With the approach of the mid-term Congressional elections, elected officials are focusing increasingly on national security issues. On September 7, 2006, Senator Frist introduced the Port Security Improvement Act of 2006 (“SA 4919”) a bill that would have a direct impact on foreign exporters, U.S. importers, ocean carriers, customs brokers, marine terminal operators and many other players in the international supply chain. The Port Security Improvement Act, which is currently being debated in the Senate, is drafted as a complete substitute to the SAFE Port Act (“H.R. 4954”), which passed the House by a recorded vote of 421-2 on May 4, 2006.

The Port Security Improvement Act replaces a prior Senate bill -- the so-called GreenLane Maritime Security Act -- which had been criticized for several reasons, including (a) its plan to require the Department of Homeland Security (“DHS”) to promulgate regulations governing the Customs-Trade Partnership Against Terrorism (“C-TPAT”); and (b) its plan to allow U.S. Customs and Border Protection (“Customs”) to authorize private third-party companies to perform security audits (known as “validations”) of C-TPAT company facilities.

In its current form, the Port Security Improvement Act adds several new provisions to the provisions that it already shares with the SAFE Port Act. As reflected below, these bills would produce major changes in the regulatory framework governing supply chain security, albeit at an increased cost of doing business:

• Both bills envision pilot projects for scanning 100% of U.S.-bound containers at foreign ports. The SAFE Port Act would require DHS to conduct a pilot project similar to the Integrated Container Inspection System currently being tested in Hong Kong. The Port Security Improvement Act would require DHS to develop such a pilot program at three foreign seaports.
• The Port Security Improvement Act provides for increased container inspection and scanning requirements. Above and beyond Customs’ current system for targeting and inspecting containers based on risk, the Port Security Improvement Act would require Customs to develop and implement a system (within one year) for random inspections of containers, and to develop and implement a system (by December 2007) for radiation scanning of 100% of containers passing through the busiest 22 U.S. seaports. The SAFE Port Act does not contain the random inspection and radiation screening requirements.
• Both bills require Customs to issue regulations setting minimum standards for securing containers in transit to the United States.
• Both bills foresee an expansion of the current “24-Hour Advance Manifest” rule, and would require Customs to consider the cost, benefit and feasibility of expanding advance information submission requirements.
• Both bills provide for the roll-out of a new Transportation Worker Identification Card system at all U.S. seaports. The Port Security Improvement Act would also require DHS to conduct a pilot program to assess the feasibility of requiring use of card reader technology in secure areas of vessels.
• The Port Security Improvement Act requires DHS to study potential transportation security user fees and make recommendations regarding such fees within one year of enactment.

In the C-TPAT area more specifically, many of the proposed changes are similar to those already proposed in the SAFE Port Act, and are therefore already familiar to importers. A comparison of the major changes in the C-TPAT area follows:
Both bills require C-TPAT participants to be validated within one year of entry into the C-TPAT program and revalidated every three years. While the SAFE Port Act would have allowed private third-party companies to perform such validations, the Port Security Improvement Act requires that Customs perform such validations.

• Both bills formalize the three-tiered system of commitments and benefits that currently exists under C-TPAT.
• Both bills require Customs to suspend C-TPAT benefits for any companies that intentionally provide false or misleading information to Customs. (Both bills also allow companies to appeal such suspensions). The Senate amendment provides -- in addition that Customs may publish the names of such suspended companies in the Federal Register.

Inasmuch as debate on the Port Security Improvement Act is ongoing, it is not certain that there will ultimately be agreement on all of the provisions described above. Nevertheless, because this Senate Bill is much closer to its House companion bill than the GreenLane Maritime Security Act was, there is an increased chance that the bill or some variation on it could be passed in the near term. Companies concerned with particular provisions in the bill should be prepared to make their concerns understood by relevant U.S. lawmakers.

For more information, please contact any of the following lawyers:

Dan Wendt, dwendt@milchev.com, 202-626-5898

Richard Abbey*

*Former Miller & Chevalier attorney

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