The U.S. Customs Service is asking traders -- including those within the electronics industry -- to help devise tighter security measures in the wake of the Sept. 11 terrorist attacks on the United States.
Customs commissioner Robert Bonner last week called on businesses to develop a Customs-Trade Partnership Against Terrorism initiative that would create stricter standards and "expand the perimeter of security away from the border entry point."
Although initially aimed at preventing biological, chemical, and nuclear weapons from entering the United States, the implications of tighter trade measures could be felt in the high-tech sector, which will likely have to pass along more information about goods and packages moving through its supply chain.
The United States imported $2.2 billion worth of electronic components in September, the latest month for which trade numbers are available, and exported $3.6 billion in components, according to the International Trade Administration.
However, Bonner also acknowledged that despite tougher requirements, the new security measures should not unduly impede trade.
"In this war, security at our borders-security of goods and the means of transporting them-is as important as a ballistic missile defense system," Bonner said at a trade conference in Washington. "But we must not choke off trade in the process of ratcheting up security."
While still in its early stages, the stepped-up customs effort is expected to result in more detailed information about where products originate, requiring shippers to send accurate manifests in advance of shipment arrivals and causing suppliers and their customers to beef up security measures at plants and loading docks. Greater emphasis will be placed on how goods are transported, what shipping routes are used, and what means companies use to move products.
"We must reaffirm the importance of knowing your customer and considering the overall 'airtightness' of your supply chain, from factory floor to loading dock to transportation to our border," Bonner said. "Every single link in that chain must be made more secure against the terrorist threat."
Bonner gave no indication when tighter rules would be imposed officially, but said the Customs Service and other federal agencies will continue to operate at the highest level of security for the foreseeable future.
According to the customs proposal, those companies that comply with higher security standards would be viewed as "low-risk companies" and receive a "fast lane" through all border crossings.
Worried about delays
Most companies in the electronics industry already have some degree of security consciousness. As part of its customer service objectives, STMicroelectronics Inc., for example, builds shipment security and tracking into an online system that links plants and regional warehouses. However, the Lexington, Mass., company is prepared to adopt other measures if necessary in the hope of qualifying for "fast lane" status, an ST spokeswoman said.
Other companies foresee bottlenecks caused by the Customs Service's proposal. Any measure requiring that manifests significantly precede shipments, for instance, would be a potentially disruptive force within the supply chain.
Typically, manifests are created the day packages are shipped because of the potential for fluctuations in quantities. Compiling that data too far in advance could add cost, said Jim Smith, senior vice president and director of Avnet Electronic Marketing Americas at Avnet Inc., Phoenix.
"Quantities can shift until the moment the box is shipped. You [don't] know what will go on the manifest until everything is boxed up and ready to go," Smith said. "Imagine the normal activity level, and then interject another process in the shipping step. In a business like distribution ... well, look at the number of line items we ship per day and that becomes a pretty meaningful task."
Other distributors surmised that, despite Bonner's intentions to the contrary, any new security process would almost certainly introduce delays to customs clearance that could affect lead times and possibly impact inventory levels.
"If the tightened inspection did begin to cause delays by tying up [goods] at import stations a week or two longer, we would immediately adjust our lead times to allow for that," said J.D. Beasley, senior vice president of operations at TTI Inc., Fort Worth, Texas. "If we were ordering on an eight-week lead time and we had to increase that to nine weeks, we'd adjust our inventory for a nine-week level."
Logistics providers agree that the electronics industry would have to brace for change if the Customs Service imposes stricter policies to guard against the smuggling of weapons of mass destruction. Even basic functions like sharing information about shipments could become a challenge, said a spokesman for logistics provider United Parcel Service of America Inc., Atlanta.
Even without an official customs clampdown, UPS has encountered problems with a few Asian freight forwarders, which the spokesman said handle much of the shipping documentation activities before air freight is loaded. Information about tonnage, actual quantities, and end-customer breakdowns is often held close to the vest.
"The freight forwarders don't always want to give us the detailed information the government is requiring because they say it's proprietary," the spokesman said. "I can see that being a bigger issue going forward."
Chipmaker Fairchild Semiconductor International Ltd., South Portland, Maine, has experienced similar problems, particularly within internal operations where documents may not have been filled out correctly, a spokeswoman said. Overall, though, Fairchild has been relying on its logistics providers to keep it informed about customs or security clearance changes.
A number of other semiconductor suppliers and distributors said they are also leaning more heavily on their logistics partners to help them sort out the changing landscape. Memec LLC, a distributor based in Thames, England, is no different, according to Gerry Fay, the company's vice president of global operations.
"We're currently looking at our security procedures," he said. "We've met with our two largest carriers to understand the precautions they're taking in regard to cargo delivered to us."
Additional reporting by Robin Lamb and Laurie Sullivan