R -- C-TPAT Third Party Validators Pilot Program

Contracting Office Address: DHS - Customs and Border Protection, Office of Field Operations, Cargo and Conveyance Security Division, 1300 Pennsylvania Avenue, N.W., Room 2.2A, Washington, DC, 20229 Executive Summary: The ?SAFE? Port Act (P.L. 109-347), as signed by the President on October 13, 2006, calls for CBP to develop a 1-year Third Party Validation Pilot Program for third party entities to conduct validations under the Customs Trade Partnership Against Terrorism (C-TPAT). As outlined in Section 218 of the Act, CBP has developed the requirements and standard operating procedures, which a third party validator must meet to be eligible for this pilot program. This announcement outlines the operation of the pilot program, as developed by CBP in consultation with the Commercial Operations Advisory Committee (COAC). Background: Currently, all C-TPAT validations of member companies are conducted by CBP Supply Chain Security Specialists (SCSSs). Lesser trade facilitation benefits are afforded to certified members (Tier 1), while validated members (Tier 2 and 3) receive increased benefits, including reduced cargo examinations. Although ultimate responsibility for certifying the security and integrity of an international supply chain needs to reside with the U.S. Government, there may be cases where the use of a 3rd party to aid in the validation process would be beneficial. CBP believes that China is a viable candidate for the Third Party Validation Pilot Program since CBP SCSSs are currently not granted access into China by the Chinese government. This presents a significant problem to the C-TPAT program in its efforts to determine a C-TPAT member?s commitment to C-TPAT and to verify its degree of compliance to the minimum-security criteria of the C-TPAT program. Data from 2006 indicates that 55 C-TPAT importer partners currently have exclusive supply chains from China, or 100% of imports originating from China. An additional 245 C-TPAT importers source over 75% of their imports from China. As a result of the inability for CBP to gain access to China to validate these supply chains, C-TPAT importers sourcing from China are given the lowest level of C-TPAT benefits, since CBP is unable to validate or verify their supply chain security practices. Until these supply chains have been validated in China, these companies and their Chinese suppliers will be at a competitive disadvantage. Other C-TPAT members who import from other countries outside of China will receive greater trade facilitation benefits, such as reduced number of inspections, front of the line inspections, and shorter wait-times at the border. CBP has compiled a list of importers who source 75 percent or more of their imports from China, eligible to volunteer for the pilot program. CBP will notify these importers of their eligibility to participate in the pilot program via the C-TPAT Security Link Web Portal and solicit any volunteers. Location China, with travel within China and the region as needed, directed, and approved by CBP. Time/Date This pilot program will remain active up to twelve calendar months, starting on or about May 1, 2007 and ending on or about May 1, 2008. Third Party Requirements and Duties Performed Under the announcement, third-party entities may be utilized to augment or assist CBP in validating or verifying the supply chains of C-TPAT members sourcing from China. CBP will certify a company?s ability to qualify as a third party entity to conduct C-TPAT validations. The following requirements listed below and further described in the attached Standard Operation Procedures ? Customs and Border Protection Third Party Validation Pilot Program (attachment 1) must be met in order to be considered under this announcement: ? Provide CBP with documentation attesting to its established presence in China. ? Demonstrate the ability to perform validations in accordance with standard operating procedures and requirements designated by CBP. ? Agree to perform validation in accordance with such standard operating procedures and requirements (and adhere to any updates to such procedures and requirements as well). ? Employ a data collection methodology to address and record a company?s compliance with CBP Importer Minimum Security Criteria and be capable of transmitting those findings to CBP in an electronic form. ? Provide CBP with documented training procedures for the validators. ? Agree to maintain liability insurance coverage sufficient to satisfy third party claims arising out of an incident arising from their duties as a third party validator. ? Apply for protections under the Support Anti-terrorism by Fostering Effective Technologies Act of 2002 or the ?SAFETY Act?, as outlined in Section 864 of the Homeland Security Act of 2002. (Office of SAFETY Act Implementation (866) 788-9318 www.safetyact.gov); however, the award SAFETY Act protections will not be a factor in an entity?s selection as a validator. Nor will an entity?s selection as a validator by CBP confer SAFETY Act protections upon that applicant. ? The third party firm must agree to a background investigation and/or criminal records check to be performed by CBP/U.S. Immigration and Customs Enforcement on the firm?s principle management and all validators that will be used by the firm. ? Provide fee schedules that will be posted on the CBP Web site and have the fees openly available on the company?s Web site. ? Agree to sign an agreement to protect all proprietary information of C-TPAT participants with respect to which the entity will conduct validations. Additional Requirements Per the SAFE Port Act, the decision to validate a C-TPAT partner will remain solely within the discretion of CBP. CBP will determine the facilities to be visited, to include the point of stuffing, drayage of the container to the port of export, and the port of export. Upon completion of the validation, CBP will retain all decisions over the status of the C-TPAT partner. The third party company must exclude themselves and cannot: ? Have any beneficial interest in, or any direct or indirect control over the C-TPAT participant for which the validation services are performed. ? Have any other issues that can be perceived as conflict of interest with respect to the C-TPAT participant. ? Enter into any future supply chain security services contract with the C-TPAT participant for 12-months following the completion of the validation. CBP will: ? Only grant a C-TPAT validation by a third party entity if the C-TPAT participant voluntarily submits to validation by such third party entity. ? Ensure that the C-TPAT participant has entered into a contract with the third party entity, under which the C-TPAT participant agrees to pay all costs associated with the validation. CBP may allow the third party entity to attend the validation meetings with the importer ?in-country? and/or in the United States, so that the recommendations produced from the 3rd Party Validation can be reviewed and discussed with the importer. Monitoring On a regular basis, CBP will monitor and review the operations of a third party entity conducting validations to ensure that the entity is meeting the requirements of standard operating procedures and all other requirements listed in this document. If CBP determines that a third party entity is not meeting the minimum standard operating procedures and requirements, CBP shall: ? Review any validations conducted by the entity. ? Revoke the entity?s certificate of conformance. Performance Measurements and Evaluations Those third party firm(s) selected will be subject to periodic performance measurements and evaluations as follows: (1) The finding and accuracy of the third party validation and subsequent findings will be evaluated and reviewed against he standard operating procedures and other requirements designated by CBP. (2) The findings and assessment of the third party entity will be reviewed to determine whether all C-TPAT minimum-security criteria have been addressed. (3) The third party entity will be subject to random ?spot checks? of the C-TPAT participant?s security profile to ensure proper documentation of implemented security policies and procedures. Additionally, the domestic corporate headquarters site of the C-TPAT participant may be visited to verify security policies and procedures documented by the third party entity. Selection of Third Party Firm(s) CBP will identify 3-4 third party firms who best meet the requirements identified by CBP for participation in this pilot program. Submitting Application and Related Documents All application materials and questions must be sent, via email, to the cbp.contractor@dhs.gov no later than April 30, 2007. Selection Process CBP?s Office of Cargo and Conveyance Security will evaluate the submitted applications based on technical ability to accomplish the stated objectives of the pilot program. CBP will exclude any applicant from consideration if it is unable to conduct a comprehensive evaluation of the qualifications based on submitted applications. Qualified and otherwise acceptable candidates will then be added to a ?qualified bidders list? from which the third party entity (s) are selected. Report CBP CBP will submit a report to the appropriate congressional and advisory committees no later that 30 days after the completion of the pilot program. This report will contain the following: (1) Results of the pilot program, including the extent to which the pilot program ensured sufficient protection of proprietary commercial information. (2) Cost and efficiency associated with validations under the pilot program. (3) Impact of the pilot program on the rate of validations conducted under C-TPAT. (4) Impact on national security of the pilot program (5) Recommendations by CBP based upon the results of the pilot program.