Proposed Supply Chain Security Legislation would have Major Impact on Importers

International Alert

Following the uproar over Dubai Ports World’s proposed purchase of P&O’s U.S. port operations, the U.S. Congress is fixing its attention on supply chain security issues as never before. In the last three weeks alone, two major legislative proposals have been introduced in the House of Representatives. These proposals may significantly impact U.S. importers and other companies that are directly involved in international trade.

SAFE Port Act (H.R. 4954) and GreenLane Maritime Security Act (S. 2008)

The SAFE Port Act introduced with bipartisan support in the House of Representatives on March 14, 2006 is substantially similar to the GreenLane Maritime Security Act (S. 2008) previously introduced in the Senate. Among other things, these bills would increase funding for port security grants, create a Director of Cargo Security Policy, seek to improve interagency cooperation on container security issues, require that the Department of Homeland Security (DHS) submit reports and formulate action plans on container security issues (e.g., installation of radiation detection equipment at U.S. ports, etc.), and bolster existing programs such as the Container Security Initiative and the Customs-Trade Partnership Against Terrorism (C-TPAT). The bills would also require Customs to consider expanding advance information submission requirements to cover purchase orders, shippers’ letters of instruction, commercial invoices, letters of credit, certificates of origin, advance shipping notices, and vessel stow plans i.e., categories of information well beyond those currently required under the 24-hour advance manifest rule.

The most significant and immediate impact on individual importers would come from the bill’s proposed reforms to C-TPAT. While leaving the “voluntary” nature of the C-TPAT program unchanged, the bills would increase the number and rigor of the C-TPAT program requirements. For example, all C-TPAT participants would have to be validated within one year of entry into the C-TPAT program, and revalidated every three years. Companies that fail their validations could be denied C-TPAT benefits or be suspended or expelled from the program -- subject to an administrative appeal process. The most significant changes to the C-TPAT program would occur through the replacement of current “Tier Three” C-TPAT status with a new status called “GreenLane” status. (“Tier Three” C-TPAT status is the highest level of C-TPAT status, reserved for companies that exceed current C-TPAT requirements.) Although there is no immediate provision for increased benefits for “GreenLane” C-TPAT members as compared with benefits currently received by “Tier Three” C-TPAT members, “Greenlane” C-TPAT members would have to meet significantly more onerous requirements than “Tier Three” C-TPAT members currently do. Notably, “GreenLane” members would be required: (a) to submit greatly expanded information on shipments prior to loading, (b) to use only vessels with a vessel security plan approved under the Marine Transportation Security Act or the International Ship and Port Facility Code, and (c) to use container security devices that exceed standards established under C-TPAT, among several other new requirements.

As currently written, the SAFE Port Act and GreenLane Maritime Security Act leave several fundamental questions unanswered. For example, they fail to address the status of C-TPAT members who import non-containerized merchandise, stating that DHS, “may consider the potential for participation in the GreenLane Program by importers of non-containerized cargoes.” This formulation leaves uncertain whether non-containerized merchandise will be eligible for “GreenLane” benefits -- such as priority access to U.S. seaports that have re-opened after port closures associated with security events. This result appears to be particularly inequitable since many types of non-containerized merchandise e.g., a steel coil within which it would be particularly difficult to secrete a weapon of mass destruction -- would appear to be inherently less risky than containerized shipments. The bills also fail to clarify other important details such as the type of “entry data” that “GreenLane” participants must submit to CBP prior to loading.

The “Sail Only If Scanned Act” (H.R. 4899)

The “Sail Only If Scanned Act,” introduced by House Democrats on March 8, 2005, is less extensive than either the SAFE Port Act or the GreenLane Maritime Security Act and does not deal specifically with C-TPAT. However, if passed, it would also have significant consequences for all importers’ supply chain security programs, since it would require: (1) that all containers be scanned prior to sailing for the United States, and (2) that container seals with “best available technology” be used on containers. Although “best available technology” is not defined in the bill, it could be construed to refer to seals with electronic tracking capability, which can be more costly than seals currently being used by many importers.

Potentially Impacted Companies Should Act Quickly

The pending legislative proposals would result in fundamental changes to the current regulatory regime governing supply chain security, and could have a major impact on the manner in which various companies foreign exporters, importers, ocean carriers, and customs brokers, to name a few currently structure their import operations and transactions. The upcoming mid-term Congressional elections increase the likelihood that legislation “enhancing” supply chain security will gain broad political support, and become law sometime during 2006.

Importers should carefully monitor the progress of this proposed legislation. In this world of “just-in-time” delivery, companies that depend on the speedy clearance of international shipments through Customs would be well served to investigate the potential impact of these new legislative proposals on their businesses, and should make their concerns understood by their Congressional representatives before any legislation becomes law.

For further information, please contact:

Richard Abbey,, 202-626-5901

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