How do you incent companies to secure their supply chain? Fatten the carrot...or the stick.

So what are the challenges that CBP still faces with C-TPAT? One of these is that according to CBP's figures, 45% of the cargo coming into the U.S. is imported by C-TPAT partners. Pretty good statistic, right? It is, except that means that more than half of the cargo coming into the U.S. is being moved by non-C-TPAT members -- companies whose committment to securing their, and the country's, supply chain is unknown. Sounds like a pretty big area of opportunity.

So why haven't more companies joined C-TPAT? My guess is that they don't see the carrot as being big enough...and they apparently aren't afraid of the stick either. According to CBP's data (these figures are dated -- they are from 2005, but this is the only data I've seen CBP release on C-TPAT vs non-C-TPAT inspection rates), non-C-TPAT companies have 1 in 47 containers inspected -- that translates to a security inspection rate of about 2.1%. C-TPAT companies experience 1 in 300 containers being stopped for a security inspection, for an inspection rate of about 0.3%. If you're a large importer focused on achieving economies of scale, "just-in-time" delivery, and driving down costs, the difference between 2.2% and 0.3% is significant and translates into speed-to-market. But if you're a small or medium sized importer, a 2.2% inspection rate probably doesn't even get your attention -- you're just trying to stay in business and figure out how to compete now that the world is flat. To these companies, the perceived costs and complexity of becoming a C-TPAT member may be disincentives to even applying to join the program.

An article in today's American Shipper seems to confirm this -- small to medium sized firms fail to see the benefits of joining C-TPAT. According to a recent survey:

• 55 percent of firms with less than 500 employees could not determine the benefits of participating in C-TPAT.
• 37 percent of companies cited either lack of time or money, or both, to devote to applying for C-TPAT status.
• More than 50 percent of those firms surveyed said they were either never invited by CBP or their customs brokers to become C-TPAT participants.

The only caveat I'd throw out here is that the number of responses seems fairly small -- the article cites "more than 100" and calls this a "snapshot" of small and medium sized importers. Mike Laden of Trade Innovations and the Trusted Trade Alliance is quoted in the article as saying that CBP should increase the exam rate for non-C-TPAT companies by 50% -- in other words, CBP should use a bigger stick. I know Mike, and he has a fair amount of experience with small and medium sized importers -- he's probably on to something.