Evaluation of the Protection (PIP) - cbsa.gc.ca · PDF fileEvaluation of the Partners in Protection (PIP) Program . Final Report . Program Evaluation Division. Internal Audit and .

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

Table of Contents Executive Summary ....................................................................................................... i 1.0 Introduction and Context........................................................................................ 1

1.1 Organizational Structure of the PIP Program ...............................................4 1.2 Purpose of the Evaluation................................................................................5 1.3 Evaluation Methodology...................................................................................7

2.0 Key Findings............................................................................................................ 9 2.1 Key Findings – Relevance ...............................................................................9 2.2 Key Findings – Performance .........................................................................13

3.0 Cost-Effectiveness and Efficiency....................................................................... 22 4.0 Key Findings, Recommendations, and Management Response ...................... 27

i

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 2010-2011 in the Agency’s 2009-2011 Risk-Based Multi-Year Evaluation Plan, which was approved by the CBSA Executive Evaluation Committee in July 2009. 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 2010. 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).

ii

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 re-organization 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 2010. 4 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.

iii

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 2006 http://www.cbsa-asfc.gc.ca/agency-agence/reports-rapports/ae-ve/2006/pip-pep-eng.html and key informant interviews with the CBP (2010).

iv

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 2007-2008 and 2009-2010. That having been said, PIP program spending exceeded planned levels7 by $884,000 and $864,000 respectively in 2008-2009 and 2009-2010. 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.

v

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: http://www.rcmp-grc.gc.ca/ts-st/workshops-ateliers/physical-materielle-eng.html.

vi

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.

______________________________________________________

1

e and processes.

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’infrastructur 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 initiative14 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 2006-2007 to 2010-2012, $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 2006. 13 FAST is a joint initiative between the CBSA and the U.S. CBP that enhances border and trade chain security while making cross-border commercial shipments simpler and subject to fewer delays. Source: http://www.cbsa.gc.ca/prog/fast-expres/menu-eng.html. 14 The Security and Prosperity Partnership (SPP) of North America is a trilateral initiative formalized between Canada, the United States and Mexico in June 2005. 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: http://cbsa-asfc.gc.ca/agency-agence/-psp-eng.html. 15Source: http://www.cbsa-asfc.gc.ca/security-securite/pip-pep/menu-eng.html.

2

(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 category18 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 2008. 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.”

• eligibility to use FAST lanes into Canada if they are also CSA21 program members;

• access to CBSA expertise22 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 2009-2010, 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 cross-border movement of goods into Canada.

Exhibit 1: PIP Members by Business Category, September 2010

2

328

1

724

83594534275

117

0100200300400500600700800

Cour

ier

Cust

oms

Brok

erIm

porte

rEx

porte

rFr

eigh

t For

ward

erW

areh

ouse

Ship

ping

Age

ntM

arin

e Ca

rrier

High

way

Carri

erAi

r Car

rier

Rail

Carri

er

Mul

tiple

bus

ines

s lin

es

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

4

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 TITAN25 for the marine and air mode.

24 Source: Partners in Protection newsletter, April 2010. 25 TITAN is an automated risk assessment tool used to screen commercial shipments.

5

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 2010-2011 in the Agency’s 2009-2011 Risk-Base Multi-Year Evaluation Plan, which was approved by the CBSA Executive Evaluation Committee in July 2009. A previous evaluation of the PIP program was carried out in 2006-2007. 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).

6

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.

7

Exhibit 2: Key Evaluation Issues and Research Questions

Evaluation Issue Research Question

Does the PIP program address an ongoing need? Relevance 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 co-operation 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?

Design and Performance

Has PIP enhanced interoperability with foreign jurisdictions?

Are there adequate resources to deliver PIP?

Is the PIP program delivered in a cost-efficient manner?

Cost-Effectiveness and Efficiency 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

8

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: 15 16 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 2006-2007 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

9

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 co-operation 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 2007. 28 Source: Resolution of the Customs Co-operation Council on the Framework of Standards to Secure and Facilitate Global Trade, June 2006). http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Enforcement/FSSecure_FGT_062006.pdf 29Source: World Customs Organization, WCO SAFE Framework of Standards, June 2007.

10

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”.32

30Source: World Customs Organization research paper no. 8, Compendium of Authorized Economic Operator (AEO) Programmes, July 2010. 31 Source: Partners in Protection Memorandum of Understanding to Enhance Border Security and Suppress Contraband Smuggling. 32 Ibid.

11

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.

33Source: http://www.publicsafety.gc.ca/media/nr/2009/nr20091124-eng.aspx. 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, 2008.

12

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 high-security mechanical seals on containers and trailers for imported, exported and in-transit 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 2008-2009. 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 2010.

13

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”.39

2.2 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 2010. 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.

14

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 2011-2012 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, 2010.

15

workshop,43 the Crime Prevention Through Environmental Design Training Program offered by the Ontario Provincial Police, or a two-week C-TPAT course on trade-chain security. Five of the 16 RIOs interviewed had not received any PIP-related training and relied on job shadowing with experienced officers as a means to acquire the knowledge needed to deliver the program. A finding of the 2006 PIP evaluation was that RIO training would need to be expanded if mandatory security requirements were introduced to the PIP program, and that specific training related to trade chain security should also be provided. While the CBSA offers a number of courses aimed at meeting the needs of intelligence officers and analysts and RIOs participating in joint forces operations, none of this training addresses site security or trade chain security. This fact reinforces the observation that there is a misalignment between the role of the RIO and the objectives of the PIP program. Are processes and systems in place to support and monitor delivery of the PIP program? PIP standard operating procedures (SOPs) have been developed and disseminated. The document, Policies and Procedures Partners in Protection (December 2009), provides a comprehensive description of the PIP program that sets out the processes for membership applications, suspending/cancelling memberships, and appeals and reinstatement. While SOPs describing the roles of staff at HQ and in the regions have been developed, they had not been updated to reflect the new organizational structure at HQ.44 The PIP program has a database that includes tools for tracking applications, maintaining member information and monitoring program activities. The 2006 evaluation of the PIP program noted that, while the program could generate data required for performance measurement, the lack of an automated system for data collection and analysis hindered the Agency’s ability to monitor and evaluate the program. In response, a Microsoft Office Access database was developed by PIP program staff at HQ. In order to ensure that system functionality reflected operational requirements, the database was developed in close consultation with the RIOs. All RIOs interviewed for this evaluation praised the level of consultation and thought that went into developing the database and stated that it meets their needs.

43 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; and security awareness program. Source: http://www.rcmp-grc.gc.ca/ts-st/workshops-ateliers/physical-materielle-eng.htm. 44 Specific SOPs describing roles and responsibilities are available for PIP data clerks, PIP junior and senior security officers, junior risk analysts, senior risk analysts and PIP regional intelligence officers.

The database tracks applications throughout the approval process, is used to assign files to regional RIOs and generates operational and statistical reports, including a bi-weekly management dashboard that indicates the number of files in process and their status as measured against service standards. Regional managers interviewed stated that they use the PIP dashboard to monitor activity. The PIP program has established service standards. However, it was not able to meet them due to the backlog of applications generated by modernization. The program experienced a surge of applications during its first year of operation due to the requirement that legacy PIP members apply for acceptance into the modernized PIP program (Exhibit 4).

Exhibit 4: PIP Applications Received and Processed July 2008 to November 2010

0

100

200

300

400

500

600

2008

July

2008

Sept.

2008

Nov.

2009

Jan.

2009

Mar.

2009

May

2009

July

2009

Sept.

2009

Nov.

2010

Jan.

2010

Mar.

2010

May

2010

July

2010

Sept.

2010

Nov.

Applications received Applications processed

Source: PIP program database, November 2010. Until November 2010, about 20 percent of PIP applications had been processed within the 90 day service standard; the average length of time taken to process an application was 261 days. (Exhibit 5)

16

Exhibit 5: Modernized Program Application Processing Time (days) Number of Applications and Percent of Total, November 2010

338, 20%

225, 13%

1,106, 67%

Less than 90 days90-150 daysOver 150 days

Source: PIP program database, November 2010.

All phases of the process experienced delays. However, the longest delays when compared to established service standards were during the first three steps of the application process (Exhibit 6). In the regions, there was some concern expressed that criteria for placing files in the late category do not always take into account circumstances outside of the CBSA’s control. Examples cited included lack of availability of the applicant for a validation, strikes, plant shutdowns and major events, such as the Olympics, the G8 Summit and the G20 Summit which temporarily pulled resources from PIP.

Exhibit 6: Average PIP Application Processing Time: Number of Days Actual vs. Service Standard, November 2010

48 8

45

3

22

66.662.6

25.3

56.8

3.8

30.7

0

10

20

30

40

50

60

70

Eligibilitydetermination

Risking report Analysis of riskingreport

Site Validation Application approval Applicationnotification

da

ys

PIP Standard Actual Time

Source: PIP program dashboard, November 2010.

17

18

Managers at HQ and in the regions stated that the 90-day standard will be met by the end of fiscal 2010-2011 once the backlog is cleared. Has PIP improved the ability of members to identify security issues and threats? There is some evidence to suggest that that PIP program activities have contributed to enhancing members’ skills in detecting security issues and threats. As a part of the site validation process, each applicant goes through the validation guide with the PIP RIO; areas that present potential security threats are identified and brought to the applicant’s attention. In cases where there are inadequate measures in place to mitigate the risks, an action plan is developed by the RIO explaining what needs to be done to bring the company’s processes and/or site to the required standard. In addition, awareness sessions and an industry-awareness DVD produced by PIP are used to provide PIP members’ and their employees with information on security threats and suspicious circumstances that should be reported to the CBSA. Based on the feedback they receive from members, RIOs believe that these activities have resulted in companies having a better understanding of trade chain security threats. This has been especially useful for smaller firms that do not have a dedicated security function. I.E. Canada survey respondents commented that site validations were well organized and informative and that recommendations to improve security procedures were valuable. During site validation and awareness sessions attended by the evaluation team, PIP applicants and members indicated that a benefit of joining the program was learning about security threats and that, as a result of PIP, they are now asking for security information from companies with which they do business. The PIP member survey conducted for the 2006 evaluation of the PIP program demonstrated the usefulness of awareness sessions towards improving members’ ability to identify security issues and threats. At that time, 83 percent of PIP members believed that their employees’ levels of awareness of border security and compliance issues had increased compared to the situation that existed before joining the program. In addition, almost 80 percent also indicated that their employees’ skills in detecting security issues and threats had increased. About 180 awareness sessions involving over 3,800 individual participants have been conducted since the launch of the modernized PIP program. Assuming that members receive only one awareness session each, this would mean that only about 13 percent have received this program benefit. The opportunity these sessions represent to enhance members’ skills in detecting security issues and threats has not been fully exploited. The 2006 PIP evaluation noted that only about 30 percent of members had received awareness sessions.

19

Has PIP contributed to improved intelligence, and has it resulted in greater co-operation in identifying threats to trade chain security? Based on data available, the number of enforcement actions that resulted from PIP-generated intelligence is low. During site visits and interviews, RIOs stated that tips received from contacts made through the PIP program had resulted in contraband seizures and other enforcement actions. As well, they provided some examples of instances where PIP members have been enlisted to help facilitate controlled deliveries as part of an investigation. Only one RIO provided a list of tips generated through PIP. This officer recorded 100 instances over a five-year period where information received directly from PIP members had been acted upon. In about one quarter of these instances lookouts were issued. About 20 of the tips were referred to other law enforcement, intelligence or immigration authorities for follow-up. The remaining instances had no associated outcomes. Interviewees in the Intelligence and Targeting Operations Directorate at HQ stated that they were aware that leads had been generated through the PIP program. While the Agency has the capacity to track files via its enforcement database and Intelligence Management System, it is not possible to accurately identify all files that may be linked to PIP. In addition, of the 7,364 calls received by the Border Watch Line between February 2010 and July 2010, only three were identified as being linked with PIP. This is likely a significant under-representation as individuals may not have linked their information with PIP, and would not likely have mentioned the program unless prompted. Another factor is that callers often wish to remain anonymous. Has PIP enhanced Agency staff’s knowledge of business operations and best practices? Information on business best practices and lessons learned with respect to trade chain security are not systematically gathered and disseminated. As a result of conducting site validations, RIOs reported that they have learned about the business operations and security measures implemented by many companies. In the past, RIOs reported that they have used the national PIP conferences and conference calls to share information on security threats and best practices in order to broaden the program’s knowledge base and improve its effectiveness. However, there is currently no process in place to catalogue and share information on business best practices and lessons learned within the Agency. The PIP program’s initiative to develop an online training module for border services officers (BSOs) has raised awareness and generated greater knowledge of the program. At the time the evaluation was conducted, 455 BSOs had completed the training.

20

Has PIP enhanced risk management through trade chain facilitation? PIP contributes to enhanced risk management by facilitated clearance of shipments through its function as a prerequisite, along with CSA, for access to FAST lanes into Canada. However, for carriers and importers that are PIP members only, the program makes only a marginal contribution to this objective. While PIP carriers in the air and marine modes receive a risk score reduction, PIP membership risk score reduction will only be available in the highway and rail modes of transportation with the implementation of eManifest in 2013. A PIP identifier was introduced into the Accelerated Commercial Release Operations Support System (ACROSS) in March 2009 so that BSOs would be able to identify PIP carriers and importers. However, the Agency does not measure referral rates for PIP members. Regional interviewees indicated that BSOs are generally not familiar with the PIP program and that the knowledge that a carrier or importer is a member would have little impact on what priority a secondary inspection should be assigned. Adding benefits to the PIP program that facilitate expedited border clearance would make the program more attractive to industry and provide for better alignment with C-TPAT. PIP members represent only a small proportion of companies involved in cross-border trade. As such, there is scope to considerably expand program reach. 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 which include reduced examination rates, expedited cargo releases and access to FAST lanes. 45 The PIP program’s enhanced focus on validation of members’ site security and security procedures has reduced the level of risk inherent in extending FAST privileges to PIP members who are not also CSA members. Three previous CBSA evaluations have suggested that the Agency consider extending FAST lane privileges based on PIP membership. 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. As well, the 2006 Evaluation of the PIP program suggested that the 45 C-TPAT benefits are based on a tiered approach. Applicants who have submitted a security profile consistent with the minimum security criteria and a favourable review of its compliance with customs laws and regulation receive tier 1 benefits which are reduced inspections. Once a site validation has been completed by C-TPAT, companies can receive tier 2 benefits which are priority searches and reduced cargo examinations. Tier 3 benefits are extended to C-TPAT members who “demonstrate a sustained commitment beyond what is minimally expected, receive expedited cargo releases at all threat levels, further reduction in cargo examinations”. Source: U.S. Government Accountability Office: report to Congressional Requesters, Supply Chain Security, U.S. Customs and Border Protection Has enhanced Its Partnership With Import Trade Sectors, But Challenges remain in Verifying Security Practices, April 2008.

21

Agency assess whether there were opportunities to harmonize PIP program components with other programs and initiatives for low-risk traders, including FAST. Finally, the 2007 Customs Self Assessment Program Evaluation Study recommended that the CBSA explore whether the FAST initiative would benefit from allowing importers and carriers who are only PIP-approved to have access to FAST lanes. In response to these recommendations, proposals to increase the usage of FAST lanes are being considered in the context of broader changes to the Agency’s trusted traders framework. This analysis is scheduled for completion by the end of the fiscal year. Has PIP enhanced interoperability with foreign jurisdictions? PIP has enhanced interoperability with foreign jurisdictions through mutual recognition with compatible customs-trade partnership programs offered by other countries. In addition to the MRA with C-TPAT, MRAs were signed in June 2010 with the Japan Customs and Tariff Bureau AEO program, the Korea Customs Service AEO program, and the Singapore Customs Secure Trade Partnership (STP) program. Together, these arrangements contribute to enhanced interoperability through mutual recognition which extends to the 9,800 members of C-TPAT, the 396 members of Japan’s AEO program, the 41 members of the Korean AEO program, and the 44 members of the Singapore Customs STP program.46 The PIP program is working closely with C-TPAT to further harmonize the two programs. Harmonization has been defined to include the use of a single application process; common application forms, single site validations and revalidations, in addition to alignment of eligibility factors, risk assessment thresholds, polices, processes and service standards.47 In order to move forward, the PIP and C-TPAT programs will conduct a joint pilot project to identify the practical challenges inherent in greater harmonization. It is anticipated that the pilot will be completed in 2011. A post-implementation review will be used to inform plans for harmonization of the two programs. Both PIP and C-TPAT program managers interviewed for the evaluation indicated that, even with greater harmonization, the programs will remain separate, with each jurisdiction having the final decision as to whether to accept or reject an application. Combining PIP and C-TPAT into a single program was considered impractical due to the following factors: differences in Canadian and U.S. privacy laws and regulations which limit the degree to which information can be shared; differences in benefits 46Source: World Customs Organization research paper no. 8, Compendium of Authorized Economic Operator (AEO) Programmes July 2010. 47 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 include: exporters, couriers, warehouse operators, freight forwarders and shipping agents.

22

extended to members; differences in program delivery language requirements and technology costs; and applicant/member identification issues.48 As well, based on their own business requirements, companies may wish to retain the option of becoming members of only one program. Industry stakeholders interviewed expressed the need for greater alignment of trusted traders programs across jurisdictions as a means to reduce costs to members. The Canadian Chamber of Commerce and the U.S. Chamber of Commerce have jointly recommended that “full harmonization between PIP and C-TPAT, as NEXUS has done with a single application and certification process”.49 In its report, Finding the Balance: Shared Border of the Future, the Canadian Chamber of Commerce states that it can cost companies more than $100,000 to become members of a trusted trader program. About 17.5 percent of the I.E. Canada survey respondents reported that they incurred over $50,000 in costs to become a member of the program. The PIP member survey conducted in 2006 indicated that 19 percent of PIP participants had made changes to their companies’ systems and processes based on advice received from the RIOs. Of these, about two-thirds reported incurring costs of $5,000 or less and 18 percent had spent in excess of $10,000.

3.0 Cost-Effectiveness and Efficiency Are there adequate resources to deliver PIP? Spending levels have remained relatively stable despite the increased workloads that resulted from modernization of the program. Spending in 2008-2009 and 2009-2010 was slightly lower than levels reported in 2007-2008 (Exhibit 7). This has occurred despite the impact of modernization and may be partly attributable to better monitoring of program delivery. As well, although PIP RIOs continue to work on non-PIP files, it is likely that they dedicate more of their time to delivery of the program than had been the case prior to modernization. In 2008-2009 and 2009-2010, actual PIP program spending exceeded planned spending50 by $884,000 and $864,000 respectively (Exhibit 7). This time frame corresponds to the introduction of the modernized PIP program which resulted in a significant increase in workloads.

48 There is no common Canadian-U.S. company/corporate identifier. 49 Source: The Canadian Chamber of Commerce, Finding the Balance: Shared Border of the Future, 2009. 50 Planned spending includes funding from the Treasury Board submissiofor the current year plus amounts reprofiled (e.g., carry forward amounts) from previous years.

23

Exhibit 7: Total PIP Program Spending (HQ and Regions), Planned and Actual by Fiscal Year

2007-2008 2008-2009 2009-2010

Planned Actual Planned Actual Planned Actual

FTEs* 35.7 36.5 31.8 40.9 32 40

Salaries $1,945,500 $2,097,800 $1,653,300 $2,377,000 $1,652,600 $2,593,400

Employee Benefits $389,100 $419,600 $330,700 $475,400 $330,500 $518,600

Other Operating $2,253,500 $1,766,100 $1,290,300 $1,305,300 $1,269,400 $1,095,300

Accommodation $212,000 $159,800 $174,000 $174,000 $173,900 $173,900

Corporate $160,400 $160,400 $160,100 $160,800 $160,100 $160,100

Total $4,960,500 $4,603,700 $3,608,400 $4,492,500 $3,586,500 $4,450,900 Variance: Actual Compared to Planned Expenditures

-$356,800 +$884,100 +$864,400

Source: Comptrollership Branch, *Full-time equivalent (FTE) While the program has spent more than planned at a national level, over the same period most regions spent less on PIP delivery than had been budgeted (Exhibit 8). As illustrated in Exhibit 9, the number of full time equivalents (FTEs) used to deliver the program by the regions was closely aligned to planned amounts.

Exhibit 8: Regional PIP Program Spending, Planned and Actual by Fiscal Year (thousands of dollars)

Region51 2007-2008* 2008-2009 2009-2010

Planned Planned Actual Variance Planned Actual Variance Atlantic $197.1 $134.1 $123.0 -$11.1 $134.1 $155 $20.9

GTA $720.7 $357.5 $303.0 -$54.5 $357.5 $341 -$16.5 NFE $417.8 $288.9 $284.1 -$4.8 $288.9 $309 $20.1

NORO $196.1 $134.1 $101.0 -$33.1 $134.1 $125 -$9.1 Pacific $461.5 $282.6 $268.0 -$14.6 $310.6 $299 -$11.6 Prairie $502.0 $280.9 $225.0 -$55.9 $280.9 $248 -$32.9

Quebec $768.0 $380.8 $340.5 -$40.3 $380.8 $363 -$17.8 WSC $300.9 $236.9 $224.5 -$12.4 $236.9 $236 -$0.9 Total $3,564.1 $2,095.8 $1,869.1 -$330.2 $2,123.8 $2,076 -$47.8

Source: Comptrollership Branch. * Actual expenditures are not available for fiscal year 2007-2008.

51 Region abbreviations: GTA- Greater Toronto Area; NORO- Northern Ontario Region; WSC- Windsor -St. Clair; NFE- Niagara-Fort Erie.

24

Exhibit 9: Regional PIP Program FTEs, Planned and Actual by Fiscal Year

Region 2007-2008* 2008-2009 2009-2010

Planned Planned Actual Variance Planned Actual Variance

Atlantic 1.2 1.2 1.0 -0.2 1.2 1.0 -0.2

GTA 5.4 3.3 2.5 -0.8 3.3 3.0 -0.3

NFE 3.2 2.7 2.7 0 2.7 3.0 0.3

NORO 1.2 1.2 1.3 0.1 1.2 1.0 -0.2

Pacific 3.2 2.7 2.7 0 2.7 3.0 0.3

Prairie 3.4 2.3 2.3 0 2.3 3.0 0.7

Quebec 5.4 3.3 3.5 0.2 3.3 3.0 -0.3

WSC 2.2 2.2 2.0 -0.2 2.2 2.0 -0.2

Total 25.2 18.9 18.0 -0.9 18.9 19.0 0.1

Source: Comptrollership Branch. *The actual number of FTEs used was not available for fiscal year 2007-2008. Based on the number of applications processed per month to date, the program may not have adequate resources to manage future workloads. The modernized PIP program requires that memberships be revalidated on a regular basis to ensure that they continue to meet program requirements. Although not yet finalized, the revalidation process will likely include requirements for re-risking of members as well as site validations. In order to ensure harmonization with C-TPAT, the PIP policy will have to reflect C-TPAT practice, which currently requires that revalidations be conducted every three years. Assuming that PIP membership revalidations are required every three years, based on the membership level of 1,353 as of the end of September 2010, the program would need to revalidate about 450 memberships per year or about 38 per month.52 As well, depending on progress towards harmonization, there is a potential that PIP will be required to conduct revalidations of the 1,800 C-TPAT members located in Canada that are not PIP members.53 If so, this would translate into the need to conduct an additional 50 revalidations each month. Finally, there will be an ongoing need to process about 12 new applications per month.54 Combined, this translates into a potential workload of 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. These estimates do not include the potential impact of conducting site validations on behalf of customs agencies other than CBP with which the CBSA has an MRA. 52 This figure assumes that some flexibility would be built into the timing of the first round of revalidations since, if a three-year cycle was to be strictly applied, there would be a surge of revalidations every three years as all memberships granted in the first 27 months of the program were revalidated. 53 Figure is provided by C-TPAT management during interview. 54 Estimated by Program Evaluation Division based on applications to PIP in the first 27 months after modernization as follows: new applications per month (12.3)=(total applications (1,827) – legacy applications (1,495))/27 months.

25

Is the PIP program delivered in a cost-efficient manner? Due to the backlog in applications created by the modernization, it was not possible to calculate a representative program cost per application or member. Since June 2008, the PIP program has expended approximately $10 million and processed 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 PIP activities at HQ and in the regions and are not limited to direct costs incurred to process applications.55 The fact that all legacy members were required to reapply for the modernized program resulted in a surge of applications and processing costs which would not be typical of a mature program. For example, the number of applications received in December 2009 was 500. In contrast, at its lowest point in October 2010, only five applications 56 were received. RIO productivity, as measured by the number of applications processed by FTE, varied significantly from region to region. Over the first 27 months that the modernized PIP program operated, regions processed on average about 35 applications per FTE per year. This figure ranged from 19 in the Pacific Region, to 49 in the GTA (Exhibit 10).

Exhibit 10: PIP Applications and FTEs Used by Region, November 2010

CBSA Region Number of Applications

FTEs Used* Applications Processed/FTE

Cost per Application**

Atlantic 104 2.25 46 $3,007Quebec 260 6.75 39 $3,044GTA 329 6.75 49 $2,202NFE 250 6.75 37 $2,269WSC 200 4.5 44 $2,590NORO 77 2.25 34 $3,302Prairie 134 6.75 20 $3,971Pacific 129 6.75 19 $4,945All Regions 1483 42.75 35 $2,993

* Calculation was based on actual FTEs used in 2009 -2010 extrapolated over 27 month period (July 2008 – October 2010). **Calculation was based on average monthly expenditures in 2008 – 2009 and 2009 – 2010, extrapolated over 27 month period.

55 Examples of additional activities include negotiation of MRAs and development of program standards, policies, operating procedures and the PIP database. 56 The average number of new applicants, that is, non-legacy members, was 12 per month over the first 27 months of the modernized program.

26

With the exception of the NORO Region, which incurs an average 10 hours of travel time per validation compared to the national average of three hours, the reasons for these variations were not obvious. Based on these data, it is estimated that regions used an average 56 hours of RIO time per application. Of this total, about 13 hours were spent on each site validation and associated travel, 0.4 hours were expended on follow-up site visits, and 0.3 hours involved delivering awareness sessions.57 Time spent on other RIO activities, such as developing intelligence sources and responding to tips, are not captured in the PIP program database. Regions may be incurring unnecessary travel costs due to the criteria used to assign files to the RIOs. Membership application files are assigned by HQ to the regions based on the company location. However, the address used for this allocation may not reflect the location of an applicant’s operations, which is often where the site validation must be conducted. RIOs and regional management indicated that the assignment of files on this basis has resulted in significant costs in time and travel. For example, the NORO region was assigned a file based on the head office location of a transport company. However, the company’s main operations were located in the GTA. To conduct the validation of this applicant, a NORO RIO was required to travel to Mississauga despite the fact that a GTA-based RIO would have been much closer. Regional managers and RIOs in the Niagara-Fort Erie Region reported similar situations.

In addition to the issue of travel costs, situations such as this limit RIOs’ ability to keep in regular contact with members. Regional interviewees indicated that specific requests to reassign work between regions in order to address these situations have not been approved by HQ. Harmonization of PIP and C-TPAT has generated efficiency gains during the validation phase of the application process. Based on data collected by the program, the average total time required to conduct a PIP site validation for a company that was not already a C-TPAT member was about 13 hours, including travel.58 In contrast, the average time required to complete the site validation phase for a PIP member that had already been accepted into the C-TPAT program was approximately 3.6 hours. The saving of 9.4 hours translates into savings of about $400 per application.59 57 One hundred eighty awareness sessions were conducted at 2.25 hours per session = 405 hours. 85 follow-up site visits at 7.3 hours per visit = 620 hours. 58 Hours are based on average numbers provided by the PIP program for September 2009 – October 2010. These are: 10 hours for site validation (PIP and joint PIP/C-TPAT) and 3 hours on average for travel per site validation. Applications with a site validation already performed by C-TPAT require 3.6 hours to process. 59This is based on the collective agreement step 3 salary rates as at June 21, 2010 ( FB-4 (RIO) $69,712 or $35.75/hour, plus 20 percent for EBP costs).

27

In addition to cost savings to the Agency, mutual recognition has reduced the burden on industry by eliminating the requirement for separate validations by both PIP and C-TPAT. Are there alternatives available for achieving program objectives? Using the same pool of officers for all CBSA site validations and audits could generate efficiencies by reducing duplication. As previously noted, BSOs are responsible for conducting verification of physical security as part of their role in delivering the licenced warehouse programs. The evaluation noted that the PIP program had 155 members that were involved in warehouse activities.60 This leads to the potential for duplication and presents an opportunity for the Agency to improve efficiency by using one site visit to conduct both warehouse site audits and PIP site validations. There may be potential to increase the number of PIP awareness sessions delivered by working with regional client services units. In the GTA alone, over 1,000 client information sessions are delivered annually by client services officers and border services officers to the trade community. The focus of these sessions varies depending on the audience and has included information on the PIP program. Modest cost savings could be realized by using officers classified at the FB-3 level to assist or replace RIOs on site validations. RIOs are classified at the FB-4 level. For other CBSA commercial programs, such as the licensed warehouse program, BSOs classified at the FB-3 level are responsible for delivery which includes site audits to ensure compliance with security requirements. Partnering BSOs with RIOs to conduct PIP site validations would reduce the cost per validation by about $25.61 Assuming an annual workload of 1,200 validations, this would translate into savings of $30,000 per year.

4.0 Key Findings, Recommendations, and Management Response 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 cooperation of private industry to enhance border and trade chain security and applying mandatory security requirements, the PIP 60 The extent to which there is overlap is not known since the PIP database does not include an indicator for membership in the licenced warehouse program. 61 This assumes an average of 13 hours per site validation (including travel) step 3 salary rates as at June 21, 2010 (FB-4 $69,712 and FB-3 $64,127, plus 20 percent for EBP costs).

28

program contributes to meeting the Government of Canada's obligations under the WCO SAFE Framework. The MRA signed with the U. S. 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 AEO program, the Korea Customs Service AEO program, and the Singapore Customs 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.62 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, with the establishment of mutual recognition of each others’ site validations. PIP program management is continuing to work with the U.S. CBP towards further harmonization of the programs, including a single application process; common application forms, in addition to alignment of eligibility factors,63 risk assessment thresholds, 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 that program managers at HQ had 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 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, and 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 whose core competencies are knowledge of cross-border trade

62 World Customs Organization research paper no. 8, Compendium of Authorized Economic Operator AEO) Programmes, July 2010. 63 The eligibility categories common to both programs are importers, highway carriers, marine carriers, air carriers, rail carriers and customs brokers. Categories eligible for only the PIP program include exporters, couriers, warehouse operators, freight forwarders and shipping agent s.

29

operations, importing (e.g., classification, valuation, origin) and cargo and conveyance security, to deliver the program. 64 Little available solid data exist 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 their functions and the Intelligence and Targeting Operations Directorate at HQ, which provides operational guidance to all other RIOs. Management in this Directorate is aware that leads have been generated through the PIP program however no data are available to quantify the contribution. In light of these findings, it is recommended that: Recommendation 1: Programs Branch, in consultation with Operations Branch, assesses whether the use of RIOs to deliver the PIP program is the most effective model for realizing program objectives. Management Response: Programs Branch concurs with this recommendation. The Trusted Traders Programs Division is developing a cohesive framework that will address the mandates, responsibilities and requirements of all CBSA pre-border low-risk trader programs. This will include an analysis of how the PIP program is to be delivered in the regions, as well as the appropriate roles of RIOs, other regional officers, the Border Watch Toll-Free Line and the Intelligence and Targeting Operations Directorate at HQ. A draft trusted traders strategy for consultation purposes is expected in January 2011. Once consultation is complete, the strategy will be presented to Programs Standing Committee by March 31, 2011. When approval is received, the Trusted Traders

64 Source: Partners in Protection (PIP) Evaluation Study, CBSA Program Evaluation Division, October 2006 http://www.cbsa-asfc.gc.ca/agency-agence/reports-rapports/ae-ve/2006/pip-pep-eng.html and key informant interviews with CBP (2010).

30

program will begin making the necessary policy/procedural changes to implement the strategy. __________________________________________________________________________________________ One of the PIP program’s stated objectives is to facilitate members’ border clearance. As a prerequisite, along with CSA membership for 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 sent for cargo examination. PIP carriers in the air and marine modes receive risk score reductions, which would 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.65 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 2007-2008 and 2009-2010. That having been said, PIP program spending exceeded planned levels66 by $884,000 and $864,000 in 2008-2009 and 2009-2010 respectively. 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 RIO’s 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 and processed 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 PIP activities at HQ and in the regions and are not limited to direct costs incurred to process applications.67 Productivity, as measured by the number of application site validations processed by FTE, varies significantly from region to region. Nationally,

65 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 which are only PIP-approved to enrol. 66 Planned spending includes funding from the Treasury Board submission for the current year, plus amounts reprofiled (e.g., carry forward amounts) from previous years. 67 Examples of additional activities include negotiation of MRAs and development of program standards, policies, operating procedures and the PIP database.

31

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. The modernized PIP program requires that memberships be revalidated on a regular basis to ensure that they continue to meet program requirements. As well, depending on results of harmonization efforts, there is a potential that revalidations of the 1,800 C-TPAT members located in Canada that are not PIP members68 will be required. Combined with ongoing new applications, this translates into about 100 files per month, 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. Management Response: Programs Branch concurs with this recommendation. An assessment conducted in November 2009 indicated that resources are adequate to sustain the revalidation cycle and 12 percent annual growth (new applications) based on the present PIP membership model. In December 2010, the Trusted Traders program developed cost estimates to accommodate the increased workload associated with harmonization; the results were the requirement for $23.5 million over five years and $4 million in ongoing funding. Included were the costs associated with building and supporting the Web portal required to communicate with the U.S. portal, funding the resources to address the increased workload associated with application processing and risk assessment; and taking over current U.S. responsibilities related to revalidations of those companies physically located in Canada. The program will continue to seek a funding source in this respect. ____________________________________________________________________________________________ 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 the 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

68 Figure was provided by CBP management during interview.

32

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 about 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 a four-day RCMP physical security workshop,69 the 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.

Management Response: Programs Branch concurs with the need for better coordination in the delivery of information sessions and services to the trade community. The PIP program utilizes client services representatives across Canada to provide industry with information about the PIP program. It also coordinates its presence at trade events through the CBSA stakeholder engagement team and consults with the Communications Directorate to ensure consistent messaging to industry. However, delivering the most effective awareness sessions requires direct knowledge of contraband detection techniques, current regional trends in smuggling and organized crime, as well as expertise in supply chain security that can be tailored to a member company’s type of business and specific security measures. Regional intelligence officers are well-suited to this role. As part of the trusted traders strategy, the Programs Branch will address how to better coordinate the delivery of information and services to the trade community.

69 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; and security awareness program. Source: http://www.rcmp-grc.gc.ca/ts-st/workshops-ateliers/physical-materielle-eng.htm.

33

Programs Branch concurs with the need to ensure that officers delivering PIP receive the necessary training. The PIP program will develop a training strategy that will incorporate the following:

CBSA employee (BSO and targeters) training: An online training package has been developed but will require updating. PIP is seeking funding for delivery of training. The existing material will be updated in fiscal year 2011/2012.

PIP officer training The PIP program will create an orientation package for PIP officer training that will include a list of pertinent training courses and training materials by July 2011. The PIP program will also assess training needs in support of the program’s objectives and determine the most effective training required for regional officers. In addition, an assessment of the U.S. C-TPAT training will be conducted by June 2011.

____________________________________________________________________________________________