cross-border trade, just as they have done for financial services.”

Reliant on technology, this shift won’t be easy, but it is coming nonetheless.

“Logistics services providers and e-commerce marketplaces are being conscripted by the US and EU into ensuring the goods they move are safe and compliant,” he said. “Their oversight obligations are increasing, and so are the stakes of noncompliance.”

Paving the way
Smith said the way financial services providers have been pulled by regulators into a shared responsibility for ensuring financial transactions are legal and compliant shows this approach is workable and effective.

“The world’s largest financial institutions are in many ways an extension of government for ensuring financial compliance,” he added. “They regularly employ thousands of analysts and financial investigators with the task of ensuring against terrorist financing, money laundering, corruption and bribery, and sanctions violations. And they face penalties of billions of dollars when they fail to do so. This same paradigm shift is coming to trade, whether we like it or not.”

Despite its relatively recent founding in 2018, Altana has already tied up contracts with customs agencies on three continents, a sign its model is taking hold.

“I’m hearing uniformly from government representatives and the logistics and e-commerce companies themselves that this is coming,” Smith said. “In a sign of these things to come, the US Department of Treasury recently issued a finding against and assessed Amazon for penalties for hosting Chinese merchants on their e-commerce platform who had tier-2 supply chain relationships with sanctioned North Korean entities. Not just directly in violation, but two tiers out in the supply chain.”

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