Executive Briefings

Non-Asset-Based 3PLs & C-TPAT Certification

This past month, non-asset-based third-party logistics companies took a big leap forward in their fight to join the Customs-Trade Partnership Against Terrorism (C-TPAT), one of our nation's leading supply chain security programs. The Department of Homeland Security approved port security legislation that includes creating a pilot program for non-asset-based 3PLs to participate in C-TPAT. The pilot program will give entry to C-TPAT to five 3PLs for one year.

C-TPAT was started in November 2001 as a result of the 9/11 attacks. The goal of this program is to establish clear supply chain security for members by extending the U.S. zone of security to the point of origin. This allows for better risk assessment and targeting of the Customs and Border Protection (CBP) to better allocate their resources to inspect more questionable shipments.

C-TPAT began with seven major importers. Now, its 10,000-plus member base includes importers, highway carriers, rail and sea carriers, customs brokers, marine port authorities, freight consolidators, ocean transportation intermediaries, non-operating common carriers, manufacturers, long-haul carriers and asset-based 3PLs.

Since 2009, the Transportation Intermediaries Association (TIA) and non-asset-based 3PLs have lobbied for entry for good reason: program members receive significant benefits for staying in compliance with C-TPAT security measures.

In general, one in every four trucks is examined when crossing U.S. borders. One of every 22 sea containers is examined and rail traffic exams have increased exponentially since 2002. C-TPAT importers are four to six times less likely to incur a security or compliance examination upon crossing U.S. borders. Access is also given to Free and Secure Trade (FAST) lanes, for quicker processing through security checkpoints. When up for an exam on a specific container, they are not required to keep their whole load in one location, but rather continue moving the rest of their freight. In addition, higher priority is given to C-TPAT members, allowing for faster examination processing.

These benefits result in:

• better reputation among competitors;

• increased business from companies that require C-TPAT partners;

• a decline in cargo theft and pilferage;

• more control over the entire supply chain and transport time;

• lower insurance rates;

• improved security of workforce; and,

• reduction in warehousing costs.

While customs brokers, freight forwarders and consolidators, and ocean transportation intermediaries who do not own their own assets are allowed entry, non-asset-based 3PLs are denied for a seemingly ambiguous reason. According to the CBP, the eligibility requirements for C-TPAT were designed to prevent companies with bare-bones operations from joining. However, customs brokers and freight forwarders are more likely to be bare-bones than 3PLs and they may join the program. In addition, the agency stated that international points of origin are considered the most vulnerable part of the supply chain and only companies who can assert control over those points should be members of C-TPAT. But yet again, freight forwarders and consolidators assert no control over international points of origin and are allowed entry.

The current eligibility standards for C-TPAT include:

• direct involvement in the handling and management of cargo throughout any point in the international supply chain;

• management and execution of logistics functions using owned transportation, consolidation and/or warehousing assets and resources on behalf of the client company;

• maintain a staffed office in the U.S.;

• have a license/bond from the Federal Maritime Commission, Transportation Security Administration, U.S. Customs and Border Protection, or the Department of Transportation;

• prohibit subcontracting or service beyond a second party other than to other C-TPAT members; and,

• prohibit the practice of double brokering.

Non-asset-based 3PL agents are as involved in the handling and management of cargo as freight forwarders, importers and consolidators. Some agents even own their own assets while the 3PL itself does not, resulting in asset-like operations. The requirement for maintaining a staffed office in the U.S. is moot for U.S.-based 3PLs as an office space and employees are required for everyday business. In addition, these companies already have at least one of the licenses or bonds required for eligibility and any 3PL worth its merit prohibits subcontracting and double brokering.

If the port security legislation is passed and enacted, non-asset-based 3PLs will quickly prove that the exclusion of this important segment of the transportation industry was baseless. They assert as much, if not more, control over moving freight than freight forwarders and consolidators. Their technology capabilities such as track-and-trace and electronic data interchange for document processing and manifesting ensure procedural security, and most already have a fully staffed IT department controlling internet security. In addition, the process for becoming an agent or carrier includes several background checks and screening to ensure these business partners are up to par.

This pilot program signifies a giant step forward in securing non-asset-based 3PLs as a strong competitor in the transportation marketplace. Combined with industry expertise and a strong agent and carrier network, these companies will quickly give more traditional international transportation companies a run for their money.

Source: TTS Inc.


Keywords: international trade, supply chain management, 3PL, third party logistics, transportation management, logistics management, logistics & supply chain, cargo screening

C-TPAT was started in November 2001 as a result of the 9/11 attacks. The goal of this program is to establish clear supply chain security for members by extending the U.S. zone of security to the point of origin. This allows for better risk assessment and targeting of the Customs and Border Protection (CBP) to better allocate their resources to inspect more questionable shipments.

C-TPAT began with seven major importers. Now, its 10,000-plus member base includes importers, highway carriers, rail and sea carriers, customs brokers, marine port authorities, freight consolidators, ocean transportation intermediaries, non-operating common carriers, manufacturers, long-haul carriers and asset-based 3PLs.

Since 2009, the Transportation Intermediaries Association (TIA) and non-asset-based 3PLs have lobbied for entry for good reason: program members receive significant benefits for staying in compliance with C-TPAT security measures.

In general, one in every four trucks is examined when crossing U.S. borders. One of every 22 sea containers is examined and rail traffic exams have increased exponentially since 2002. C-TPAT importers are four to six times less likely to incur a security or compliance examination upon crossing U.S. borders. Access is also given to Free and Secure Trade (FAST) lanes, for quicker processing through security checkpoints. When up for an exam on a specific container, they are not required to keep their whole load in one location, but rather continue moving the rest of their freight. In addition, higher priority is given to C-TPAT members, allowing for faster examination processing.

These benefits result in:

• better reputation among competitors;

• increased business from companies that require C-TPAT partners;

• a decline in cargo theft and pilferage;

• more control over the entire supply chain and transport time;

• lower insurance rates;

• improved security of workforce; and,

• reduction in warehousing costs.

While customs brokers, freight forwarders and consolidators, and ocean transportation intermediaries who do not own their own assets are allowed entry, non-asset-based 3PLs are denied for a seemingly ambiguous reason. According to the CBP, the eligibility requirements for C-TPAT were designed to prevent companies with bare-bones operations from joining. However, customs brokers and freight forwarders are more likely to be bare-bones than 3PLs and they may join the program. In addition, the agency stated that international points of origin are considered the most vulnerable part of the supply chain and only companies who can assert control over those points should be members of C-TPAT. But yet again, freight forwarders and consolidators assert no control over international points of origin and are allowed entry.

The current eligibility standards for C-TPAT include:

• direct involvement in the handling and management of cargo throughout any point in the international supply chain;

• management and execution of logistics functions using owned transportation, consolidation and/or warehousing assets and resources on behalf of the client company;

• maintain a staffed office in the U.S.;

• have a license/bond from the Federal Maritime Commission, Transportation Security Administration, U.S. Customs and Border Protection, or the Department of Transportation;

• prohibit subcontracting or service beyond a second party other than to other C-TPAT members; and,

• prohibit the practice of double brokering.

Non-asset-based 3PL agents are as involved in the handling and management of cargo as freight forwarders, importers and consolidators. Some agents even own their own assets while the 3PL itself does not, resulting in asset-like operations. The requirement for maintaining a staffed office in the U.S. is moot for U.S.-based 3PLs as an office space and employees are required for everyday business. In addition, these companies already have at least one of the licenses or bonds required for eligibility and any 3PL worth its merit prohibits subcontracting and double brokering.

If the port security legislation is passed and enacted, non-asset-based 3PLs will quickly prove that the exclusion of this important segment of the transportation industry was baseless. They assert as much, if not more, control over moving freight than freight forwarders and consolidators. Their technology capabilities such as track-and-trace and electronic data interchange for document processing and manifesting ensure procedural security, and most already have a fully staffed IT department controlling internet security. In addition, the process for becoming an agent or carrier includes several background checks and screening to ensure these business partners are up to par.

This pilot program signifies a giant step forward in securing non-asset-based 3PLs as a strong competitor in the transportation marketplace. Combined with industry expertise and a strong agent and carrier network, these companies will quickly give more traditional international transportation companies a run for their money.

Source: TTS Inc.


Keywords: international trade, supply chain management, 3PL, third party logistics, transportation management, logistics management, logistics & supply chain, cargo screening