As international trade continues to expand, the global supply chain remains even more vulnerable to security threats. Despite efforts by importers and other supply chain participants to improve security, the danger of a terrorist attack involving the international transportation system remains high.

The Customs-Trade Partnership Against Terrorism (C-TPAT), part of the U.S. Customs and Border Protection’s (CBP) cargo enforcement strategy, has played a key role in strengthening the security of our country’s supply chain. The program works by engaging businesses in a cooperative effort to improve the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain.

Although participation in the program has increased, and CBP continues to roll out minimum-security criteria covering new business types, a key category has yet to be incorporated into the program-third-party logistics providers (3PLs). While U.S. Customs and Border Protection has announced that security criteria covering 3PLs will be incorporated into the C-TPAT program sometime this year, it is unclear how they will develop a common definition for service providers in the outsourced logistics sector.

To effectively incorporate minimum security criteria for 3PLs into C-TPAT, it is critical that CBP recognize the extensive impact that outsourced logistics providers have on international supply chain security and develop a clearer definition of business partner requirements associated with 3PLs. To do this, 3PLs need a seat at the table in the C-TPAT process.

Our experience at Ryder provides a good example of why this is so.

Ryder completed its validation process in 2007 and is currently a validated C-TPAT partner. Because there is not a category for 3PLs within the program, Ryder is certified as a land carrier, along with other 3PLs interested in securing the global supply chain.

With global operations throughout North America, Latin America, Europe, and Asia, we move goods for hundreds of customers in and out of Canada and Mexico alone. For the customers who rely on us to safely and securely transport their products in and out of the U.S., working with a C-TPAT partner has certainly been beneficial. Our border crossings are faster and smoother, and our validated status gives customers added comfort that their loads are secure.

In our experience so far, C-TPAT has become the benchmark for doing business with importers and large manufacturers in the U.S. (Ryder currently supports more than 50 different C-TPAT importers from hundreds of locations across North America).

U.S. Customs and Border Protection (CBP) reports that firms participating in C-TPAT have received tangible benefits in terms of reduced customs examinations. In addition, faster throughput times at border crossings result from fewer inspections by virtue of being in compliance with government regulations. Reduced processing time at border crossing points improve customer service levels and lead to other benefits, including less variable delivery schedules, and lower operating costs from less handling and fewer movements.

While overall, participating 3PL customers like ours have had a positive experience, we still see misunderstanding throughout the shipping community about who is responsible for different components of the security criteria associated with C-TPAT. Confusion about driver passport requirements and the manifest process are common amongst shippers. However, as a certified partner, we have been able to help navigate our customers through the process and ultimately facilitate the extension of the program for importers who are trying to meet C-TPAT requirements.

Defining third-party logistics for C-TPAT

To properly define minimum security criteria for 3PLs, let’s properly define the outsourced logistics sector. There are about 20 to 25 companies who have the global capabilities necessary to provide lead logistics management service to Global Fortune 500 companies. In general, these 3PLs could be the single provider for Fortune 500-1,000 companies. These largest 3PLs are classified as Tier 1 Global Supply Chain Managers (GSCMs). In general, they have very sophisticated information technology capabilities, employ 4,000 or more people, and service over 100 countries with a typical net revenue of $1 billion.

Companies hire 3PL services primarily for freight payment, shipment consolidation, direct transportation services, customs brokerage and warehouse management.

Currently, ten percent of goods entering the U.S. are managed by 3PLs. And, the global supply chain market is large and growing. Manufacturers are increasingly open to outsourcing of complex activities and are expanding their reliance on 3PLs. Because globalization of supply chains brings increased variability and uncertainty, more companies are outsourcing to logistics experts and are migrating to fewer providers. As this trend continues, the security of the global supply chain will rest more and more in the hands of top tier supply chain managers.

What does this mean to C-TPAT? A common misperception about outsourced logistics providers that may be an obstacle to developing effective security criteria is that 3PLs don’t do the “actual work,” but rather manage supply chain activities from afar. In reality, the breadth and depth of freight movement that a 3PL touches, and is ultimately responsible for securing, is extensive.

According to Armstrong & Associates, Tier 1 Global Supply Chain Managers serve most of the world’s GDP. And while, yes, there are cases where “asset light” logistics providers act in a more consultative role, most of the major Tier 1 logistics providers are directly responsible for transporting goods, running distribution centers, employing drivers, and managing a carrier network.

So, what is the security impact of a 3PL on the supply chain?

•            Carrier selection and procurement – 3PLs are responsible for hiring carriers used by most major importers. Based on an importer’s requirements, those carriers may or may not be C-TPAT certified.

•            Warehouse management – Many importer facilities are managed by 3PLs. This means that they often hire and train warehouse staff, design the workspace, recommend equipment and protocols to maximize facility security, and provide security monitoring services.

•            Drivers and vehicles – Companies who engage 3PLs in a dedicated contract carriage agreement use drivers employed by their outsourced logistics provider. Ryder alone employs over 6,800 drivers that are responsible for transporting goods for more than 700 customers. Approximately 20 percent of Ryder’s drivers work in cross-border operations. These drivers are responsible for the security of a load while it’s in their possession.

•            Freight brokerage – 3PLs match freight with available modes on behalf of shippers and also facilitate customs clearance for international shipments.

•            Supply chain visibility – 3PLs use sophisticated technology that provides visibility deep into a customer’s proprietary supply chain. Movement of a product is often tracked in real time.



Each of the areas described above is vulnerable to a security threat. If criteria doesn’t match a 3PLs business needs, cost structure, or infrastructure, each of these areas faces increased risk of a security breach.

Rail, sea, highway, and air carriers have already been incorporated into the C-TPAT program along with importers, marine ports, long haul carriers in Mexico, customs brokers and foreign manufactures. However, without an overarching 3PL definition, 3PLs must piece together security processes and protocols using the various criteria in order to meet the incredibly diverse range of supply chain activities that we manage and implement for our customers. This results in more interpretation of the criteria and a lack of standardization, which ultimately impacts the overall effectiveness of C-TPAT.

Business partner requirements

One of the greatest areas of confusion for 3PLs is related to current business partner requirements. The current minimum security criteria states that participating companies need to secure their global supply chains and extend security requirements to their supply chain partners. This criterion does not specify domestic versus international partners. So, does an importer need to make sure that its warehouse in Atlanta, which only deals with domestic goods, meet C-TPAT requirements? Does a 3PL have to make sure all partners, even domestic carriers, are C-TPAT compliant? These are the types of questions 3PLs deal with each day as they try to live up to their security commitments while still meeting customer needs.

This will be an important concept for 3PLs to help CBP understand. Meeting the business partner requirements is easier for importers with a limited number of supply chain partners. For a 3PL with thousands of customers and carriers, it’s not reasonable, nor does it necessarily make sense, to force all partners to become C-TPAT compliant.

For example, Ryder has approximately 1,500 carriers under contract across all modes. If we required our entire carrier base to participate in the C-TPAT program, the number of highway carriers in the program could double. Since this isn’t feasible, we have to differentiate how we are going to manage this variance for our customers. Third-party logistics providers are typically not in a position to force non-C-TPAT customers to use C-TPAT carriers just because the 3PL participates in the program.

When working with a C-TPAT customer, the process is clearer. Many importers are requiring that all of their loads-domestic and international-be carried by C-TPAT certified partners. In these cases, a 3PL can actually facilitate the broadening of carriers, both internationally and domestically, that are not currently participating in the program.

One of the benefits to giving 3PLs a seat at the table is clearer definition between domestic and international business partner requirements.

Benefits of a common definition accepted by 3PLs

With the involvement and support of 3PLs, CBP can develop criterion that is:

•            Supported by the outsourced logistics industry;

•            Consistent and standardized; and

•            Considerate of any economic impact to logistics providers.



Creating effective security criteria for 3PLs will mitigate potential for loss, reduce gridlock at our borders, and ultimately minimize the extent of disruption to the supply chain in a crisis situation. In addition, creating a defined 3PL category with industry accepted security criteria would add another layer of protection against attacks to the U.S. supply chain.

In addition, a solid C-TPAT 3PL program has added benefits. Anytime a company invests in supply chain security, it is helping to build a more resilient organization. Of course, while security investments do not directly increase revenues, they are intended to prevent or mitigate costs.

Strong security processes and programs provide businesses with a competitive advantage that allows them to prevent loss and accelerate recovery. A well-thought out and implemented security program has far reaching effects in an organization. It helps ensure the screening and hiring of qualified people, improves the safety of employees, assets and operations, it streamlines customer service, enhances supply chain visibility, and reduces costs associated with lost product and reduced insurance levels.

Participation in a voluntary program like C-TPAT also serves to instill process discipline, which increases compliance and higher performance in other areas such as quality and safety.

The more 3PLs can influence CBP to develop appropriate and effective criteria, the more participation and support it will get from the outsourced logistics sector. At Ryder, our hope is that we, along with other similar businesses, will be invited to participate in the development of C-TPAT criteria that is beneficial to our companies, customers, and the security of the nation. wt



Bill Anderson is Director of Global Security, Ryder System, Inc.