Audit of Border Controls for Marine Ports of Entry

Final Report
December, 2012

Table of Contents

• 1.0 INTRODUCTION
• 2.0 SIGNIFICANCE OF THE AUDIT
• 3.0 STATEMENT OF CONFORMANCE
• 4.0 AUDIT OPINION
• 5.0 KEY FINDINGS
• 6.0 SUMMARY OF RECOMMENDATIONS
• 7.0 MANAGEMENT RESPONSE
• 8.0 AUDIT FINDINGS
  • 8.1 Container examination
  • 8.2 Radiation detection portals
  • 8.3 Bay Plan Initiative
• APPENDIX A – ABOUT THE AUDIT
• APPENDIX B – ACRONYMS

Please note: The {*} asterisk denotes sections that have been removed because they contain sensitive information.

1.0 INTRODUCTION

The Canada Border Services Agency (the Agency) administers border-related legislation (over 90 acts) on behalf of other government departments and agencies. The Customs Act authorizes Agency border services officers (officers) to examine imported goods and containers, or any conveyance used in importation, including in-transit cargo.

More than 80% of global merchandise is transported across oceans as marine cargo and over 95% of marine cargo imported into Canada comes through five major marine ports. These ports are Vancouver, Prince Rupert, Saint John, Montréal and Halifax. The rest is dispersed throughout smaller ports across Canada. Over 2.5 million containers were imported into Canada in 2011.

The Agency reviews information for marine cargo to determine the highest risk cargo for potential terrorist activities, contraband, irregular migration and invasive species, and to facilitate the movement of low-risk cargo. Generally, containerized cargo is the highest risk for contraband or other health and safety threats, as it is the easiest to exploit. Therefore the Agency has enhanced border controls for this type of cargo.

Containers may be referred for examination based on a pre-arrival risk assessment or selected spontaneously by an officer while he/she is at the marine port. Goods found during examination that violate Canadian legislation may be subject to enforcement action such as a monetary penalty or seizure.

This audit specifically covers border examination controls in the marine environment. There are four key border examination controls; each involves physically examining the containers and their contents:

• Examination at a container examination facility (CEF)
• Large scale imaging (LSI) examination
• Pier examination
• Radiation detection portals

2.0 SIGNIFICANCE OF THE AUDIT

Each year the Agency processes millions of containers that arrive at Canada’s marine ports. Border examination controls for containerized marine cargo are integral in detecting contraband, irregular migration, invasive pests/plants, hazardous substances and potential terrorist activities. Weakness in border examination controls could result in exploitation of marine containers by terrorist or criminal organizations, as well as the potential for invasive species or hazardous substances to be introduced into Canada.

The audit objective was to provide assurance that Agency responsibilities for marine ports are appropriately carried out and managed. More specifically, the objectives were to determine whether:

• controls and procedures at the border are effective and working as intended in inspecting high-risk containers arriving at marine ports; and
• the Agency uses the results of examinations to improve the process for inspecting high-risk containers at the border.

3.0 STATEMENT OF CONFORMANCE

The audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program. The audit approach and methodology followed the International Standards for the Professional Practice of Internal Auditing as defined by the Institute of Internal Auditors and the Internal Auditing Standards for the Government of Canada as required by the Treasury Board Internal Audit Policy.

This audit provides a high level of assurance that the opinion provided therein is appropriate and reflects conditions that existed at the time of the audit.

4.0 AUDIT OPINION

The Agency has border controls that are being repeated at marine ports of entry. While these process controls are in place, there are some gaps in the design and effectiveness of security controls and documentation of examination results. {*}

5.0 KEY FINDINGS

The Agency uses a number of methodologies to examine containers which are appropriate. Examinations conducted at the container examination facilities are adequate. Large scale imaging examination can assist to determine whether an intrusive examination is needed.

Agency targeters use several factors to determine whether a marine container should be referred for examination. TITAN, an electronic risk scoring tool is one tool to assist officers’ identification of high-risk containers. {*} As part of the new National Targeting Program, the targeting regime for marine containers including TITAN is currently under review. While officers are recording the results of their examinations, the quality of narrative reports and the consistency of the information should be improved.

Security of marine ports and cargo containers is a shared responsibility of a number of organizations. {*}

Radiation detection regimes implemented at the marine ports are well-designed. Effective action is taken when there is an alarm. {*}

The Bay Plan Initiative is being implemented to enable the detection of undeclared containers in an efficient and effective manner. The system was built and available to the Agency in 2011. The regulatory work to enforce mandatory reporting of the bay plan has not been completed {*}.

6.0 SUMMARY OF RECOMMENDATIONS

This audit makes seven recommendations:

• review and improve the effectiveness of the TITAN risk scoring methodology for marine container targeting;
• implement a cost-effective, statistically sound {*} program;
• monitor to ensure examination results are accurately and consistently recorded in TITAN;
• clarify and communicate how the penalty regime is applied;
• review and improve security marine container handling and storage;
• strengthen controls {*}; and
• confirm and monitor the timetable to demonstrate the benefits realization of the Bay Plan Initiative.

7.0 MANAGEMENT RESPONSE

8.0 AUDIT FINDINGS

8.1 Container examination

8.1.1 Examination methodologies

Physical examination of imported cargo is a key control in the detection and interdiction of threats. Higher risk containers are referred for an examination of the container and its contents. The Agency invests significant resources in examination, hence it is expected that examination methodologies would be adequately robust to detect contraband or threats.

Examination methodologies were observed and management and officers were interviewed. Overall, examination methodologies are appropriate.

Examinations at a container examination facility (CEF) – Containers are moved from the marine port to the CEF, where they are fully de-stuffed, the contents intrusively examined, followed by an examination of the container itself. Tools are provided to officers, such as X-ray, drug testing kits and other contraband detection tools. Once the contents and container have been examined, the container is reloaded and returned to the port. Of all examination types, the CEF intrusive examinations are the most effective in detecting contraband or other threats.

Large scale imaging (LSI) examinations – LSI examinations are non-intrusive dockside X-ray examinations of containers, enabling the officer to see inside the container. Anomalies deep within a container, such as contraband or weapons, can be detected, depending on commodity density. A LSI examination can also assist in determining whether an intrusive examination is needed, and is especially useful in selective examinations. As well, intrusive examination effectiveness may be enhanced by prior use of LSI, as it may pinpoint where to look within the container.

Pier examinations – This dockside examination is partially intrusive and involves the officer opening the container doors to perform a visual inspection and a limited physical examination of the cargo closest to the door. This inspection may result in referral for an intrusive examination conducted at the container examination facility. This is the less effective examination methodology and the Agency has reallocated funding for this activity to higher risk activities.

8.1.2 Use of TITAN for high-risk container identification

Companies wishing to import containerized marine cargo into Canada must electronically submit Advance Commercial Information (ACI) about the shipment to the Agency, as required by the Customs Act and the Reporting of Imported Goods Regulations. This information is first submitted in the Accelerated Commercial Release Operations Support System (ACROSS) and then fed into the Agency’s TITAN electronic risk assessment system. ACROSS is the mainframe system used for receiving and processing data from trade chain clients. TITAN, introduced in 2004, allows targeters to view transmitted data prior to arrival in order to make decisions to further examine containers destined for Canada. TITAN calculates a risk score for each container from zero to 100 and the scores are used for assisting targeting officers in making referrals.

{*}

It is recognized that the Agency is in the process of implementing a new National Targeting Program to address a number of issues identified in previous audits, reviews and evaluations. All targeting activities are being consolidated into the National Targeting Centre.

In this context, there are two observations with respect to the TITAN electronic risk scoring system. {*} Second, referrals by Agency targeting officers are an important component of the Agency’s risk identification approach. However, exclusive reliance on referrals chosen by Agency employees does not allow the Agency to evaluate the effectiveness of the electronic risk indicators and rules, versus employee referrals. Evaluating the performance of the TITAN risk scoring system is important to assess whether the Agency is realizing the anticipated benefits.

Recommendation 1: The Vice-President of the Programs Branch should review and improve the effectiveness of the TITAN risk scoring methodology for marine container targeting, so that the Agency can rely on the TITAN risk score when making referrals.

Recommendation 2: The Vice-President of the Programs Branch should implement a cost-effective statistically sound methodology for {*} and examination of containers, and should use the results to benchmark compliance and assess performance of the TITAN risk rules and targeters.

8.1.3 Examination results

Officers enter examination results into TITAN, indicating whether the examination is resultant (i.e. contraband was found in the container) or non-resultant (i.e. nothing was found in the container). As well, the officer prepares an examination narrative report.

These examination results should provide the Agency with sufficient data to determine if referral processes work, such as the risk indicators and rules or referrals by targeters. As well, examination results data should enable the Agency to monitor operations, to continuously improve container risk assessment and to report on performance.

The quality of recorded examination results in TITAN is not systematically reviewed by management. Additionally, documented examination results are insufficient to determine whether the examination referral process is effective, and as a result prevents the Agency from accurately measuring and improving performance of the Agency’s controls for marine operations.

For example:

• Of 193 sample examinations, border services officers reported sufficient information 75% of the time in their narrative reports. In other cases the officer’s narrative reports described results inconsistent with the result chosen.
• The meaning of “resultant” is interpreted differently between Agency offices. In certain offices all results are indicated as “resultant”, whether or not the result related to the referral reason. In other offices, “resultant” is indicated only when the result corresponded to the original referral reason.
• Four sites visited conduct selective examinations. Two offices record the results of all selective examinations, while the other two sites only record the resultant examinations. There is no policy on when to record selective examinations in TITAN.

While not examined during the audit, management has implemented a review of the quality of recorded examinations for the admissibility targets in ACROSS. Reports are provided regularly to management. This was not examined as part of the audit because border services officers record container examinations at the border for national security in TITAN.

Recommendation 3: The Vice-President of the Programs Branch, in consultation with the Operations Branch, should implement monitoring controls to ensure examination results are accurately and consistently recorded in TITAN.

8.1.4 Security

Security controls throughout the import and examination process should be designed, such that the Agency has assurance that high-risk containers referred for examination are not tampered with or moved without authorization prior to presentation to the Agency for examination.

Security of marine ports and cargo is a shared responsibility between Transport Canada, port authorities, marine terminal operators, transportation companies, container examinations facilities (CEF) and the Agency. The Agency has no 24-hour presence at ports. However, marine terminal operators are licensed by the Agency under the Customs Sufferance Warehouses Regulations and are obligated under s.11(1)(e) to provide secure storage of goods. They may also be members of the Partners in Protection Program which enlists the cooperation of the trade chain community to enhance border security, combat organized crime and help detect and prevent contraband smuggling. Program members agree to implement and adhere to high security standards while the Agency agrees to assess their security measures and provide information sessions. This audit did not examine the Partners in Protection Program as it is subject to a separate audit.

Regarding the container security outside the marine ports, the Agency’s CEFs are not located at marine ports. Transportation of the containers to the CEF is provided by the private sector. For example, in one case the CEF is located about 49 kilometres from the marine port. {*}

Penalties – When containers are referred for examination, the marine terminal operator is notified and instructed to hold the container for examination. Most referred containers are presented to the Agency as requested. Occasionally a container may be moved without authorization. The Agency has a penalty regime, the Administrative Monetary Penalty System (AMPS) in place to reinforce the presentation of containers for examination. For example, if a container is not held and presented by the marine terminal operator as requested, then a penalty can be issued. There is no uniform understanding in the Regions and Headquarters about which penalty to issue and for what circumstances. While the AMPS is a deterrent, it is one element of the overall security and enforcement regime.

Recommendation 4: The Vice-President of the Programs Branch should clarify and communicate the proper application of the penalty regime regarding non-compliance with presentation of containers for examination.

Recommendation 5: The Vice-President of the Programs Branch, in consultation with the Comptrollership and Operations branches, should perform a review of the security surrounding the handling and storage of marine containers, and take action to strengthen security where appropriate.

8.2 Radiation detection portals

The Agency has invested in the security of Canadians by installing radiation detection portals at five major Canadian marine terminals, which process over 95% of imported marine freight. Due to the importance of radiation detection to the health and safety of Canadians, the controls in place should be strong.

Radiation detection portals are located on marine terminal operator property. All containers are to be passed through the portals. Port authorities and marine terminal operators are expected to ensure compliance with portal passage. Less than 1% of the containers have triggered an alarm. Of those, 80% will be cleared quickly as the radiation is naturally occurring. The remaining alarms require further examination. At the ports, there is a security infrastructure that includes cameras, perimeter fencing, access control and personnel security screening by Transport Canada. Some ports also have 24-hour monitoring and an automated container logistic process.

Radiation detection regimes implemented at the major marine ports are generally well-designed. {*} The Agency relies on the marine terminal operators to follow proper procedures in all cases. {*}

Recommendation 6: The Vice-President of the Programs Branch, in consultation with the Operations Branch, should strengthen the controls {*}.

8.3 Bay Plan Initiative

{*}

To improve the efficiency and effectiveness of undeclared container detection, the Agency is implementing the Bay Plan Initiative. A “bay plan” maps how the containers are stacked and stowed on the ship, and identifies each container by its unique number.

The Bay Plan Initiative is an electronic reporting functionality, available since 2011, whereby a vessel’s bay plan can be electronically submitted to the Agency prior to the ship’s arrival at a marine port. The Agency’s systems electronically compare submitted bay plans to the reported ACI to identify undeclared containers. However, currently there is no regulatory requirement forcing marine carriers to report their bay plan to the Agency, and very few are providing this information on a voluntary basis. {*}

Recommendation 7: The Vice-President of the Programs Branch should confirm and monitor the timetable to demonstrate the benefits realization of the Bay Plan Initiative.

APPENDIX A – ABOUT THE AUDIT

AUDIT OBJECTIVES AND SCOPE

The audit objective was to provide assurance that Agency responsibilities for marine ports are appropriately carried out and managed. More specifically, the objectives were to determine whether:

• controls and procedures at the border are effective and working as intended in inspecting high-risk containers arriving at marine ports; and
• the Agency used the results of examinations to improve the process for inspecting high-risk containers at the border.

The audit scope included the review of at-border controls over imported containerized freight, namely: radiation detection portals, LSI examinations, pier examinations and CEF examinations. The audit included visits to the three highest risk marine ports, which process the largest volumes of containers, and also included four lower risk marine ports. The audit reviewed a sample of examination results that were recorded in TITAN between January 1 and December 31, 2011.

The audit did not examine the quality of advance commercial information, overseas examinations, inland examinations, vessel rummage, ship targeting and crew screening.

RISK ASSESSMENT

The risk assessment conducted during the planning phase identified a key risk: If the Agency’s controls at Canadian marine ports of entry are not functioning as intended, there is a risk that high-risk containers could enter Canada and threaten its security, safety and economy. More specifically, any weaknesses in these controls involve enterprise risks relating to terrorism, smuggling by organized crime, irregular migration and to Canada’s ecosystem.

APPROACH

The following approach was used:

• surveyed and interviewed stakeholders, specifically staff in the Programs, Operations and Information, Science and Technology branches, and external stakeholders such as port authorities; 
• reviewed and analyzed information from various sources, such as, but not limited to, legislation, policies, procedures, and reports;
• reviewed control processes for marine commercial importing;
• conducted site visits at marine ports and inspecting port and Agency facilities; and
• sampled and reviewed the results of examinations of containers.

AUDIT CRITERIA

The following audit lines of enquiry and criteria were selected.

Line of Enquiry 1 - Controls at Canadian Ports

• 1.1 Effective controls are in place to ensure that the highest risk containers are selected and examined.
• 1.2 Radiation detection controls are well-designed and are functioning as intended.
• 1.3 Controls for detecting and examining containers undeclared in TITAN are well-designed and effective.

Line of Enquiry 2 - Monitoring and Reporting

• 2.1 The Agency uses examination results to continuously improve the process for inspecting high-risk containers at the border.

APPENDIX B – ACRONYMS

Agency

Canada Border Services Agency

Officer

Border services officer

TITAN

The electronic system which receives electronic advance commercial information and scores it for risk

ACI

Advance commercial information

CEF

Container examination facility

LSI

Large scale imaging examination, done with a truck equipped with an X-ray arm

ACROSS

Accelerated Commercial Release Operations Support System

AMPS

Administrative Monetary Penalty System