Container Security: Expansion of Key Customs Programs Will Require Greater Attention to Critical Success Factors
Published: 2003-07-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since September 11, 2001, concern has increased that terrorists could smuggle weapons of mass destruction in the 7 million ocean containers that arrive annually at U.S. seaports. In response to this concern, the U.S. Customs Service (Customs) implemented the Container Security Initiative (CSI) to screen for high-risk containers at overseas ports and Customs-Trade Partnership Against Terrorism (CTPAT) to improve global supply chain security in the private sector. GAO (1) describes the purpose and elements of these new programs, (2) examines Customs' implementation of CSI and C-TPAT during the first year, and (3) assesses the extent to which Customs has focused on factors critical to the programs' long-term success and accountability.
section_title: What GAO Found
paragraphs: Announced in January 2002, CSI places Customs staff at designated foreign seaports to screen containers for weapons of mass destruction. In November 2001, Customs also initiated C-TPAT, in which private companies improve the security of their supply chains in return for the reduced likelihood that their containers will be inspected for weapons of mass destruction. Customs quickly implemented both programs in the first year. It concluded bilateral arrangements with foreign governments to place Customs personnel at 24 foreign ports and deployed staff to 5 of these ports under CSI, and it enrolled more than 1,700 companies in C-TPAT. Customs is developing critical program elements intended to ensure that C-TPAT companies improve and maintain their security practices. GAO found that Customs' implementation of these programs evolved in response to challenges it encountered. Although Customs is preparing to devote significantly more resources to CSI and C-TPAT as it expands the programs, it has not taken adequate steps to incorporate factors necessary for the programs' long-term success and accountability. These factors include human capital planning, development of performance measures, and strategic planning. GAO found the following: (1) although CSI seeks to staff Customs officials at more than 30 overseas ports and C-TPAT expects to hire more than 150 additional staff, Customs has not devised systematic human capital plans to meet longterm staffing needs for both programs; (2) while Customs has created some performance measures to quantify operational activities and efforts, it has not developed measures to establish accountability and measure program achievement; and (3) in its efforts to rapidly implement the programs and enroll participants, Customs focused on short-term planning. Customs lacks a strategic plan that would allow it to establish accountability for approximately $73 million in planned expenditures for fiscal year 2004.

section_title: Letter
paragraphs: Ocean containers play a vital role in the movement of cargo between global  trading partners. In 2002, more than 7 million ocean cargo containers  arrived at U.S. seaports.  Responding to heightened concern about national  security since September 11, 2001, several U.S. government agencies have  acted to prevent terrorists from smuggling weapons of mass destruction  (WMD) in cargo containers from overseas locations to attack the United  States and disrupt international trade.  Because of its frontline  responsibilities for inspection at U.S. ports of entry, the U.S. Customs  Service assumed the lead role in improving ocean container security and  reducing the vulnerabilities associated with the overseas supply chain.  By  January 2002, Customs had initiated the Container Security Initiative (CSI)  and Customs-Trade Partnership Against Terrorism (C-TPAT) to enhance  the security of the global supply chain and deter international acts of  terrorism, as well as facilitate the smooth passage of commerce across U.S.  borders. The purpose of CSI is to enable Customs to screen for high-risk  containers in key ports overseas, while the purpose of C-TPAT is to  improve global supply chain security in the private sector.
In response to your interest in Customs’ efforts to counter potential threats  posed by ocean containers as they move through the global supply chain,  we have (1) described the purpose and program elements of the new CSI  and C-TPAT programs, (2) examined Customs’ implementation of the  programs during the first year, and (3) assessed the extent to which  Customs has focused on factors critical to the programs’ long-term success  and accountability.
To address our objectives, we met with U.S. Customs officials in  Washington, D.C., with program responsibilities for CSI and C-TPAT.  We  also met with private companies and industry associations in the United  States to learn how C-TPAT affects the private sector.   To learn about  Customs’ early experiences with CSI, we visited Canada, the Netherlands,  and France, the countries where CSI was first implemented, to meet with  the U.S. Customs attachés responsible for managing the implementation in  the ports of Vancouver, Rotterdam, and Le Havre, respectively. We also met  with members of the CSI team deployed at these three ports.  In addition,  we interviewed officials representing the governments of Canada, the  Netherlands, and France who were involved in CSI negotiations and  implementation.  We also spoke with private sector officials in these  countries to understand their perspectives on both CSI and C-TPAT.  In  addition, we reviewed Customs’ Web site for information on the programs’  status and activities.  Finally, we used GAO reports on factors critical to the  long-term success of organizations such as the Department of Homeland  Security (DHS).  Our methodology primarily relied on interviews with  knowledgeable officials because both programs are new and Customs was  not able to provide documentation regarding many of the issues that were  the subject of our review.  (For additional information on our scope and  methodology, see app. I.)
subsections: section_title: Background
paragraphs: Ocean-going cargo containers are a critical link in the system of global  trade.  With the rise of the “just-in-time” delivery system, which allows  companies to reduce their inventories, as well as the efficiencies of the  maritime transportation system, the U.S. and world economies have  become increasingly reliant on the cargo container to transport their  goods.  In fact, approximately 90 percent of the world’s trade moves by  cargo container.  Although these containers arrive from various ports  throughout the world, about 49 percent of U.S.-bound containers arrive  from the top 10 international ports listed in table 1.
In 2002, roughly 7 million containers entered U.S. seaports.  About 87  percent of these ocean containers entered 10 U.S. seaports, as shown in  table 2.  More than half—approximately 58 percent—of ocean container  arrivals are concentrated in three of the largest U.S. ports: Los Angeles,  Long Beach, and New York-New Jersey.
According to research initiated by the U.S. Department of Transportation’s  Volpe National Transportation Systems Center (Volpe), cargo security is  affected by the number of individual companies contracted to facilitate the  handling and movement of cargo through its supply chain.  To move a  container from production facilities overseas to distribution points in the  United States, an importer faces various choices regarding the logistical  process such as routes and the selection of freight forwarders.  For  example, importers can own and operate key aspects of the overseas  supply chain process, such as warehousing and trucking operations.   Conversely, importers can contract with logistical service providers, such  as freight consolidators and nonvessel operating common carriers.  In  addition, importers must choose which modes of transportation to use,  such as rail, truck or barge, to move containers from the manufacturer’s  warehouse to the seaport of lading. According to this Volpe study,  importers who own and operate the entire supply chain route from start to  finish suffer the least amount of security breaches because they have  greater control over their supply chains.  Figure 1 depicts basic  characteristics of the overseas portion of the supply chain and some areas  of vulnerability to terrorists intent on placing a WMD in a container.
A report prepared by the National Defense University’s Center for  Technology and National Security Policy states that an ocean container  itself is ideally suited to deliver a WMD. The likelihood that a terrorist will  use a container to deliver a WMD depends on the type of WMD and the  likelihood an ocean container would be used as the means of delivery.   These researchers believe that it is feasible for a terrorist group to make a  radiological “dirty bomb” which uses standard explosives to disperse  radiological material, and that the ocean container would provide an ideal  mode of transportation.  On the other hand, these researchers have  concluded, a terrorist attack using a nuclear WMD has a much lower  feasibility because it is deemed less probable that terrorists have the  resources and technical ability to build or obtain a workable nuclear  weapon at this time and the nuclear WMD might be too valuable an asset to  relinquish control by shipping it in a container.  But some experts agree  that the possibility of terrorists smuggling a nuclear WMD by ocean  containers merits attention because the consequences would be much  more severe than those of other types of WMDs. While there have been no  known incidents of containers being used to transport WMDs, criminals  have exploited containers for other illegal purposes, such as smuggling  weapons, people, and illicit substances. Such activities demonstrate the  vulnerability of the freight transportation industry and suggest  opportunities for further exploitation of containers by criminals, including  terrorist groups.
Various experts have estimated that the cost to the U.S. economy of port  closures due to the discovery or detonation of WMDs could be significant.   For example, in May 2002, the Brookings Institution estimated that costs  associated with U.S. port closures resulting from a detonated WMD could  amount to $1 trillion.  Estimating the cost of discovering an undetonated  WMD at a U.S. seaport, Booz, Allen and Hamilton reported in October 2002  that a 12-day closure would cost approximately $58 billion.
section_title: Key Customs Programs Developed to Address Container Security
paragraphs: Customs developed CSI to detect and deter acts of container-related  terrorism at the earliest point feasible along the supply chain, and it  developed C-TPAT to address concerns about supply chain vulnerabilities.   CSI placed Customs officials in key foreign ports to detect WMDs in  containers prior to their arrival to the United States and to deter terrorists  from using containers to deliver a WMD.  C-TPAT established a partnership  between the private sector and Customs to improve the overall security of  international supply chains, offering participating companies the incentive  that their containers will have a lower chance of being inspected for  WMDs.  For fiscal year 2003, CSI’s budget is about $28 million, and C- TPAT’s budget is about $9 million.  Customs has proposed budget  increases, combined total of $73 million, for fiscal year 2004 to support the  programs’ expansion plans.
subsections: section_title: CSI Placed Customs Officials Overseas to Screen Containers
paragraphs: Announced in January 2002, CSI allows Customs to screen for high-risk,  U.S.-bound containers at key foreign ports, a task previously carried out  only at U.S. seaports. To do this, Customs negotiates and enters into  bilateral arrangements with foreign governments.  These arrangements  contain common language that specifies the placement of Customs  officials, on a pilot basis, at foreign ports and the exchange of information  between U.S. Customs and foreign customs administrations.  Customs first  targeted for CSI the 20 foreign ports that shipped the highest volume of  ocean containers to the United States.  These top 20 ports are located in 14  nations and shipped a total of 66 percent of all containers that arrived in  U.S. seaports in 2001.  Customs also plans to expand CSI to an additional 20  to 25 strategic ports that ship a significant volume of containers to the  United States and are considered to be strategic locations.  According to  Customs, these strategic ports must meet minimum requirements such as  having nonintrusive inspection equipment and having customs officials  capable of conducting inspections to support the CSI program.  Customs  proposed to increase CSI’s budget from $28.4 million in fiscal year 2003 to  $61.2 million in fiscal year 2004.
subsections: section_title: CSI Operations
paragraphs: To prepare a CSI team for deployment overseas, Customs sends an  assessment team to the CSI port to collect information about the port’s  physical and informational infrastructure and the host country’s customs  operations.  Customs then deploys a CSI team of approximately four to five  Customs officials to work with the host country’s customs administration  to identify high-risk containers departing from these ports for the United  States.  Containers targeted for CSI inspection arrive at CSI ports by land,  rail, or sea en route to the United States.  The CSI team uses Customs’  Automated Targeting System to screen container data and identify high-risk  containers for inspection.  This system evaluates U.S.-bound cargo  manifest data electronically and determines a container’s risk level.  To  improve its screening capabilities, the CSI team further analyzes U.S.- bound containers by means of data provided by host countries’ customs  administration.  Host countries’ customs officials then inspect containers  that both U.S. and host customs officials identify as high risk.  Although the  arrangements do not specify that U.S. Customs officials must be able to  observe inspections, Customs officials told us that a central tenet of the  CSI concept is that U.S. Customs inspectors be able to observe and verify  the inspections and that all partner Customs administrations accept this  tenet.
According to Customs officials, the most important benefits of CSI derive  from the collocation of U.S. Customs officials with foreign customs  officials.  Prior to the implementation of CSI, Customs officials in U.S. ports  screened container data using the Automated Targeting System and  inspected high-risk containers on their arrival in the United States.  With  the placement of officials overseas, Customs expects that the added value  of real-time information sharing will improve Customs’ ability to target  high-risk containers.  For example, using the Automated Targeting System,  U.S. Customs officials may identify unfamiliar consignees that have been  flagged as high risk but are later determined not to be high risk based on  the host customs’ knowledge and experiences.  Customs’ presence  overseas is intended to help ensure that containers identified as high risk  are inspected prior to arrival in the United States.  In addition, Customs  officials hope that the collocation of its officials with foreign customs  officials will result in relationships that enhance cooperation and  intelligence sharing.
Customs officials believe that CSI should facilitate the flow of trade to the  United States and could reduce the processing time for certain shipments,  because the screening at CSI ports will in most cases take place during  “down time” while containers wait at the port terminal prior to being  loaded onto vessels.  In addition, CSI eliminates the necessity of inspecting  containers for security purposes, absent additional information affecting  their risk analyses, when they reach the United States.  CSI also offers  benefits to foreign ports that participate in the program, including  deterrence of terrorists that may target their ports and a shorter time frame  to resume operations in the event of a catastrophic incident.
section_title: CSI Staffing
paragraphs: Customs created an intra-agency task force to manage and operate the  program, headed by Customs’ Office of International Affairs and staffed  with representatives from different offices within Customs.  In addition,  the assessment teams that travel to CSI ports to survey the operational  needs comprise members from these various offices.  Customs officials  state that Customs relies on its overseas attachés to facilitate CSI  negotiations with foreign governments, oversee CSI operations at one or  more CSI ports, and report CSI operations to the task force, in addition to  their existing Customs duties.
Each CSI team deployed at a foreign port consists of four to five team  members: two to three inspectors from Customs’ Office of Field  Operations, one intelligence research analyst, and one agent serving as a  CSI team leader representing the Office of Investigations. (See fig. 2.)   According to Customs officials, while Customs inspectors review container  data using the Automated Targeting System and seek assistance from local  customs to screen containers, the intelligence analyst conducts further  analyses using additional research tools and real-time information sharing  with local customs’ intelligence analysts.  The team leader serves as a  liaison between the CSI team and the foreign customs administration and  reports to the Customs Attaché regarding CSI operations.  Currently, each  CSI team is assigned to a foreign port under a temporary duty assignment  and is replaced by other Customs personnel after a 120-day period.   However, Customs officials told us that they are currently seeking to  convert these temporary positions to permanent CSI staff positions at  foreign ports.
The budget for the CSI program is expected to grow as the program  expands, as shown in table 3.  In fiscal year 2002, Customs spent about $3.3  million, using emergency supplemental no-year funds to support  preliminary CSI needs.  These funds were budgeted for such needs as  travel to promote the program to foreign customs, the purchase of  computer equipment for CSI ports, and the maintenance of a CSI team in  Rotterdam. Customs’ fiscal year 2003 budget is approximately $28.4 million  to support CSI operations in an anticipated 21 foreign ports and conduct  assessments of 6 additional ports.  As of March 2003, Customs had spent  $3.4 million of fiscal year 2003 funds to support operations in 9 ports.  As  part of the new DHS budget, Customs requested $61.2 million to support  anticipated CSI operations in 30 foreign ports in fiscal year 2004.
section_title: C-TPAT Works with Private Sector to Improve Supply Chain Security
paragraphs: Announced in November 2001, C-TPAT is a voluntary partnership program  between the business community and Customs, designed to enhance the  security of international supply chains and thus reduce the number of  containers that otherwise might be screened for WMDs because of risk  considerations.  Customs plans to achieve these objectives by encouraging  importers, freight forwarders, carriers, and other logistics service  providers to improve security practices and to persuade their service  providers along their supply chain to do the same.  Customs accomplishes  this through partnership agreements and by reviewing and following-up on  company supply chain security profiles. In return, Customs offers a number  of incentives, including the key benefit of a reduced likelihood of  inspection for WMDs. Customs is still developing critical aspects of the  program intended to ensure that member companies respond to C-TPAT  recommendations for improving and maintaining supply chain security  practices.  Like CSI, the budget for C-TPAT is expected to increase as the  program expands.
subsections: section_title: C-TPAT Operations
paragraphs: Prior to recruiting C-TPAT members, Customs worked with industry  leaders to develop a set of recommendations intended to improve the  security practices for specific segments of the supply chain (e.g.,  air/sea/land carriers, customs brokers, importers, manufacturers,  warehouses, freight forwarders, and domestic ports). The C-TPAT security  recommendations are meant to serve as a guide for members to follow and  are not mandatory.  For example, a common C-TPAT recommendation  encourages carriers, warehouses, importers, and manufacturers to affix,  replace, record, track, and verify seals on containers, but its  implementation is not obligatory.
As a first step in C-TPAT membership, a company must sign an agreement  with Customs signifying its commitment to enhance its supply chain  security by embracing C-TPAT security recommendations and to work with  its service providers throughout its supply chain to enhance security  processes. At this point, the company becomes a C-TPAT member, and its  risk score is partially reduced.  After signing the agreement, the company  is required to self-assess its supply chain security practices, using the C- TPAT industry security recommendations as a guideline, and document its  observations in a security profile. The security profile is intended to be an  executive summary of the company’s current and future supply chain  security practices and vulnerabilities, as well as an indication of how these  recommendations were communicated to its business partners overseas.
Using a checklist based on the C-TPAT recommendations, C-TPAT officials  review the security profile to understand the company’s security practices  and decide whether to further reduce the company’s risk score.   To help  complete their assessments of companies, C-TPAT officials also seek  information from other Customs offices on the company’s historic  relationship with Customs, such as the results of trade compliance  examinations or any past criminal investigations.  Once any concerns that  C-TPAT officials may have raised are resolved, Customs will further reduce  the company’s risk score.  Through standard feedback letters, Customs  notifies companies of the results of the review process and requests  additional information on security practices.
According to Customs, C-TPAT participants are never rejected from the  program because of an inadequate security profile or for adverse  information discovered during the review process.   On the contrary,  Customs officials say that they are committed to working with these  companies, even if there are serious security or trade compliance  weaknesses.  However, Customs may, under certain circumstances,  withhold or reduce C-TPAT benefits. Furthermore, Customs officials stated  that they may remove a company from C-TPAT membership if they  determine that its commitment is not serious or that it has intentionally  misled Customs.
Other program elements are intended to ensure that member companies  have taken action to improve and maintain supply chain security practices.  Customs intends to use validations to establish accountability by verifying  that information on a company’s security profile is accurate and complete.   Customs intends to use action plans to communicate the weaknesses it  identifies and outline the steps that companies need to take to strengthen  their supply chains.  Customs also plans to use annual assessments, or  questionnaires, to follow up on a variety of open-ended security issues.
section_title: C-TPAT Staffing
paragraphs: Customs created a C-TPAT management team to oversee and implement  the program. Currently, C-TPAT staff includes a director, four program  managers, and five program officers, working at Customs’ headquarters  and organized by trade sectors that cover all aspects of C-TPAT  membership (see fig. 3). According to C-TPAT officials, program managers  provide overall program direction and guidance, as well as program  promotion within trade sectors.  Program officers, with help from program  managers, provide guidance to companies on how to complete their  security profiles as well as review security profiles and prepare feedback  letters.  In addition to C-TPAT staff, account managers who are located at  Customs sites across the country and manage a portfolio of companies on  trade compliance matters, also assist with the C-TPAT program.  Over 300  account managers promote the program and serve as points of contact for  many companies seeking information about C-TPAT.
The budget for C-TPAT is expected to increase as the program expands.   Funding for C-TPAT began in April 2002, with emergency supplemental no- year funds totaling $8.3 million. According to Customs, it carried over  unexpended funds to support a C-TPAT budget of $8.8 million for  operations in fiscal year 2003.  Customs’ proposed C-TPAT budget for fiscal  year 2004 is $12.1 million and includes a request for 157 security specialist  positions.   Table 4 depicts budget plans and obligations for fiscal years  2002 to 2004.
section_title: C-TPAT, Adapting Programs to Meet Challenges
paragraphs: Responding to concerns about container security, Customs quickly rolled  out CSI and C-TPAT, adjusting its implementation of the programs to meet  challenges.  Early on, the programs enlisted the participation of many  countries and companies, respectively.  By January 2003, Customs had  entered into bilateral arrangements with foreign governments to place  Customs officials at 24 ports and soon deployed CSI teams to 5 of them.    Similarly, by the end of C-TPAT’s first year, Customs had recruited  approximately 1,700 companies to become C-TPAT members, received  security profiles from about half of these companies, and sent feedback  letters to half of the companies submitting security profiles.  As CSI and C- TPAT evolved, Customs adapted its implementation of the programs as it  encountered challenges.  For example, experiences at one of the first CSI  ports of deployment showed Customs that it needed to change the way it  collected the manifest data necessary for targeting high-risk containers and  the way it selected staff for CSI assessment teams.  Similarly, as Customs  realized that its account managers, who were on the “front lines,” were not  prepared to provide companies the level of assistance they required,  Customs developed a new supply chain specialist position to assist with  key program elements and limited the role of account managers to  promoting the program.  These supply chain specialists will play a key role  in ensuring that member companies are improving and maintaining supply  chain security practices.
subsections: section_title: Many Countries Agreed to Join CSI; Program Modifications Made in Response to Early Challenges
paragraphs: In CSI’s early stage of implementation, Customs entered into numerous  bilateral arrangements with foreign governments to place Customs officials  at CSI ports and soon deployed several CSI teams; however, at the port of  Rotterdam, Customs found that logistical and legal challenges limited the  CSI team’s ability to obtain manifest data essential to screen high-risk  containers.  To ensure that it would obtain complete and timely manifest  data, Customs implemented the 24-Hour Rule, which allows Customs to  directly receive from carriers information necessary for screening  containers overseas.  In addition, after realizing that the early composition  of CSI assessment teams and the survey instrument used by the teams were  inadequate, Customs modified the teams by building in additional expertise  and developed comprehensive and standardized port surveys.
subsections: section_title: Most Target Governments Agreed to CSI in First Year, Some CSI Teams Deployed
paragraphs: During CSI’s first year of implementation, Customs completed  arrangements with 15 governments to place officials at 24 seaports.  First,  Canada agreed to the placement of U.S. Customs personnel at 3 seaports  under the Smart Border Declaration, which preceded the announcement of  CSI.  Then, between January 2002 and January 2003, Customs concluded  bilateral arrangements with 12 governments covering 18 of the 20 seaports  that ship the highest volume of containers to the United States, as well as 2  other governments representing 3 strategic ports.
During the program’s initial year, Customs deployed CSI teams to 5 ports, a  few months after the arrangements were signed.  As of May 2003, Customs  had placed CSI teams at 7 additional ports.  The number of CSI  deployments as of May 2003 represented about half of the 21 anticipated  CSI ports outlined in the CSI budget for fiscal year 2003.  Deployments are  sometimes delayed, according to Customs officials, for reasons such as the  logistics of placing Customs staff overseas and the readiness of the foreign  ports.  (See table 5 for list of CSI arrangements and deployments.)
According to Customs, between the time of the initial deployments for the  first five CSI ports and May 2003, the CSI teams screened manifest data for  more than 606,000 containers, looking for high-risk cargo.  Their screening  efforts identified a total of 2,091 containers they considered to be high risk  that were then inspected by host customs administrations.  Officials from  the three foreign customs administrations we visited told us that, so far, the  CSI requests for inspection had not been a burden, and that they had often  invited the CSI teams to observe inspections.  At the three CSI ports in  Canada, around 343,000 containers were screened, and 2,022 containers  were inspected between the time of the CSI deployments in March 2002  and May 2003.  At the port of Rotterdam, the CSI team screened more than  203,000 containers, and Dutch customs inspected 54 containers between  September 2002 and May 2003.  At the port of Le Havre, the CSI team  screened more than 59,000 containers, and French customs inspected 15  containers between December 2002 and May 2003.  A Customs official  informed us that these inspections did not reveal any WMDs.
section_title: Program Operations Evolved as CSI Team in First Port Faced Challenges
paragraphs: As the first CSI team arrived in Rotterdam, Customs encountered data  limitations that required revising its approach to obtaining needed  information for screening containers.  CSI operations overseas involve the  utilization of complete, accurate, and timely manifest data to target high- risk containers bound for the United States.   However, the manifest  information in Customs’ Automated Targeting System was insufficient,  because carriers did not always submit manifest data to U.S. Customs  electronically, completely, and prior to the containers’ departure from  foreign ports to the United States.  Therefore, Customs planned to  supplement its own manifest database with manifest data provided by  foreign customs administrations at CSI ports.
Soon after deploying CSI teams at the first European CSI port of  Rotterdam, Customs realized that its ability to effectively screen containers  was limited by the host customs administration’s lack of sufficient export  manifest data for container traffic leaving Rotterdam and headed for U.S.  seaports.  According to U.S. Customs officials, like most customs  administrations, Dutch customs does not completely track export data.   Although the CSI team was provided manifest data on U.S.-bound  containers by the host customs, this information generally was limited to  containers transferred from one vessel to another at Rotterdam, and even  then, the data sometimes arrived after the vessel’s departure.  In addition,  the CSI team did not have information for containers remaining on board a  vessel that was destined for the United States but that stopped at the port  of Rotterdam.  Furthermore, the CSI team did not have manifest data for  containers leaving Rotterdam after arriving via truck, train, or barge from  other countries.
Customs also learned soon after the CSI team’s arrival in Rotterdam that  the physical layout of the port and the sovereign laws of the Netherlands  posed other challenges to the CSI team’s receipt of needed manifest  information.  For example, the CSI team discovered that in the port of  Rotterdam there were 40 different physical locations where Dutch Customs  received paper manifests.  In addition, the CSI team learned that under  Dutch law, paper manifests could not be removed from certain locations.   Given the logistical challenges of compiling information from the 40  locations, as well the limitations posed by existing Dutch law, the two  customs administrations realized that providing the CSI team with this  information would not be feasible.  Customs officials told us that without  complete and accessible manifest data, the CSI team could not achieve its  goal of screening containers at foreign ports.
On the basis of its experiences in Rotterdam, Customs took steps to modify  its approach.  First, Customs expedited the development and finalization of  its 24-Hour Rule, which established new requirements that carriers present  complete vessel cargo declarations to Customs 24 hours before loading  cargo aboard a vessel at foreign ports, regardless of whether these ports  are CSI or non-CSI ports, for transport to the United States.  This  amendment allowed Customs to overcome the obstacle of obtaining  manifest data on containerized exports bound for the United States at  foreign ports—a critical element in the process of screening containers  overseas.  Instead, the CSI teams would now have direct access to the  needed manifest data, thus lessening their dependence on foreign customs  to provide it.
Customs also modified the composition and procedures of CSI assessment  teams in order to gather all information needed for a full understanding of  port operations prior to the CSI team’s arrival.  Customs officials stated  that the insufficiency of information collected by the assessment teams at  Rotterdam delayed Customs’ discovery that the port’s manifest data for  U.S.-bound containers was incomplete.  The inadequacy of the information  collected by the team resulted, in large part, from the team’s lack of subject  matter expertise and a tool to standardize the collection of relevant  information at CSI ports.  Customs officials told us that they have since  identified the required skills and have incorporated staff with significant  expertise from various offices within Customs to properly survey foreign  ports.  In addition, Customs developed a standardized survey questionnaire  to obtain information about a host nation’s port, such as the physical  infrastructure and the availability of manifest and cargo information.   Furthermore, Customs now collects the same information from foreign  customs administrations in advance in an effort to inform the assessment  teams prior to their visits.
section_title: Many Companies Enrolled in C-TPAT, Program Evolving Over Time
paragraphs: Customs quickly designed C-TPAT and rolled-out some key program  elements, adjusting its implementation over time.  Since the beginning of  the program, Customs enrolled a large number of companies across the  United States, receiving security profiles from half of those companies and  providing feedback letters to half of the companies that submitted security  profiles.  More recently, Customs began pretesting another program  element, validations, with a few companies.  Initially, Customs expected  that its account managers, who had experience working with the trade  community, could promote the program and help companies develop  action plans.  However, Customs soon realized that it needed staff with a  different skill set, supply chain security expertise, to help with future  program elements, including validations and action plans.  In response,  Customs created a new supply chain specialist position, which was  finalized in May 2003. Customs will continue to modify the program as it  becomes aware of needed changes and implements other key program  elements.
subsections: section_title: Numerous Companies Enrolled in C-TPAT Program
paragraphs: In December 2001, the first charter members, seven importers, signed  agreements and enrolled in C-TPAT.  Beginning in February 2002, C-TPAT  invited importers that were already participating in Customs’ Low-Risk  Importer Initiative to join C-TPAT. Open enrollment for all other importers  began in April 2002, and enrollment for other trade sectors opened  thereafter. Customs’ outreach targeted large to medium-sized companies in  order to immediately cover a large percentage of the trade entering the  United States.  C-TPAT, in consultation with private-sector partners, plans  to expand the program to foreign warehouse operators and manufacturers.   Figure 4 depicts C-TPAT enrollment time line by type of industry.
According to C-TPAT officials, in January 2003, approximately 1,700  companies had signed C-TPAT agreements, becoming C-TPAT members  and receiving the benefit of a partially reduced risk score.  During the first  year of the program, more than 800 of these companies had completed the  next step in the program and submitted security profiles to Customs.   Customs sent feedback letters to 429 companies, granting 416 of them full  program benefits, including a further reduction in their company risk  scores.  The remaining 13 companies received feedback letters from  Customs informing them that their profiles were insufficient for the  companies to be granted full benefits. Table 6 provides information on the  status of the C-TPAT program membership by type of industry sector and  status of key program elements.
By May 2003, the number of agreements signed nearly doubled to 3,355.   According to C-TPAT officials, the 10 program staff were able to review all  1,837 security profiles and prepare all 1,105 feedback letters in a timely  manner. Customs officials told us that they had not removed any  companies from C-TPAT membership due to the determination that a  member company’s commitment is not serious or that a member company  had intentionally misled Customs or for other matters.  As of the end of  May 2003, Customs had not fully implemented other critical program  elements, such as validations, company action plans, and annual  assessments, designed to ensure that companies have taken action to  improve and maintain supply chain security practices.  A few validations  had been completed, as the concept was being pretested.  No action plans  or annual assessments had been prepared.
Customs has adjusted elements of C-TPAT operations since the program’s  inception and plans to continue doing so as it gains experience and begins  implementing other program elements.  Initially, Customs expected to use  account managers to recruit companies and field general questions about  the application process.  Customs also expected that account managers  would help companies develop action plans in response to Customs  assessments of supply chain security practices. However, C-TPAT officials  later realized that account managers lacked the skill set necessary to  provide more than basic program information to companies.  In response,  Customs took action to hire supply chain specialists to provide the  requisite skill set needed to implement various C-TPAT program elements  and limited the role of account managers to promoting the program.   Account managers were instructed to refer any technical inquiries from  applicants about completing their security profiles to the four C-TPAT  program managers.
In October 2002, Customs began the process of developing a new position  description for supply chain specialists and obtaining authorization to hire  more than 150 such specialists.  In May 2003, the specialist position was  announced.  C-TPAT officials plan to hire 40 specialists by the end of fiscal  year 2003.  According to C-TPAT officials and program documents,  specialists will be used to guide companies in the development of their  security profiles, conduct validations, develop action plans, and facilitate  annual assessments.  However, given the need to complete over 3,000  validations and establish accountability, the C-TPAT officials most recently  told us that the specialists would focus on conducting validations and  action plans.
Early implementation of the program focused on recruiting companies and  collecting information on companies’ security practices.  So far, companies  have only had to report on their existing and planned security practices.  As  the program evolves, validation and action plans will be used by Customs  to advise C-TPAT members to adopt new security measures that could  impose increased costs if adopted.  According to C-TPAT officials, supply  chain specialists will play a critical role in implementing the next C-TPAT  program elements while balancing the dual goals of improving security  with facilitating trade.  The supply chain specialists, according to C-TPAT  officials, will increase the program’s creditability by bringing on experts  who can make feasible and meaningful recommendations that will compel  companies to change their security practices.  C-TPAT officials told us the  program will continue to evolve as the other program elements such as the  company action plans and annual assessments are developed and  implemented and lessons are learned.
section_title: Customs Has Not Adequately Incorporated Factors Critical to Programs’ Success and Accountability
paragraphs: Although CSI and C-TPAT are evolving into major tools in the U.S. war  against terrorism, in implementing the programs, Customs has not taken  adequate steps to incorporate human capital planning, develop  performance measures, and plan strategically—factors essential to the  programs’ long-term success and accountability.  While Customs was able  to meet the programs’ initial staffing needs, it has not devised a systematic  plan to recruit, train, and retain the expected fivefold increase in CSI  overseas staff by fiscal year 2004.  In addition, Customs lacks a plan for  increasing the number of C-TPAT staff almost 15-fold, from 10 to more than  160, while it rolls out new program elements. Although Customs had  created some performance measures, such as tallying the number of  countries and companies that have enrolled in the CSI and C-TPAT,  respectively, it has not developed measures that establish accountability  and measure program achievements.  For example, Customs lacks  measures that assess the impact of CSI and C-TPAT on improving targeting  and security practices, respectively—the programs’ fundamental goals.  In  its effort to rapidly implement the programs and enroll participants,  Customs focused on short-term operational planning.  As a result, Customs  lacks the elements of strategic planning that would allow it to establish  program accountability for approximately $73 million in funds budgeted for  fiscal year 2004.
subsections: section_title: CSI and C-TPAT at Critical Point
paragraphs: Customs has come to a critical point in its management of CSI and C-TPAT,  as they transition from start-up programs to mature global programs on the  front lines of the U.S. effort to address container security and protect  global commerce.  Whereas Customs quickly launched the programs in  response to homeland security concerns, the programs have now reached  the stage where Customs projects a rapid expansion to additional countries  and companies, as well as additional C-TPAT program elements, such as  validations.  Furthermore, Customs has proposed to commit significantly  more resources to both of these programs.  (See fig. 5.)  For example, the  CSI budget will increase from $4.3 million in the first year to more than $61  million proposed for fiscal year 2004, and C-TPAT staff levels will jump  from approximately 10 to more than 160 by the end of fiscal year 2004.
section_title: Customs Has Not Created Human Capital Plans for CSI and C-TPAT
paragraphs: Over 1 year into the implementation of CSI and C-TPAT, Customs has not  developed a human capital plan that systematically addresses long-term  staffing needs such as recruiting, training, and retaining personnel for these  programs.  A key element of human capital planning includes thinking  strategically about how to put the right people in the right jobs at the right  time.  By the end of fiscal year 2004, Customs will need to attract at least  120 CSI employees with the skills to identify high-risk containers at 30  ports and who are willing to live in challenging environments.  Ultimately,  Customs envisions maintaining CSI teams at 43 or more ports.   C-TPAT  intends to hire and train more than 150 supply chain specialists within the  next few years to review company security profiles for weaknesses,  identify solutions, and maintain company relations to ensure that voluntary  improvements are made.   While short-term human capital decision making  was necessary in the programs’ first year to address the challenge of a rapid  start-up, Customs is now required, as a result of its transfer to DHS, to face  these and other important human capital questions to ensure CSI’s and C- TPAT’s long-term success.
Deploying Customs staff to overseas CSI ports will be a complex, multiyear  task.  Customs seeks CSI candidates with targeting, diplomatic, and  language skills.  Customs officials stated that they did not experience  significant difficulties in finding qualified staff to fill its short-term human  capital needs from among the pool of existing Customs employees, such as  inspectors from the Office of Field Operations.  However, Customs  anticipates creating 2- to 3-year permanent assignments to replace its  current 120-day temporary duty assignments, which could strain existing  resources.  In spite of the potential challenges Customs could face, CSI  officials said that they had not documented a human capital plan and would  instead, in the near term, rely exclusively upon other Customs offices such  as the Office of Field Operations to use their own standards to screen and  make final selections of CSI staff for placement at CSI ports overseas.
Customs faces a daunting task as it prepares for its future human capital  needs at key CSI ports overseas, including strategic ports in countries  where it may be difficult to attract U.S. personnel.  Specifically, Customs’  port status planning document projects the deployments of CSI teams in  fiscal year 2004 to seven countries  (Brazil, China, Greece, Sri Lanka,  Thailand, Turkey and the United Arab Emirates) for which the Department  of State requires pay compensation to U.S. government officials for  hardships they may encounter while working in these locations.   As an  example of how challenging it can be to place staff overseas, we found that  the Department of State, whose staff routinely serves overseas, had  difficulty filling positions in hardship posts and that, as a consequence, the  affected embassies were hampered in their ability to effectively carry out  U.S. foreign policy objectives. The difficulties faced by the Department of  State demonstrate that staffing posts abroad with appropriately skilled  personnel is a challenge even for agencies with a long history of recruiting  and placing staff overseas. Without a human capital plan that includes  recruiting and training strategies, Customs may be unable to identify and  develop the human resources necessary to handle the staffing for the  expanded number of CSI ports.
As with CSI, Customs plans to expand C-TPAT by hiring over 150 additional  staff that will help implement new program elements such as validations  and actions plans.   The duties of these new staff, or supply chain  specialists, are to identify, recommend, and negotiate with member  companies to undertake corrective actions to improve supply chain  security, as well as to guide companies through the C-TPAT process.   Customs officials said that they expect to hire 40 supply chain specialists in  fiscal year 2003 and the remaining number after that.  However, although  Customs acknowledged the importance of human capital planning for C- TPAT, Customs officials indicated that they have been unable to devote  resources to developing a human capital plan that outlines how C-TPAT  will increase its staff 15-fold and implement new program elements that  will require training.
A human capital plan that emphasizes recruitment, retention, and training  is particularly important given the unique operating environments and  personnel requirements of the two programs.  According to Customs  officials, the professional and personal relationships that CSI team  members and C-TPAT supply chain specialists build with their clients over  time will be critical to the long-term success of both programs.  For  example, Customs has indicated that a key benefit of CSI is the ability of  Customs officials to work with their foreign counterparts to obtain  sensitive information that enhances its targeting of high-risk containers at  the foreign ports.  If Customs fails to establish these good working  relationships, the added value of targeting from foreign ports is called into  question.  Similarly, Customs officials indicated that C-TPAT’s success at  improving supply chain security will depend, in large part, on supply chain  specialists’ ability to persuade companies to voluntarily adopt C-TPAT  recommendations. Given the reliance of CSI and C-TPAT staff on  relationships and persuasion rather than authority, a human capital plan  that regularly places personnel with language skills and the ability to work  effectively in these environments will maximize the programs’  performance.  In the absence of a human capital plan, Customs may be  unable to anticipate potential obstacles to placing the right people in the  right jobs at the right time.
section_title: Customs Developed Limited Performance Measures
paragraphs: Customs has attempted to create some performance measures for CSI and  C-TPAT, but neither program has developed measures that reflect progress  in achieving program goals.  Organizations use performance measures to  help demonstrate the level of progress in achieving results, to inform  decision making, and to hold managers accountable. To better articulate a  results-orientation, organizations create a set of performance goals and  measures that addresses important dimensions of program performance.  Using intermediate goals and measures, such as outputs or intermediate  outcomes, would allow Customs to measure progress toward enhancing  the security of U.S.-bound ocean container trade, the primary goal of these  programs. As other programs are proposed to address homeland security  needs, DHS and the Congress must have access to credible performance  information that allows them to make resource allocation decisions across  programs and hold managers accountable.
Customs officials had developed some measures for CSI and C-TPAT that  simply quantify program results like operational activities and efforts.  For  example, Customs tracks the number of CSI teams operating in foreign  ports and the number of countries that have signed up to participate in CSI,  as well as the number of CSI inspections.  Similarly, for C-TPAT, Customs  tracks results like the number of companies from different industrial  sectors that participate in the program and the percentage value of cargo  imported by C-TPAT companies.  These measures have served as useful  indicators of operational results.
However, Customs had not developed measures to help assess how CSI’s  presence overseas helps improve targeting of high-risk containers beyond  Customs’ existing capabilities.  As previously discussed, Customs officials  stated that the most important benefit derives from the collocation of U.S.  and foreign customs officials, which provides them with additional  information that should enhance Customs’ targeting abilities.   However,  Customs does not analyze statistics to ascertain the nature and extent of  the contributions made by foreign customs administrations in determining  whether a particular container should be targeted or inspected.  Customs  officials told us that they had not had the opportunity to prepare  performance measures that will help evaluate CSI’s outcomes.  In the  absence of performance indicators that provide a measure of the program’s  success, the benefits of placing personnel overseas are unclear.
On the other hand, Customs developed a performance measure to indicate  whether C-TPAT has resulted in improved security practices, using the  results of trade compliance audits as a proxy.  This indicator uses select  data elements derived from trade compliance audits, such as whether the  container seals indicated possible tampering and whether the manifest  contained data discrepancies (e.g., whether cargo weight significantly  changed between export and arrival).  While this is a useful first step, its  effectiveness is limited by the fact that it compares two different  populations, contrasting the behavior of C-TPAT members with that of non- C-TPAT members.  A more reliable measure of program impact would  compare companies’ trade compliance before and after they enroll in C- TPAT.   As of May 2003, Customs had not developed any other indicators to  ascertain whether C-TPAT has had an impact on the members’ supply chain  security practices. Recent efforts to validate the C-TPAT security profiles  provide Customs with an opportunity to establish baseline data to later  determine whether members’ security practices improve over time.  The  validations also provide Customs an opportunity to authenticate the  information contained in security profiles and determine whether the  company merits a continued reduction in its risk score.
section_title: Customs Planning Efforts Do Not Reflect Strategic Approach
paragraphs: Customs does not have a strategic plan that describes how it intends to  achieve CSI and C-TPAT goals and objectives and that makes full  accountability possible.  According to Customs, the short-term  requirements of implementing the programs quickly and encouraging  program participation by countries and companies impeded Customs’  ability to systematically carry out strategic planning.  Strategic planning  helps organizations manage their programs more effectively by requiring  that they clearly establish mission goals and objectives and, after assessing  their environment and involving stakeholders, describe how program  activities serve program goals.  In addition, strategic plans can provide a  basis for communication and mutual understanding between stakeholders  and contribute to program accountability.
Although Customs has taken some steps that demonstrate operational  planning for CSI implementation in key ports throughout the world, its  efforts do not reflect a strategic approach to planning.  While Customs  intends to continue deploying CSI teams to the 20 top ports and to 20 to 25  strategic ports, it has not prepared strategic plans that show how it will  accomplish this enormous task.  Whereas Customs told us that it intends to  develop strategic plans, so far, the only available record regarding its  expansion plans is a table outlining when Customs expects to deploy CSI  teams to foreign ports for fiscal years 2003 and 2004.
Without the benefit of strategic planning, Customs quickly rolled out CSI in  France but failed to involve primary stakeholders in making key decisions.   Although Customs officials pointed to their collaboration with the French  government as a model of cooperation in setting up this port, a lack of  communication between the partner countries caused French customs  officials to impose unnecessary demands on private industry shipping out  of Le Havre to provide the CSI team with complete manifest information  needed for effective targeting.  Customs had failed to inform the French  that it was implementing the 24-Hour Rule, which essentially negated the  need for the French effort.  When we met with French government officials,  they expressed frustration that they had not been kept informed.  Poor  communication, as evidenced by this experience, can lead to a lack of  cooperation between the two partners and make attainment of CSI goals  more difficult.  Good communication is essential for a program like CSI,  which relies on the exchange of information between the U.S. and foreign  customs administrations to improve the targeting of high-risk containers.
Customs’ experience in rolling out C-TPAT similarly demonstrates a lack of  strategic planning. This is particularly true with regard to Custom's  communicating how it plans to implement critical C-TPAT program  elements—validations, action plans, and annual assessments—designed to  verify that companies have security measures in place and follow through  with recommended changes. Customs does not have a planning document  that describes the operational objectives for each element, how those  objectives support C-TPAT's overall goals, and how they intend to meet  those objectives.  Although Customs recently pilot-tested the validation  process with 15 companies, they have yet to incorporate results and  lessons learned into a planning document to guide the validation process  for the more than 3,300 companies currently receiving C-TPAT's key benefit  of reduced risk scores.
Customs lacks a strategic plan that describes how Customs intends to  achieve its programs’ goals and establish program accountability for  approximately $73 million in funds budgeted for fiscal year 2004.   Furthermore, Customs does not have strategic planning documents that  establish measurable objectives, detailed implementation strategies,  resource needs, and project time frames for CSI and C-TPAT.  The effective  implementation of CSI and C-TPAT programs depends, in part, on rigorous  strategic planning.  Without strategic plans, Customs may discover that CSI  cannot place CSI teams in strategic ports in a timely fashion, or that they  place the teams but do not achieve any improvement in security.  Similarly,  Customs may find that the security of C-TPAT companies' supply chains is  not improved and that, as a result, reductions in risk scores are granted to  undeserving companies.
section_title: Conclusions
paragraphs: Customs quickly launched CSI and C-TPAT to secure ocean containers  bound for U.S. seaports.   However, accomplishing the desired outcome of  securing containers bound for the United States and achieving the long- term effectiveness of both programs would be aided by human capital  planning, the development of performance measures, and strategic  planning, elements that Customs has not fully incorporated into the  programs.  As CSI and C-TPAT make the transition from early  implementation to full-scale operations, Customs’ management of these  programs has not evolved from its short-term focus to a long-term strategic  approach.  Customs faces unprecedented demands as it expands CSI to  other countries and C-TPAT begins rolling out the critical validation phase  of the program.  Planning and measuring program performance to  determine if goals and objectives are being met play an important role in  the management of Customs operations and enable internal and external  decision makers to assess the programs’ effectiveness, make resource  allocation decisions, and hold managers accountable.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that CSI and C-TPAT achieve their objectives as they  transition from smaller start-up programs to larger programs with an  increasingly larger share of the Department of Homeland Security’s budget,  we recommend that the Secretary of Homeland Security, working with the  Commissioner of Customs and Border Protection and the CSI and C-TPAT  program directors, takes the following steps:   Develops human capital plans that clearly describe how CSI and C-TPAT  will recruit, train, and retain staff to meet their growing demands as they  expand to other countries and implement new program elements.  These  plans should include up-to-date information on CSI and C-TPAT staffing  and training requirements and should be regularly used by managers to  identify areas for further human capital planning, including opportunities  for improving program results.
Expands efforts already initiated to develop performance measures for CSI  and C-TPAT that include outcome-oriented indicators.  These measures  should be tangible, measurable conditions that cover key aspects of  performance and should enable agencies to assess accomplishments, make  decisions, realign processes, and assign accountability.  Furthermore, the  measures should be used to determine the future direction of these  Customs programs.
Develops strategic plans that clearly lay out CSI and C-TPAT goals,  objectives, and detailed implementation strategies. These plans should not  only address how the strategies and related resources, both financial and  human, will enable Customs to secure ocean containers bound for the  United States, but should also reinforce the connections between these  programs’ objectives and both Customs’ and the Department of Homeland  Security’s long-term goals.
section_title: Agency Comments and Our Evaluation
paragraphs: Customs provided written comments on a draft of our report.  Customs  agreed with our recommendations and overall observations that it needs to  take adequate steps to incorporate human capital planning, expand efforts  to develop performance measures and develop strategic plans—factors  necessary for the long-term success and accountability of CSI and C-TPAT.    Customs reported that is has already taken some steps and will continue to  take prudent steps to address these factors.  Customs, however, raised  concerns about the draft report’s characterization of some information.   Customs also provided technical comments, which we incorporated as  appropriate.  The following summarizes their general comments and our  responses. Customs’ comments, along with our responses to specific  points, are contained in appendix II.
We made changes to our report to address Customs’ concerns that we  overlooked CSI’s central tenet—U.S. Customs inspectors must be able to  observe the inspections conducted by host customs officials—which,  according to Customs, is accepted by all partner Customs administrations.   We revised the report to note CSI’s central tenet and its acceptance by all  partners, but we also noted that the bilateral arrangements do not specify  that U.S. inspectors must be able to observe inspections conducted by host  customs officials.  Although Customs requested, we did not drop our  statement that CSI teams are often invited to attend inspections because  this is what officials from three foreign customs administrations told us.
Customs raised concerns about our characterization of the expected role of  account managers in C-TPAT.  In its general comments, Customs noted that  account managers were never expected to help companies develop action  plans.  This statement directly contradicts previous statements by Customs  officials as well as an early program document.  Therefore, we maintain  that Customs account managers were initially expected to help companies  develop action plans.
Customs noted that its policy is not to reject companies because of an  inadequate security profile or for adverse information discovered during  the review process.  However, Customs provided further clarification that it  may, under certain circumstances, withhold or reduce C-TPAT benefits.   Furthermore, Customs stated that it may remove a company from C-TPAT  membership if it determines that its commitment is not serious or that it  has intentionally misled Customs.  We incorporated changes in our report  to reflect these clarifications.
We are sending copies of this report to other interested members of  Congress, the Secretary of the Department of Homeland Security, and the  Commissioner of Customs.  We also will make copies available to others  upon request.  In addition, the report will be available at no charge on the  GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512- 4347.  Other GAO contacts and staff acknowledgments are  listed in appendix III.
section_title: Scope and Methodology
paragraphs: To describe the Container Security Initiative (CSI) and the Customs-Trade  Partnership Against Terrorism (C-TPAT), we met with U.S. Customs  officials in Washington, D.C. with program responsibilities for CSI and C- TPAT.  Specifically, we met with officials in the Office of International  Affairs to discuss the planning and start-up of the CSI program.  In  examining the CSI program, we limited the scope of our work to two of the  CSI program’s four elements—(1) identifying “high-risk” containers and (2)  screening the “high-risk” containers at the foreign CSI ports before they are  shipped to U.S. ports. Our examination of those two elements focused on  the planning and management issues specific to the rollout of this program  abroad in the program’s first year.  We did not examine the adequacy of  Customs-wide tools and technology, such as the Automated Targeting  System, for successfully targeting high-risk ocean containers.  We reviewed  documents on CSI including testimony and speeches by Customs officials,  as well as information on the Customs Web site, which outlined CSI goals,  implementation strategies, and operations plans.  In addition, we reviewed  Customs documentation, to understand CSI procedures including  agreements with the foreign countries to set up CSI at designated ports,  CSI assessment teams’ survey questionnaire at ports, and CSI budget and  staffing data.  We visited the ports of New York-New Jersey, Los Angeles,  and Long Beach to familiarize ourselves with Customs’ standard operating  procedures in a seaport environment.  At the ports, we interviewed  Customs officials and observed operations, with particular emphasis on  Customs cargo container targeting units charged with using the Automated  Targeting System to screen cargo containers entering U.S. ports.
We also met with C-TPAT officials from the Office of Field Operations to  discuss program goals, implementation strategies, and plans.  We reviewed  C-TPAT program documents outlining the early planning efforts for the  program.  We also met with private companies and industry associations in  the United States to obtain their views on C-TPAT, supply chain  vulnerabilities and corroborate information provided by Customs.  We  attended conferences in Phoenix and Chicago that included remarks by  Customs officials and private sector representatives on the start-up of C- TPAT, including the process for application for membership.  We met with  officials from both the Office of Naval Intelligence and the National  Defense University to understand threats and vulnerabilities associated  with the overseas container supply chain.
To examine Customs’ implementation of CSI and C-TPAT during the first  year, we interviewed Customs officials at the Washington, D.C.,  headquarters as discussed earlier.  For CSI, we reviewed Customs press  releases to learn the status of CSI bilateral arrangements with various  countries and the deployment of CSI staff at foreign ports.  We also  reviewed and analyzed Customs documentation, including arrangements  with the foreign countries to set up CSI at designated ports, trip reports to  prospective CSI ports, port assessments, plans for CSI operations at the  port of Rotterdam, and statistics on the number of containers screened by  CSI teams and the number of containers inspected by local customs at CSI  ports to date.  For the C-TPAT program, in Washington, D.C., we reviewed  and analyzed C-TPAT paperwork for selected member companies,  including partnership agreements, company profiles of their supply chains,  and security measures taken to secure their supply chains, as well as C- TPAT’s feedback letters welcoming companies as certified members and  recommending improvements to their supply chains.   We discussed with  representatives of U.S. companies their experiences in becoming members  of C-TPAT and their efforts to improve the security of their supply chains,  particularly those parts of the supply chain controlled by their foreign  suppliers.
As part of our examination of the first year of implementation of CSI and C- TPAT, we also visited four countries—Canada, the Netherlands, France,  and Germany.  In Canada, the Netherlands, and France, we met with U.S.  Embassy officials, particularly the U.S. Customs attachés responsible for  managing CSI implementation in the ports of Vancouver, Rotterdam, and Le  Havre.  We discussed the issues that came up during the CSI negotiations  and the substance of the final arrangements between the U.S. and host  governments.  We also discussed the start-up of the CSI program, as well as  any issues that had arisen during implementation in each country.  We  interviewed CSI team members at each port to obtain detailed explanations  of CSI operations there and any available related documentation.  At the  ports of Vancouver and Le Havre, we were able to observe customs  operations and the interaction of the CSI team with its host country  officials.  We were not able to observe CSI operations at the port of  Rotterdam, owing to a decision by the Dutch government to restrict the  number of foreign delegations that could access customs operations at  Rotterdam.  However, in the Netherlands, as well as in France and Canada,  we were able to interview foreign government officials about the  negotiations to start up CSI in their ports, issues and problems related to  the start-up of the program, and their views regarding the future of the CSI  program in their ports.  For the C-TPAT program, we interviewed trade  associations, port authorities, suppliers, and supply chain service providers  during our visits to Canada, Germany, France, and the Netherlands. With  trade associations, we discussed their impressions of C-TPAT, and the  potential impact that C-TPAT security expectations could have on  members’ operations. With port authorities, suppliers, and supply chain  service providers, we observed their operations and discussed the potential  impact that implementing C-TPAT security recommendations could have  on their operations and the vulnerabilities that they faced.
To assess the extent to which Customs has focused on factors critical to  the long-term success of the programs, we first reviewed a broad range of  GAO reports examining management factors that were necessary  components for the successful management of cabinet departments,  agencies, and, by extension, individual programs.  As the result of our  review of GAO’s work on best management practices, we chose to focus  this analysis on three management factors— human capital planning, the  development of performance measures, and strategic planning —because  of their general importance in the literature.  (In particular, a recent GAO  report identified critical factors, including the three listed above, that the  new Department of Homeland Security would need to incorporate for the  successful long-term management of the new department.)  In addition to  interviewing Customs officials in Washington, as described above, we  examined available budgetary and other documentation to ascertain  management plans for the expansion of CSI and C-TPAT.  We assessed the  extent to which Customs expansion plans incorporated human capital  planning, the development of performance measures, and strategic  planning.
We performed our work from April 2002 to June 2003 in accordance with  generally accepted government auditing standards.
section_title: Comments from the Bureau of Customs and Border Protection
paragraphs: The following are GAO’s comments on the letter from the Bureau of  Customs and Border Protection, dated July 16, 2003.
subsections: section_title: GAO Comments
paragraphs: 1. Customs agreed with our findings that human capital planning is  needed, and Customs indicated that it is developing a comprehensive  training plan for Customs-Trade Partnership Against Terrorism   (C-TPAT).  However, while training is an important aspect of human  capital planning, our report shows that human capital plans should also  systematically address other long-term staffing needs, such as  recruitment and retention for the more than 150 supply chain  specialists Customs plans to hire. 2. Customs commented that it is making progress in developing further  performance measures that are based on trade compliance data.  As our  report states, to ensure that C-TPAT performance indicators are  reliable, the measures should compare trade compliance data for  companies before and after they enroll in the program.  Customs also  indicated that it intends to review the results of the validation process  in order to develop possible baselines for measurements.  These efforts  are responsive to the recommendation in our report. 3. Customs noted that more accurate budget data are available.  Between  the fall 2002 and June 2003, we requested clarification and updated  budget information for our report. Our report presents the budget data  that Customs provided us. Furthermore, we did not use the fall 2002  container data in our report; our report presents the number of ocean  containers inspected under the Container Security Initative (CSI)  program through May 2003, which was provided by Customs officials in  June 2003.  4. Customs raised several concerns about our characterization of the  expected role of account managers in C-TPAT.  Customs indicated that   “at no time was it certain or probable that account managers would  become involved beyond the communication function.”  This statement  contradicts previous statements by Customs officials and an early C- TPAT program document that account managers would be involved in  developing action plans.  Therefore, we maintain that Customs account  managers were initially expected to help companies develop action  plans. 5. Regarding Customs’ assertion that U.S. Customs inspectors must be  able to observe inspections at CSI ports, we do not question the need  for Customs inspectors to make such observations.  However, our  analysis of the bilateral arrangements show that the arrangements do  not specify that U.S. Customs must be able to inspect containers or  observe inspections.  In addition, our analysis of Customs’ documents  and our discussions with Customs officials reveal that bilateral  arrangements with foreign governments are not legally binding  documents.  We will not revise the sentence that states “Officials from  the three foreign customs administrations visited told us that, so far,  the CSI requests for inspections had not been a burden and that they  had often invited the CSI teams to observe inspections” because this is  what foreign customs officials told us.  However, we will revise the  report to clarify that the ability of the U.S. Customs officials to observe  and verify inspections is a central tenet of the CSI concept and,  according to U.S. Customs officials, all partner Customs  administrations accept this tenet. 6. Customs stated that company participants are not rejected from the  program and are instead engaged by C-TPAT to increase the security of  the international supply chain.  This statement is consistent with  information in our report.  Customs also noted that it withholds  benefits when this action is warranted by adverse information or  identified security weaknesses and that it can reduce benefits, for less  serious reasons, to encourage a company to rectify a security gap or  problem. We revised the report to clarify these two points.  We also  added a footnote to capture Customs’ comments that C-TPAT  participants are not exempt from Customs trade compliance and  enforcement activities.   We further revised the report to clarify that  Customs can remove a company from C-TPAT membership if it  determines that the company has not made a serious commitment or  has intentionally misled Customs.  To date, Customs reported that it has  not removed a company from C-TPAT membership.   7. Customs noted the evolution of the supply chain specialist position.
This is consistent with our report. 8. We believe that our portrayal of the relationship between the 24-Hour  Rule and CSI is accurate.  Our report states that the 24-Hour Rule was  implemented to ensure that Customs would obtain complete and timely  manifest data.  This is based on specific evidence found in our  examination of the 24-Hour Rule, as published in the Federal Register.    The 24-Hour Rule, as found in the Federal Register, specifically states,  under the heading Necessity for Advance Presentation of Vessel Cargo  Manifest to Customs, that “CSI is already operational in Canada and the  Netherlands….Given this explosive growth, it is critical that the  information necessary to implement CSI fully be provided to Customs  in the near term.  For this reason, Customs proposed this rulemaking  on August 8, 2002.”  9. Customs noted that the development of action plans and assessment of  security improvements are part of the validation process.  In earlier  interviews with Customs officials, we were told that supply chain  specialists would focus on validating the company security profiles,  because Customs needed to validate the large number of security  profiles that they had received.  We revised the report to eliminate the  statement that other program elements would be a lower priority and  clarified that supply chain specialists would focus on validations and  action plans.  We also added that supply chain security specialists  would help facilitate the annual assessments.  10. We have deleted the second paragraph.    11. Customs noted that the statement in our report that Customs does not  track the contributions made by foreign customs administrations in  determining whether a particular container should be targeted or  inspected is inaccurate.  We revised the report to reflect that Customs  does not analyze statistics to ascertain the nature and extent of the  contributions made by foreign customs administrations in determining  whether a particular container should be targeted or inspected. 12. We disagree with Customs’ assertion that our report implied that U.S.
Customs imposed unnecessary demands on private industry.  To the  contrary, our report states that French Customs imposed demands on  private industry that proved unnecessary.  However, our central point  still stands.  French Customs officials told us that they updated their  manifest system in anticipation of the implementation of CSI in the port  of Le Havre, but without knowledge of the imminent implementation of  the 24-Hour Rule.  In our interviews with French Customs officials, they  expressed dissatisfaction with the confusion surrounding the  implementation of the 24-Hour Rule.  That benefits derived from  French Customs’ efforts to update the manifest system is beside our  point that good communication is vital between CSI partners.
section_title: GAO Contact and Staff Acknowledgments
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section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Patricia Cazares-Chao, Richard  Boudreau, Hector Wong, Victoria Lin, Jill Johnson, and Reid Lowe made  key contributions to this report.
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