ACE and Modernization
I greatly appreciate TSN's long-standing support of ACE and our modernization goals.

One Window into Government for Trade Data
The last time I spoke to you, you may recall I talked about the importance of establishing "one window" into government for all trade data. Today, I'm pleased to say that we have made great strides to make the single window concept a reality.

We now have 26 agencies participating in the International Trade Data System: the ITDS link to the Automated Commercial Environment (ACE). Most recently, TSA has joined ITDS to ensure its needs for cargo security data are addressed through our single ACE portal. I am also pleased that DHS has recently recognized and acknowledged the central role of ACE for cargo security screening.

Supply Chain Security Committee
As you know, CBP relies heavily on collecting and analyzing advance information, the right information in advance, in order to achieve the Twin Goals of security and facilitation of trade. To do this better, to risk manage better, to reduce rather than increase inspections, we need to explore the use of additional supply chain data sources, beyond the advance data generated by the 24-Hour and Trade Act rules. This is our Advance Trade Data Initiative.

And, it's also important that we establish a forum to work with the trade to identify and leverage advance information going back to the earliest point in the supply chain. To help us accomplish this goal, I want to announce the creation of a new TSN Committee—the Supply Chain Security Committee. This new committee will be headed by Tom Bush from CBP and Mike Laden from the Target Corporation.

Let me say that the response from TSN members has been phenomenal. Already, more than 50 TSN members have volunteered to serve on this Committee, and I thank you in advance for your commitment of time, energy, and expertise.

How C-TPAT Came About
Now, let me turn to another area where you have shown your support, but where we need to accelerate progress: The Customs-Trade Partnership Against Terrorism, or C-TPAT.

As you know, over three years ago, at the Customs-Trade Symposium in November 2001—many of you were there—I asked for your help to secure our nation, your companies, and our economy from the threat of future terrorists attacks. I proposed a partnership with the trade to combat terrorism.

And, you responded in an extraordinary way, and I want to thank all of you who were involved in forming this partnership. You will recall the sense of urgency we all felt, that we had to do everything we could to reduce the threat of further terrorist attacks on our homeland.

Collectively, you—the trade, the companies that own and operate and are the key players in the supply chain—knew the security practices. You knew what could and should be done to really improve supply chain security.

At Customs, we knew, at a time when we were dramatically increasing security inspections for everything—every shipment, every vehicle—arriving at our ports of entry, the importance of keeping goods moving across our borders. And, we knew the importance and relevance of managing risk, especially the risk of terrorism. We knew we could and should reduce inspections for companies—for our partners, who implemented increased and meaningful supply chain security—and whose shipments, therefore, were of less risk.

And so, a partnership made sense. And C-TPAT was born.

The Elements of C-TPAT
I want to discuss this morning how we take C-TPAT to the next level, but it's useful, I think, to remind ourselves, first, of what C-TPAT is all about.

C-TPAT was created as a direct response to 9/11. It is part of CBP's extended border strategy to protect America against the terrorist threat, and indeed, to protect the global supply chain, our economy and the global economy.

C-TPAT partners have made the commitment and taken actions to protect their supply chains from concealment of terrorist weapons, including potentially even weapons of mass destruction. In exchange, CBP provides benefits to our C-TPAT partners, in the form of fewer inspections at the ports of arrival, in the form of faster processing at the border.

C-TPAT is one of several major CBP initiatives implemented after 9/11 to achieve our twin goals: (1) security and (2) facilitation. With over 8,000 participants, C-TPAT is the largest government-private sector partnership to arise after 9/11, and I believe it is the most successful government-private sector partnership, as well.

Why has it taken off with 2,000 to 3,000 new members applying each year?

It is because C-TPAT—like all true partnerships—provides mutual benefits. Because C-TPAT builds on the best practices of both CBP and the private sector to strengthen supply chain security, and to better allow CBP to focus our resources on the higher risk, the more risky shipments and conveyances. The shipments that travel through supply chains that are not secure, or which CBP knows nothing about. These shipments are, by definition, higher risk.

C-TPAT is—and was always intended to be—a dynamic and flexible program, one designed to keep pace with the terrorist threat and one designed to increase and promote the use of security best practices for protecting the supply chain.

Our partnership is built on two important elements:

First, a demonstrated commitment to supply chain security: Trust and, yes, validation that the company is meeting its commitments to supply chain security; and the second element is: in exchange for meeting its commitments, CBP provides expedited processing of C-TPAT shipments.

C-TPAT companies have recognized that C-TPAT is not only good business, but it's important to the national security of our country, and to the U.S. and global economy.

C-TPAT: A Voluntary Program
C-TPAT is a voluntary program. This is one of its hallmarks. Some have asked why C-TPAT is a voluntary program.

Let me say that C-TPAT is voluntary, because, quite frankly, the government doesn't always do such a great job when it regulates. Regulation and laws are the bluntest of instruments to achieve goals. We should, of course, use them when they are necessary—and we have [APIS, 24-Hour Rule, etc.]—but I believe a dynamic and robust government-private sector partnership is often a better approach.

And, we also proposed C-TPAT as a voluntary partnership for a very practical reason: U.S. Customs—the U.S. Government—did not—and does not—have the regulatory reach into the supply chain beyond our borders. The U.S. Government does not have the ability to effectively regulate, or to enforce regulations, deep into the supply chain, relating to point of origin security, to a foreign manufacturers' loading docks. But, as I’ve noted, many C-TPAT companies have—and have used—their leverage with their foreign vendors to increase security at the overseas point of origin—and beyond—to foreign transport and outbound overseas ports.

Other Related Initiatives
C-TPAT complements our other initiatives to secure and facilitate trade. In October 2001, U.S. Customs established the National Targeting Center and revised its Automated Targeting System (ATS) to assess inbound cargo for terrorist risk, to better determine which shipments were high risk, which were lower or no risk.

In January 2002, we started the Container Security Initiative to target and inspect high-risk containers for terrorist weapons in foreign ports before the ships leave for the United States.

We have regulated when necessary. In 2002, we instituted the 24-Hour Rule to require advance manifest information on all oceangoing container shipments to the U.S. We followed that with the Trade Act 2002 rules requiring electronic information in advance for the other modes of transportation—truck, rail, and air.

By the first half of 2002, when we had sufficient detection equipment in place at our major U.S. seaports, we mandated that all high-risk containers be inspected using large scale imagining and x-ray systems and radiation detection technology. We are able to do this without disrupting the flow of trade to the U.S.

Indeed, we have increased the number of inspections sixfold, if you compare before 9/11 with after. Better and more detection technology has made it possible to do this without grinding trade to a halt. And we are doing our inspections on a targeted basis, targeting for risk, for the risk of terrorism.

These initiatives are all part of CBP’s Smart Border and Extended Border Strategy, and our strategy is working to help achieve our Twin Goals—to secure and facilitate trade.

Taking Our Partnership to the Next Level
These initiatives are building blocks for security and facilitation of trade, but our work is not done. With these initiatives, we’ve laid a foundation. But now it's time to complete the edifice, one that will make the supply chain even more secure and more efficient.

What, then, are the next steps for C-TPAT?

I believe we should take the following steps in order to fully realize the promise and potential of C-TPAT, of our partnership:

First, we should implement a more secure, smarter container—the Smart Box—a container that, at a minimum, tells us whether it has been tampered with anywhere along its journey. We should do this as soon as the technology to reduce false positives to an acceptable levels is there to do so, and not a day later.

Second, we will take C-TPAT to the next level by providing greater, better-understood C-TPAT benefits. And by issuing better defined C-TPAT security criteria that our C-TPAT partners are expected to meet.

This is "the essential bargain" of C-TPAT, but I recognize that many of our C-TPAT partners are true patriots. C-TPAT harnessed a desire to be part of the solution—to contribute to our national security—and it continues to do so. No doubt about it.

But a part—a big part—of what has made C-TPAT a robust, dynamic program is "the bargain"—increasing benefits that improve the bottom line of C-TPAT companies, in exchange for investments that improve—really improve—security of your company’s supply chain from point of origin to point of arrival, and in turn, improve the security of the United States.

You commit your company to meet certain minimal C-TPAT security criteria. In exchange, CBP gives you benefits, including faster and more predictable processing and clearance of your goods through the ports of arrival and entry. This is a classic “win-win.”

This bargain has evolved, and improved, over the past three years by the type of open discussion good partners should have. This was one of the key topics addressed at our CBP-Trade Symposium last month: How do we take C-TPAT to the next level?

It is now time to take C-TPAT to another level. And, we are.

In exchange for the C-TPAT benefits, C-TPAT importers are expected to use their leverage over their foreign suppliers and vendors to meet better defined, minimal security criteria.

These are not impossible criteria. But they are “best practices” that other C-TPAT partners, including those operating in the same sectors, have adopted. It is only fair that they apply across the sector and across the board. If a company is to receive the considerable C-TPAT benefits, it must meet C-TPAT supply chain security criteria.

C-TPAT Benefits
These initiatives are building blocks for security and facilitation of trade, but our work is not done. With these initiatives, we’ve laid a foundation. But now it's time to complete the edifice, one that will make the supply chain even more secure and more efficient.

What, then, are the next steps for C-TPAT?

I believe we should take the following steps in order to fully realize the promise and potential of C-TPAT, of our partnership:

First, we should implement a more secure, smarter container—the Smart Box—a container that, at a minimum, tells us whether it has been tampered with anywhere along its journey. We should do this as soon as the technology to reduce false positives to an acceptable levels is there to do so, and not a day later.

Second, we will take C-TPAT to the next level by providing greater, better-understood C-TPAT benefits. And by issuing better defined C-TPAT security criteria that our C-TPAT partners are expected to meet.

This is "the essential bargain" of C-TPAT, but I recognize that many of our C-TPAT partners are true patriots. C-TPAT harnessed a desire to be part of the solution—to contribute to our national security—and it continues to do so. No doubt about it.

But a part—a big part—of what has made C-TPAT a robust, dynamic program is "the bargain"—increasing benefits that improve the bottom line of C-TPAT companies, in exchange for investments that improve—really improve—security of your company’s supply chain from point of origin to point of arrival, and in turn, improve the security of the United States.

You commit your company to meet certain minimal C-TPAT security criteria. In exchange, CBP gives you benefits, including faster and more predictable processing and clearance of your goods through the ports of arrival and entry. This is a classic “win-win.”

This bargain has evolved, and improved, over the past three years by the type of open discussion good partners should have. This was one of the key topics addressed at our CBP-Trade Symposium last month: How do we take C-TPAT to the next level?

It is now time to take C-TPAT to another level. And, we are.

In exchange for the C-TPAT benefits, C-TPAT importers are expected to use their leverage over their foreign suppliers and vendors to meet better defined, minimal security criteria.

These are not impossible criteria. But they are “best practices” that other C-TPAT partners, including those operating in the same sectors, have adopted. It is only fair that they apply across the sector and across the board. If a company is to receive the considerable C-TPAT benefits, it must meet C-TPAT supply chain security criteria.

Improvements to C-TPAT: The Next Level
There are three important things we are doing to improve C-TPAT.

First, we are now more clearly defining the point of stuffing security criteria for C-TPAT members, but especially for C-TPAT importers and their foreign vendors and manufacturers.

What do I mean by that?

I mean that, as a result of a lot of dialogue and discussion with the trade, we have refined the security criteria of C-TPAT. We need to be clearer about what we expect—what you need to expect—from your foreign vendors. Accordingly, we have defined more clearly the C-TPAT security criteria at point of origin or stuffing.

As a government agency, CBP doesn't have the authority to require that the security practices be implemented by your foreign vendors. But you do. At least, many U.S. importers do. Indeed, many of our C-TPAT importers have considerable leverage.

If you can require Quality Assurance (QA) from your vendors, you can require C-TPAT security assurance (SA) from them, as well. Many C-TPAT importers already monitor your foreign vendors to make sure your products meet your quality standards. I am pleased to say quite a few C-TPAT importers monitor their vendors to see that C-TPAT security practices are being met.

One of the points that stuck in my mind from my first days as Commissioner of U.S. Customs is that the top 1,000 U.S. importers account for 62 percent of all goods imported into the U.S., by value. Think about what improved security practices of the foreign vendors for those 1,000 importers means to improving security of the movement of goods to the U.S.

Already, C-TPAT covers about 40 percent of containerized imported goods into the U.S., by value. So, we have already greatly added to the security of goods and conveyances exported to the U.S.

As is the case before we make any significant decision about C-TPAT, we have engaged in an extensive dialogue with the trade, and especially with importers, to better and more clearly define minimum security criteria for C-TPAT membership.

This dialogue began in October 2004 with a strawman proposal. That proposal has gone through several versions, and is now in its third iteration based on comments we have received. The COAC’s C-TPAT Subcommittee discussed this proposal in January after the CBP-Trade Symposium. As a result of this process, we have more clearly defined the minimal security criteria for C-TPAT importers.

As I've noted, we are giving substantial benefits. We don’t want to cut back on benefits. But we do need more specific, “validatable” criteria.

CBP has very recently issued a Strategic Plan for C-TPAT. This plan clearly sets forth the strategic approach I have just talked about and the goals for C-TPAT. Very shortly, we will issue our Human Capital Plan for C-TPAT to assure that we have adequate, trained personnel to administer the program, including the validation part of the program, to make sure C-TPAT supply chain security commitments are met. And we are implementing a Validation Plan that will result in validation of every certified C-TPAT partner, at least part of its supply chain.

Already 10 percent of all certified partners have had critical aspects of their supply chains validated by CBP, and another 20 percent are in the process. As part of our validation plan, we are prioritizing based on terrorism risk.

But let me be clear: C-TPAT partners are expected to meet their commitments, because if they don't, they will be decertified and lose C-TPAT benefits. The more clearly defined security criteria I’ve referred to will be phased in.

But, it is important to note that this security criteria can be more meaningfully validated by CBP’s supply chain security specialists, and that—I am sure you will agree—is important to maintaining the rigor of the C-TPAT program. Otherwise, we are going, rightly, to be criticized for not getting enough for the benefits. Not getting our end of the C-TPAT bargain.

Now, the other part of that bargain is what happens if companies aren’t meeting their commitments to improve their security of their supply chain? To put it bluntly, we don’t want companies in C-TPAT who aren’t meeting their commitments, that aren’t holding up their end of the bargain—nor do you.

While not a large number, we have decertified 35 C-TPAT members because of negative validations and violations of their commitments. Fifty-four (54) C-TPAT members have had C-TPAT benefits suspended because their supply chain security was compromised. During the application process for certified status,

20 percent of the security profiles submitted for C-TPAT membership have been rejected, because of failure to meet minimally acceptable C-TPAT security levels.

This is a serious no-nonsense program. Like a good partner, we expect C-TPAT members to meet their end of the bargain. We will also be increasing our validations to assure that security commitments by our C-TPAT partners are being met.

The priority focus for our validations is the importer’s foreign vendors and transporters and foreign transportation, from the point of origin to the point of arrival in the U.S. Because the terrorist threat is external to the United States, we are not ignoring, but we are not focusing our validations on your domestic warehouses or purely domestic transportation.

The Vision for the “Green Lane”
We can do even better. Let me outline my vision about an even higher level for C-TPAT—one that we can—and should—aspire to.

In my view, C-TPAT benefits for validated C-TPAT members who meet supply chain security best practices should mean:

1. No inspections, i.e., true “Green Lane” treatment. They will be subjected to only relatively infrequent random inspections, or, of course, inspection where a shipment is subject to specific tactical intelligence as a security or enforcement threat.
2. It will mean moving shipments of C-TPAT members to the front of the inspection line, because the added investment to meet and maintain “best practices” should be recognized and rewarded.
3. I foresee a two-tiered system of C-TPAT benefits, based on the level of security, validation results, and use of “best practices,” like the Smart Box, and taking ownership of your supply chain.

Let me be clear: First tier, certified C-TPAT importers, for example, who meet C-TPAT minimal security criteria, will receive, as now, a lower ATS score and fewer inspections on arrival.

But a second, or higher, tier C-TPAT partners—partners who meet the “gold standard”—that is, certified, validated C-TPAT importers using C-TPAT best security practices will get the Green Lane: no inspections for security.

In other words, my vision is a more secure supply chain that includes point of origin security, security at point of stuffing, ensured by C-TPAT validated partners who control their supply chain and assure point of origin security, who use a smart container, or see that their foreign vendors do, and who ship their goods through a CSI port to the United States. That shipment should get the green lane on arrival.

Conclusion
Our efforts are revolutionizing our approach to supply chain security in ways that facilitate trade, rather than impede trade. Our efforts, together, are also helping to secure our homeland.

This is a win-win. It's time to take the next step. We will build the Green Lane. Together, we can make this happen this year.

Thank you for your attention. Thank you for your support of C-TPAT, of ACE, and of CBP.

Commissioner Bonner reserves the right to edit his written remarks during his oral presentation and to speak extemporaneously. His actual remarks, as given, therefore, may vary slightly from the written text.