NMFS Proposes Commerce Trusted Trader Program
March 1, 2018
In January, the National Marine Fisheries Service (NMFS) published a proposed rule called the "Commerce Trusted Trader Program" (CTTP). The proposal has been a long time coming. It would be part of a larger effort to trace illegal, unreported and unregulated (IUU) fishing and seafood. The goal is to help to prevent IUU imports into the US. NMFS is seeking comments on its proposal; the comments are due March 19.
Some history and context are helpful. On March 15, 2015, a Presidential task force published an Action Plan for combatting IUU fishing and seafood fraud. The Action Plan proposed a number of steps. It called for the identification of seafood species most at-risk for IUU fishing or subject to significant seafood fraud. It started the development of a traceability program to track these priority species from point of harvest to entry into U.S. commerce. That tracking effort resulted in the seafood Import Monitoring Program (SIMP). SIMP is the first phase of monitoring imported seafood, starting with 13 priority species. Eventually, monitoring is supposed to expand to all US seafood imports.
The Action Plan also called for the development of a voluntary Commerce Trusted Trader Program for businesses subject to SIMP. NMFS has been thinking about and considering a trusted trader program for a while.
In April, 2016, the agency published a request for comments "seeking public input on the design and implementation of a Commerce Trusted Trader Program as part of an effective seafood traceability process to combat IUU fishing and seafood fraud;" more than 300 people sent comments. SIMP and CTTP seemed to be progressing concurrently, but SIMP was finished first, in December, 2016.
To a large extent, understanding the CTTP effort requires a constant back-and-forth reference to SIMP; one helps to define the other. During the SIMP rulemaking many people suggested or inquired about a trusted trader program, commenting that such a program would help alleviate the expected upcoming SIMP reporting burdens. NMFS wrote that it would not pursue SIMP and CTTP at the same time. CTTP would receive attention after SIMP.
The NMFS proposal in January is largely based on the premise that businesses will want to participate as a trusted trader because they can get a break from SIMP's extensive data entry and record keeping requirements. If accepted into the program, trusted traders would spend less time and money on paper work (so to speak). CTTP, at least for businesses that qualify, allows SIMP, to a degree, to become SIMP-Lite. Whether it's simple enough, of course, remains to be seen.
The CTTP would require an importer to develop a plan that can assure that his or her entire supply chain is legal and documented, and that it is preventative, that the tracking safeguards also prevent the entry of illegally harvested fish. The value of the CTTP would come from work avoided, from less data entry completing International Trade Data System forms.
SIMP requires information within three broad categories:
• Harvesting or Producing Entity;
• Harvest Event – What, when and where; and,
• Importer of Record.
Actual reporting is more complicated because each category contains 4-6 very specific subcategories. This information has to be provided at the time of "filing an entry," i.e., when products enter the US market.
As proposed, CTTP would provide an exemption from the SIMP reporting requirements and allow alternative recordkeeping options. Trusted traders would need to enter their International Fisheries Trade Permit number and species codes when recording the time of entry. The NMFS proposal does not specifically describe or address how or which of the various SIMP reporting fields might be handled differently. NMFS references that non-participants will "need to fully comply with the SIMP rule." The CTTP process, however, allows filing the "header record only" versus a full-SIMP filing requiring the header "and all harvest vessel and landing records."
NMFS presents possible dollars-and-cents advantages. The Agency estimates the time and cost of the abbreviated CTTP entry to be 12 minutes at $25 per hour, or $5 while the full SIMP form is estimated to take 36 minutes, or $15 per filing. The CTTP proposal does have an audit requirement. But even after paying, for an annual audit, NMFS calculates that the CTTP will save businesses money.
For the SIMP rule, NMFS estimated that annual compliance costs would total $6.07 million. With the CTTP allowance, and based on 216 high-volume importers (out of a total of 2,000 importers) NMFS estimates annual industry wide savings of $806,810. Importantly, these numbers should only serve as very broad cost-benefit indicators. In fact, NMFS specifically requests comments on its economic impact assessments. The Agency wants to know whether there could be economic impacts that have not been addressed, or that could be difficult to anticipate.
Of course there are requirements to become a CTT participant. The first step is largely procedural – dealing with proper identification, a record of general legal and regulatory compliance and paying the application fee, expected to cost $30. If this initial application is turned down, a person gets one chance to correct errors and resubmit. A second rejection cannot be appealed.
The second requirement is quite substantive, establishing the criteria for a "Trusted Trader Compliance Plan." A minimal plan needs six components.
1. An internal control system;
2. Procedures for ensuring an annual third-party audit of the Plan and compliance;
3. A written policy and related supporting materials on preventing the import of illegally harvested and misrepresented seafood and corrective actions to be taken as needed;
4. An organizational chart showing persons with responsibility for filing, recordkeeping, developing, administering, and implementing the Compliance Plan and conducting training to ensure implementation;
5. A signature page completed by the applicant and the individual at the highest level of authority; and,
6. Any changes to the Compliance Plan.
The internal control system is one component given its own set of expanded requirements. The control system must include "traceability monitoring procedures" built around seven requirements, each of which is only partially presented here:
1. Procedures to verify the legal harvest and landing of fish or fish products subject to the SIMP that the CTT enters into U.S. commerce.
2. Procedures to enable verification of the full chain of custody from point of first landing (or point of aggregation for small-scale fisheries) to entry into U.S. commerce; this topic links to recordkeeping requirements.
3. Procedures to ensure that chain of custody documentation will be provided to NMFS, upon request, within 14 days to support an agency audit.
4. Procedures for the CTT (or designee) to perform at least one traceback annually for each species covered by the SIMP that is imported by the CTT. A trace-back is a document review of all records that follow the product from the point of entry into U.S. commerce backwards through the supply chain (e.g., through all steps of processing, shipping, purchase, and storage) to the point of harvest (or point of first aggregation for small scale fisheries).
5. Procedures to be taken in response to information that illegally harvested or misrepresented fish or fish products have entered the supply chain (e.g., notice from NOAA's Office of Law Enforcement (OLE) or inclusion of the harvesting vessel in a regional fishery management organization's list of vessels that have engaged in illegal, unreported and unregulated fishing), measures to ensure that such fish and fish products are removed from commerce and further shipments are prevented from entering commerce.
6. Procedures to be taken in response to a supplier being placed on an FDA Import Alert List.
7. Procedures to regularly review and update internal control procedures in response to changes in the fish or fish products that the CTT wants to enter into U.S. commerce.
Compliance audits are also given extensive separate text within NMFS' proposal. The CTT would be responsible for ensuring that a 3rd party audit is conducted annually. The audit is to evaluate the adequacy of the compliance plan, particularly the plan's components and internal control system. An audit would require a minimum 30-day advance notice to NMFS, whose representative can choose to attend the audit. If the audit requires correction plans, that is considered an "initial audit report." A final is due within 60 days describing the CTT's corrective actions. The auditor must be certified.
There are two final pieces to the CTT program. One presents how trusted trader status can be revoked and the process for that revocation. The final component deals with prohibitions, e.g., false statements, not maintaining records and not following up with planned corrective actions.
The CTTP presents as a major rulemaking. The program title itself is something of a riddle: if a business does not seek "trusted trader" status will it be seen, deliberately or not, as an untrusted trader? Businesses seeking to participate step into a complex regulatory scheme, presenting difficult rules and, of course, possible federal enforcement actions.
Recall that this is just phase 1 of tracking imported seafood, that programs will expand over time to many species. As noted, the public comment period is open until March 19. NMFS seeks comments in some specific areas, including, for example, the Plan's general requirements, particularly for the internal control system and ways to minimize the collection of information.