Mobility Matters Bulletin - August 2010

The Mobility Matters Bulletin reviews significant legal and policy developments regarding the secure movement of people and cargo across borders. Steptoe & Johnson LLP offers clients comprehensive counseling on these matters, including insights from former senior government officials responsible for homeland security laws and policies.

Companies Investing in SAFETY Act Liability Protections.  The SAFETY Act – the Support Anti-terrorism by Fostering Effective Technologies Act of 2002 – provides liability protection in the event of a terrorist attack. In particular, the Act provides protections for developers and users of SAFETY Act approved products, services, and intellectual property.

• After a terrorist attack, companies in the transportation industry and elsewhere could face lawsuits alleging that a company’s security was deficient in some regard.
  
  
• For developers or users of approved products, services, or intellectual property, however, that risk is mitigated substantially: liability may be capped or precluded (depending on the type of approval); federal courts have exclusive jurisdiction; punitive damages are not allowed; and other protections also may follow. 
  
  
• The Department of Homeland Security (DHS) administers the SAFETY Act and issued the final rule implementing the liability protection system in June 2006.
  
  
• Many companies that initially sought SAFETY Act approval were product manufacturers, but DHS has emphasized that services and intellectual property – including security plans and “best practices” – are eligible for protection.
  
  
• DHS has approved the National Football League’s “Best Practices for Stadium Security,” which illustrates the broad scope of possible SAFETY Act coverage.
  
  
• In recent months DHS has approved many cargo screening services; in particular, company facilities certified under the Certified Cargo Screening Program are eligible for expedited SAFETY Act approval, and since 2009 at least 16 screening service facilities have been approved.
  
  
• Transportation service providers – whether air, maritime, rail, bus, pipeline, subway, or other mode – should consider following in the path of cargo screening facilities and others by investing in SAFETY Act liability protections.
  

Potential Change in the Nature of TSA Enforcement?  Since its inception in 2001, the Transportation Security Administration’s approach to enforcing its rules generally has been a cooperative one. Recognizing the burdens on industry from new security regulations and a difficult economic environment, and understanding that harsh enforcement actions can be counterproductive, TSA generally has sought to educate and train rather than punish. Monetary fines have been uncommon, and serious punishment – steep fines or greater severity – have been rare. While this approach has worked reasonably well, there is reason to believe it will not last forever.  

• A common catalyst to a “harder” enforcement approach (e.g., more frequent and large fines) is public focus on instances of noncompliance.
  
  
• A recent example of such a catalyst is the oil spill in the Gulf of Mexico, which has transformed the Interior Department’s Minerals Management Service into the new “Bureau of Ocean Energy Management, Regulation, and Enforcement” – enforcement is now part of the name.
  
  
• The likelihood of public focus on noncompliance is related to at least two factors: the passage of time and the industry’s ability to affect a broad cross-section of the public. Both factors weigh in favor of an eventual turn toward harder enforcement:
  
  
• TSA is still a new agency but, as time passes, the likelihood of a significant rule violation by the regulated industry increases; and
  
  
• TSA interacts constantly with a very broad cross-section of the public, which is one of the reasons that TSA problems quickly draw broad public attention.
  
  
• Another possible catalyst to a harder enforcement approach is the growth or diversification of the regulated industry.
  
  
• When the regulated industry grows and/or diversifies, regulators may be more inclined to take a harder approach to enforcement as a way of signaling seriousness to industry participants.
  
  
• Hard enforcement actions often are an efficient way for regulators to deliver a message to a large or diverse set of industry participants; when the participants are few in number or homogenous, education and training by the regulators may be sufficient, but a “severe fine” warning message is more likely to be carried quickly (by the trade press, lawyers, and others) to a large or diverse set of industry participants.
  
  
• The industry regulated by TSA has been growing and diversifying quickly: among the recent additions are businesses newly regulated under the Certified Cargo Screening Program – these businesses, which soon may approach 1,000 in number, have to be regulated by TSA without a proportional increase in TSA resources, making the eventual resort to a harder enforcement approach more likely.
  
  
• For all of these reasons, TSA-regulated companies would be wise to focus on compliance efforts as though TSA were going to take a harder approach to enforcement.
  

Inbound and Transshipped Air Cargo and the 100% Screening Mandate.  As most readers probably are aware, August 1 was the deadline for the “100% air cargo screening” mandate. From now onward, 100% of cargo must be screened before it can be loaded onto a passenger plane flying within, or departing from, the United States. TSA has announced its intention to enforce this deadline strictly. However, TSA has acknowledged that full enforcement for foreign-originating inbound cargo currently is impractical, while asserting that within a few years TSA will enforce the 100% screening mandate for inbound cargo as well. The strict domestic enforcement juxtaposed with the absence of foreign systems that can facilitate inbound enforcement creates a particular quandary for transshipped cargo, i.e., cargo loaded in a foreign location, flown to the United States, and then flown immediately to another destination.

• It generally is impractical to require 100% screening during the US transshipment process – the movement of the cargo from one plane to another at the US airport – for reasons of timing and logistics.
  
  
• Further, requiring 100% screening for transshipments destined for another country may create a competitive disadvantage for US passenger carriers.
  
  
• Unlike foreign passenger carriers, US passenger carriers flying from foreign locations generally must fly via the United States. Transshipment by a US carrier moving cargo by passenger plane from Asia to Los Angeles to Mexico triggers the 100% screening mandate when the plane departs Los Angeles. Foreign carriers, however, may have the option of moving the same cargo from Asia to Vancouver to Mexico City and thereby avoiding the 100% screening mandate imposed by US law.
  
  
• To mitigate the transshipment problem, TSA has been urged to allow foreign freight forwarders to satisfy the screening mandate before cargo is loaded at the foreign location.
  
  
• TSA previously has resisted the notion that foreign freight forwarders can satisfy the 100% screening mandate without TSA first approving the foreign government’s screening system.
  
  
• The Certified Cargo Screening Program (CCSP) – which allows businesses to become TSA-certified to screen cargo before it arrives at an airport – applies only domestically. The regulations state that TSA will not certify a screening facility located outside the United States.
  
  
• But without authorizing screening by foreign freight forwarders or approving the relevant government’s screening system, TSA will be hard-pressed to ensure 100% screening on all flights within and from the United States where those flights carry transshipped cargo.
  
  
• Authorizing screening by foreign freight forwarders, perhaps via TSA’s authority over foreign airlines, may be a way for TSA to satisfy the 100% screening mandate for all inbound passenger flight cargo, not just transshipped cargo.
  
  
• Other alternatives for enforcement of the 100% screening mandate for all inbound air cargo include:
  
  
• TSA approval of foreign government screening systems.
  
  
• A data-screening system whereby TSA collects information about, and then assigns a risk rating to, all inbound air cargo, insisting on more intensive physical screening only for the higher risk cargo. 
  

Developments in Global Entry, Visa Waiver Program, and C-TPAT.  The Department of Homeland Security and its operational agencies – including TSA and Customs and Border Protection (CBP) – administer a variety of “trusted traveler and trade” programs. Global Entry enables expedited US entry at major airports; individuals participating in the program generally skip immigration lines, instead recording their entry by providing fingerprints at kiosks. The Visa Waiver Program (VWP) enables citizens of member countries to travel to the United States for up to 90 days without a visa, where secure screening of travelers can be conducted electronically. And the Customs-Trade Partnership Against Terrorism (C-TPAT) enables expedited entry of cargo for members that meet voluntary supply chain security standards.

• CBP’s Global Entry program expanded its international presence in April 2010 when DHS and the German Interior Ministry announced plans to integrate Global Entry and Germany’s Automated and Biometrics-Supported Border Controls (ABG) program. This partnership means that German citizens will be able to apply to Global Entry (for expedited entry at US airports), and US citizens will be able to apply to ABG (for expedited entry at German airports). The United States and the Netherlands have a similar arrangement, linking Global Entry with the Dutch Privium program. Additional partnerships create the possibility of expedited travel to multiple destinations – a business traveler from a new partner country may get expedited travel to the United States, the Netherlands, Germany, and additional countries, as those countries enter similar arrangements.
  
  
• In May 2010, DHS announced the elimination of the paper arrival/departure form (Form I-94W) for authorized Visa Waiver Program travelers with an approved Electronic System for Travel Authorization (ESTA). This increase in both security and convenience followed a successful seven-month pilot conducted with the support of the Government of New Zealand on Air New Zealand flights from Auckland to Los Angeles International Airport. CBP has begun activating automated processing for US airports on a rolling basis, aiming to eliminate the paper forms at all airports by the end of the summer.
  
  
• In June 2010, CBP signed a C-TPAT mutual recognition arrangement with the Korean Customs Service. The arrangement means that members of Korea’s supply chain security program will get C-TPAT benefits of faster average cargo entry, and C-TPAT members will get the similar benefits afforded members of the Korean supply chain security program. This marks the fifth mutual recognition arrangement signed by DHS; previous arrangements have been signed with New Zealand, Canada, Jordan, and Japan.
  

The Mobility Matters Bulletin is published quarterly. If you have any questions or for further information, please feel free to contact Stephen Heifetz at 202.429.6227 or Marc Frey at 202.429.6414.