U.S. Customs and Border Protection (CBP) recently issued its first-ever “Security Criteria” for foreign manufacturers wishing to participate in the Customs-Trade Partnership Against Terrorism (C-TPAT).

These Security Criteria are significant insomuch as they formalize the rules of admission for such manufacturers, and impose new burdens on foreign manufacturers that do not exist for importers. At the same time, the range of foreign manufacturers that can qualify for C-TPAT participation remains limited to Mexican and Canadian companies that are related to U.S. importers. CBP has no current plans to expand the scope of foreign manufacturer eligibility beyond manufacturers in these countries.

The Foreign Manufacturer Security Criteria closely resemble the Importer Security Criteria and impose obligations relating to physical security, access controls, procedural security, information technology security, personnel security and security awareness and training. The Foreign Manufacturer Security Criteria also impose obligations relating to business partners.

There are, however, notable and important differences between the Foreign Manufacturer Security Criteria and the Importer Security Criteria, as described below:

• The Foreign Manufacturer Security Criteria require foreign manufacturers to conduct a “comprehensive assessment of their international supply chains” on an annual basis at a minimum. While importers are also expected to continually verify their own compliance with C-TPAT standards, there is no specific requirement for an annual self-verification of this nature.
• The Foreign Manufacturer Security Criteria explicitly recognize that supply chain security gaps that result in smuggling and theft are also areas of vulnerability for terrorist activity. The self-described "design" of the Foreign Manufacturer Security Criteria is "to mitigate the risk of loss, theft and contraband smuggling that could potentially introduce terrorists and implements of terrorism into the global supply chain."
• Foreign manufacturers are expected to develop container security procedures that specifically address the risk of human concealment or smuggling, if the manufacturers operate in regions where there is some risk of such activity.
• Foreign manufacturers are expected to monitor their carriers to ensure that C-TPAT-approved carriers do not subcontract the transportation of U.S.-bound shipments to non-approved carriers. Additionally, foreign manufacturers are expected to work with carriers to ensure that they have effective security controls relating to the stuffing of containers.
• Finally, the Implementation Plan for these new security criteria contains a direct warning to foreign manufacturers that benefit from access to expedited border clearance procedures under the Free and Secure Trade (FAST) program: If C-TPAT validations or seizures of merchandise at the border reflect inadequate security procedures, FAST program benefits will be immediately suspended.

Eligible foreign manufacturers and the U.S. importers that rely on such manufacturers for supplies should carefully review the new Foreign Manufacturer Security Criteria. Foreign manufacturers that are currently C-TPAT members must fortify their internal security procedures as necessary to bring them in line with the new security criteria within 90 days (i.e., by November 27, 2006). Any foreign manufacturers wishing to join C-TPAT for the first time must provide evidence of compliance with these criteria in the security profiles submitted with CBP.

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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