Supply Chain Security
CBP Has Made Progress in Assisting the Trade Industry in Implementing the New Importer Security Filing Requirements, but Some Challenges Remain Gao ID: GAO-10-841 September 10, 2010Cargo containers present significant security concerns given the potential for using them to smuggle contraband, including weapons of mass destruction. In January 2009, U.S. Customs and Border Protection (CBP), within the Department of Homeland Security (DHS), implemented the Importer Security Filing (ISF) and Additional Carrier Requirements, collectively known as the 10+2 rule. Collection of cargo information (10 data elements for importers, such as country of origin, and 2 data elements for vessel carriers), in addition to that already collected under other CBP rules, is intended to enhance CBP's ability to identify high-risk shipments. As requested, GAO assessed, among other things, (1) the extent to which CBP conducted the 10+2 regulatory assessment in accordance with Office of Management and Budget (OMB) guidance, (2) how CBP used information it collected and assessed to inform its efforts to implement the 10+2 rule since January 2009, and (3) the extent to which CBP has used the additional 10+2 data to identify high-risk cargo. GAO analyzed relevant laws, OMB guidance, and CBP's 10+2 regulatory assessment, and interviewed CBP officials.
CBP's 10+2 regulatory assessment generally adheres to OMB guidance, although greater transparency regarding the selection of alternatives analyzed and a more complete analysis could have improved CBP's assessment. CBP's regulatory assessment addresses some elements of a good regulatory assessment, as required by OMB, such as the need for the proposed action and evaluation of the benefits and costs. However, the assessment lacks transparency in that it does not explain how the four alternatives considered for the rule--variations in what and how many data elements are to be collected--were selected or how the preferred alternative was chosen. OMB guidance states that regulatory analyses should clearly explain the assumptions used in the analysis. If, as CBP officials stated, an update might be published in the future, greater transparency could help justify the scope of alternatives analyzed in the regulatory assessment and provide insight into CBP's decision making. Further, a more complete analysis of the uncertainty involved in estimating key variables used to evaluate costs and benefits could have improved CBP's regulatory assessment by providing better information about the circumstances under which benefits justify costs. CBP officials said that to the extent that data are available, this information could be added to an updated regulatory assessment to improve its completeness. CBP is using information it has collected, assessed, and shared with the trade industry to monitor and help improve compliance with and implementation of the 10+2 rule. For example, CBP collects daily information on the ISF compliance of importers' shipments at each U.S. port to monitor the status of ISF implementation, as well as data on vessels arriving in U.S. ports for which carriers did not supply information such as the position of each cargo container (stow plans). CBP data indicate that in July 2010, approximately 80 percent of shipments were ISF compliant, and CBP officials said that most carriers had submitted stow plans. CBP publishes answers to frequently asked questions on its Web site and has conducted outreach sessions with the trade industry to discuss errors in ISF submissions and help improve compliance. The 10+2 rule data elements are available for identifying high-risk cargo, but CBP has not yet finalized its national security targeting criteria to include these additional data elements to support high-risk targeting. CBP has assessed the submitted 10+2 data elements for risk factors, and according to CBP officials, access to information on stow plans has enabled CBP to identify more than 1,000 unmanifested containers--containers that are inherently high risk because their contents are not listed on a ship's manifest. CBP has conducted a preliminary analysis that indicates that the collection of the additional 10+2 data elements could help determine risk earlier in the supply chain, but CBP has not yet finalized its national security targeting criteria for identifying high-risk cargo containers or established project time frames and milestones--best practices in project management--for doing so. Such efforts could help provide CBP with goals for finishing this project, thus better positioning it to improve its targeting of high-risk cargo. GAO recommends that CBP should, if it updates its regulatory assessment, include information to improve transparency and completeness, and set time frames and milestones for updating its national security targeting criteria. DHS concurred with these recommendations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Stephen L. Caldwell Team: Government Accountability Office: Homeland Security and Justice Phone: (202) 512-9610GAO-10-841, Supply Chain Security: CBP Has Made Progress in Assisting the Trade Industry in Implementing the New Importer Security Filing Requirements, but Some Challenges Remain
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
September 2010:
Supply Chain Security:
CBP Has Made Progress in Assisting the Trade Industry in Implementing
the New Importer Security Filing Requirements, but Some Challenges
Remain:
GAO-10-841:
GAO Highlights:
Highlights of GAO-10-841, a report to congressional requesters.
Why GAO Did This Study:
Cargo containers present significant security concerns given the
potential for using them to smuggle contraband, including weapons of
mass destruction. In January 2009, U.S. Customs and Border Protection
(CBP), within the Department of Homeland Security (DHS), implemented
the Importer Security Filing (ISF) and Additional Carrier
Requirements, collectively known as the 10+2 rule. Collection of cargo
information (10 data elements for importers, such as country of
origin, and 2 data elements for vessel carriers), in addition to that
already collected under other CBP rules, is intended to enhance CBP‘s
ability to identify high-risk shipments. As requested, GAO assessed,
among other things, (1) the extent to which CBP conducted the 10+2
regulatory assessment in accordance with Office of Management and
Budget (OMB) guidance, (2) how CBP used information it collected and
assessed to inform its efforts to implement the 10+2 rule since
January 2009, and (3) the extent to which CBP has used the additional
10+2 data to identify high-risk cargo. GAO analyzed relevant laws, OMB
guidance, and CBP‘s 10+2 regulatory assessment, and interviewed CBP
officials.
What GAO Found:
CBP‘s 10+2 regulatory assessment generally adheres to OMB guidance,
although greater transparency regarding the selection of alternatives
analyzed and a more complete analysis could have improved CBP‘s
assessment. CBP‘s regulatory assessment addresses some elements of a
good regulatory assessment, as required by OMB, such as the need for
the proposed action and evaluation of the benefits and costs. However,
the assessment lacks transparency in that it does not explain how the
four alternatives considered for the rule”variations in what and how
many data elements are to be collected”were selected or how the
preferred alternative was chosen. OMB guidance states that regulatory
analyses should clearly explain the assumptions used in the analysis.
If, as CBP officials stated, an update might be published in the
future, greater transparency could help justify the scope of
alternatives analyzed in the regulatory assessment and provide insight
into CBP‘s decision making. Further, a more complete analysis of the
uncertainty involved in estimating key variables used to evaluate
costs and benefits could have improved CBP‘s regulatory assessment by
providing better information about the circumstances under which
benefits justify costs. CBP officials said that to the extent that
data are available, this information could be added to an updated
regulatory assessment to improve its completeness.
CBP is using information it has collected, assessed, and shared with
the trade industry to monitor and help improve compliance with and
implementation of the 10+2 rule. For example, CBP collects daily
information on the ISF compliance of importers‘ shipments at each U.S.
port to monitor the status of ISF implementation, as well as data on
vessels arriving in U.S. ports for which carriers did not supply
information such as the position of each cargo container (stow plans).
CBP data indicate that in July 2010, approximately 80 percent of
shipments were ISF compliant, and CBP officials said that most
carriers had submitted stow plans. CBP publishes answers to frequently
asked questions on its Web site and has conducted outreach sessions
with the trade industry to discuss errors in ISF submissions and help
improve compliance.
The 10+2 rule data elements are available for identifying high-risk
cargo, but CBP has not yet finalized its national security targeting
criteria to include these additional data elements to support high-
risk targeting. CBP has assessed the submitted 10+2 data elements for
risk factors, and according to CBP officials, access to information on
stow plans has enabled CBP to identify more than 1,000 unmanifested
containers”containers that are inherently high risk because their
contents are not listed on a ship‘s manifest. CBP has conducted a
preliminary analysis that indicates that the collection of the
additional 10+2 data elements could help determine risk earlier in the
supply chain, but CBP has not yet finalized its national security
targeting criteria for identifying high-risk cargo containers or
established project time frames and milestones”best practices in
project management”for doing so. Such efforts could help provide CBP
with goals for finishing this project, thus better positioning it to
improve its targeting of high-risk cargo.
What GAO Recommends:
GAO recommends that CBP should, if it updates its regulatory
assessment, include information to improve transparency and
completeness, and set time frames and milestones for updating its
national security targeting criteria. DHS concurred with these
recommendations.
Contents:
Letter:
Background:
Results in Brief:
CBP's Regulatory Assessment Generally Adheres to OMB Guidance, but
Could Have Been Improved by Additional Information:
CBP Has Collected, Assessed, and Shared Information with the Trade
Industry to Monitor and Help Improve Compliance with and
Implementation of the 10+2 Rule:
Importers' Use of Flexibilities Has Declined over Time and Has
Remained Consistently Low for a Variety of Reasons:
CBP Has Not Yet Finalized Its Targeting Criteria to Identify Risk
Factors in 10+2 Data, and CBP's Use of the Data Has Not Impacted Trade
Flow:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Comments from the Department of Homeland Security:
Appendix II: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Required ISF Data Elements:
Table 2: Flexibilities for U.S.-Bound Containerized Cargo:
Table 3: Alternatives Analyzed in CBP's Regulatory Assessment:
Figures:
Figure 1: Container Vessels Carry Millions of Cargo Containers to the
United States Each Year That Could Be Used by Terrorists to Transport
Dangerous Cargo:
Figure 2: Example of a Vessel Stow Plan, Which Identifies the Location
of Containers on a Vessel and Can Expedite the Removal of High-Risk
Containers for CBP Inspections:
Figure 3: Percentage of ISF Submissions Indicating Use of
Flexibilities, by Week, for the Flexible Enforcement Period (September
13, 2009, through June 14, 2010):
Figure 4: The Vessel Stow Plan Allows CBP to Identify the Location of
Unmanifested Containers on a Vessel While in Transit, Prior to It
Reaching a U.S. Port:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 10, 2010:
The Honorable Max Baucus:
Chairman:
Committee on Finance:
United States Senate:
The Honorable Sander M. Levin:
Chairman:
The Honorable Dave Camp:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
The Honorable Charles B. Rangel:
House of Representatives:
The economic well being of the United States is dependent on the
expeditious flow of people and goods through the U.S. transportation
system, which moves millions of passengers and tons of freight each
day. The extensiveness of the transportation system, as well as the
sheer volume of passengers and freight moved, makes it both an
attractive target and challenging to secure. Ports, waterways, and
vessels are part of an economic engine handling more than $1 trillion
in merchandise annually, and an attack on this system could have a
widespread impact on global shipping, international trade, and the
global economy. Cargo containers present significant security
concerns, as individuals have exploited vulnerabilities associated
with the world's supply chain--the flow of goods from manufacturers to
retailers--by using cargo containers to smuggle narcotics, stowaways,
and other contraband. Given these vulnerabilities, there is a threat
that terrorists could use a cargo container to transport a weapon of
mass destruction into the United States. Within the federal
government, U.S. Customs and Border Protection (CBP), part of the
Department of Homeland Security (DHS), is responsible for
administering container security and reducing the vulnerabilities
associated with the supply chain. Balancing security concerns with the
need to facilitate the free flow of people and commerce, part of CBP's
mission, remains an ongoing challenge for the public and private
sectors alike.
In response to a requirement in the Security and Accountability for
Every Port Act of 2006 (SAFE Port Act)[Footnote 1] that DHS collect
additional data to identify high-risk cargo for inspection, in January
2009 CBP implemented the Importer Security Filing (ISF) and Additional
Carrier Requirements,[Footnote 2] collectively known as the "10+2
rule." The rule mandates that importers (who order containerized and
break bulk[Footnote 3] goods to be shipped from foreign sources to the
United States via oceangoing vessel) and vessel carriers (who
physically transport international goods from foreign ports to the
United States) submit additional cargo information, such as country of
origin, to CBP before the cargo is loaded onto a U.S.-bound vessel.
[Footnote 4] Collection of the additional cargo information (10 data
elements for importers and 2 data elements for vessel carriers) and
their incorporation into CBP's Automated Targeting System (ATS)
[Footnote 5] are intended to enhance CBP's ability to identify high-
risk shipments and prevent the transportation of potential terrorist
weapons into the United States. CBP estimates that about 250,000
importers and 1,000 vessel carriers could be affected by the rule.
The provisions in the rule are final, with the exception of certain
interim provisions that apply to the timing and content for submitting
certain data elements, such as allowing information on the location
where a container is packed with cargo to be provided after the
initial submission of the data elements but at least 24 hours prior to
arrival at a U.S. port. These interim provisions are known as
"flexibilities," or the "flexible filing" options, and they were
included in the 10+2 interim final rule to allow DHS to conduct a
review of compliance difficulties and limit the burden on the trade
industry.[Footnote 6] CBP's final regulatory assessment estimates that
annualized costs of the rule's implementation could range from $890
million to $7 billion. These estimates include costs incurred by
importers and carriers to collect, coordinate, and electronically
transmit the required data to CBP; losses to U.S. importers arising
from potential delays in the supply chain; and U.S. government
implementation costs.
CBP is conducting a review to analyze, for those data elements subject
to flexibilities: (1) compliance costs for various trade industry
entities; (2) the impact of the flexibilities provided for in the
rule, based on data on the extent to which importers have used the
flexibilities and trade industry comments; (3) the challenges to
submitting the additional data elements 24 hours prior to loading; and
(4) the benefits of collecting the additional data elements. The
corresponding analysis is intended to inform the decision to
eliminate, modify, or maintain the requirements subject to
flexibilities under the interim final rule. CBP expects to complete
its review in the fall of 2010, at which point DHS plans to review
CBP's analysis before making any changes to the flexibilities in the
publication of the final rule.
In response to your request, we reviewed certain aspects of the 10+2
regulatory assessment and the 10+2 rule. Specifically, this report
addresses the following objectives:
* To what extent did CBP conduct the 10+2 regulatory assessment in
accordance with Office of Management and Budget (OMB) guidance?
* How has CBP used information it collected and assessed to inform its
efforts to implement the 10+2 rule since January 2009?
* To what extent have importers used the flexibilities when submitting
their Importer Security Filings since January 2009?
* To what extent has CBP used 10+2 data to identify high-risk cargo
for inspection and enhance cargo security while minimizing the impact
on trade flow?
To answer these four objectives, we reviewed legal documentation,
including the 10+2 rule and the SAFE Port Act, which requires DHS to
consider the cost, benefit, and feasibility of the rule and consult
with stakeholders.[Footnote 7] Additionally, to address the second,
third, and fourth objectives, we interviewed CBP officials from CBP's
10+2 program office, which is responsible for overseeing
implementation of the 10+2 rule; the National Targeting Center-Cargo,
which is responsible for targeting high-risk shipments for inspection;
and the Office of Intelligence and Operations Coordination, which is
responsible for adjustments to ATS to incorporate the 10+2 data. We
interviewed officials from these offices to discuss the status of
CBP's efforts to integrate the 10+2 data elements into its targeting
strategy.
We also interviewed representatives of four industry associations that
CBP identified as involved in 10+2 outreach--the American Association
of Exporters and Importers (AAEI), the National Association of
Manufacturers (NAM), the National Customs Brokers and Forwarders
Association of America (NCBFAA), and the World Shipping Council (WSC).
Further, we interviewed representatives from 30 importers and 2
carriers, as referred to us by the industry associations we met with
and the trade co-chair of CBP's Commercial Operations Advisory
Committee (COAC) ISF Subcommittee.[Footnote 8] Our interviews with
trade industry associations, importers, and carriers solicited views
on the flexibilities in the 10+2 rule and CBP's consultation with the
trade industry in developing and implementing the 10+2 rule. The AAEI
and NAM representatives we met with identified representatives of 27
importer member companies who were knowledgeable about their
companies' policies and procedures for filing ISFs. For the purposes
of this report, we refer to these individuals as importers. We
conducted interviews with these importers in group settings. This
interview format allowed us to determine consensus and also identify
and examine instances where viewpoints differed among importers. As a
result of the group settings, we do not explicitly identify the number
of importers who expressed particular views. Rather, we express these
views as those of some of the importers we interviewed. The trade co-
chair of COAC's ISF Subcommittee referred us to representatives of 3
importers, whom we interviewed individually. These interviews
specifically addressed the importers' use of the flexibilities when
filing ISFs and whether their companies have experienced any trade
flow delays as a result of CBP's use of the additional data elements,
including CBP's use of the data to identify high-risk containers and
use of enforcement measures for noncompliance with the 10+2 rule. We
selected 2 carriers to interview based on a recommendation from the
World Shipping Council. Our interviews with representatives of trade
industry associations, importers, and carriers were based on a
nonprobability sample, so while they are not generalizable to the
maritime trade industry as a whole, they provide insights into the
ongoing implementation of the 10+2 rule, including reasons for using
or not using the flexibilities, and the impact of the 10+2 rule on the
trade industry, including any trade delays resulting from CBP
enforcement of compliance with the 10+2 rule.
In addition to the above steps, which involved multiple objectives, we
also performed audit work specific to each of the four objectives. To
evaluate the extent to which CBP's regulatory assessment adhered to
OMB guidance, we analyzed CBP's Regulatory Assessment and Final
Regulatory Flexibility Analysis for the Interim Final Rule,[Footnote
9] and compared it to criteria in OMB Circular No. A-4, which provides
guidance to federal agencies on the development of regulatory
analyses, as required under Executive Order 12866 (Regulatory Planning
and Review).[Footnote 10] To determine how CBP has used information it
collected and assessed, we reviewed CBP reports and analyses for
monitoring ongoing implementation of the 10+2 rule since January 2009,
such as daily compliance reports, and information regarding CBP's
consultation with and outreach to the trade community, including
presentations to importers and the program's Frequently Asked
Questions (FAQ) document.[Footnote 11] To determine the extent to
which importers have used the flexibilities, we analyzed CBP data from
September 13, 2009--the date on which CBP implemented a capability to
collect data--through June 14, 2010, on importers' election to use the
flexibilities when filing their ISFs.[Footnote 12] We assessed the
reliability of these data by reviewing CBP's data management practices
and determined that the data are sufficiently reliable to demonstrate
overall trends in use and improper use of flexibilities. To determine
how CBP has used the additional 10+2 data elements to identify high-
risk cargo for inspection while minimizing the impact on trade flow,
we reviewed CBP analysis from 2006 of the potential impact of new data
on targeting efforts. We also visited the National Targeting Center-
Cargo to observe a demonstration of ATS and how it incorporates the
10+2 data elements into the targeting process. To assess the extent to
which CBP has enhanced cargo security based on the additional 10+2
information, we compared CBP's progress in integrating the 10+2 data
elements into its targeting strategy to best practices for project
management.[Footnote 13] For the purposes of this objective, we limit
our discussion of the impact on trade flow to the impacts resulting
from CBP's use of the data elements, specifically targeting and
compliance enforcement. We did not explore how the requirement to
provide the additional data elements to CBP in advance of container
loading may have impacted trade flow because CBP has separately
addressed this issue in its regulatory assessment of the impacts of
the regulation.
We conducted this performance audit from March 2010 to September 2010
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
Supply Chain Entities:
A number of entities are involved in the supply chain. These entities
include the following:
* Importers: Bring articles of trade from a foreign source into a
domestic market. Importers are responsible for providing ISF data, but
an importer may designate an authorized agent to file the ISF on the
importer's behalf.
* Carriers: Transport goods from a foreign port to a U.S. port. For
foreign cargo remaining on board,[Footnote 14] the carrier is
considered the importer and is required to submit the ISF for the
shipment.
* Licensed customs brokers: Clear goods through customs by preparing
and filing proper entry forms, advising importers on duties to be
paid, and arranging for delivery of imported goods to the destination.
They also may act as the designated agent for importers in filing
their ISFs.
* Shippers: Supply or own the commodities that are being shipped.
* Freight consolidators: Accept partial container shipments from
individual shippers and combine the shipments into a single container
for delivery to the carrier.
* Non-vessel operating common carriers: Buy shipping space on a
vessel, through a special arrangement with an ocean carrier, and
resell the space to individual shippers.
Supply chain entities may participate in CBP's Customs-Trade
Partnership Against Terrorism (C-TPAT), a voluntary program designed
to improve the security of the international supply chain while
maintaining an efficient flow of goods. Under C-TPAT, CBP officials
work in partnership with private companies to review their supply
chain security plans to improve members' overall security. In return
for committing to making improvements to the security of their
shipments by joining the program, C-TPAT members may receive benefits,
such as reduced numbers of inspections or shorter border wait times
for their shipments. Within 1 year of a member's initial certification
into the program, CBP is to conduct a validation to ensure that the
security measures outlined in the certified members' security profiles
and periodic self-assessments are reliable, accurate, and effective.
As of July 8, 2010, 4,416 importers were members of C-TPAT.[Footnote
15]
Development of the Importer Security Filing and Additional Carrier
Requirements (10+2 Rule):
In June 2004, CBP launched the Advance Trade Data Initiative with the
goal of identifying information about shipments in advance of their
arrival in the United States for improving the targeting of containers
that could be used by terrorists to transport dangerous cargo. In the
process of identifying such information for the Advance Trade Data
Initiative, CBP consulted with its Trade Support Network in 2005 and
formed a Cargo Targeting Task Force in March 2006 to review the
initiative and to make recommendations for improving targeting of high-
risk oceangoing cargo. Figure 1 shows a portion of the millions of
cargo containers that are shipped to the United States each year that
CBP is to screen for potential threats.
Figure 1: Container Vessels Carry Millions of Cargo Containers to the
United States Each Year That Could Be Used by Terrorists to Transport
Dangerous Cargo:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
In October 2006, the SAFE Port Act was enacted, which requires CBP to
collect additional data related to the movement of cargo through the
international supply chain and analyze these data to identify high-
risk cargo for inspection prior to cargo loading at foreign seaports.
The additional data elements were to include appropriate elements of
customs entry data as determined by the Secretary of Homeland
Security. The SAFE Port Act requires CBP to adhere to the parameters
in section 343(a) of the Trade Act of 2002, including provisions
requiring consultation with a broad range of affected trade industry
entities and restricting the use of information to security purposes,
in developing the regulation.[Footnote 16] In 2007, CBP distributed to
trade industry groups a Proposal for Advance Trade Data Elements,
which proposed the data elements that later became known as the 10+2
data elements, and posted the proposal on its Web site with a request
for comments from the public. In January 2008, CBP published a notice
of proposed rulemaking and, in November 2008, CBP issued its interim
final rule to require the submission of these additional data
elements. The interim final rule went into effect on January 26, 2009,
and provided a 1-year flexible enforcement period.
Importers are responsible for submitting data elements for the ISF,
and the required data elements differ depending on the cargo's
destination. For cargo containers that are bound for the United States
as the final destination, the rule requires importers to submit 10
data elements to CBP 24 hours prior to loading. Four of these 10 data
elements are identical to elements submitted later for customs entry
purposes.[Footnote 17] For cargo containers that are transiting the
United States but for which the United States is not the final
destination, the rule requires importers to submit 5 data elements to
CBP prior to loading.[Footnote 18] (See table 1 for the required ISF
data elements.)
Table 1: Required ISF Data Elements:
Containerized U.S.-bound cargo:
Seller: Entity selling or agreeing to sell the goods;
Buyer: Entity to whom the goods are sold or agreed to be sold;
Importer of record number: Assigned number of the entity liable for
payment of all duties and responsible for meeting all statutory and
regulatory requirements incurred as a result of importation;
Consignee number: Number assigned to the individual(s) or firm(s) in
the United States on whose account the merchandise is shipped;
Manufacturer: Entity that last manufactures, assembles, produces, or
grows the commodity;
Ship to party: First deliver-to party scheduled to physically receive
the goods after the goods have been released from customs custody;
Country of origin: Country of manufacture, production, or growth of
the article;
Commodity Harmonized Tariff Schedule of the United States number:
Category for type of merchandise, as defined by the Harmonized Tariff
Schedule, being imported into the United States;
Container stuffing location: Physical location(s) where the goods were
packed or loaded into the container;
Consolidator: Entity who loaded the container or arranged for the
loading of the container;
Containerized in-transit cargo:
Booking party: Entity who initiates the reservation of the cargo space
for the shipment;
Foreign port of unlading: Port code for the foreign port of unloading
at the intended final destination;
Place of delivery: Foreign location where the carrier's responsibility
for the transport of the goods terminates;
Ship to party: First deliver-to party scheduled to physically receive
the goods after the goods have been released from customs custody;
Commodity Harmonized Tariff Schedule of the United States number:
Category for type of merchandise, as defined by the Harmonized Tariff
Schedule, being imported into the United States.
Source: Importer Security Filing and Additional Carrier Requirements,
73 Fed. Reg. 71,730 (Nov. 25, 2008), and CBP.
[End of table]
In addition to data already provided by carriers under the 24-hour
rule, which requires that carriers submit cargo manifest information--
a list of cargo carried in a container--to CBP 24 hours before U.S.-
bound cargo is loaded onto a vessel at a foreign port, carriers are
required to provide the Additional Carrier Requirements, which include
the following two data elements:
* Vessel stow plan: No later than 48 hours after departure from the
last foreign port, carriers must submit information to include the
vessel operator, voyage number, the stow position of each container,
hazardous material code (if applicable), and the port of discharge.
For a voyage of less than 24 hours (short haul), CBP requires that the
stow plan be provided any time prior to arrival at the first U.S.
port. For an example of a vessel stow plan see figure 2.
* Container status messages (CSM): CSMs report terminal container
movements, such as loading and discharging the vessel, and report the
change in the status of containers, such as if they are empty or full.
CSMs also report conveyance movements, such as vessel arrivals and
departures. Carriers must supply CSMs daily for certain events
relating to all containers laden with cargo destined to arrive within
the limits of a port in the United States by vessel.[Footnote 19]
Figure 2: Example of a Vessel Stow Plan, Which Identifies the Location
of Containers on a Vessel and Can Expedite the Removal of High-Risk
Containers for CBP Inspections:
[Refer to PDF for image: illustration]
Source: CBP.
Note: The image above is a portion of information available to CBP
officers through the vessel stow plan module in ATS. The left portion
of this figure provides CBP officers with a general idea of the total
number, location, and origin of the containers. Colors designate
containers loaded at the same ports. The right portion of this figure
represents a cross section of the ship and shows the layout of
containers for each bay and level on the ship. Other information
accessible to CBP officers through the vessel stow plan module
includes summary information for the vessel--for example, last foreign
port and departure date, destination port, number of containers--and
information about containers individually or in groups--for example,
CBP officers can view information about all unmanifested containers or
all containers loaded at the same foreign port.
[End of figure]
ISF Flexibilities:
For U.S.-bound cargo, the interim final rule provides two types of
flexibilities with respect to certain data elements (see table 2).
These flexibilities do not apply to the ISF filings for in-transit
cargo. The purpose of the flexibilities is to allow CBP to conduct a
review of the data elements, including an evaluation of any specific
compliance difficulties that the trade industry may be encountering
with respect to these data elements.
Table 2: Flexibilities for U.S.-Bound Containerized Cargo:
Type of flexibility: Timing;
Applicable ISF data elements: 1. Container stuffing location; 2.
Consolidator;
Flexibility provided: These data elements may be omitted from the
initial filing and filed at a later time, but no later than 24 hours
prior to arrival at a U.S. port.
Type of flexibility: Range;
Applicable ISF data elements: 1. Manufacturer; 2. Ship to party; 3.
Country of origin; 4. Commodity Harmonized Tariff Schedule of the
United States number;
Flexibility provided: For these data elements, importers may provide a
range of acceptable responses, based on facts available to the
importer at the time of submission, in lieu of a single specific
response. Importers must provide more precise or more accurate
information as soon as it becomes available to them, but no later than
24 hours prior to arrival at a U.S. port.
Source: Importer Security Filing and Additional Carrier Requirements,
73 Fed. Reg. 71730 (Nov. 25, 2008).
Note: Importers may use both types of flexibilities when filing their
ISFs.
[End of table]
In order to ensure that importers always provide CBP with the most
updated and accurate 10+2 data, CBP allows importers to alter their
ISF submissions through an amendment process that is not related to
the flexibilities. Under this standard amendment process, the importer
is obligated to provide an amended ISF as soon as better information
is discovered or if there are changes to the shipment--for example, if
merchandise is sold in transit--up until vessel arrival in the first
U.S. port. Using this standard amendment option, importers can amend
any data element included in an ISF submission, regardless of whether
the flexibilities were used, before a shipment's arrival at a U.S.
port. In addition, CBP allows for these standard amendments to be
provided after vessel arrival at the first U.S. port even though the
importer is not generally obligated to make amendments to the ISF when
better information or changes to the shipment occur after vessel
arrival in the first U.S. port.
ATS Targeting:
The collection of these additional 10+2 data elements is intended to
improve high-risk targeting efforts. ATS incorporates two types of
targeting rules--tactical and strategic--to identify risk factors in
shipment data.
* Tactical rules: Rules that identify risks posed by specific
intelligence or threats. Tactical rules typically identify threats
based on the specific entries for one or more shipment data elements.
Tactical rules are updated with minimal delay to react to the
immediate and specific nature of the intelligence.
* Strategic rules: Rules that identify more generalized intelligence
or threats or that identify relationships between different data
elements within a single record or across multiple records. The
process to update strategic rules involves iterations of testing to
ensure that rules have their intended effect.
Within ATS, CBP develops combinations, or sets, of these two types of
rules and assigns numerical weights to the rules in a set to determine
overall risk scores for particular threats, such as narcotics
trafficking or national security threats. CBP uses one such weighted
rule set--the national security weighted rule set--as targeting
criteria to assess the national security risk posed by maritime cargo.
TECS[Footnote 20]--a set of tactical rules that compares 10+2 data to
known violators of federal law--contributes, along with other
strategic and tactical rule sets, to risk scores generated by the
national security weighted rule set. Based on these risk scores, as
well as CBP targeters' analyses of shipment data, CBP is to take
actions to mitigate the threats.
CBP assesses the risks posed by shipments repeatedly throughout the
transit process. CBP reviews shipment records prior to the loading of
the cargo onto a U.S.-bound vessel, as well as during shipment
transit, to identify potential threats and determine if additional
action, such as cargo inspection, is required. When shipment record
data elements are updated with additional or amended information, ATS
could identify new risks or mitigate previously identified risks.
Therefore, a shipment's overall risk score could change while the
shipment is in transit.
The Federal Rulemaking Process and CBP's Regulatory Assessment and
Final Regulatory Flexibility Analysis:
Regulatory agencies have authority and responsibility for developing
and issuing regulations. The basic process by which all federal
agencies develop and issue regulations is spelled out in the
Administrative Procedure Act.[Footnote 21] Among other things, the act
generally requires agencies to publish a notice of proposed rulemaking
in the Federal Register. After giving interested persons or entities
an opportunity to comment on the proposed rule by providing "written
data, views, or arguments," the agency may then publish the final
rule.[Footnote 22]
OMB is responsible for the coordinated review of agency rulemaking to
ensure that regulations are consistent with applicable law, the
President's priorities, and the principles set forth in executive
orders, and that decisions made by one agency do not conflict with the
policies or actions taken or planned by another agency. Under
Executive Order 12866, executive branch agencies must conduct a
regulatory analysis for economically significant regulations
(generally those rules that have an annual effect on the economy of
$100 million or more).[Footnote 23] OMB also provides guidance to
agencies on regulatory requirements, such as OMB Circular No. A-4,
which provides analytical guidelines for agencies to use in assessing
the regulatory impact of economically significant regulations.
Circular No. A-4 is designed to assist analysts in regulatory agencies
by defining good regulatory analysis and standardizing the way
benefits and costs of federal regulatory actions are measured and
reported.
CBP published its Regulatory Assessment and Final Regulatory
Flexibility Analysis, referred to in this report as CBP's regulatory
assessment, as part of the rulemaking process for the 10+2 rule. This
assessment was prepared for CBP by an outside contractor. CBP
conducted this assessment to address (1) the requirement to conduct a
regulatory analysis for economically significant actions; and (2) the
SAFE Port Act of 2006, which requires DHS to consider the cost,
benefit, and feasibility of the rule. CBP published its initial
regulatory assessment in December 2007 and a revised regulatory
assessment in November 2008, which is discussed later in this report.
The regulatory assessment contains a "break-even" analysis that
determines how many times a West Coast port shutdown, a nuclear
attack, or a biological attack would need to be prevented through use
of the data in order for the benefits to equal the costs. For example,
the regulatory assessment concludes that the benefits would exceed the
costs of the rule if one West Coast port shutdown due to a terrorist
attack were prevented over a period of 3 months to 2 years, assuming
that the rule only reduces the risk of a single such event.[Footnote
24]
Implementation of the 10+2 Rule:
Although the effective date of the 10+2 rule was January 26, 2009, the
rule allowed for a 1-year flexible enforcement period. Since the end
of the flexible enforcement period, CBP has stated that it has been
applying a "measured, common sense approach" to enforcement, which
includes exercising the least punitive measures necessary to obtain
full compliance, evaluating noncompliance on a case-by-case basis, and
continuing to provide outreach and guidance to trade industry entities.
During the enforcement period, which began January 26, 2010, CBP plans
to first focus on importers who have not filed ISFs for shipments by
issuing warning letters and possibly subjecting some of these
shipments to nonintrusive inspections, such as taking x-ray images of
cargo containers. Data from the ISFs must be matched to other data
sources to determine compliance, including whether each required
shipment has an ISF on file and whether the ISF was filed in a timely
manner. ISFs are matched to manifest data using the bill of lading
number--an alphanumeric code issued by a carrier that references an
individual cargo shipment in a manifest--and then the matched ISF
becomes part of a shipment record that includes manifest information
and the International Maritime Organization number of the vessel on
which the cargo is shipped.[Footnote 25] Using this vessel number, the
shipment can be matched to a vessel departure message, which carriers
are required to supply to CBP. CBP also matches the ISF and manifest
information to customs entry data.
Results in Brief:
CBP's regulatory assessment generally adheres to OMB guidance,
although greater transparency regarding the selection of alternatives
analyzed and a more complete analysis could have improved CBP's
assessment. CBP's regulatory assessment addresses some elements of a
good regulatory assessment, as stated in OMB guidance, such as the
need for the proposed action and evaluation of the benefits and costs.
It is also generally transparent in citing sources, such as third-
party studies regarding the costs associated with a potential
terrorist attack; explaining how estimates were derived; and providing
supporting documentation and analysis. The assessment, however, lacks
transparency in that it does not explain how the four alternatives
considered for the rule were selected for the analysis, or how one of
the four was selected as the preferred option. OMB guidance states
that regulatory analyses should be transparent and, in particular,
that such analyses should clearly explain the assumptions used in the
analysis. CBP officials said that more information could be provided
in a future update to the regulatory assessment, if an update is
published, to provide more information about the 10+2 rulemaking
process, specifically the selection of the 10+2 data elements. Greater
transparency regarding the selection of alternatives could have
improved the assessment by justifying the limited scope of the
alternatives analyzed in the regulatory assessment and providing
insight into CBP's decision making. Further, a more complete analysis
of the uncertainty involved in estimating key variables used to
evaluate costs and benefits and additional information regarding some
costs to foreign entities--also requirements in OMB guidance--could
have improved CBP's regulatory assessment by providing better
information about the circumstances under which benefits justify
costs. CBP officials said that to the extent that data are available,
this information could be added to the regulatory assessment to
improve the completeness of the assessment if CBP updates its
regulatory assessment.
CBP is using information it has collected, assessed, and shared with
the trade industry to monitor and help improve compliance with and
implementation of the 10+2 rule. For example, CBP collects daily
information on the ISF compliance of importers' shipments at each U.S.
port to monitor the status of ISF implementation, as well as data on
vessels arriving in U.S. ports for which carriers did not file vessel
stow plans. CBP data indicate that in July 2010, approximately 80
percent of shipments were ISF compliant, and CBP officials said most
carriers have submitted vessel stow plans. CBP is also communicating
information about ISF submissions, such as the number of ISFs accepted
and rejected, to importers, or their filers, through monthly progress
reports. Additionally, CBP receives questions from the trade industry
about the 10+2 rule's requirements and CBP responds to them through
public outreach events, correspondence, and publication of a
"Frequently Asked Questions" document posted on its Web site. Further,
CBP has conducted outreach sessions with trade industry entities to
discuss common errors occurring in ISF submissions in an effort to
eliminate such problems.
Importers' use of flexibilities has declined over time and has
remained low since January 2010 when CBP began enforcement of the 10+2
rule. From the beginning of the flexible enforcement period on January
26, 2009, through September 13, 2009, CBP did not have a mechanism to
collect data on importers' intent to use flexibilities. However, CBP's
analysis of filings submitted during this period led it to conclude
that relatively few importers were using the flexibilities. Over the
portion of the flexible enforcement period for which CBP has collected
data (September 13, 2009, through January 25, 2010), about 5 percent
of ISFs (100,252 out of 1,909,523) indicated the use of flexibilities.
According to CBP data, the use of flexibilities on ISFs declined over
this period, from 11 percent each week in September 2009 to 2 percent
each week in January 2010. The use of flexibilities on ISFs over the
enforcement period, beginning January 26, 2010, through June 14, 2010,
has remained at about 2 percent (67,429 of 3,647,476). Additionally,
CBP data on ISFs for which importers indicated their use of
flexibilities show that importers consistently claimed flexibilities
incorrectly or unnecessarily at rates of around 70 percent or greater
for range flexibilities and 60 percent or greater for timing
flexibilities. CBP officials and some importers we spoke with cited
various motivations for using, or not using, flexibilities. CBP
officials noted, for example, that its standard ISF amendment process
offers greater flexibility and a potential cost savings compared to
the flexibilities because it does not require importers to commit to
updating their ISFs, while use of the flexibilities does.
Additionally, some importers we interviewed stated that use of
flexibilities would not be financially beneficial for them because (1)
of the potential increase in filing fees, (2) it could be detrimental
to their corporate image due to potential perceptions of unfamiliarity
with supply chain processes, or (3) they are unnecessary because
importers are able to collect the 10+2 data elements prior to the
submission deadline. CBP officials stated that the limited overall use
of flexibilities, as well as the high rates of incorrect use, will be
considered in determining whether to eliminate, modify, or maintain
the existing flexibilities associated with the 10+2 rule.
The 10+2 rule data elements are available for identifying high-risk
cargo, but CBP has not yet finalized its targeting criteria--the
national security weighted rule set--to identify risk factors in 10+2
data. Further, in the view of both CBP officials and trade industry
representatives we met with, CBP's use of inspections and shipment
holds to enforce 10+2 rule compliance has not impacted overall trade
flow. CBP has made some progress to assess submitted 10+2 data
elements in its targeting system for risk factors that could indicate
a shipment is high risk. For example, CBP compares 10+2 data to
certain high-risk national security threats through the TECS rules.
Additionally, according to CBP officials, access to information on
vessel stow plans has enabled CBP to identify more than 1,000
unmanifested containers--containers that are inherently high risk
because their contents are not listed on a ship's manifest--on ships
bound for U.S. ports. However, CBP has not yet finalized its national
security weighted rule set to identify risk factors in 10+2 data, but
it has conducted a preliminary analysis that indicates that the
collection of the 10+2 data could improve the determination of risk
scores earlier in the supply chain process. In particular, the
analysis demonstrated that risk scores assigned in transit based on
manifest data may differ from risk scores assigned at arrival based on
customs entry data and that the difference in scores may affect
actions CBP takes to mitigate potential threats. Because the process
to update the national security weighted rule set involves iterations
of testing, CBP officials said they will not be able to determine when
the 10+2 data will be integrated with the existing national security
weighted rule set until testing is complete. We recognize that the
results of such testing could require adjustments to tasks that make
it difficult to adhere exactly to established dates for completing a
project. However, establishing project time frames and milestones--
best practices in project management--could help guide CBP staff in
such testing and provide CBP with goals for completing interim steps
and finishing this project, thus better positioning it for targeting
high-risk cargo, which is the purpose stated in the SAFE Port Act for
collecting the additional data elements. Additionally, CBP officials
and trade industry representatives reported that CBP's 10+2 compliance
enforcement efforts, which include holding cargo for inspection when
the importer has failed to submit an ISF, have not resulted in
measurable impacts to overall trade flow. While CBP does not collect
data on enforcement actions specific to 10+2 compliance, such as cargo
inspections, CBP officials stated that they have not received any
complaints from the trade industry regarding 10+2 enforcement actions.
Additionally, none of the importers we spoke with said they have
experienced delays in trade flow as the result of CBP's enforcement of
10+2 compliance.
We are recommending that, if CBP publishes an update to its regulatory
assessment, CBP include additional information in the updated
regulatory assessment to improve the transparency and completeness of
the assessment. We are also recommending that CBP establish milestones
and time frames for updating the ATS national security weighted rule
set to provide CBP with goals for conducting interim steps and
completing the project to better position it to effectively target
high-risk container shipments. In written comments regarding a draft
of this report, DHS stated that it concurred with these
recommendations. DHS's comments are reprinted in appendix I. CBP also
provided technical comments, which we incorporated as appropriate.
CBP's Regulatory Assessment Generally Adheres to OMB Guidance, but
Could Have Been Improved by Additional Information:
CBP's regulatory assessment generally adheres to OMB guidance by
including required elements--such as a statement of the need for the
proposed action, an examination of alternative approaches, and
evaluation of the benefits and costs. However, the regulatory
assessment lacks transparency regarding the selection of alternatives
for analysis and support for the selection of the preferred
alternative. Greater transparency on this topic could have improved
CBP's regulatory assessment. Additionally, a more complete analysis of
the uncertainty involved in estimating key variables used to evaluate
costs and benefits, and additional information regarding some costs to
foreign entities, could also have improved CBP's regulatory assessment.
CBP's Regulatory Assessment Generally Adheres to OMB Guidance:
CBP's regulatory assessment addresses the three basic elements of a
good regulatory assessment, as defined by OMB:
Statement of the need for the proposed action: The assessment includes
a statement that the regulation was based on a statutory requirement
(SAFE Port Act, Section 203(b)).
Examination of alternative approaches: The assessment presents four
alternatives for analysis. Each of the four alternatives has different
components, and table 3 outlines the requirements of each alternative
analyzed in the regulatory assessment. For example, alternative 1
requires importers to submit an ISF (bulk cargo shipments are exempt
from the requirement) and carriers to submit the Additional Carrier
Requirements.
Evaluation of the benefits and costs: In accordance with OMB guidance,
because the benefits could not be quantified, the assessment includes
a "break-even" analysis. For example, the analysis concludes that the
benefits of the rule would equal the costs if the rule avoids a:
nuclear attack once in 60 to 500 years, assuming that the rule only
reduces the risk of a single such event.[Footnote 26]
Table 3: Alternatives Analyzed in CBP's Regulatory Assessment:
Alternative: Alternative 1;
Components required in alternatives considered for analysis: ISF (10
data elements): [Check];
Components required in alternatives considered for analysis: ISF
exemption for bulk cargo shipments[A]: [Check];
Components required in alternatives considered for analysis:
Additional Carrier Requirements (2 data elements): [Check].
Alternative: Alternative 2;
Components required in alternatives considered for analysis: ISF (10
data elements): [Check];
Components required in alternatives considered for analysis: ISF
exemption for bulk cargo shipments[A]: [Empty];
Components required in alternatives considered for analysis:
Additional Carrier Requirements (2 data elements): [Check].
Alternative: Alternative 3;
Components required in alternatives considered for analysis: ISF (10
data elements): [Check];
Components required in alternatives considered for analysis: ISF
exemption for bulk cargo shipments[A]: [Check];
Components required in alternatives considered for analysis:
Additional Carrier Requirements (2 data elements): [Empty].
Alternative: Alternative 4;
Components required in alternatives considered for analysis: ISF (10
data elements): [Empty];
Components required in alternatives considered for analysis: ISF
exemption for bulk cargo shipments[A]: [Empty];
Components required in alternatives considered for analysis:
Additional Carrier Requirements (2 data elements): [Check].
Source: Industrial Economics, Inc., in an assessment prepared for CBP.
[A] Bulk cargo is shipped loose in the hold of a ship, not in packages
or containers. For example, grain, coal, oil, and chemicals are
usually bulk cargo.
[End of table]
Additionally, the regulatory assessment is generally transparent in
citing sources and explaining how estimates were derived. Where the
analysis relied on third-party data sources, the regulatory assessment
provides references to those data sources. For example, third-party
sources are cited for estimates regarding the cost to importers for
each day of delay and the costs associated with a potential terrorist
attack. The regulatory assessment also provides explanations for how
some of the estimates used in the assessment were developed. For
example, the assessment explains that the initial one-time costs to
adjust business practices to implement the 10+2 rule were based on
information from a COAC survey and the recurring costs for
transmitting ISF data were based on interviews with representatives
from the shipping, importing, and customs brokerage industries.
The regulatory assessment also contains supporting documentation and
analysis, including an uncertainty and sensitivity analysis, as called
for by OMB guidance.[Footnote 27] The assessment addresses limitations
and key sources of uncertainty for each of three sections of the
analysis that produced estimates: (1) the baseline shipping analysis,
which estimates shipping trends (such as number of importers,
carriers, and U.S.-bound shipments) in absence of the rule; (2)
incremental costs (such as up-front costs per importer to adapt to the
rule and costs per filing) and economic impact (such as losses from
potential delays); and (3) potential benefits (such as the costs
avoided by preventing a terrorist attack). It also includes an
uncertainty analysis for the industry's total estimated costs and
welfare losses. The sensitivity analysis analyzes the effects of
variables' uncertainty on the results of the analysis and concludes
that the uncertainty associated with the initial, up-front costs to
importers has the greatest effect on the results of the analysis. As a
result of the sensitivity and uncertainty analysis, the assessment
concludes that the likelihood of reaching the higher end of the cost
range is low.
Additional Information Could Have Improved CBP's Regulatory Assessment:
Our review of the regulatory assessment found that CBP was not
transparent regarding how it selected the four alternatives for
analysis. According to CBP officials, CBP selected the alternatives
that the contractor analyzed in the regulatory assessment. However,
based on our review, there is little variation in the alternatives
analyzed. Each of the alternatives is a combination of including or
excluding three components--the 10 ISF data elements, an exemption for
bulk cargo shipments from filing the ISF, and the two data elements
for the Additional Carrier Requirements--and the regulatory assessment
does not discuss whether other alternatives may have met the
requirements of the SAFE Port Act. Moreover, the regulatory assessment
does not discuss other potential alternatives with additional or fewer
data elements or why such other alternatives were not included in the
analysis. For example, it does not discuss a range of other
alternatives, such as requiring 15 data elements for the ISF or only
one of the two carrier data elements. According to CBP officials, the
regulatory assessment does not discuss other alternatives because CBP
identified the current 10+2 data elements--in consultation with trade
industry stakeholders, as data elements that would significantly
increase CBP's ability to make better informed targeting decisions--
prior to the SAFE Port Act requirement to collect such data.
Greater transparency regarding the selection of alternatives could
have improved the assessment by justifying the limited scope of the
alternatives analyzed in the regulatory assessment and providing
insight into CBP's decision making. According to OMB guidance,
regulatory analysis provides a way of organizing the evidence on the
key effects--good and bad--of the various alternatives that should be
considered in developing regulations. The motivation is either to
learn if the benefits of an action are likely to justify the costs or
to discover which of various possible alternatives would be the most
cost-effective. According to OMB guidance, a good regulatory analysis
is designed to inform the public and other parts of the government (as
well as the agency conducting the analysis) of the effects of
alternative actions. Including a discussion of the full scope of
feasible regulations could have enhanced transparency about the
regulatory assessment's usefulness for informing decision making. In
response to our findings, CBP officials acknowledged that more
information about the 10+2 rulemaking process, specifically the
selection of the 10+2 data elements, could be added in a future update
to the regulatory assessment, if an update is published, to provide
greater context about the decision making involved in developing the
10+2 rule.
The regulatory assessment also lacks transparency regarding the final
selection of alternative 1 as the preferred alternative. OMB guidance
states that regulatory analyses should be transparent, and in
particular that such analyses should clearly explain the assumptions
used in the analysis. Three of the alternatives (alternatives 1, 2,
and 3) have almost identical costs and, therefore, the number of
events (terrorist attacks) that would need to be avoided to justify
the costs are almost identical. Absent supporting documentation, it is
not clear why, based on the information and analysis in the regulatory
assessment, CBP selected alternative 1 over the other alternatives.
For example, the assessment does not explain how alternative 1 may be
more likely to achieve benefits, specifically prevention of terrorist
attacks, than the other alternatives to justify the selection of
alternative 1. The assessment states that alternative 1 was favored
over alternative 2 because the impact of requiring the ISF for bulk
cargo--alternative 1 exempts bulk cargo from the ISF requirement,
while alternative 2 requires an ISF for all cargo--is expected to be
slight given that the number of bulk cargo shipments is small compared
to the number of nonbulk shipments. Furthermore, according to CBP
officials, the exemption for bulk cargo was selected to mirror the
requirements of the 24-hour rule--which requires that carriers submit
cargo manifest information for containerized cargo but allows certain
timing exemptions for bulk cargo submissions. The assessment states
that alternatives 3 and 4 were rejected based on CBP's judgment that
the ISF and Additional Carrier Requirements should work in tandem to
be effective. However, the regulatory assessment does not describe or
analyze how or why CBP made this judgment. For example, it does not
describe how the ISF and Additional Carrier Requirements are used
jointly to target for risk to support the requirement to provide both
types of data to CBP. In response to our findings, CBP officials
acknowledged that more information could be added to the regulatory
assessment to provide greater transparency on this topic.
The regulatory assessment acknowledged uncertainty for the cost to
importers for a day of delay and the value of statistical life,
[Footnote 28] but these variables were not addressed by the
assessment's uncertainty analysis. OMB guidance states that the
important uncertainties connected with regulatory decisions need to be
analyzed and presented as part of the overall regulatory analysis.
Uncertainties with respect to these two variables may have influenced
the results of the assessment. For example, if the assessment's
estimate for the value of statistical life was too low, the resulting
conclusion would be that more terrorist attacks using cargo containers
would need to be prevented in a particular time period to justify the
costs of the regulation and the analysis would favor a less costly
alternative. The quantitative uncertainty analysis includes the number
or percentage of containers that may experience delays and the length
of the potential delays in the supply chain, but the assessment does
not address the impact of the uncertainty associated with the estimate
for the dollar cost of delay. A more complete analysis of these
variables' uncertainty could have more fully addressed the elements in
OMB guidance and, therefore, could have improved the regulatory
assessment. CBP officials recognized that these estimates were not
addressed in the uncertainty analysis and they acknowledged that more
information could be added to improve the assessment's discussion of
uncertainty.
The regulatory assessment notes that lost producer surplus, or
profits, which were assumed to be borne by foreign entities, are not
estimated in the assessment. OMB Circular No. A-4 states that, when
evaluating a regulation that is likely to have effects beyond the
United States, the effects to foreign entities should be reported
separately. Because the assessment does not evaluate lost producer
surplus, the costs to foreign entities are not fully reported.
According to the regulatory assessment, these costs are not addressed
because the regulatory assessment focuses on impacts to the U.S.
economy. CBP officials acknowledged that, to the extent data are
available on these costs, this information could be added to the
regulatory assessment.
These officials also said that CBP is conducting additional analyses
to determine the impact of delays resulting from the rule and to
review public comments solicited in the publication of the 10+2 rule.
Depending on the results of these analyses, CBP may update its
regulatory assessment. If CBP publishes an update to its regulatory
assessment, additional information, such as a discussion of how the
alternatives were selected for analysis, an uncertainty analysis for
the cost to importers for a day of delay and for the value of
statistical life, and estimates for lost profits borne by foreign
entities, would improve the transparency and completeness of the
assessment.
CBP Has Collected, Assessed, and Shared Information with the Trade
Industry to Monitor and Help Improve Compliance with and
Implementation of the 10+2 Rule:
CBP has collected and assessed a variety of information, such as daily
compliance reports, and has shared information with the trade
industry, through importer progress reports and outreach events, to
help improve compliance with and implementation of the 10+2 rule. CBP
is also using information it has collected to monitor and help improve
implementation of the rule, for example, by posting a "Frequently
Asked Questions" document on its Web site that addresses some common
problems.
CBP Has Collected and Assessed a Variety of Information to Help
Improve Compliance with and Implementation of the 10+2 Rule:
CBP is tracking the daily level of ISF compliance at each U.S. port to
determine the overall level of compliance with the 10+2 rule. For all
shipments scheduled to arrive at a U.S. port within 2 days, CBP
assesses the percentage of shipments that have ISFs filed. For
example, for shipments scheduled to arrive in the United States on
April 18, 2010, a report generated on the morning of April 16, 2010,
indicated that 22,310 of 26,348 shipments (85 percent) had ISFs filed.
CBP also monitors data on arriving vessels that have not submitted
vessel stow plans, based on data for ships that are due to arrive in
port within 96 hours. CBP forwards these reports to the local port
officials who then contact the carriers who have not filed stow plans
to obtain the necessary information. CBP has also collected and
analyzed information about the use of flexibilities in filing ISFs.
(Information on importers' use of flexibilities is discussed later in
this report.) To gauge issues trade industry entities may have in
understanding or implementing the ISF requirement, CBP has also
reviewed and analyzed data on ISF errors and rejections, including
determining the most common errors that result in rejections.
According to a CBP analysis, which examined ISFs submitted from
January 26, 2010, through March 28, 2010, 22,257 of 81,435 rejected
ISFs (27 percent) were rejected because they were duplicates of ISFs
already on file.[Footnote 29] This was the most common error that led
to rejections. Other types of errors, such as not supplying the ISF
importer number, each accounted for less than 5 percent of rejected
ISFs.
While the data that CBP has collected to date provide information on
the most common errors or reasons for rejecting ISFs for importers who
are trying to comply with the rule, the data provide limited
information about the reasons for noncompliance among other importers.
According to CBP officials, CBP can identify a shipment for which an
ISF has been filed, but it is difficult to determine the importer
responsible for filing the ISF and possible reasons for why an ISF was
not filed or was not matched to the shipment. For the purposes of
filing the ISF, the importer for a shipment may be one of several
entities involved in the supply chain, such as the owner or purchaser
of the goods, and it is left to the various supply chain entities
involved with a shipment to determine who will be responsible for
filing the ISF. Furthermore, a shipment lacking an ISF may appear to
be noncompliant if the importer makes an error in submitting the ISF,
such as providing the incorrect bill of lading number. In April 2010,
CBP began sending letters to importers who appeared to be
noncompliant, based on CBP's review of data collected from ISFs and
other data such as customs entries, to notify these importers of
possible noncompliance and encourage them to contact CBP about any
concerns they may have. CBP officials said that they have been pleased
with importers' responsiveness to these letters.
CBP Has Shared Information with the Trade Industry to Help Improve
Compliance with and Implementation of the 10+2 Rule:
CBP is providing compliance and implementation data--specifically data
on the number of ISFs that were (1) accepted, (2) rejected, and (3)
timely[Footnote 30]--for each importer's filings in the form of
monthly progress reports sent to the importer's filer or directly to
the importer in the case of validated C-TPAT members.[Footnote 31]
According to CBP officials, providing the information directly to the
importer requires a manual process to set up accounts for individual
importers and, therefore, this service is only offered to validated C-
TPAT members as a benefit of participating in the program. For other
importers, filers can register to receive a monthly progress report
with the data for each importer they represent. The data in the
progress reports for the other importers are aggregated for each
month. For example, a progress report will indicate the number of
rejected ISFs for an importer, but it does not provide transaction-
level data, such as which particular ISFs were rejected. Although CBP
officials recognize some importers' concerns that progress reports
lack transaction-level data for importers who are not validated C-TPAT
members, they said that CBP has no plans to include transaction-level
data for progress reports other than for validated C-TPAT member
importers. According to some importers we interviewed, the lack of
transaction-level data may make it difficult for an importer to
identify causes of discrepancies between its own internal data and the
information presented in CBP's progress report. However, according to
CBP officials, importers or their filers already receive information
for each transaction, such as messages regarding errors in the ISF or
confirmation that the bill of lading number was matched to other data.
In addition to the monthly progress reports, CBP has also conducted
outreach sessions for members of the trade industry and has received
and responded to questions and comments about the 10+2 rule. From
December 2008 through December 2009, CBP sponsored 35 town hall events
across the country and has conducted additional outreach sessions
through trade industry associations. In April and May 2010, CBP
conducted Web-based seminars targeted to reach and inform small and
medium importers.[Footnote 32] CBP also responds to questions and
comments from the trade industry it receives through a dedicated e-
mail address as well as phone calls and e-mails to program officials
and has posted a "Frequently Asked Questions" (FAQ) document on its
Web site. However, some importers we interviewed expressed concern
that, rather than publish its policies informally through its Web site
and FAQ, CBP should publish its policies in a document that is legally
binding, such as a notice in the Federal Register. In particular, one
concern is that CBP has not legally obligated itself to treat its
current proxy for measuring ISF timeliness (24 hours prior to vessel
departure) as meeting the rule's requirement of 24 hours prior to
loading. According to CBP officials, the regulation must require the
data to be submitted prior to loading because the SAFE Port Act
establishes this aspect of the requirement. CBP officials said they
recognize that there is no existing metric for measuring the time of
loading and, therefore, CBP plans to use the proxy measure in
enforcing the rule. CBP also solicited public comments regarding the
flexibilities and final regulatory assessment. According to CBP
officials, comments that were directly relevant to the flexibilities
or the regulatory assessment will be taken into consideration in
developing the final rule. CBP officials stated that some comments
that were not relevant to the interim aspects of the rule were
addressed in the FAQ.
CBP Is Using Information It Has Collected to Monitor and Help Improve
Implementation of the 10+2 Rule:
CBP officials said that CBP is generally satisfied with the status of
ISF implementation, based on CBP data that indicate that approximately
80 percent of shipments in July 2010 were compliant with the ISF
requirement. CBP officials noted that this measure of 80 percent
compliance includes ISFs for U.S.-bound and in-transit cargo, and
compliance rates for in-transit cargo are lower than for U.S.-bound
cargo. In July 2010, 646,016 of 748,780 U.S.-bound shipments
(approximately 86 percent) had submitted ISFs, whereas 20,811 of
84,170 in-transit shipments (approximately 24 percent) had submitted
ISFs. CBP officials stated they have a goal of increasing compliance
to about 95 percent by fall 2010. As a result, CBP is monitoring
performance to identify areas to improve implementation and
compliance. CBP has identified issues with the implementation of the
ISF for in-transit cargo, such as lack of clarity regarding the party
responsible for filing the ISF for two types of in-transit cargo
(immediate exportation and transportation and exportation) shipments,
and CBP officials said that they plan to revise the requirements
through future rulemaking.
To help correct problems CBP has identified through its monitoring of
ISF data, CBP has conducted further outreach efforts to members of the
trade industry. For example, after identifying duplicate ISFs as the
most common error and reason for rejecting ISFs, CBP officials
determined that some filers or importers were resubmitting ISFs if
they had received a message from CBP that the ISF had not been matched
to a bill of lading. In some cases, this was occurring because the ISF
preceded submission of manifest information containing the matching
bill of lading number. As a result, according to CBP officials, CBP
has conducted outreach sessions through trade industry associations
and posted information on its FAQ to reduce the number of such
resubmissions. In April 2010, CBP also began identifying importers who
may not be complying and sent letters to these importers notifying
them of possible noncompliance and encouraging them to contact CBP
about any concerns they may have. In general, representatives of the
four industry associations we spoke with said they have been satisfied
with CBP's outreach efforts during implementation of the rule.
[Footnote 33]
In addition to its other outreach efforts, CBP is also working to
address concerns regarding the information contained in ISF progress
reports, specifically the number of ISFs that cannot be measured for
timeliness.[Footnote 34] In order to determine if an ISF was submitted
on time, CBP must match the ISF to the vessel departure message
supplied by carriers.[Footnote 35] According to CBP data, about 50
percent of the ISFs it analyzed for the May 2010 progress reports
could not be assessed for timeliness because they could not be matched
to vessel departure messages. For example, an ISF may not be matched
to a vessel departure message if the bill of lading number on the ISF
does not match a bill of lading associated with cargo on a vessel for
which CBP has received a departure message. In order to improve the
number of ISFs that can be matched to vessel departure messages, CBP
is making adjustments to the system used by importers and their filers
to submit ISFs, the Automated Broker Interface, to allow filers to
query bill of lading numbers in the system. According to CBP
officials, this will enable importers and filers to ensure that the
bill of lading information is correct before submitting an ISF. Under
the 10+2 rule, importers are required to submit complete and accurate
information, and fewer errors in the bill of lading information will
improve CBP's ability to match ISF data to other data sources and
monitor compliance. CBP officials also said that CBP does not make
enforcement decisions based on the information in the progress reports.
With respect to carriers' implementation, CBP officials said that
while there have not been many instances of major carrier companies
failing to submit vessel stow plans, some smaller companies may have
had trouble adapting to the requirement because they had not
previously maintained vessel stow plan information. According to CBP
officials, CBP has developed a spreadsheet format that smaller
carriers can use to submit vessel stow plan information, rather than
submitting it through specialized stow plan software.
Importers' Use of Flexibilities Has Declined over Time and Has
Remained Consistently Low for a Variety of Reasons:
The number of ISFs indicating use of flexibilities--provisions that
allow importers flexibility in the timing and content of submission
for certain data elements--has declined over time--from 11 percent of
filings in September 2009 to less than 2 percent in June 2010. CBP
officials stated that the decrease in flexibility usage can be
primarily attributed to the trade industry's determination that
flexibility use is unnecessary due to the existence of CBP's standard
amendment process, which allows filers to update the information in
their ISF regardless of whether or not they claim flexibility use.
Additionally, importers we interviewed cited a variety of reasons for
the nonuse and use of flexibilities.
Importers' Use of Flexibilities Has Declined over Time:
Prior to September 13, 2009, CBP did not have a mechanism to track
importers' intended use of flexibilities and it relied instead on
analyses of filed submissions to approximate the use of flexibilities.
For example, CBP conducted analyses of filed submissions and concluded
that relatively few importers were using the flexibility of not
providing either the consolidator element (entity who loads the
container) or the container stuffing (packing) location element at the
time of initially filing their ISFs. Among initial ISF submissions, 99
percent provided the consolidator element and 99 percent provided the
stuffing (packing) location element. To gauge importers' understanding
of the flexibilities, CBP implemented a function in its electronic
filing submission system in September 2009 to allow importers to
identify their intent to use flexibilities at the time they submit
filings.[Footnote 36] However, this function did not allow CBP to
monitor whether an importer was using both flexibilities for a single
ISF. Further, beginning in November 2009, CBP adjusted its system for
receiving ISFs to allow importers to indicate their intent to use both
range and timing flexibilities--the data element submission options
provided to importers that allow the submission of a range of
acceptable responses and the initial omission of certain data
elements, respectively. Prior to this change, importers could only
indicate their intent to use one flexibility type, although CBP's
system allowed the data to be entered in a way that utilized both
types of flexibilities.
According to data obtained through CBP, ISFs indicating an intent to
use range flexibilities or timing flexibilities declined from 11
percent of filings each week in September 2009 to 2 percent each week
in January 2010. Further, following the start of the enforcement
period on January 26, 2010, overall use of the flexibilities has
remained low, with importers indicating use of the flexibilities in
about 2 percent of ISFs submitted each week from January 26, 2010,
through June 14, 2010 (see figure 3). From September 13, 2009, through
June 14, 2010, the percentage of importers that indicated use of the
flexibilities on their ISFs declined from more than 13 percent to less
than 4 percent. Over the portion of the flexible enforcement period
for which CBP has data on importers' indication of flexibilities use
(September 13, 2009, through January 25, 2010), 100,252 of the
1,909,523 submitted ISFs (or 5 percent) indicated flexibilities use.
Since the start of the enforcement period on January 26, 2010, through
June 14, 2010, the percentage of ISFs for which importers claimed
flexibility use remained relatively consistent at about 2 percent of
ISF submissions (67,429 of the 3,647,476 filed). Additionally, from
December 7, 2009, through June 14, 2010, ISFs that indicated use of
both types of flexibilities remained below 0.5 percent of all ISFs
each week, which corresponds to about 1 percent or less of importers
claiming both types of flexibilities on their ISFs each week.
Figure 3: Percentage of ISF Submissions Indicating Use of
Flexibilities, by Week, for the Flexible Enforcement Period (September
13, 2009, through June 14, 2010):
[Refer to PDF for image: multiple line graph]
September 13-September 20:
ISF claiming any flexibilities: 11.1%;
ISFs claiming range flexibilities: 8.9%;
ISFs claiming timing flexibilities: 2.3%.
September 21-September 27:
ISF claiming any flexibilities: 10.5%;
ISFs claiming range flexibilities: 8.2%;
ISFs claiming timing flexibilities: 2.3%.
September 28-October 4:
ISF claiming any flexibilities: 9.2%;
ISFs claiming range flexibilities: 6.9%;
ISFs claiming timing flexibilities: 2.3%.
October 5-October 11:
ISF claiming any flexibilities: 8.6%;
ISFs claiming range flexibilities: 6.4%;
ISFs claiming timing flexibilities: 2.1%.
October 12-October 18:
ISF claiming any flexibilities: 7.2%;
ISFs claiming range flexibilities: 5.4%;
ISFs claiming timing flexibilities: 1.8%.
October 19-October 25:
ISF claiming any flexibilities: 8%;
ISFs claiming range flexibilities: 6%;
ISFs claiming timing flexibilities: 2%.
October 26-November 1:
ISF claiming any flexibilities: 7.6%;
ISFs claiming range flexibilities: 5.7%;
ISFs claiming timing flexibilities: 1.9%.
November 2-November 8:
ISF claiming any flexibilities: 8%;
ISFs claiming range flexibilities: 6.2%;
ISFs claiming timing flexibilities: 1.8%.
November 9-November 15:
ISF claiming any flexibilities: 7.8%;
ISFs claiming range flexibilities: 5.9%;
ISFs claiming timing flexibilities: 1.9%.
November 16-November 22:
ISF claiming any flexibilities: 5.2%;
ISFs claiming range flexibilities: 3.7%;
ISFs claiming timing flexibilities: 1.4%.
November 23-November 29:
ISF claiming any flexibilities: 5.6%;
ISFs claiming range flexibilities: 4.3%;
ISFs claiming timing flexibilities: 1.3%.
November 30-December 6:
ISF claiming any flexibilities: 5.4%;
ISFs claiming range flexibilities: 3.9%;
ISFs claiming timing flexibilities: 1.5%.
December 7-December 13:
ISF claiming any flexibilities: 5.4%;
ISFs claiming range flexibilities: 3.7%;
ISFs claiming timing flexibilities: 1.3%;
ISFs claiming both types of flexibilities: 0.4%.
December 14-December 20:
ISF claiming any flexibilities: 4.1%;
ISFs claiming range flexibilities: 2.7%;
ISFs claiming timing flexibilities: 1.1%;
ISFs claiming both types of flexibilities: 0.4%.
December 21-December 27:
ISF claiming any flexibilities: 2.6%;
ISFs claiming range flexibilities: 1.6%;
ISFs claiming timing flexibilities: 0.8%;
ISFs claiming both types of flexibilities: 0.2%.
December 28-January 3:
ISF claiming any flexibilities: 2.5%;
ISFs claiming range flexibilities: 1.5%;
ISFs claiming timing flexibilities: 0.8%;
ISFs claiming both types of flexibilities: 0.3%.
January 4-January 10:
ISF claiming any flexibilities: 2.1%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.7%;
ISFs claiming both types of flexibilities: 0.3%.
January 11-January 17:
ISF claiming any flexibilities: 2.2%;
ISFs claiming range flexibilities: 1.3%;
ISFs claiming timing flexibilities: 0.7%;
ISFs claiming both types of flexibilities: 0.2%.
January 18-January 24:
ISF claiming any flexibilities: 2.1%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.6%;
ISFs claiming both types of flexibilities: 0.3%.
January 25-January 31:
ISF claiming any flexibilities: 2.1%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.6%;
ISFs claiming both types of flexibilities: 0.3%.
February 1-February 7:
ISF claiming any flexibilities: 2.1%;
ISFs claiming range flexibilities: 1.3%;
ISFs claiming timing flexibilities: 0.6%;
ISFs claiming both types of flexibilities: 0.3%.
February 8-February 14:
ISF claiming any flexibilities: 2%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.3%.
February 15-February 21:
ISF claiming any flexibilities: 1.7%;
ISFs claiming range flexibilities: 0.9%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.3%.
February 22-February 28:
ISF claiming any flexibilities: 1.7%;
ISFs claiming range flexibilities: 1%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.3%.
March 1-March 7:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.3%.
March 8-March 14:
ISF claiming any flexibilities: 1.9%;
ISFs claiming range flexibilities: 1.1%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.3%.
March 15-March 21:
ISF claiming any flexibilities: 1.9%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.3%.
March 22-March 28:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.1%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.3%.
March 29-April 4:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.1%;
ISFs claiming timing flexibilities: 0.5%;
ISFs claiming both types of flexibilities: 0.2%.
April 5-April 11:
ISF claiming any flexibilities: 1.7%;
ISFs claiming range flexibilities: 1.1%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
April 12-April 18:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4v
ISFs claiming both types of flexibilities: 0.2%.
April 19-April 26:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
April 26-May 3:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
May 3-May 10:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.3%;
ISFs claiming both types of flexibilities: 0.2%.
May 10-May 16:
ISF claiming any flexibilities: 1.7%;
ISFs claiming range flexibilities: 1.1%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
May 17-May 23:
ISF claiming any flexibilities: 1.9%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.3v
May 24-May 31:
ISF claiming any flexibilities: 2%;
ISFs claiming range flexibilities: 1.3%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
May 31-June 6:
ISF claiming any flexibilities: 1.8%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.4%;
ISFs claiming both types of flexibilities: 0.2%.
June 7-June 14:
ISF claiming any flexibilities: 1.7%;
ISFs claiming range flexibilities: 1.2%;
ISFs claiming timing flexibilities: 0.3%;
ISFs claiming both types of flexibilities: 0.2%.
Source: GAO analysis of CBP data.
[End of figure]
While importers' use of flexibilities has remained at about 2 percent
since January 2010, the percentage of ISFs indicating use of
flexibilities that constitute incorrect or unnecessary use of
flexibilities has remained consistently high. The system changes CBP
implemented to allow importers to indicate their intent to use the
flexibilities has enabled CBP to gauge importers' understanding of the
flexibilities by analyzing whether the data provided in ISFs
indicating use of the flexibilities are consistent with the
flexibilities provisions in the interim final rule. For timing
flexibilities, correct use of the flexibilities is indicated by an ISF
missing either the consolidator element or the stuffing (packing)
location element, or both.[Footnote 37] For range flexibilities,
correct use of the flexibilities is indicated by multiple entries for
one or more of the flexible range data elements: manufacturer, ship to
party, country of origin, or commodity Harmonized Tariff Schedule
number.[Footnote 38] During the period September 13, 2009, through
June 14, 2010, the rate of incorrect or unnecessary use of range
flexibilities has remained consistent, at around 70 percent or more of
the ISFs that indicated use of the flexibilities. The rate of
incorrect or unnecessary use of timing flexibilities declined from 85
percent to 63 percent during the time period September 13, 2009,
through January 26, 2010, but has generally remained at around 60
percent or greater since the start of the enforcement period. Thus,
while the overall use of flexibilities remains relatively low, the
rate of incorrect or unnecessary use of flexibilities has remained
consistently high. CBP officials stated that the overall use of
flexibilities, as well as the high rates of incorrect use, will inform
their consideration of whether to eliminate, modify, or maintain the
existing flexibilities associated with the 10+2 rule. Due to the
limited use of the flexibilities, CBP officials currently question
their utility.
CBP and Importers Cited Various Motivations for Deciding Whether or
Not to Use Flexibilities:
CBP officials and trade industry representatives we spoke with stated
that CBP's standard ISF amendment process provides greater flexibility
than the timing and range flexibilities provided for in the 10+2 rule.
When an importer indicates use of the flexibilities on an ISF, it must
submit an updated ISF to indicate that the information is final,
regardless of whether the information on the ISF has changed. CBP's
standard amendment process, however, provides more latitude in that it
allows the importer to initially submit information on the basis of
what it reasonably believes to be true and then requires the importer
to update the filing only if any of the information changes or more
accurate information becomes available. These updates may be filed any
time before goods enter a U.S. port, in contrast to the flexibilities,
which require updates no later than 24 hours prior to goods' arrival
at a U.S. port.
CBP officials also explained that using the flexibilities could
subject importers to additional fees if they are using a third-party
filer that charges for each filing because the importers would have to
pay for the initial filing in addition to any updated filings.
However, if the importer does not use flexibilities, the importer
would only be subject to additional filing fees if shipment
information changes and use of the standard amendment process is
required. Some of the importers we spoke with concurred with the
benefits offered by the standard amendment process as compared to use
of the flexibilities.
Importers we spoke with cited a variety of reasons for not using
flexibilities, and one importer cited benefits for using them. Some
importers echoed CBP officials' explanation that the standard
amendment process provides more flexibility and can be less costly
than using the flexibilities provided for in the interim final rule.
Additionally, some importers who are C-TPAT members said they are
reluctant to use flexibilities because it could convey to CBP that
they do not have complete awareness of their supply chains. Further,
some importers cited no need for the flexibilities because they
collect all of the required 10+2 data elements prior to the ISF
submission deadline. One importer, however, stated that use of the
range flexibilities has allowed it to develop a template through which
it can submit multiple entries per flexible range element, which in
turn improves the efficiency of its submission process. This importer
stated it is not concerned about the expense of filing flexibility
updates because that cost is expected to be offset by savings
associated with automation of its filing process.
CBP Has Not Yet Finalized Its Targeting Criteria to Identify Risk
Factors in 10+2 Data, and CBP's Use of the Data Has Not Impacted Trade
Flow:
Data generated by the 10+2 rule are available for use in targeting
efforts, such as identification of unmanifested containers, but CBP
has not yet finalized the ATS national security weighted rule set--
CBP's primary targeting criteria within ATS for identifying high-risk
cargo containers--to identify risk factors present in the ISF data
set. Additionally, CBP officials and trade industry representatives
report that CBP's use of the data to enforce rule compliance has not
impacted trade flow.
CBP Is Using 10+2 Data to Target High-Risk Shipments, but Has Not
Finalized the ATS National Security Weighted Rule Set to Identify Risk
Factors in 10+2 Data:
CBP targeters have access to data generated by the 10+2 rule, and
tactical rules can identify risk factors based on any of the 10+2 data
elements. In particular, CBP has updated the TECS rules in ATS to
incorporate the additional 10+2 data elements to identify shipments
that could pose a threat to national security. ATS uses the updated
TECS rules to compare 10+2 data--such as the identities of the buyer,
seller, or manufacturer--to certain high-risk TECS national security
threats. These rules use the data to affect containers' risk scores,
which can affect whether a shipment is inspected for dangerous cargo.
If ATS determines that any of the data elements are connected to high-
risk TECS national security threats, it then increases the overall
national security weighted rule set risk score for that shipment. For
example, CBP officials said that the TECS tactical rules have
identified potential risk factors for hundreds of thousands of
shipments based on information from the additional 10+2 data elements.
Additionally, CBP officials stated that access to vessel stow plans--
one of the two data elements provided by carriers--has enhanced CBP's
ability to identify potentially dangerous unmanifested containers--
containers and their associated contents not listed on a ship's
manifest that pose a security risk in that no information is known
about their origin or contents.[Footnote 39] CBP officials explained
that they are able to use vessel stow plans to mitigate the risk posed
by unmanifested containers by taking investigative actions, such as
contacting carriers and trade associations to collect missing shipment
data or assigning the containers for additional inspection upon
reaching a U.S. port. For example, CBP officials stated that from
April 22, 2010, through July 14, 2010, targeters used vessel stow
plans to identify 1,050 cargo-laden unmanifested containers bound for
U.S. ports.[Footnote 40] Without access to the carriers' vessel stow
plans, CBP officials said that they would not have been able to
identify, investigate, and mitigate the risks posed by these
potentially dangerous containers. See figure 4 for an example of a
cargo-laden container vessel in transit.
Figure 4: The Vessel Stow Plan Allows CBP to Identify the Location of
Unmanifested Containers on a Vessel While in Transit, Prior to It
Reaching a U.S. Port:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
CBP officials said that they are in the process of updating the ATS
national security weighted rule set to identify risk factors in the
10+2 data elements and intend to test them thoroughly prior to
implementation, but CBP has not established time frames or milestones
for when integration of a finalized weighted rule set will be
completed. The finalized national security weighted rule set is
intended to analyze relationships between the 10+2 data elements to
identify risks in these relationships beyond those that are analyzed
by TECS. According to best practices in project management, the
establishment of project milestones and time frames can help ensure
timely project completion.[Footnote 41] According to CBP officials,
the updated weighted rule set will be tested prior to deployment by
executing it in tandem with the existing weighted rule set. This test
is intended to determine the ability of the updated weighted rule set
to identify all potential risk factors and assign scores based on all
available shipment data, including the 10+2 data elements. The test
will also determine the number of shipments that would face mandatory
examination because of their high risk scores. If the updated weighted
rule set does not perform according to specification, or if there is
an unexpected change in the number of shipments facing mandatory
examination because of their risk scores, CBP plans to review and
possibly amend the weighted rule set. CBP plans to continue to retest
the amended weighted rule set to ensure that the system is performing
according to design and that the flow of trade is not unduly impacted.
Thus, until this testing is complete, CBP officials said that they
will not be able to determine a date when the finalized weighted rule
set will be in place. We recognize that the results of such testing
could require adjustments to tasks that make it difficult to adhere
exactly to established dates for completing a project. However,
establishing milestones and time frames for having the finalized
weighted rule set in place could help guide CBP in such testing and
provide CBP with goals for completing interim steps and finishing this
project, thus better positioning it for targeting high-risk cargo,
thereby fulfilling the statutory purpose of the requirement to collect
the additional data elements.
According to CBP, the potential effectiveness of the additional 10+2
data in enhancing cargo security has been demonstrated in analyses it
conducted on cargo containers arriving at the ports of Los Angeles,
Long Beach, New York, and Newark in February 2006. The analyses
indicated that risk scores assigned while a shipment is in transit,
which are based on manifest data, may differ from the final assigned
risk scores, which are based on customs entry data. For certain
shipments, the difference in the risk scores assigned at these two
times, in transit and at arrival, is significant enough to affect
CBP's response to these shipments. For example, twice as many
containers were targeted as high risk based on entry data compared to
manifest data. Therefore, earlier access to information that
approximates entry data could allow CBP to (1) address risk factors
before cargo is loaded on U.S.-bound ships at foreign ports, or (2)
obtain more information that indicates the cargo is not high risk
before the cargo arrives in the United States. The goal of the 10+2
rule is to prevent dangerous shipments from being loaded onto U.S.-
bound vessels and CBP may issue "Do Not Load" orders for shipments
identified as high risk based on analyses of shipment data. CBP has
yet to issue any "Do Not Load" orders as a result of the 10+2 rule and
does not plan to begin issuing such orders for ISF noncompliance any
earlier than January 2011.
CBP Officials and Trade Industry Representatives Report That
Enforcement of the 10+2 Rule Compliance Has Not Measurably Impacted
Trade Flow:
According to trade industry representatives, to date, CBP's use of the
additional 10+2 data elements to target noncompliant shipments for
inspection has not impacted trade flow. In particular, none of the 30
importers we interviewed stated that their trade flow has been
impacted by 10+2 rule enforcement efforts such as shipment inspections
or holds. According to CBP officials, individual ports have begun to
use the additional 10+2 data elements to target noncompliant shipments
for inspection, but CBP cannot identify the number of shipments held
specifically due to 10+2 noncompliance because the data it collects do
not discern between different types of holds. CBP officials added,
though, that they have not received any complaints from the trade
industry regarding inspections of noncompliant shipments impacting the
flow of trade. According to CBP officials, individual ports make
compliance enforcement decisions based on their own discretion. CBP
believes that the potential impacts of noncompliance, which can
include cargo inspection fees of $100 to $150 and a delay in cargo
release of 1 to 3 days, are sufficient incentives for the trade
industry to comply with the ISF requirements. As a result, CBP's
current enforcement strategy is to exercise the least punitive
measures necessary to obtain full ISF compliance. CBP does not have
any plans for initiating mandatory holds on noncompliant shipments and
will continue to monitor compliance rates and its application of a
measured enforcement approach for the immediate future. CBP officials
stated, though, that if CBP determines that additional enforcement
actions are necessary, it may consider measures, such as mandatory
inspections for all noncompliant shipments. CBP officials added that
they do not believe that they would take such actions before November
2010.
Conclusions:
The stated purpose of the SAFE Port Act requirement for CBP to collect
additional data on U.S.-bound cargo is to enhance CBP's ability to
target high-risk cargo containers at an earlier point in the shipping
process than can currently be done. To determine the benefits and
costs of requiring such additional data, applying best practices, such
as those in OMB guidance, to the development of regulatory assessments
could help to determine the likelihood that the benefits of a
regulation justify the costs and also identify which possible actions
would be most cost-effective. To this end, transparency in the
assessment regarding why certain alternatives were selected for
analysis and how estimates were derived is important to ensure that
stakeholders can clearly see how the information in the regulatory
assessment informs the regulatory action an agency takes. Furthermore,
to achieve the proposed benefits of collecting additional data, CBP
would need to incorporate the additional data into its targeting
practices.
CBP's regulatory analysis is not transparent regarding how the
alternatives were selected for analysis or why the selected
alternative is preferable over the others. If CBP publishes an update
to its regulatory assessment, as CBP officials said that CBP may do,
further transparency could help clarify CBP's decision making in
formulating the 10+2 rule. In addition, a more complete analysis--with
further analysis of uncertainty for both costs and benefits, as well
as certain costs to foreign entities--could help to provide better
information about the circumstances under which benefits justify
costs. An update to the regulatory assessment with this additional
information could make the assessment more transparent to the trade
industry and other stakeholders who are affected by the rule.
To accomplish the statutory purpose of collecting the 10+2 data, which
is to enhance CBP's ability to target high-risk cargo containers, CBP
plans to update the ATS national security weighted rule set to
identify risk factors in 10+2 data. CBP is in the process of updating
the ATS national security weighted rule set to identify risk factors
in submitted 10+2 data elements, but it has not determined when
updates to the ATS national security weighted rule set will be
finalized. Establishing milestones and time frames for updating the
ATS national security weighted rule set could help guide CBP staff in
its efforts and provide CBP with goals for completing interim steps
and finishing the project, thereby better positioning it to fulfill
the purpose of the SAFE Port Act requirement and enhance its
capability to identify high-risk shipments.
Recommendations for Executive Action:
We recommend that the Commissioner of CBP take the following two
actions:
* If CBP updates its Regulatory Assessment and Final Regulatory
Flexibility Analysis, provide greater transparency in the updated
assessment regarding the information which contributed to decisions
made in developing the 10+2 rule by including information, such as:
1. a discussion of how the alternatives were selected for analysis,
including alternatives that were considered but not included in the
analysis, and what information CBP considered in addition to the
regulatory assessment to conclude that the alternative requiring the
Importer Security Filing, with an exemption for bulk cargo, and the
Additional Carrier Requirements was preferable over the other
alternatives analyzed;
2. an uncertainty analysis for the costs to importers for a day of
delay and for the value of statistical life; and:
3. to the extent data are available, estimates for lost profits borne
by foreign entities.
* To help guide CBP in updating the ATS national security weighted
rule set, establish milestones and time frames for updating the ATS
national security weighted rule set to use 10+2 data in its
identification of shipments that could pose a threat to national
security.
Agency Comments:
DHS provided written comments on a draft of this report, which are
reprinted in appendix I. DHS concurred with our two recommendations.
Regarding our recommendation to provide greater transparency in an
updated regulatory assessment, if CBP publishes such an assessment,
DHS concurred. Specifically, it stated that the potential elements we
cited for improving transparency will accompany the publication of a
final rule for the ISF and Additional Carrier Requirements. Such
actions should address the intent of our recommendation, provide
greater transparency to the trade industry and other stakeholders,
help clarify CBP's decision-making process, and provide better
information about the circumstances under which benefits justify
costs. Regarding our recommendation to establish milestones and time
frames for updating the ATS national security weighted rule set to use
10+2 data in its identification of shipments that could pose a threat
to national security, DHS commented that it had already updated the
weighted rule set for certain risk factors, some of which are
discussed in this report, and identified requirements for modifying
the weighted rule set for other risk factors, many of which it stated
have been incorporated into ATS and are available for preliminary
evaluation and analysis. Moreover, DHS stated that it has plans to
fully integrate these updates by November 2010. Establishing a time
frame for fully integrating these updates into ATS provides DHS with a
goal for completing the project to fulfill the purpose of the SAFE
Port Act requirement to collect additional data and can better
position it to effectively target high-risk container shipments.
Therefore, although DHS did not specifically discuss actions being
taken to establish interim milestones for integrating these
requirements, effectively integrating the updates into ATS by November
2010 would address the intent of our recommendation. CBP also provided
technical comments, which we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to interested congressional committees, the Secretary of Homeland
Security, and other interested parties. The report will also be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Should you or your staff have questions concerning this report, please
contact me at (202) 512-8777, or caldwells@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix II.
Signed by:
Stephen L. Caldwell:
Director, Homeland Security and Justice Issues:
[End of section]
Appendix I: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20525:
September 7, 2010:
Stephen L. Caldwell:
Director, Homeland Security and Justice:
441 G Street, NW:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Caldwell:
RE: U.S. Customs and Border Protection's Comments on Government
Accountability Office's Draft Report Entitled "Supply Chain Security:
CBP Has Made Progress in Assisting the Trade Industry in Implementing
the New Importer Security Filing Requirement, but Challenges Remain."
(GAO-10-841).
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO) draft report. DHS concurs with the
recommendations in the draft report and offers the following response.
Recommendation 1: If CBP updates its Regulatory Assessment and Final
Regulatory Flexibility Analysis, provide greater transparency in the
updated assessment regarding the information which contributed to
decisions made in developing the 10+2 rule by including information,
such as:
1) a discussion of how the alternatives were selected for analysis,
including alternatives that were considered but not included in the
analysis, and what information CBP considered in addition to the
regulatory assessment to conclude that the alternative requiring the
Importer Security Filing, with an exemption for bulk cargo, and the
Additional Carrier Requirements was preferable over the other
alternatives analyzed;
2) an uncertainty analysis for the cost to importers for a day of
delay and for the value of statistical life: and;
3) to the extent data are available, estimates for lost profits borne
by foreign entities.
Response: Concur. These potential additions to the Regulatory
Assessment and Final Regulatory Flexibility Analysis will accompany a
Final Rule for Importer Security Filing and Additional Carrier
Requirements.
Completion Date: Dependent upon issuance of a final rule.
Recommendation 2: To help guide CBP in updating the ATS national
security targeting criteria, establish milestones and timeframes for
updating the ATS national security weighted rule set to use 10+2 data
in its identification of shipments that could pose a threat to
national security.
Response: Concur. CBP has already updated its national security weight
set to identify certain risk factors present in the 10+2 data.
Specifically, the national security weight set currently identifies
subjects of terrorist-related TECS records and importers that are
participants in the Customs-Trade Partnership Against Terrorism (C-
TPAT) program.
CBP officials have gathered a significant number of programming
requirements to identify risk factors present in the 10+2 data set.
Many of these criteria have been programmed in ATS and are available
for the purpose of preliminary evaluation and analysis. Full
integration of these updates is scheduled to be completed in November
2010.
Completion Date: November 30, 2010.
Thank you for the opportunity to comment on this Draft Report and we
look forward to working with you on future homeland security issues.
Sincerely,
Signed by:
Jerald E. Levine:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Stephen L. Caldwell, (202) 512-8777 or caldwells@gao.gov:
Acknowledgments:
Key contributors to this report were Christopher Conrad, Assistant
Director; Alana Finley, Analyst-in-Charge; Lisa Canini; and Matthew
Tabbert. Charles Bausell contributed economics expertise, Stanley
Kostyla assisted with design and methodology, Frances Cook provided
legal support, and Katherine Davis and Lara Miklozek provided
assistance in report preparation.
[End of section]
Related GAO Products:
Supply Chain Security: Feasibility and Cost-Benefit Analysis Would
Assist DHS and Congress in Assessing and Implementing the Requirement
to Scan 100 Percent of U.S.-Bound Containers. [hyperlink,
http://www.gao.gov/products/GAO-10-12]. Washington, D.C.: October 30,
2009.
Combating Nuclear Smuggling: DHS's Program to Procure and Deploy
Advanced Radiation Detection Portal Monitors is Likely to Exceed the
Department's Previous Cost Estimates. [hyperlink,
http://www.gao.gov/products/GAO-08-1108R]. Washington, D.C.: September
22, 2008.
Supply Chain Security: CBP Works with International Entities to
Promote Global Customs Security Standards and Initiatives, but
Challenges Remain. [hyperlink,
http://www.gao.gov/products/GAO-08-538]. Washington, D.C.: August 15,
2008:
Supply Chain Security: Challenges to Scanning 100 Percent of U.S.-
Bound Cargo Containers. [hyperlink,
http://www.gao.gov/products/GAO-08-533T]. Washington, D.C.: June 12,
2008.
Supply Chain Security: U.S. Customs and Border Protection Has Enhanced
Its Partnership with Import Trade Sectors, but Challenges Remain in
Verifying Security Practices. [hyperlink,
http://www.gao.gov/products/GAO-08-240]. Washington, D.C.: April 25,
2008.
Supply Chain Security: Examination of High-Risk Cargo at Foreign
Seaports Have Increased, but Improved Data Collection and Performance
Measures Are Needed. [hyperlink,
http://www.gao.gov/products/GAO-08-187]. Washington, D.C.: January 25,
2008.
Maritime Security: The SAFE Port Act: Status and Implementation One
Year Later. [hyperlink, http://www.gao.gov/products/GAO-08-126T].
Washington, D.C.: October 30, 2007.
Combating Nuclear Smuggling: Additional Actions Needed to Ensure
Adequate Testing of Next Generation Radiation Detection Equipment.
[hyperlink, http://www.gao.gov/products/GAO-07-1247T]. Washington,
D.C.: September 18, 2007.
Combating Nuclear Smuggling: DHS's Cost-Benefit Analysis to Support
the Purchase of New Radiation Detection Portal Monitors was Not Based
on Available Performance Data and Did not Fully Evaluate All the
Monitors' Costs and Benefits. [hyperlink,
http://www.gao.gov/products/GAO-07-133R]. Washington, D.C.: October
17, 2006.
Cargo Container Inspections: Preliminary Observations on the Status of
Efforts to Improve the Automated Targeting System. [hyperlink,
http://www.gao.gov/products/GAO-06-591T]. Washington, D.C.: March 30,
2006.
Homeland Security: Key Cargo Security Programs Can Be Improved.
[hyperlink, http://www.gao.gov/products/GAO-05-466T]. Washington,
D.C.: May 26, 2005.
Container Security: A Flexible Staffing Model and Minimum Equipment
Requirements Would Improve Overseas Targeting and Inspection Efforts.
[hyperlink, http://www.gao.gov/products/GAO-05-557]. Washington, D.C.:
April 26, 2005.
Preventing Nuclear Smuggling: DOE Has Made Limited Progress in
Installing Radiation Detection Equipment at Highest Priority Foreign
Seaports. [hyperlink, http://www.gao.gov/products/GAO-05-375].
Washington, D.C.: March 31, 2005.
Cargo Security: Partnership Program Grants Importers Reduced Scrutiny
with Limited Assurance of Improved Security. [hyperlink,
http://www.gao.gov/products/GAO-05-404]. Washington, D.C.: March 11,
2005.
Homeland Security: Summary of Challenges Faced in Targeting Oceangoing
Cargo Containers for Inspection. [hyperlink,
http://www.gao.gov/products/GAO-04-557T]. Washington, D.C.: March 31,
2004.
Homeland Security: Preliminary Observations on Efforts to Target
Security Inspections of Cargo Containers. [hyperlink,
http://www.gao.gov/products/GAO-04-325T]. Washington, D.C.: December
16, 2003.
Container Security: Current Efforts to Detect Nuclear Materials, New
Initiatives, and Challenges. [hyperlink,
http://www.gao.gov/products/GAO-03-297T]. Washington, D.C.: November
18, 2002.
[End of section]
Footnotes:
[1] Pub. L. No. 109-347, § 203(b), 120 Stat. 1884, 1904 (codified at 6
U.S.C. § 943(b)).
[2] Importer Security Filing and Additional Carrier Requirements, 73
Fed. Reg. 71,730 (Nov. 25, 2008) (to be codified at 19 C.F.R. pts. 4,
12, 18, 101, 103, 113, 122, 123, 141, 143, 149, 178, & 192).
[3] Break bulk cargo includes commodities such as bound lumber or
goods stacked on wooden pallets. These pallets, or other holders, can
be separated or broken apart.
[4] Under other requirements which preceded the 10+2 rule, importers
are also required to provide customs entry information, and carriers
are required to provide cargo manifest information under the 24-hour
rule.
[5] The Automated Targeting System (ATS) is a computer model that CBP
uses to analyze shipment data for risk factors and target potentially
high-risk oceangoing cargo containers for inspection. For more
information on ATS, see GAO, Cargo Container Inspections: Preliminary
Observations on the Status of Efforts to Improve the Automated
Targeting System, [hyperlink, http://www.gao.gov/products/GAO-06-591T]
(Washington, D.C.: Mar. 30, 2006) and GAO, Homeland Security: Summary
of Challenges Faced in Targeting Oceangoing Cargo Containers for
Inspection, [hyperlink, http://www.gao.gov/products/GAO-04-557T]
(Washington, D.C.: Mar. 31, 2004).
[6] The current regulation is published as an interim final rule, in
which the flexibilities are the only interim component of the rule.
All other components of the rule are final, and the publication of a
final rule will eliminate, modify, or maintain the existing
flexibilities, depending on the results of a DHS review of the interim
final rule. CBP refers to this review as a structured review. For the
purposes of this report, we refer to the 10+2 interim final rule as
the 10+2 rule.
[7] 6 U.S.C. § 943(c)(1).
[8] COAC advises the Secretaries of the Departments of the Treasury
and Homeland Security on the commercial operations of CBP and related
DHS and Treasury functions. Its ISF Subcommittee has a government co-
chair and a trade co-chair.
[9] Industrial Economics, Inc., Regulatory Assessment and Final
Regulatory Flexibility Analysis for the Interim Final Rule, Importer
Security Filing and Additional Carrier Requirements: Cost, Benefit,
and Feasibility Study as Required by Section 203(c) of the SAFE Port
Act, prepared at the request of Customs and Border Protection,
Department of Homeland Security (November 2008).
[10] Office of Management and Budget, Regulatory Analysis, Circular A-
4 (Washington, D.C.: Sept. 17, 2003).
[11] For the purposes of this report, compliance refers to importers'
and carriers' timely submission of the required data elements.
Implementation refers to a broader set of related issues, such as
importers' use of the flexibilities or technical errors in submitting
ISFs.
[12] CBP data on flexibility use are not available for January 26,
2009, through September 12, 2009, because the electronic format for
filing the ISF did not allow filers to indicate their intent to use
the flexibilities.
[13] Project Management Institute, A Guide to the Project management
Body of Knowledge, 4th ed. (Newtown Square, Pa. Project Management
Institute, Inc., 2008).
[14] Foreign cargo remaining on board (FROB), also known as freight
remaining on board, refers to cargo that is loaded aboard a vessel in
a foreign port and is to be unloaded in another foreign port with an
intervening vessel stop in one or more ports in the United States.
While the vessel and the FROB cargo enter the limits of a U.S. port,
the FROB cargo is not discharged while in the United States.
[15] For more information on C-TPAT, see GAO, Supply Chain Security:
U.S. Customs and Border Protection Has Enhanced Its Partnership with
Import Trade Sectors, but Challenges Remain in Verifying Security
Practices, [hyperlink, http://www.gao.gov/products/GAO-08-240]
(Washington, D.C.: Apr. 25, 2008).
[16] See 6 U.S.C. § 943(d); Trade Act of 2002, Pub. L. No. 107-210,
div. A, § 343(a)(3), 116 Stat. 933, 981.
[17] The importer of record number, consignee number, country of
origin, and commodity Harmonized Tariff Schedule of the United States
number are required for both the ISF and customs entry purposes. The
Harmonized Tariff Schedule of the United States is the primary
resource used by CBP for determining tariff classification for goods
imported into the United States. It classifies a good by assigning a
10-digit tariff classification number, based on such things as its
name and use, providing CBP detailed information to identify items
entering the United States. It is based on the international
Harmonized Commodity Coding and Classification System (Harmonized
System) 6-digit code, which has been established by the World Customs
Organization and is used as the basis for the tariff schedule for most
countries. Importers are required to supply the 6-digit Harmonized
Tariff Schedule number on ISFs.
[18] In-transit cargo includes foreign cargo remaining on board (also
known as freight remaining on board), immediate exportation shipments,
and transportation and exportation shipments. Immediate exportation
shipments arrive and are unloaded at a U.S. port but are to be
immediately exported from that same port without payment of duties.
Transportation and exportation shipments include merchandise that
arrives at a U.S. port and is allowed to be transported through the
United States and exported from another U.S. port without the payment
of duties. Because foreign cargo remaining on board is frequently
loaded based on a last-minute decision by the carrier, the ISF for
foreign cargo remaining on board is required any time prior to
loading. The ISF for immediate exportation and transportation and
exportation shipments is required 24 hours prior to loading.
[19] Carriers are not required to create or collect any container
status message data other than those which the carrier already creates
or collects on its own and maintains in its electronic equipment
tracking system. A carrier must submit these messages no later than 24
hours after the message is entered into the carrier's equipment
tracking system.
[20] TECS is a computerized information system designed to identify
individuals, businesses, and vehicles suspected of, or involved in, a
violation of federal law. TECS is also a communications system
permitting messages between law enforcement offices and other federal,
state, and local law enforcement agencies. TECS is constantly updated
based on intelligence information from other agencies and data gleaned
from CBP's ongoing operations.
[21] 5 U.S.C. § 553.
[22] In addition to the requirements under the Administrative
Procedure Act, an agency may also need to comply with requirements
imposed by other statutes.
[23] Regulatory analysis, such as a benefit-cost analysis, is a tool
regulatory agencies use to anticipate and evaluate the likely
consequences of rules.
[24] Because the regulatory assessment presents a range of cost
estimates, the time period for preventing an event is also a
corresponding range.
[25] The bill of lading is a contract between a shipper and carrier
listing the terms for moving freight between specified points. A bill
of lading includes the name of the shipping line, importer, consignee
(recipient of the shipment), and manufacturer. The bill of lading also
identifies the commodity being shipped, the date the shipment was
sent, the number of containers used to transport the shipment, the
port where the containers were laden on the U.S.-bound vessel, and the
country from which the shipment originated.
[26] The range for the time (60 to 500 years) it would take for costs
of the 10+2 rule to equal the benefits of a potential nuclear attack
is large due to the wide range of the cost estimates for the 10+2 rule
($890 million to $6.6 billion, using a 3 percent discount rate). If
the actual costs are in the low end of that range (closer to $890
million), fewer attacks need to be prevented in order for the costs to
equal the benefits (e.g., one attack every 500 years); alternatively,
if the costs are in the high end of that range (closer to $6.6
billion), more attacks need to be prevented in order for the costs to
equal the benefits (e.g., one attack every 60 years).
[27] OMB Circular No. A-4 states that the important uncertainties
connected with regulatory decisions--both the statistical variability
of key elements underlying the estimates of benefits and costs and the
incomplete knowledge about the relevant relationships--need to be
analyzed and presented as part of a regulatory analysis. Sensitivity
analysis refers to an analysis of whether, and to what extent, the
results of the assessment are sensitive to plausible changes in the
main assumptions and numeric inputs.
[28] In CBP's regulatory assessment for the 10+2 rule, the value of
statistical life is used to estimate the benefits of the 10+2 rule by
calculating the value of avoiding fatalities resulting from potential
terrorist attacks caused by a weapon of mass destruction smuggled via
a cargo container. The value of statistical life refers to the
aggregate estimated value of reducing small risks across a large
number of people and is based on how the people themselves would value
reducing these risks. For example, if a government policy affects
100,000 people and reduces the risk of premature death by 1 in 100,000
for each individual, summing these individual risks across the entire
affected population results in 1 life "saved" by the policy. If each
of the 100,000 people were willing to pay $500 for this reduction in
risk, the total willingness to pay would be $5 million (i.e., 100,000
multiplied by $500). For this situation, the value of statistical life
would be $5 million for the 1 life "saved" by the policy.
[29] CBP determines the prevalence of errors based on error messages
generated by CBP's system. CBP's system allows for a filer to submit
an initial filing ("add") and to update that filing ("replace"). An
error message for a duplicate ISF occurs when a filer tries to add an
ISF where one already exists for that shipment.
[30] The 10+2 rule requires that the ISF be submitted 24 hours prior
to loading for cargo other than FROB and prior to loading for FROB
cargo.
[31] Filers and C-TPAT importers must register with CBP to receive
these progress reports.
[32] For the purposes of ISFs, CBP considers small importers to be
those who import fewer than 10 ISF shipments per year and medium
importers to be those who import at least 10 but fewer than 100 ISF
shipments per year.
[33] As mentioned in the discussion of our scope and methodology,
these four associations are the American Association of Exporters and
Importers, the National Association of Manufacturers, the National
Customs Brokers and Forwarders Association of America, and the World
Shipping Council.
[34] An earlier format for CBP's progress reports relied on a
timeliness measure that compared the time the ISF was submitted to the
time the bill of lading was submitted. Although carriers must submit
bill of lading information 24 hours prior to loading, which is the
same as the deadline for the ISF, if the bill of lading information
was submitted earlier, an ISF filed on-time might be measured as
untimely based on this proxy measure. As a result, CBP altered its
measure of timeliness to compare the time of ISF submission against 24
hours prior to vessel departure.
[35] The rule requires that the ISF be submitted 24 hours prior to
loading for cargo other than FROB and prior to loading for FROB. CBP
does not collect data on the time of loading; therefore, CBP is using
vessel departure as a proxy measure for the time of loading.
[36] Importers indicate their intent to use the flexibilities by
checking a box on the form for the type of flexibilities to be used.
If an importer checks a box for use of the flexibilities, the importer
must later update the ISF to check a box indicating that the
information is complete.
[37] Use of timing flexibilities is considered incorrect if an ISF
submission includes entries for both the consolidator element and
stuffing location element.
[38] Use of range flexibilities is considered incorrect if an ISF
submission includes only a single entry for each manufacturer, ship to
party, country of origin, and commodity Harmonized Tariff Schedule
element.
[39] CBP officials stated that access to vessel stow plans provides
additional security and safety benefits by allowing CBP to identify
the stow positions of containers at risk of being used for smuggling,
as well as those carrying hazardous materials.
[40] According to CBP officials, the United States was the final
destination of 213 of these unmanifested containers, while the
remaining 837 were destined for foreign nations and were to remain on
board the carrier vessels while in U.S. ports (i.e., FROB).
[41] Project Management Institute, A Guide to the Project Management
Body Of Knowledge.
[End of section]
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