What is the Difference Between the WHO, C-TPAT, NEEC, and AEO?

There seem to be a lot of different organizations overseeing trade patterns and regulations.  What is the distinction between them?

In the past, the main focus of customs efforts was devoted to collecting appropriate duties on goods traded.  In light of current concerns about the safety and security of goods in the supply chain, the focus has broadened to include the creation of standards and regulations for securing and facilitating safe trade.

The WCO (World Customs Organization) is the governing body for most countries with regard to customs issues. The WCO has developed a framework of standards to secure trade along the supply line, using the acronym SAFE.  Countries are evaluated by the WCO to measure their level of adherence to safe standards, recordkeeping, and proper inspections of goods along the supply chain.  Entities that the WCO has evaluated and deemed capable of safely and securely dealing in the international movement of goods are given the designation AEO, Authorized Economic Operator.

The list of WCO member countries that have instituted AEO programs is lengthy and includes the US, China, Canada, Israel, Mexico, India, many Central and South American countries, and several African nations.   Many countries set up their own programs and develop their own standards for brokers, distributors, manufacturers, importers, and exporters to follow when conducting international trade matters.  The US runs its own program under the title C-TPAT (the Customs-Trade Partnership Against Terrorism), while the EU has its own AEO program.  Mexico’s program for safe trade goes under the acronym NEEC (Nuevo Esquema de Empresas Certificadas).

Regardless what terms are used, the goal is the same:  once a country can be trusted to have high quality programs in place to ensure goods are not tampered with by the various parties handling the movement of goods along the supply chain, customs inspections can be reduced or streamlined so that goods can move safely and swiftly from country to country.  Customs officers are then freed up to spend their time scrutinizing shipments of cargo from unknown or potentially unsafe operators.

Suzanne DeCuir, Global Trade Expertise

 

 

What is C-TPAT?

C-TPAT or Customs / Trade Partnership Against Terrorism is a voluntary public-private sector partnership program established in November of 2001 in an effort to prevent terrorism within the United States borders.  The program allows the CBP to work closely with certified, trusted partners in the trade community to better mitigate and prevent contraband, human smuggling, and potential attacks to the international supply chain.  When an organization joins C-TPAT, the company signs an agreement to work with CBP to protect the supply chain, identify security gaps, and implement specific security measures and best practices. C‐TPAT members are considered low‐risk and are therefore less likely to have their shipments examined.

What are the Benefits of C-TPAT Certification?

By taking an active role in working closely with the government, C-TPAT partners are able to better identify their own security vulnerabilities and take corrective action to mitigate risks.  Additional benefits from C-TPAT certification include:

  • Reduced number of CBP examinations
  • Front of the line inspections
  • Possible exemption from Stratified Exams
  • Shorter wait times at the border
  • Assignment of Supply Chain Security Specialist to the company
  • Access to the Free and Secure Trade (FAST) lanes at land borders
  • Access to the C-TPAT portal system and a library of training material
  • Importer eligibility to participate in the Importer Self Assessment Program (ISA)
  • Recognition as a trusted trade partner by foreign customs administrations and other corporate entities

Who Can Apply for C-TPAT Certification? 

  • U.S. Importers of Record
  • U.S. / Canada Highway Carriers
  • U.S. / Mexico Highway Carriers
  • Mexico Long Haul Highway Carriers
  • Rail, Sea, and Air Carriers
  • U.S. Maritime Port Authority and Terminal Operators
  • Mexican and Canadian Manufacturers
  • Licensed U.S. Customs Brokers
  • Third Party Logistics Providers
  • Consolidators / NVOCC
  • U.S. Exports (effective May 17, 2015)

How to Become C-TPAT Certified

To become C-TPAT certified, a company must first conduct and document a security risk assessment in order to determine the risks the company faces and how to mitigate those risks.  Upon completion of the risk assessment, a company must submit an application to CBP through the C-TPAT Portal System.  The company must complete a supply chain security profile which explains how the company is meeting C-TPAT’s minimum security criteria.  After filing the application and the security profile, a C-TPAT Supply Chain Specialist will be assigned to the company to review the materials and provide program guidance on an on-going basis.

How Does C-TPAT Compare to AEO?

AEO or Authorized Economic Operator is a party involved in international movement of goods that has been approved by a national Customs administration as complying with the standards of the World Customs Organization (WCO) or equivalent supply chain security standards.  Under Mutual Recognition Agreements, CBP can agree with a foreign Customs Administration to recognize AEO’s under the foreign Customs Administration’s supply chain security program.  This recognition allows for AEO’s under both C-TPAT and the foreign Customs Administrations program to receive reciprocal benefits through each program.

How Does C-TPAT Compare to NEEC?

The NEEC or Nuevo Esquema de Empresas Certificadas (New Certified Companies Scheme) is the Mexican counterpart to C-TPAT.  The NEEC is a voluntary business-government program aimed at fostering cooperation between the public and private sectors by establishing requirements that participants agree to meet in exchange for benefits such as a simplified cargo processing.  Under a Mutual Recognition Agreement, both Mexico and the United States agreed to provide companies enrolled in one program to receive reciprocal benefits under the other.   These benefits consist of fewer inspections, simplified approval processes for cargo, and reduced processing times for cargo trucks at the U.S. / Mexico border.  Because the NEEC was created as a C-TPAT counterpart, the certification requirements are very similar to C-TPAT.

Aaron Ambrite, Extern, Global Trade Expertis

What is Customs Entry?

Who May Make a U.S. Customs Entry?

Not everyone may make a customs entry. Only parties qualified as the “importer of record” may make entry.  Customs law defines “importer of record” as the owner or purchaser of the merchandise, or, when appropriately designated by the owner, purchaser or consignee, a licensed customs broker.  Carriers may not make entry.  Note also, that a parent company may not enter merchandise for a subsidiary company based on the corporate relationship.

What Merchandise Must Be Entered Via a Customs Entry?

With very few exceptions (such as human remains and the Internet), all merchandise imported into the U.S. is required to be entered even if it is duty-free. The U.S. Customs Territory is defined as the U.S. States, District of Columbia, and Puerto Rico.

Types of Customs Entries

Depending on the circumstances, imported merchandise may be entered for consumption, entered for warehouse, admitted into a foreign trade zone or transported in bond to another port of entry or country.

The most popular type of entry is a consumption entry, which is filed with the intent to introduce the goods into the stream of U.S. commence. 

What is Customs Entry Process?

 The entry process is completed in two steps: 

1.     At the time of entry, an importer of record (or its designee) must file a Customs Form 3461, a commercial invoice, packing list and other documentation necessary to determine admissibility.

2.     Within 10 working days after the time of entry, a follow-up entry summary on CF 7501, with estimated duties attached, must be filed.

What are Customs Entry Requirements?

At the time of entry, the importer must file a bond. The basic importation bond is a contract whereby a guarantor (the surety) has an obligation to pay a second party (CBP) upon default by a third party (the importer of record) in the performance that the third party owes to the second party. The failure to file an entry summary or other documentation will result in a demand for liquidated damages against the importer’s bond. 

Pursuant to U.S. Customs law and regulations, the trade must exercise reasonable care in classifying, valuing, marking and entering its goods.

What is Entry Liquidation?

Entry liquidation is the final step in a customs entry process. It is the final computation or ascertainment of the duties accruing on an entry.

Customs has 314 days from the date of entry to “liquidate” the entry or to extend the liquidation. Liquidation can be extended up to 3 years.  An entry not liquidated within 4 years from the date of entry shall be deemed liquidated by operation of law at the rate of duty and value asserted by the importer.  (There are a few situations where liquidation continues to be suspended beyond the 4-year period due to court order).

What serves as the legal evidence of liquidation is A bulletin notice posted in the customhouse serves as the legal evidence of liquidation. A protest disputing an element of an entry (that is qualified as protestable matter under the U.S. customs regulations) must be filed no later than 180 days from the date of liquidation.

What is Export Control Reform?

In August 2009, President Obama initiated a broad interagency review of the U.S. export control system. The stated goal of the review was strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats, as well as adapting to the changing economic and technological landscape. This review determined that the current export control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishes our ability to focus our efforts on the most critical national security priorities.

Based on the results of that review, the White House launched the Export Control Reform Initiative (ECR Initiative) with the intention of fundamentally reforming the U.S. export control system. The ECR Initiative (which is not related to the President’s National Export Initiative) is designed to simplify the U.S. export control system while enhancing U.S. national security and strengthening the United States’ ability to counter threats such as the proliferation of weapons of mass destruction.

The ECR Initiative will implement reform in three phases. Phases I and II reconcile various definitions, regulations, and policies for export controls. Phase III will create a single control list, single licensing agency, unified information technology system, and enforcement coordination center.

On October 15, 2013, the first final export control list rules implementing Export Control Reform took effect. These rules include both structural changes as well as revisions to USML Categories VIII (Aircraft) and XIX (Gas Turbine Engines) that transition many less sensitive items from the State Department’s International Traffic in Arms Regulations (ITAR) to the Commerce Department’s Export Administration Regulations (EAR). USML Categories XVII (Classified Defense Articles) and XXI (Miscellaneous Articles) are also included in the final rules. Please see the recently released White House Fact Sheet and 
State Department Media Note for more information.
 

What is C-TPAT?

 Customs-Trade Partnership Against Terrorism (C-TPAT) is a voluntary government/private sector program run by the U.S. Customs and Border Protection (CBP) that focuses on improving security and efficiency of international cargo. C-TPAT is meant to increase security measures, practices and procedures through all components of the international supply chain. The program requires certification of a participant by the CBP. 

Is C-TPAT for me? What are C-TPAT benefits?

As of November 2013, the program had approximately 10,500 participants  that account for over 50% of total U.S. imports (by value). The program participants include U.S. importers, U.S./Canada highway carriers, U.S. Mexico highway carriers, rail and sea carriers, licensed U.S. Customs brokers,  U.S. marine port authority/terminal operators, U.S. freight consolidators, ocean transportation intermediaries and non-operating common carriers, Mexican and Canadian manufacturers, and Mexican long-haul carriers. 

Some of the C-TPAT benefits include a decreased number of security and compliance inspections and reduced border wait times; front of the line privileges for examined cargo; eligibility to self-monitor security activities via Importer Self-Assessment (ISA) program; eligibility for FAST/dedicated lane access on the Canadian and Mexican borders with expedited cargo processing;  and business marketability as a CBP-certified company.  

 

What penalties apply to Customs violations?

 

Criminal Penalties

  • 18 U.S.C. § 1001 - Statements or Entries Generally - Punishable by recovery of duty loss plus a fine of $10,000 per count, imprisonment up to 5 years or both
  • 18 U.S.C. § 1542 - Entry of Goods by Means of False Statements - Punishable by recovery of duty loss plus a fine of $5000 per count, imprisonment up to 2 years, or both
  • 18 U.S.C. § 1545 - Smuggling Goods into the United States - Punishable by recovery of duty loss and seizure of goods plus a fine up to $250,000, imprisonment up to 5 years, or both

Civil Penalties

  • 19 U.S.C. § 1592 -Penalties for Fraud, Gross Negligence, and Negligence

Penalties for non-compliance are as follows based on the level of culpability:

Fraud - For violations resulting in a revenue loss = up to the domestic value of the entry(ies) ; for non-revenue loss violations = up to the domestic value of the merchandise. 

Gross Negligence - For violations resulting in a revenue loss = 4x the loss of duty; for non-revenue loss violations = 40% of the dutiable value of the merchandise.
 

 Negligence - For violations resulting in a revenue loss = 2x the loss of duty;  for non-revenue loss violations = 20% of the dutiable value of the merchandise.

What are "deemed exports"?

As the release of technology within the U.S. to a foreign national (i.e., a non-U.S. citizen or permanent resident) is deemed to be an export to the home country of the foreign national. Thus, allowing a foreign national to have access to technology that is controlled under the Export Administration Regulations is considered a "deemed export" and may require a license prior to granting such access to controlled technology.