Evaluation of the Partners in Protection (PIP) Program

Transcription

1 Evaluation of the Partners in Protection (PIP) Program Final Report Program Evaluation Division Internal Audit and Program Evaluation Directorate January 2011

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3 Table of Contents Executive Summary... i 1.0 Introduction and Context Organizational Structure of the PIP Program Purpose of the Evaluation Evaluation Methodology Key Findings Key Findings Relevance Key Findings Performance Cost-Effectiveness and Efficiency Key Findings, Recommendations, and Management Response... 27

4 Executive Summary The Canada Border Services Agency s (CBSA) mandate is to facilitate the movement of legitimate travellers and goods and to intercept those travellers and goods that pose a threat to Canada. The CBSA fulfills this mandate by providing integrated border services that support national security, public safety and economic prosperity priorities. The CBSA s Partners in Protection (PIP) program enlists the co-operation of private industry to enhance trade chain security. PIP was introduced in 1994 with a primary focus on promoting awareness of and compliance with customs regulations among members. 1 However, after the events of 9/11, the program shifted its emphasis towards trade chain security through security enhancements to members infrastructure and processes. In 2002, the importance of the PIP program increased. At that time, PIP membership became a prerequisite, along with Customs Self Assessment (CSA) membership, for access to Free and Secure Trade (FAST) lanes. In 2008, a modernized version of PIP was launched, featuring changes to ensure compatibility with the United States (U.S.) Customs-Trade Partnership Against Terrorism (C-TPAT) and the World Customs Organization (WCO) Standards to Secure and Facilitate Global Trade (SAFE) Framework minimum security requirements. The implementation of these changes made it possible for the CBSA and the U.S. Customs and Border Protection (CBP) to agree to mutual recognition of site validations and security measures conducted as part of the PIP and C-TPAT programs. As of November 2010, the program had almost 1,400 members. Evaluation Purpose and Scope An evaluation of the PIP program was identified as a priority for fiscal year in the Agency s Risk-Based Multi-Year Evaluation Plan, which was approved by the CBSA Executive Evaluation Committee in July The purpose of the evaluation was to assess the ongoing relevance of PIP, its performance in achieving intended results, and its cost efficiency. The evaluation covers only the PIP program and does not include an assessment of the CBSA s other trusted traders programs or initiatives. 2 Evaluation research was conducted from April 2010 to November Evaluation Methodology The evaluation incorporated multiple lines of evidence, including analysis of CBSA operational and financial data; a review of open source documents concerning similar programs in other countries, WCO reports, guidelines and frameworks, and studies published by industry associations and chambers of commerce. In addition, one-on-one 1 The program was originally called the Customs Carrier Memorandum of Understanding program. 2 The CBSA s other trusted trader programs/initiatives are: Free and Secure Trade (FAST), Customs Self-Assessment (CSA) and Partners in Compliance (PIC - currently in pilot status). i

5 and group interviews were conducted with key stakeholders, including management in CBSA Headquarters (HQ) and in the regions, regional intelligence officers (RIOs) responsible for delivering the program, CBP program officials, and representatives of associations representing the trade community. Site visits were conducted in the Prairie, Pacific and Windsor-St. Clair regions. Key Findings and Recommendations The PIP program is linked to and entrenched in numerous important international and domestic initiatives. Overall, PIP is addressing an ongoing need and the program s objectives are aligned with Government of Canada and CBSA priorities and responsibilities. For example, by enlisting the co-operation of private industry to enhance border and trade chain security and applying mandatory security requirements, the PIP program contributes to meeting the Government of Canada's obligations under the WCO SAFE Framework. The Mutual Recognition Arrangement (MRA) signed with the CBP supports the Government of Canada s Security and Prosperity Partnership (SPP) of North America commitment with the U.S. to align PIP and C-TPAT. In addition, MRAs have been concluded with the Japan Customs and Tariff Bureau s Authorized Economic Operator (AEO) program, the Korea Customs Service AEO program, and the Singapore Customs Secure Trade Partnership (STP) program in order to further internationalize the interoperability of PIP. Together, all MRAs provide for mutual recognition of membership status which extends to 1,400 PIP members, 9,800 members of C-TPAT, 396 members of Japan s AEO program, 41 members of the Korean AEO program, and the 44 members of the Singapore Customs STP. 3 Furthermore, PIP is coordinated with the Transport Canada-led Air Cargo Security Initiative in order to avoid duplication of efforts and demands on industry in assessing the risk of applicants. Finally, PIP supports the Agency s objective of facilitating the movement of legitimate goods through its role, along with CSA, as a prerequisite for access to the FAST lanes into Canada. Since the 2006 evaluation, the modernized PIP program has been implemented. Specifically, several elements of the harmonization with C-TPAT have been implemented by establishing mutual recognition of each other s site validations. PIP program management is continuing to work with the CBP towards further harmonization of the programs in the following areas: a single application process; common application forms; and alignment of eligibility factors, 4 risk assessment thresholds, and policies and service standards. A pilot project between the CBP and the CBSA will be undertaken in 2011 to further explore the practicalities of harmonization. From a management and delivery perspective, the evaluation found that the reorganization of the program at HQ had resulted in some confusion in the regions, but 3 Source: World Customs Organization research paper no. 8, Compendium of Authorized Economic Operator (AEO) Programmes. July The eligibility categories common to both programs are: importers, highway carriers, marine carriers, air carriers, rail carriers and customs brokers. Categories eligible for PIP-only membership include: exporters, couriers, warehouse operators, freight forwarders and shipping agent s. ii

6 that program managers at HQ have taken steps to enhance communications in order to address the issues. Processes and systems are in place to support and monitor delivery of the program, including standard operating procedures (SOPs) and a database for tracking applications, assigning files to regions, maintaining member information and monitoring program activities. In the regions, RIOs value PIP primarily as a means to facilitate intelligence gathering. However, the objective of the Agency s trusted traders programs is to enhance the integrity of the trade chain by partnering with businesses to facilitate the movement of legitimate goods through streamlined processes for pre-approved, low risk traders. As such, there appears to be a disconnect between the objective of PIP (trade chain security through security enhancements to members infrastructure and processes, and as a trusted traders program) and the role of RIOs (gather intelligence for enforcement actions). The PIP model differs significantly from C-TPAT which uses supply chain security specialists to deliver the program. The core competencies of these specialists are knowledge of cross-border trade operations, importing (e.g., classification, valuation, origin) and cargo and conveyance security. 5 Little solid data are available to determine whether PIP has contributed to improved intelligence and co-operation with industry in identifying threats to trade chain security. Providing awareness sessions to PIP members has been regarded as an important means for generating tips. However, this avenue of source development has not been maximized, as only about 180 sessions have been conducted since the modernized program came into effect. Anecdotal evidence suggests that tips generated have resulted in contraband seizures and other enforcement actions, and that PIP members have been enlisted to help facilitate controlled deliveries. Based on one RIO s comprehensive list of 100 tips generated through PIP over a five-year period, 25 led to lookouts being issued and another 20 were referred to other law enforcement, intelligence or immigration authorities for follow-up. The remaining tips did not result in any enforcement actions. While PIP is delivered by RIOs, there is no linkage between them and the Intelligence and Targeting Operations Directorate (ITOD) at HQ, which provides operational guidance to all other RIOs. ITOD management is aware that leads have been generated through the PIP program however no data are available to quantify the contribution. 5 Source: Partners in Protection (PIP) Evaluation Study, CBSA Program Evaluation Division, October and key informant interviews with the CBP (2010). iii

7 In light of these findings, it is recommended that: Recommendation 1: Programs Branch, in consultation with Operations Branch, assess whether the use of RIOs to deliver the PIP program is the most effective model for realizing program objectives. One of the PIP program s stated objectives is to facilitate members border clearance. As a prerequisite, along with CSA membership for the use of FAST lanes into Canada, PIP contributes to facilitated clearance of shipments. However, for carriers and importers that are PIP members only, the program makes only a marginal contribution to this objective. There are no data available to ascertain whether members get priority when they are sent for cargo examination. PIP carriers in the air and marine modes receive risk-score reductions which reduce the frequency of examination. PIP membership is not yet factored into the risk-scoring algorithm for shipments arriving by highway or rail. The program could be made more attractive to potential members by adding benefits that expedite border clearance such as access to FAST lanes. Doing so would also more closely align PIP and C-TPAT benefits and contribute to harmonization of the programs. Three previous CBSA evaluations have suggested that the Agency consider extending FAST privileges to PIP members. 6 Proposals to increase the usage of the FAST lanes are currently being considered in the context of the broader trusted traders framework, with the development of a strategy scheduled for completion by the end of the fiscal year. PIP program expenditures remained consistent between and That having been said, PIP program spending exceeded planned levels 7 by $884,000 and $864,000 respectively in and This time frame corresponds to the introduction of the modernized PIP program which resulted in significant increases in workloads. It is likely that more of the PIP RIOs time is now spent on PIP activities and that this, combined with a solid monitoring of program performance, may have increased the level of activity without greater resource expenditures at the regional level. Since modernization, the PIP program has expended approximately $10 million in processing 1,800 applications. Overall, this translates into an average cost of about $5,600 per application. Over the same period 1,353 PIP memberships were granted at an average cost of $7,400 per member. It should be noted that these costs reflect all 6 The 2005 Customs Action Plan Interim Evaluation Study recommended the development of a second CSA/FAST option that would provide participants with border streamlining privileges with only a PIP membership. The 2006 evaluation of the PIP program suggested that the Agency assess whether there were opportunities to harmonize PIP program components with other programs for low-risk traders, including FAST. Finally, the 2007 Customs Self Assessment program evaluation study recommended that the CBSA explore whether the FAST program would benefit from allowing importers and carriers who are only PIP-approved to enrol. 7 Planned spending includes funding from the Treasury Board submission for the current year plus amounts reprofiled (e.g., carry forward amounts) from previous years. iv

8 PIP activities at HQ and in the regions and are not limited to direct costs incurred to process applications. 8 Productivity, as measured by the number of application site validations processed by full-time-equivalent (FTE), varies significantly from region to region. Nationally, regions processed on average about 35 application site validations per FTE. This figure ranged from 19 in the Pacific Region to 49 in the Greater Toronto Area (GTA). The modernized PIP program requires that memberships be revalidated on a regular basis to ensure that program requirements continue to be met. As well, depending on the results of harmonization efforts, there is a potential that revalidations will be required for the 1,800 non-pip C-TPAT members located in Canada. 9 Combined with ongoing new applications, this translates into about 100 files per month which is approximately 37 percent higher than the 63 applications processed on average each month during the first 27 months of the modernized PIP program. As such, the program may not have adequate resources to manage ongoing workloads. In light of theses findings, it is recommended that: Recommendation 2: The Programs Branch identify the resource implications stemming from the need to conduct revalidations of PIP members on a regular cycle; additional workload resulting from harmonization with C-TPAT; and ongoing processing of new applications to the program. The evaluation noted two areas of overlap and potential duplication in activities by different areas of the Agency. Approximately 13 percent of PIP members have received awareness sessions by RIOs since the start of the modernized program. There are also other areas of the CBSA regional offices that provide information sessions to the trade community. For example, the GTA Client Service section provides some 1,000 presentations to companies in that region on an annual basis. In addition, officers responsible for licensing warehouse operators also conduct site validations from a security perspective. PIP membership includes 155 warehouse operators. Those that are also CBSA-licensed warehouse operators would have had two site validations. RIOs delivering the program must be knowledgeable regarding what constitutes acceptable physical and trade chain security. However, CBSA training for intelligence officers does not address site security or trade chain security. Some RIOs have received the following training: a four-day RCMP physical security workshop, 10 the 8 Examples of additional activities include negotiation of MRAs and development of program standards, policies, operating procedures and the PIP database. 9 Figure was provided by CBP management during the interview process. 10 The RCMP workshop covers basic concepts of physical security including: security zones; perimeter and landscaping; fences, gates and lighting; doors, locks and master keys; construction, windows, walls and doors, identification cards and access badges; security containers; intrusion detection and access control systems; closed circuit television; transport, transmittal and destruction of sensitive material; security awareness program. Source: v

9 Crime Prevention Through Environmental Design Training Program offered by the Ontario Provincial Police; and/or a two-week C-TPAT course on trade chain security. However, five of the 16 RIOs interviewed over the course of the evaluation had not received any PIP-related training. In light of these findings, it is recommended that: Recommendation 3: Programs Branch, in consultation with Operations Branch, enhance the delivery of PIP by: establishing greater coordination of information and awareness sessions provided to the trade communities; and ensuring that officers responsible for delivery of the PIP program are trained in site and trade chain security. vi

10 1.0 Introduction and Context The Canada Border Services Agency s (CBSA) mandate is to facilitate the movement of legitimate travellers and goods and to intercept those travellers and goods that pose a threat to Canada. The CBSA fulfills this mandate by providing integrated border services that support national security, public safety and economic prosperity priorities. The CBSA carries out its responsibilities with a workforce of approximately 15,400 employees who provide services at approximately 1,200 points across Canada including: 119 land border crossings, 13 international airports, numerous ports and marinas, and 27 rail sites. Program Description Partners in Protection (PIP) is a CBSA program that enlists the co-operation of private industry to facilitate legitimate trade and enhance border and trade chain security by combating smuggling, organized crime and terrorism. It is a voluntary program with no membership fee. The PIP program was introduced in 1994 with a primary focus on promoting awareness of and compliance with customs regulations among members. 11 However, the program was also intended to facilitate information exchange between members and the CBSA and to generate intelligence about cross-border criminality to enhance the CBSA s enforcement effectiveness and to prevent contraband smuggling. 12 Since the events of 9/11, the program has shifted to place greater emphasis on trade chain security through security enhancements to members infrastructure and processes. In 2002, the importance of the PIP program increased as membership became a prerequisite for access to Free and Secure Trade (FAST) lanes. 13 The 2007 Security and Prosperity Partnership (SPP) of North America initiative 14 also had a significant impact on PIP. Under the SPP, the Government of Canada committed to strengthen the PIP program in order to achieve mutual recognition and compatibility with the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program. 15 To help achieve this goal, over the five-year period from to , $11.6 million was allocated, in addition to $2.2 million in ongoing funding. The modernized PIP program was introduced in June 2008 and featured changes to ensure compatibility with C-TPAT, as well as with the World Customs Organization 11 The program was originally called the Customs Carrier Memorandum of Understanding program. 12 Source: CBSA Program Evaluation Division, Partners in Protection Evaluation Study, October FAST is a joint initiative between the CBSA and the U.S. CBP that enhances border and trade chain security while making crossborder commercial shipments simpler and subject to fewer delays. Source: 14 The Security and Prosperity Partnership (SPP) of North America is a trilateral initiative formalized between Canada, the United States and Mexico in June The SPP provides a framework to ensure that North America is a safe place to do business and aims to increase security and enhance prosperity among the three countries through greater co-operation and information-sharing. Source: 15 Source: 1

11 (WCO) Standards to Secure and Facilitate Global Trade (SAFE) Framework minimum security requirements. Changes introduced included: implementation of security profiles outlining minimum security criteria; 16 site validations to confirm that minimum security criteria are met; new program policies outlining the circumstances under which an application can be denied, a membership can be suspended, reinstated or cancelled, and an appeal process for CBSA decisions on membership matters; 17 addition of a PIP Associate member category 18 to facilitate communications with organizations not eligible for full membership, but which have an interest in trade and supply chain issues; automated application process; and revisions to the Memorandum of Understanding (MOU) with members to reflect the requirements of the modernized program. Prior to program modernization, site validations were not required and minimum security requirements did not exist. The implementation of these changes made it possible for the CBSA and the CBP to agree to mutual recognition of security standards and site validations conducted in one another s countries as part of the PIP and C-TPAT programs; a Mutual Recognition Arrangement (MRA) was signed in June To be eligible for PIP membership, applicants must fall within one of the authorized eligible business categories and own or operate facilities in Canada that are directly involved in the importation or exportation of commercial goods. 19 As well, U.S. highway carriers that are members of the Customs Self Assessment (CSA) program are also eligible to apply for PIP membership. In all cases, company directors are required be of good character and companies must have a solid record of compliance with the CBSA to be considered for membership. Program benefits did not change significantly as a result of modernization and have been identified by the program as follows: consideration for front-of-the-line inspections when and where feasible, and for priority crossing in the event of an emergency situation at the border; 20 preferred consideration when making risk-based determinations for the purposes of cargo examinations; 16 Minimum security criteria were established for each eligible business category. Categories are: importer, exporter, air carrier, rail carrier, marine carrier, highway carrier, customs broker, courier, warehouse operator (including marine terminal operator), freight forwarder and shipping agent. 17 There are no monetary penalties associated with the PIP program but members must meet and remain compliant with the program s requirements to maintain their membership status. 18 PIP Associate status is available to companies and organizations that are not eligible for PIP membership (e.g., associations, port authorities, lawyers, consultants). Associates are included in consultations with respect to proposed changes to PIP, receive notification of program changes, and receive the PIP newsletter. 19 Applicant head offices may be located outside Canada however they must have facilities in Canada. Site validations are conducted on facilities in Canada. 20 Source: CBSA emergency preparedness manual Appendix S: During periods of constrained or restricted trade flows, priority will be given first to processing national priority goods, second to shipments for participants who qualify under the CSA, FAST and PIP programs. Priority treatment will be afforded where possible, subject to operational considerations. 2

12 eligibility to use FAST lanes into Canada if they are also CSA 21 program members; access to CBSA expertise 22 to assess members security measures and vulnerabilities; security awareness sessions provided by CBSA regional intelligence officers (RIOs); and enhanced reputation as a secure, low-risk company. In fiscal year , the CBSA spent $4.5 million to deliver the PIP program. By the end of September 2010, the program had processed about 1,800 applications and 1,353 memberships had been approved. As illustrated in Exhibit 1, just over half of member companies (724) were classified solely as highway carriers. 23 The next most common type of business reported among members was that of importer (117). Three hundred twenty-eight members reported being involved in multiple business categories. In addition to these regular members, the program had 92 associate members. PIP members represent only a small proportion of companies involved in cross-border trade. For example, the 2006 PIP evaluation estimated that there were about 6,000 highway carriers and 17,000 commercial importers in Canada that were involved in the crossborder movement of goods into Canada. Exhibit 1: PIP Members by Business Category, September Courier Customs Broker Importer Exporter Freight Forwarder Warehouse Shipping Agent Marine Carrier Highway Carrier Air Carrier Rail Carrier Multiple business lines Source: PIP database, September 2010 All members of the pre-modernized program, referred to as legacy PIP members, had to apply for acceptance into the modernized program. At the time of the modernization, 21 The CBSA Customs Self Assessment program allows members to use their own business systems and processes to forward trade data and to report and remit payment of taxes and duties, provided that these systems meet CBSA requirements. 22 Site validations are conducted by RIOs and action plans are developed to address deficiencies in security measures. As well, members may request that RIOs deliver security awareness sessions to staff and drivers. 23 The 2006 PIP evaluation found that 70 percent of members were highway carriers. There was no multiple business lines category reported at that time. 3

13 there were 2,192 legacy PIP members. Of these, 1,495 applied for membership in the modernized program. Program management indicated that a number of factors likely contributed to the fact that not all legacy members applied under the modernized program. These included the economic downturn, more rigorous security standards, and changes to eligibility requirements whereby U.S.-based companies could only apply if they are members of CSA. Previously, all U.S.-based carriers could apply. At the end of September 2010, 1,185 legacy members applications had been approved, while 229 were rejected for administrative reasons (e.g., incomplete or missing information on the application), 11 were denied because they did not meet program eligibility requirements (e.g., ineligible business category, no facilities in Canada), 29 were withdrawn by the applicant, and 41 were still being processed. 1.1 Organizational Structure of the PIP Program CBSA Programs Branch Effective April 1, 2010, the Pre-Border Programs Directorate of the Programs Branch assumed responsibility for the PIP Program. Within the Directorate, PIP falls under the Trusted Traders Programs Division. The Division is divided into six units, three of which are involved in delivery of the PIP program. These units and their responsibilities are as follows: 24 The National Trusted Traders unit, which is the principle point of contact for the regions, conducts risk assessments for all trusted traders programs, including PIP, in addition to CSA importers and the Transport Canada-led Air Cargo Security Initiative. It is also responsible for developing policies for the CSA program, the Partners in Compliance (PIC) pilot, as well as processes and procedures for all risking functions. The International and Bilateral Trusted Traders unit develops the trusted traders strategy, policies and promotional materials for the PIP program and is responsible for international liaison (including the alignment of PIP and C-TPAT) and negotiation and implementation of MRAs. The Program Support and Monitoring Trusted Traders unit is responsible for developing and monitoring service standards and performance indicators for all CBSA s trusted traders programs, as well as coordinating activities that support the Transport Canada-led Air Cargo Security Initiative. The Risk Assessment Programs Directorate incorporates PIP membership into risk scoring algorithms in TITAN 25 for the marine and air mode. 24 Source: Partners in Protection newsletter, April TITAN is an automated risk assessment tool used to screen commercial shipments. 4

14 CBSA Regions and Operations Branch PIP is delivered by RIOs who receive operational direction from their chiefs who report to the regional directors of intelligence. The primary role of the PIP RIOs is to perform site validations of PIP applicants assigned by HQ. RIOs also develop action plans to address deficiencies identified during the site validations and deliver trade chain security awareness sessions to PIP members, their staff and drivers. Other CBSA Branches Comptrollership Branch s Security and Professional Standards Directorate provides functional guidance on matters pertaining to physical site security and input to the site validation criteria developed for the PIP program. Legal Services provides guidance and support to the Trusted Traders program on development of the MOUs, program policies, MRAs and on information-sharing mechanisms. Other Governments The CBP is responsible for delivery of the C-TPAT program. As per the MRA between the CBP and the CBSA, site validations conducted by RIOs may be accepted by C-TPAT in lieu of its own validations and vice versa. External Stakeholders The PIP program is directed at the private sector, and specifically organizations involved in the international movement of goods. 1.2 Purpose of the Evaluation An evaluation of the PIP program was identified as a priority for fiscal year in the Agency s Risk-Base Multi-Year Evaluation Plan, which was approved by the CBSA Executive Evaluation Committee in July A previous evaluation of the PIP program was carried out in However, since that time the program has undergone significant changes. This evaluation covers only the PIP program and does not include an assessment other CBSA trusted traders programs. 26 In accordance with the Treasury Board Secretariat s Policy on Evaluation, the purpose of the evaluation was to assess the relevance of the PIP program (i.e., ongoing need and alignment with Government of Canada and CBSA priorities and responsibilities), and its performance (effectiveness and efficiency). The evaluation was conducted by the CBSA Program Evaluation Division in the Internal Audit and Program Evaluation Directorate; the research was carried out between April 2010 and November 2010, a 26 The CBSA s other trusted trader programs are: Free and Secure trade (FAST), Customs Self-Assessment (CSA) and the pilot program Partners in Compliance (PIC). 5

15 period which corresponded with a reorganization of the program management structure at HQ. In preparation for the evaluation, the evaluation team consulted with key internal stakeholders to develop a program logic model. The following program outcomes were identified: Improved security in the storage, handling and transportation of goods throughout the supply chain. Improved skills of the CBSA and partner organizations in detecting and preventing security issues and threats. Enhanced Agency understanding of business operations and best practices. Enhanced intelligence information. Enhanced risk management through trade facilitation. Enhanced interoperability and co-operation with foreign countries through MRAs and alignment with C-TPAT. Enhanced co-operation in the detection and prevention of contraband smuggling and terrorism. Support to CBSA s intelligence and enforcement capacity to combat cross-border criminality and terrorism. Evaluation Issues and Questions Exhibit 2 provides a summary of the key evaluation issues and research questions for this evaluation. 6

16 Evaluation Issue Relevance Design and Performance Exhibit 2: Key Evaluation Issues and Research Questions Research Question Does the PIP program address an ongoing need? Are the program s objectives aligned with Government of Canada and CBSA priorities and responsibilities? How effective is the management and delivery of PIP? Are processes and systems in place to support and monitor delivery of the PIP program? Has PIP improved the ability of members to identify security issues and threats? Has PIP contributed to improved intelligence, and has it resulted in greater cooperation in identifying threats to trade chain security? Has PIP enhanced the Agency staff's knowledge of business operations and best practices? Has PIP enhanced risk management through trade chain facilitation? Has PIP enhanced interoperability with foreign jurisdictions? Cost-Effectiveness and Efficiency Are there adequate resources to deliver PIP? Is the PIP program delivered in a cost-efficient manner? Are there alternatives available for achieving program objectives? 1.3 Evaluation Methodology The evaluation used the following qualitative and quantitative lines of evidence to evaluate the PIP program: Review and Analysis of CBSA Documents, Data and Statistics To obtain a solid understanding of PIP, including the program s context within the CBSA, its design, objectives, actual and expected outputs and outcomes, the following documents and statistics were reviewed and analyzed: PIP s Results-Based Management and Accountability Framework (RMAF); files and data relating to program activities and PIP program performance; strategies, management reports and relevant internal correspondence regarding the implementation and management of PIP; documented PIP processes and procedures (e.g., standard operating procedures); MRAs with foreign customs administrations; and PIP budget and expenditure reports. Literature Review A review of documents on the design and delivery of similar programs in other countries (i.e., United States, New Zealand and Singapore) was conducted for comparison purposes. As well, WCO guidelines, frameworks and other relevant documents concerning customs private sector partnerships were reviewed to better understand the 7

17 international context of these trusted trader programs. A review of documents and studies produced by industry associations and chambers of commerce concerning trusted traders programs and trade chain security was also conducted. Key Interviews One-on-one and group interviews were conducted with key stakeholders to gain an understanding of program design and management, and to solicit views and explanations of data and results obtained from other methodologies. Interviews were conducted with management in CBSA HQ as well as the regions, and with RIOs responsible for delivering the program. As well, the evaluators interviewed CBP officials involved with the C-TPAT program and representatives of associations representing the trade community. In total, 51 individuals were interviewed over the course of the evaluation (Exhibit 3). Exhibit 3: Individual and Group Interviews Interviewees One-on-One interviews Group Interviews CBSA HQ 2 2 CBSA Regions 8 11 External Stakeholders 5 2 U.S. CBP 1 Total: group interviews (36 individuals) Site Visits The evaluation team conducted site visits in the Prairie (Winnipeg), Pacific (Vancouver) and Windsor-St. Clair regions. The purpose of these visits was to interview staff and managers involved in the delivery of the PIP program and to observe regional PIP program delivery activities. Specifically, the evaluation team accompanied PIP RIOs on site validations with PIP applicants and attended awareness sessions delivered to PIP members staff and managers. Study Limitations The inability to conduct a PIP member survey limited the amount of information available concerning member views of program benefits, areas for improvement and impact on trade chain security. In order to address this issue, interviews with industry associations included questions on their members perceptions of PIP. As well, some information was available through published results of a Canadian Association of Importers and Exporters (I.E. Canada) survey with respect to members satisfaction with the PIP program. This information, along with relevant findings from the PIP member survey conducted as part of the PIP evaluation, was included when possible. The CBSA underwent a significant reorganization effective April 1, 2010, and responsibilities for the PIP program changed significantly under the reorganization. This 8

18 produced observations of the effectiveness of program management that reflect the transition period, but which may not reflect longer-term effectiveness. 2.0 Key Findings 2.1 Key Findings Relevance Does the PIP program address an ongoing need? The PIP program contributes to meeting the Government of Canada's obligations under the WCO SAFE Framework, which are intended to protect the trade chain from exploitation by terrorists and criminals. The WCO has stated that the global trading system is vulnerable to terrorist exploitation that would severely damage the entire global economy. As government organizations that control and administer the international movement of goods, customs administrations are in a unique position to provide increased security to the global supply. 27 The recent attempt by terrorists to send explosives via commercial shipment from Yemen to the United States illustrates that terrorists will attempt to exploit the trade chain. In June 2006, Canada signalled its intent to support the implementation of the WCO SAFE Framework. 28 Core elements of SAFE are: the recognition that trade chain security is a shared responsibility of countries as well as the private sector; a requirement to use a consistent risk management approach to address security threats; and defined benefits for businesses that meet trade chain security standards. PIP program design addresses these obligations and standards by enlisting the cooperation of private industry to enhance border and trade chain security, conducting consistent risk assessments of PIP applicants, and defining certain benefits for PIP members. The SAFE Framework includes the concept of Authorized Economic Operators (AEO) which is defined as a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration as complying with WCO or equivalent supply chain security standards. 29 Under the modernized PIP program, mandatory security requirements have been aligned with SAFE supply chain security standards. The MRAs concluded by the PIP program address the SAFE standard that Customs administrations should agree on mutual recognition of Authorized Economic Operator status. Of the 161 countries that are signatories to SAFE, 39 (including Canada) have 27 Source: WCO SAFE Framework of Standards, World Customs Organization, June Source: Resolution of the Customs Co-operation Council on the Framework of Standards to Secure and Facilitate Global Trade, June 2006) Source: World Customs Organization, WCO SAFE Framework of Standards, June

19 established AEO programs. 30 SAFE also stipulates that AEOs should be entitled to participate in simplified and rapid release procedures on the provision of minimum information. The criteria include having an acceptable record of compliance with Customs requirements, a demonstrated commitment to supply chain security by being a participant in a Customs-Business partnership program, and a satisfactory system for managing their commercial records. PIP membership benefits include consideration for front-of-the-line inspections, when feasible, and preferred consideration when making risk-based determinations for the purposes of cargo examinations. As well, the PIP application process includes risk assessments that take into consideration the applicant s customs compliance history. The PIP objective of enhancing supply chain security is aligned with and supports commitments made by the Government of Canada under the SPP agreement. The SPP includes a security agenda intended to find effective ways to enhance safety and security while at the same time ensuring that the flow of legitimate goods and people is not impeded. One of the means identified by the SPP to accomplish this objective is through the development and expansion of joint public-private partnerships aimed at securing the supply chain. PIP supports this objective by establishing partnerships with individual companies involved in the supply chain in order to assist the CBSA to combat organized crime and terrorism, and to detect and prevent contraband smuggling by ensuring that procedures are in place to encourage employees to report suspicious circumstances to the Agency. PIP MOUs also set out member responsibilities with respect to physical security and enhancing the integrity of the production, transportation, importation and/exportation processes. 31 MOUs require that members meet or exceed minimum security standards established by the CBSA, that they condition business dealings with entities that agree to ensure that their minimum security measures and systems meet or exceed the minimum security criteria established by the CBSA Source: World Customs Organization research paper no. 8, Compendium of Authorized Economic Operator (AEO) Programmes, July Source: Partners in Protection Memorandum of Understanding to Enhance Border Security and Suppress Contraband Smuggling. 32 Ibid. 10

20 The CBSA is supporting the joint commitment of the governments of Canada and the United States to align PIP and C-TPAT. In November 2009, U.S. Department of Homeland Security Secretary Janet Napolitano and Public Safety Canada Minister Peter Van Loan announced initiatives to tackle common threats like terrorism and organized crime, while at the same time ensuring the lawful flow of travel and trade across the border. Included in these initiatives was a commitment to work toward aligning the U.S. Customs Trade Partnership Against Terrorism (C-TPAT) and Canada s Partners in Protection (PIP) program, in an effort to achieve harmonization as quickly as possible.. 33 As a result of the MRA with C-TPAT, PIP has accepted almost 500 site validations conducted by C-TPAT. In addition, 52 site validations conducted by RIOs in Canada were requested by or conducted for C-TPAT. PIP contributes to addressing industry s expressed need to expedite clearance of commercial shipments through its role as a prerequisite, along with CSA, for use of FAST lanes into Canada. The Canadian Trucking Alliance is on record as stating that anything that impairs the predictability and reliability of the North American supply chain also impairs the competitiveness of the North American economy. 34 Industry stakeholders interviewed for the evaluation stated that trusted traders programs are needed as one means to help expedite commercial border crossings and thus reduce border-related costs. I.E. Canada, which represents Canada s importers and exporters, has stated that its members want to minimize the threats to their supply chains, have processes in place to assess and reduce risks, and ensure that any disruption is handled quickly and efficiently. 35 I.E. Canada has also noted that the need for consistent and compatible standards within North America and globally is critical to facilitating efficient international trade. In addition to benefits that include consideration for front-of-the-line inspections and consideration in risk-based determinations for the purposes of secondary examinations, PIP contributes to expedited clearances through its role as a prerequisite for access to the FAST lanes into Canada, since membership in both the PIP and CSA programs is required to use these lanes. 33 Source: 34 Source: Speech by the CEO of the Canadian Trucking Alliance (CTA) to the CANAM Border Trade Alliance in Ottawa. 35 Source: Presentation by I.E. President at the PIP Conference on April 29,

21 Are the program s objectives aligned with Government of Canada and CBSA priorities and responsibilities? The PIP program s objectives of enhancing border and trade chain security and of facilitating the movement of legitimate goods are clearly aligned with Government of Canada s national security priorities and the Agency s mandate to protect the safety and security of Canadians. The March 3, 2010 Speech from the Throne committed the Government of Canada to taking steps to safeguard national security and stated that criminals threaten Canadians personal safety and terrorists threaten our country s security. A key objective of the PIP program is to mitigate risks to security by preventing criminals and terrorists from exploiting the trade chain as a means to carry out their activities. An objective of PIP is to encourage industry to assist the CBSA in its efforts to enhance border security, combat organized crime and terrorism, detect and prevent contraband smuggling, and increase awareness of issues to secure the flow of legitimate goods and travellers across the border. 36 This is accomplished by ensuring that the program s 1,400 members have secure facilities that are difficult to exploit for criminal or terrorist purposes; they use secure processes to ship goods including tracking and use of highsecurity mechanical seals on containers and trailers for imported, exported and intransit cargo; and they enlist the participation of members and their employees in reporting suspicious activity. The fact that this need is real is demonstrated by the 85 action plans developed for applicants by RIOs in order to address deficiencies noted during site validations. These PIP members, about six percent of the total, did not have adequate site security in place prior to joining the program. The CBSA conducted almost 247,000 commercial examinations in fiscal year These resulted in over 36,000 enforcement actions including 202 related to prohibited goods and 1,163 drug seizures. As an integral requirement for access to FAST lanes, PIP contributes to the CBSA s ability to focus commercial examination resources on unknown and un-assessed traders. As such, PIP supports strategic principles outlined in the Agency s Border Management Action Plan, which include improving the Agency s capacity to risk manage the border by targeting high-risk travellers and goods as early as possible in the travel and supply chain continuum. 37 PIP supports Transport Canada s delivery of the Air Cargo Security (ACS) Initiative which focuses on trade chain security in the air mode. Under ACS, Transport Canada has incorporated aspects of the PIP application process and the same container seal standards. A CBSA/Transport Canada working group is in place to identify further means to coordinate the two programs. 36 Source: Partners in Protection Memorandum of Understanding to Enhance Border Security and Suppress Contraband Smuggling. 37 Source: CBSA Border Management Action Plan, version 3, June

22 The negotiation by the CBSA of Mutual Recognition Arrangements (MRAs) with compatible customs-trade partnership programs in other countries is consistent with the Agency s responsibilities as prescribed in the Canada Border Services Agency Act. The CBSA s authority to establish international agreements within the Canada Border Services Agency Act empowers the Agency to implement agreements with a foreign state or a public body performing a function of government in a foreign state to carry out an activity, provide a service or administer a tax or program. 38 As well, entering into mutual recognition arrangements with other customs agencies is entirely consistent with principles expressed in the CBSA Charter which acknowledges the value of strong domestic and international partnerships dedicated to working together on critical safety, security and trade issues Key Findings Performance How effective is the management and delivery of PIP? As the result of the recent CBSA reorganization, the PIP program roles and responsibilities at HQ were not clearly understood in the regions. HQ provided the regions with a description of the responsibilities of the three units within the Trusted Traders Programs Division. Nevertheless, the majority of RIOs and regional management interviewed for the evaluation indicated that they did not clearly understand the roles and responsibilities of the three HQ units. As a result, RIOs and regional managers stated that they were unclear about which area to contact for support, and often forwarded the same query to all trusted trader managers at HQ. HQ program managers interviewed were aware that the transition to the new organizational structure had resulted in communications issues. To improve the situation, monthly conference calls with PIP RIOs were introduced starting in the fall of 2010, and a national PIP conference involving RIOs and HQ management and staff was held in November In the regions, all PIP RIOs interviewed understood their roles and responsibilities for membership application files, conducting site validations, holding awareness sessions and developing action plans to address deficiencies identified during the application process or as the result of a site validation. 38 Source: Canada Border Services Agency Act, S.C. 2005, c. 38, section 5(1)(b). 39 Source: Canada Border Services Agency Charter. 13

23 There is a misalignment between the role of the RIO and the objectives of PIP as a trusted traders program. RIOs value the PIP program primarily as a means to develop contacts within industry in order to facilitate intelligence gathering. This view supports the Agency s strategic outcome for its intelligence function which is reliable, accurate and actionable intelligence that results in the interception of inadmissible people, goods, shipments and/or conveyances. 40 However, the purpose of PIP, as stated in the MOUs with members, is to enhance physical security and the integrity of processes. 41 While members are encouraged to report suspicious activity, there is no reference in the MOUs to the Agency s intelligence program. Intelligence gathering is not included in the role of the Trusted Traders Programs Division whose objective is to enhance the integrity of the trade chain by partnering with businesses and to facilitate the movement of legitimate goods. Further, it is not aligned with the intended outcome of the Agency s trusted traders programs in general which is to provide streamlined processes for pre-approved, low-risk traders. This intelligence focus also differs significantly from the C-TPAT model which uses supply chain security specialists for delivery. The core competencies of these specialists include knowledge of cross-border trade operations, importing (e.g., classification, valuation, origin) and cargo and conveyance security. 42 The 2006 PIP evaluation also observed that PIP management and PIP delivery were not aligned with organizational mandates. Despite the focus on intelligence gathering in the regions, there are no linkages between the PIP program and the Intelligence and Targeting Operations Directorate. HQ interviewees within the Intelligence and Targeting Operations Directorate (ITOD) saw the value of PIP as a means of establishing intelligence sources and generating tips. However, while the Directorate has responsibility for coordinating the activities of RIOs, no resources are dedicated to manage PIP-related activities. HQ intelligence interviewees noted that they do not have access to the PIP membership database, which could be of benefit in directing intelligence and targeting activities. Not all PIP RIOs have received site or trade chain security training. In many cases, these skills are acquired informally by working with more experienced officers. To effectively conduct site validations of PIP applicants facilities, RIOs require knowledge of what constitutes acceptable physical security features. In order to address this need, some RIOs have attended the following: a four-day RCMP physical security 40 Source: CBSA s Performance Measurement Framework (PMF). 41 Source: Section 2.1, Partners in Protection Memorandum of Understanding to Enhance Border Security and Suppress Contraband Smuggling. 42 Source: Partners in Protection (PIP) Evaluation Study, CBSA Program Evaluation Division, October 2006 and key informant interviews with CBP,