csi v8n2 standard res - SIMMof the supply chain to transport illegal chemical, biological, radiological or nuclear (fissile) materials or, in the worst case, deliver a weapon of mass

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INTERMODAL TRANSPORT SECURITY INTELLIGENCE

I N T E R N A T I O N A L

www.cargosecurityinternational.com Volume 8 Number 2 April / May 2010

CARGO SCANNING:Time for a

new approach?

April / May 2010 Cargo Security Internationalwww.cargosecurityinternational.com18

Many stakeholders within the international maritime supply chain community, both public

and private, believe that the contentious international debate surrounding the US mandated 100% container scanning legislation (enacted within the 9/11 Commission Act) is coming to a close.

A newly released, European Union (EU) commissioned report has studied and assessed the potential impacts of implementing the US 100% scanning mandate. It concluded that such unilateral supply chain security legislation would be too difficult, complex and costly to implement, and could severely impact international trade and diplomatic relations should the US continue down the path of proposing to scan all shipping containers bound for its shores.

To address the extreme threat posed by certain terrorist groups, whose intent is to infiltrate and exploit vulnerabilities of the supply chain to transport illegal chemical, biological, radiological or nuclear (fissile) materials or, in the worst case, deliver a weapon of mass effect (WME), the EU prefers to adopt a ‘multi-layered risk-based approach’ in protecting its people and economic interests.

Now it appears that the views of the head of the US Government agency tasked by the US Congress with implementing the new law by 2012 are converging with the EU’s assessment. In a hearing at the end of last year, Department of Homeland Security (DHS) Secretary, Janet Napolitano, briefed the US Senate Committee on Commerce, Science and Transportation that other areas of transportation also require attention and so the department has taken a ‘layered approach’ to cargo security.

The practicality of implementing the 100% container scanning law by 2012 was assessed by the EU as simply ‘not doable’, whilst the DHS appears to consider 100% cargo scanning at least as being insufficient to achieve US security goals. We do not know whether a US commitment to intermodal layered security for its transportation system might lead to backing off from the commitment to 100% foreign-based

scanning and we do not know whether broader US political acceptance of these assessments is possible. Consequently, a confusing ‘will they, won’t they implement the law?’ situation remains.

However, a significant forthcoming global event may hold the answers and, at last, provide some clarity on the matter, something which the maritime supply chain sector and the international community have for some time been seeking in relation to this critical and contentious issue.

Addressing the global Nuclear Non Proliferation issue was one of the central pillars of the Obama administration’s election campaign. In April 2009, President Obama laid out a clear strategy to address the nuclear threats facing the United States and the world. His three-part strategy to address these threats globally proposes to:

Take measures to reduce and ●eventually eliminate existing nuclear arsenals

Strengthen the Non Proliferation ●treaty and halt proliferation of nuclear weapons to additional states

Prevent terrorists from acquiring ●nuclear weapons or materials.

During the July 2009 G-8 Summit

Summit agenda‘The practicality of

implementing the 100% container scanning law by 2012 was assessed by the EU as simply

‘not doable’, whilst the DHS appears to consider

100% cargo scanning at least as being

insufficient to achieve US security goals’

David Fairnie is Global Port Solutions Director for G4S, the international security group which specialises in outsourced business processes in sectors where security and safety risks are considered a strategic threat. G4S has operations in more than 110 countries, and is the world’s second largest private employer with more than 585,000 employees.Prior to joining G4S, David Fairnie was Director of Security for DP World. He has also worked for Hart Security as Director of Maritime and Supply Chain Security.

Contact: Tel: +971 4 429 0266 Email: [email protected] Web: www.g4s.com

In the run-up to the Global

Nuclear Security Summit

in Washington D.C.,

David Fairnie, Global

Ports Solutions Director

for G4S, asks whether the

tipping point has eventually

been reached in the

contentious 100% container

scanning debate?

MARITIME & PORT SECURITY

Cargo Security International April / May 2010 www.cargosecurityinternational.com 19

in Italy, President Obama reiterated his call for a summit to specifically address the third component of his strategy (preventing terrorists from acquiring nuclear weapons or materials) and, as a consequence, a Global Nuclear Security Summit was planned and is scheduled to take place on 12 April 2010 in Washington, D.C. where the United States will host more than 40 heads of state and several international organisations.

The stated purpose, and primary focus, of the summit is to agree to international protocols to safeguard against nuclear terrorism through bolstering international cooperation and improving the security of nuclear materials worldwide.

The summit aims to provide an opportunity to discuss and agree practical ways to identify and disrupt the illicit trade and movement of nuclear materials. The White House, in the summit pre-amble, states that the event will facilitate ‘discussion on the nature of the threat and develop steps that can be taken together to secure vulnerable materials, combat nuclear smuggling and deter, detect, and disrupt attempts at nuclear terrorism.’

In hosting the summit, the US administration is seeking to transform the global nuclear security agenda into a multilateral effort.

It hopes that the summit will reaffirm each nation’s responsibility to secure nuclear material on its own territory, as well as helping those nations which lack the capacity to secure material to do so successfully. Additionally, the summit is intended to strengthen the institutions and initiatives that combat nuclear smuggling and theft, including the Global Threat Reduction Initiative, the Global Initiative to Combat Nuclear Terrorism, and the Proliferation Security Initiative.

With the summit’s purpose and aims clearly communicated in advance by the US government, it should be noted that there is significant and key language within the messaging that would strongly indicate that clarity is beginning to come from within the US administration as

to how it intends to tackle the issue of combating terrorist groups with nuclear aspirations (the threat for which, of course, was the reason the 100% scanning legislation was mandated by the US Congress in the first place).

Through interpretation of the pre-event messaging and appreciation of the historical background and the political intent of this major global event, it is not unreasonable to conclude that considerable political and diplomatic effort has taken place, or is currently underway, by the US administration, to intentionally move the focus away from the controversial aspects of the 100% scanning legislation into shaping a coordinated international response that would mitigate the specific risk posed by nuclear terrorism.

The Obama administration is clearly mindful of the considerable pushback from the international community and supply chain industry over the last two years, as a result of the decision taken by Congress to enact the 9/11 Commission 100% scanning legislation, including the diplomatic damage this has caused. It will, of course, also be appreciative of Secretary Napolitano’s department’s views on the considerable impracticalities of implementing the act’s legislative requirements, as they are defined at this time. Through hosting this event, the US administration is publicly embracing the position that effectively addressing the threat can only be done in partnership, through an international multilateral effort, which is a clear and promising move away from the Congressional unilateral standpoint.

As for the practical solutions to address the threat of nuclear terrorism, interpreting the pre-event messaging again would indicate strongly that the US administration is intent on expanding, in partnership and collaboration, tried and tested initiatives such as the Department of Energy’s Second Line of Defense (SLD) programme – the Megaports initiative, whose goal is to deliver an effective and sustainable global capability to deter, detect and interdict illicit trafficking in special nuclear and other radioactive materials.

MARITIME & PORT SECURITY

The Megaports programme, which predates the politically contentious and potentially trade inhibiting 100% scanning legislation by four years, is a non-contentious, cost-effective and successful programme which has installed more than 150 radiation portal monitors, straddle carriers, spectroscopic portal monitors, and handheld radiation detection systems in 18 countries without adversely impacting trade. These Megaports detection systems are currently deployed at 19 international ports with 25 additional installations underway. The programme has a stated target of deploying similar systems in more than 100 ports worldwide by 2015, at which point 50% of global container traffic will be scanned for illicit special nuclear material.

The threat remains clear, the terrorist intent is unquestionable, and what ‘is doable’ to mitigate this threat should be done as a matter of urgency as part of a layered risk-based and progressive approach. The solution to the problem would appear to be patently obvious; governments and industry working together in safeguarding against nuclear terrorism through re-focusing on the real risk (illicit special nuclear materials), applying an agreed, tried and tested, cost-effective, trade facilitating solution universally (Megaports-type programmes – Detect, Deter & Disrupt) with governments, Customs, port authorities, port operators and private industry working together to:

deploy radiation detection equipment ●with minimal impact to port operations at entrance, exit and trans-shipment points in port facilities, and

to ensure that the placement and ●operation of equipment and systems results in trade facilitation benefits.

Such measures will, ultimately, through time, enable all container traffic to be scanned, resulting in…

‘The prevention of illicit trafficking of nuclear or radioactive materials (WMD) which could be used in a terrorist attack’ and concurrently achieving the intent of the Congressional 9/11 Commission Act in preventing an attack on the United States.


Gustavo L. Bottan of Passport Systems argues

the case for tightening the links between supply

chain protection and national security

Although the future is unpredictable, cargo container inspections will likely continue

much like today. We may see an increase in the number of containers inspected by Customs organisations worldwide, but it will be far from approaching one hundred percent. Most supply chain players will invest the minimum required to achieve a perception of security (called deterrence) or for equipment that just meets the letter of a mandate.

Among the many reasons for this prediction, two make it highly likely:

there is a disconnect between national ●security and the supply chain’s business drivers, and

when envisioning container ●inspections for the sake of national security, we think about the level of those performed today by Customs organisations.

The chances for a more robust supply chain and better national security would dramatically increase if the above factors were taken into consideration in government and industry policies.

It is imperative that governments and the supply chain industry achieve a much tighter link regarding the broader goals of security.

In industry, product quality is tightly linked with customer needs. It affects sales and profits, as was recently illustrated by the impact on Toyota Motor Company. The dimensions of quality for a supply chain are the timely and reliable delivery of goods at competitive prices. Reliability of service (continuity of operations) is important to many customers, in particular those depending on just-in-time (JIT) operations, and is certainly a competitive advantage that the logistics community understands. Protecting the millions invested in supply chain infrastructure and procedures is certainly also in the minds of owners and operators of equipment and facilities. So far, however, the security aspects connected to quality in a supply chain have mostly been associated with the reduction of theft and losses of goods. Beyond this, security is not a business driver for the supply chain, in particular if it refers to contributing to

national security (after all, the concept of government exists, among other things, to provide for the common defence and protection of the nation).

Does this mean, therefore, that the supply chain should not consider the impact of its operations on the broader aspects of security?

When a cargo container is inspected by Customs and found to have contraband, the consequence to the supply chain is the possible retention of the container and all other legal shipments in it, and perhaps in some cases even penalties or fines. Although an undesired situation for the business, it is not an outcome that companies feel they must avoid at all costs. Furthermore, if a container were not inspected or the contraband in it not detected, there would be no implications for the supply chain members, although there could be pernicious consequences to society.

Whether transporting illegal or dangerous materials can affect a business, an unrelated case to cargo scanning may highlight the relevance to the question. In recent days, Google executives have been found guilty in Italy for the posting of a video with objectionable or illegal content on YouTube. Despite the fact the video was taken down as soon as the company found out about it, the prosecutors prevailed. The appeal is ongoing because, in the words of the defence, Google cannot be found guilty anymore than the Post Office for unknowingly transporting offensive or illegal material.

Although the same ‘Post Office defence’ argument seems valid to me in today’s environment for the logistics

Tighter links‘It is impossible for any government to protect against all conceivable

threats, so in most cases the most consequential

receive priority’

Gustavo L. Bottan is the Vice President Business Development, Passport Systems Inc.The opinions expressed in this article are solely the author’s and do not represent those of Passport Systems Inc. or any of its clients.

Contact: Tel: +1 978 263 9900 x2210 Fax: +1 978 263 9971 Email: Bottan@ passportsystems.com Web: www.passportsystems.com

CARGO SCANNING


industry, it may not be to others or in the future. The Google case, therefore, should at least raise the issue of the potential consequences to a logistics business for having illegal or dangerous materials in the cargo they transport, even if unknowingly so.

Container inspections, as they are currently carried out today, will not properly address national security. One of the problems preventing the supply chain and governments from moving forward with improved national security is the fact that when it comes to discussing 100% cargo scanning, we assume these inspections have to be of the same kind as those performed today by Customs (i.e. with x-ray equipment).

The case for 100% sea cargo container scanning has been analysed by the World Customs Organization (WCO) and many others. It has been deemed too costly or impossible to perform. The US in collaboration with other countries tested the concept at three overseas ports. In these tests, the traditional inspection provided by Customs authorities was performed on all containers, instead of the 2% to 5% normally targeted. It was determined that the process used would be unsuitable for large volume ports and those with transshipment cargo. They also highlighted a number of technical, communication and organisational obstacles. What is expected now is for the US Secretary of Homeland Security to certify to Congress that the mandate for 100% sea cargo container scanning cannot be achieved by the 1 July 2012 deadline because it causes delays in the flow of commerce and the lack of suitable technology. Therefore, a request will be made for a two-year across-the-board extension for meeting the mandate.

It is unlikely that 100% container scanning will be achieved in the foreseeable future, if performed in this way. I say this not because technology cannot address the problem of improving national security, but rather because the concept of 100% container scanning is seen in the same light as the x-ray scanning performed by Customs today. Studies conducted at the Wharton

School clearly show that when a traditional Customs inspection is done, bottlenecks at ports arise as soon as 2% to 7% of containers are inspected.

It is impossible for any government to protect against all conceivable threats, so in most cases the most consequential receive priority. ‘Quality’ in delivering national security would thus have different standards depending on the threats. When it comes to cargo container inspections, not interdicting all contraband drugs and cigarettes, for example, is less of a concern than if a nuclear device or other weapon of mass destruction (WMD) were successfully smuggled into the country. In the former case, because there is no immediate catastrophic event, we can afford to use risk assessments for targeting high risk containers for inspection. It is a logical approach. We therefore accept the limitations of the equipment and technologies we use, particularly if they are the lowest cost alternatives. In the latter case, however, quality of inspection needs to be 100% and the goal should be to interdict every WMD that could be present in any and all containers. Unfortunately, when it comes to preventing a WMD from reaching a target, some have argued it is not likely to be transported in a sea cargo container. They reason that being a high value asset, terrorists would not leave a WMD in the supply chain away from their control. They further state it would be more likely for terrorists to bring it in a small boat or aircraft into the targeted country. Their argument leads to discounting the need for investments in cargo container inspection for the interdiction of a WMD – a bad idea.

The US Congress has tried to address the national security issue related to containerised goods arriving in the country by issuing a mandate for 100% cargo scanning. This has created a general belief that, in order to meet the mandate, responsible authorities will have to perform the same type of inspection done today (for 2% to 5% of containers entering the country) for all containers entering the country.

This perception has caused widespread

‘The sophisticated and capital intensive

infrastructure of the logistics and

transportation industry cannot be easily changed and it would be difficult for private companies to justify the investment

required to detect WMD in all cargo’

CARGO SCANNING


opposition from governmental agencies and the transportation industry around the world because this type of inspection for all containers could paralyse the system, as it takes too long to examine all containers and keep the flow of goods moving.

Instead, it might have been clearer if Congress had mandated 100% scanning for the specific purpose of interdicting weapons of mass destruction (WMD). Such inspection might be considered far less of a challenge to perform while keeping the flow of goods moving, in light of new technologies and focused inspection procedures.

An additional issue of contention is that because the mandate is unfunded, the cost of purchasing such new equipment to effectively cover all points of entry to the US or from a port of debarkation to the US would be too burdensome. In addition, if industry were required to make the investment and perform the scanning, it would be impractical for the government to be responsible for the law’s enforcement.

The sophisticated and capital

intensive infrastructure of the logistics and transportation industry cannot be easily changed and it would be difficult for private companies to justify the investment required to detect WMD in all cargo.

However, the cost of investment in advanced detection equipment and focused inspection procedures is significantly lower than the consequent costs of failing to secure the supply chain in the event of a WMD attack in any port.

Because there is technology today with the capability of providing advanced material identification inside cargo containers, it may be that not only would enhanced revenues arise from improved manifest verification and the interdiction of contraband, but the transportation industry itself would benefit by providing value to its customers (e.g. confirming the quality or origin of the goods acquired).

Once the cargo inspection operation is proven to provide business value to the supply chain, national security will be strengthened.

CARGO SCANNING

‘Because there is technology today with the

capability of providing advanced material

identification inside cargo containers, it may be that not only would enhanced revenues arise from improved manifest

verification and the interdiction of contraband,

but the transportation industry itself would

benefit by providing value to its customers’


Dan Burges summarises the findings from

FreightWatch International’s latest

review of global cargo theft activity

Each year, FreightWatch International USA conducts a review of global cargo theft

activity and researches the effectiveness of supply chain security efforts by industry and law enforcement. As part of this review, FreightWatch researches cargo theft trends in each continent and conducts a survey with industry personnel.

Our latest research shows that while cargo theft rates spiked in the Western Hemisphere in 2009, cargo theft activity across Europe was mixed. Based on research and polling, FreightWatch has identified the United States, Mexico, Brazil, South Africa, Russia, and the UK as having the most significant risk for supply chain operations.

North AmericaIn 2009, FreightWatch recorded an average of 72 cargo theft incidents a month in the United States, which represented a 12% increase on 2008.

Of the 859 incidents in 2009 (which were primarily full truckload thefts), FreightWatch recorded 36 warehouse burglaries (4.1%), and less than 2% of the incidents (13) were hijackings, as cargo theft in the United States is almost exclusively a non-violent crime.

The electronics industry suffered the highest number of cargo theft incidents, going from 174 theft incidents in 2008 to 196 in 2009 and accounting for 23% of all cargo theft. The food and drinks industry came in second at 20%, and home and garden items came in third at 10%.

Cargo theft has consistently expanded in Mexico over the past three years, showing incremental increases in theft volume and aggressiveness shown by cargo theft gangs. According to police reports, there are an estimated 700 to 1,000 gangs involved in cargo theft in the Mexico City area alone.

Gangs are significantly more aggressive and violent than those in the United States and Canada. Mexican cargo theft gangs primarily target electronics, pharmaceuticals, and high-value apparel items; these organised criminal elements know what they are after and more

often than not succeed in securing their objective.

The area around Mexico City continues to serve as the focal point for cargo theft in the country. Reports show that the majority of incidents happened in the north industrial zone in Mexico City. The main areas of risk are in Tutitlan and Tultepec where the Mexico-Queretaro roads intersect.

In late 2009, Guadalajara and Monterrey both saw a significant spike in cargo theft activity, with cargo theft gangs becoming increasingly aggressive and targeting large convoys – even those being escorted. There was also an increase in cargo thefts in the northern states including Chihuahua, Coahuila, Tamaulipas, Sonora, Sinaloa and Nayarit.

Central and South AmericaCargo theft in Central and South America saw significant increases in 2009. Beyond the inherent risk present in all supply chain operations, these regions experience substantial in-transit and warehouse losses, often through aggressive tactics and violence.

In Brazil, approximately 52% of all cargo theft occurs in São Paulo state, which saw a 17% increase in cargo theft volume in 2009. Hijackings, armed warehouse raids, systemic pilferage and full truckload thefts are all commonplace for companies victimised by established cargo theft gangs that work regionally.

As supply chains have been hardened, these theft gangs have adapted their strategies. For end delivery vehicles in São Paulo and Rio de Janeiro, the majority now have global positioning system (GPS) tracking onboard, often hidden and difficult to find. Because of this, theft gangs rarely take the entire vehicles, instead bringing a van and transferring product from the delivery truck before police arrive on scene.

Cargo theft in Argentina, though not as rampant as Brazil, has many of the same characteristics. Aggressive, organised cargo theft gangs that are adaptive to the security environment are seeking out high end products such as electronics, pharmaceuticals, construction material,

Dan Burges is the Director of Consultancy and Intelligence for FreightWatch International (USA), which provides cargo theft intelligence through data collection, analysis, and customised reporting.This article summarises the findings that are published in FreightWatch International’s 2010 Global Threat Assessment. The survey represents the views and experience of supply chain security professionals as surveyed by FreightWatch International and does not reflect official government data, as cargo theft is not an official statistic in most countries.

Contact: Dan Burges FreightWatch International (USA) Tel: +1 512 532 0159 Email: dan.burges@ freightwatchusa.com Web: www.freightwatchusa.com

Global risk

CARGO THEFT


ceramics and food products. The area surrounding Buenos Aires accounts for approximately three quarters of all cargo theft in the country, and the problem has only grown throughout the past decade.

According to the International Transport Association (ATI), Guatemala is now considered the Central American country with the highest volume of cargo theft. In 2009, ATI reported 210 incidents in one month. Over the last five years, police have identified at least 15 active organised gangs, with four particularly powerful organised gangs operating throughout the country in 2009.

Organised gangs have made Guatemalan highways among the most dangerous routes in Central America. As a consequence, cargo theft activity in Guatemala has created an atmosphere giving foreign investors pause before moving operations into the country, as well as concerning drivers coming in from different countries.

EuropeIn 2009, the United Kingdom, the Netherlands, France and Germany led Europe in cargo theft numbers, accounting for the majority of all cargo theft incidents recorded in the continent. While these countries have long been seen as the highest risk areas for cargo theft in the continent, other regions have begun to emerge, posing significant risk to shippers and their transportation providers.

In 2009, multiple European countries saw a decrease in cargo theft activity, including the UK and France. According to the Transported Asset Protection Association (TAPA) EMEA, cargo theft decreased in Europe as a whole by 17.5%. However, the situation is not as straightforward as a simple decline in total cargo theft volume.

Several factors for the decrease in overall cargo theft statistics could include a decrease in reporting efforts by victims and law enforcement agencies as well as a significant decrease in the number of loaded containers on the road. With the economy in decline, shipments throughout Europe, including import/

export movements decrease substantially, lowering the overall per capita of available shipments for cargo thieves to choose from.

Beyond the traditional cargo theft hot spots in Europe, such as the UK, Germany, France and the Netherlands, countries such as Spain, Austria, Romania and Russia are emerging as areas of increased concern for cargo security. In a 2009 Eurowatch report, virtually every listed cargo theft incident in Russia involved the use of automatic weapons.

In Spain, reports have shown an increase in cargo theft activity as high as 87% in 2009. While largely attributed to increased reporting coupled with cargo theft gangs moving from France into Spain, such a dramatic increase in theft statistics not only highlights a growing issue, but also can create concern throughout the supply chain.

Risk profiles in Europe vary greatly by country and region, resulting in areas of severe risk along with areas of moderate to low risk. Hijackings, robberies, police impersonators, and other aggressive tactics frequently occur in nearly all countries with cargo theft activity. From a frequency-of-incident standpoint, the European corridor typically has the highest level of cargo theft on any continent.

Law enforcement has continued to be proactive in combating cargo theft. Europol is working on a project (FreightPol) for 2010 which will involve all the European Union (EU) member states. FreightPol will provide a unique public/private partnership to combat organised freight crime. The goal is to distribute intelligence and information, develop preventative strategies and share knowledge/experience for the benefit of the supply chain and member states.

AsiaStatistics on high volume cargo theft (such as full truckload thefts and warehouse burglaries) show that East Asia is the world’s safest region, presenting moderate levels of risk to supply chain operations. Countries in central and western Asia, however, face

‘The electronics industry suffered the highest

number of cargo theft incidents, going from 174 theft incidents in 2008 to 196 in 2009 and accounting for 23% of all cargo theft. The food

and drinks industry came in second at 20%, and home and garden items came in third at 10%’

CARGO THEFT


significant challenges. Issues such as pilferage, copyright infringement, and counterfeiting have long remained a source of concern, particularly around the major ports such as Hong Kong, while full truckload theft and violence are seen more frequently in countries such as India.

Recent trends indicate that the risk is starting to increase throughout Asia. In almost every Asian country, organised crime targets cargo for theft, although on a scale much lower than in other regions.

China presents a wide array of security problems for manufacturing plants and distribution centres. Political, labour, and social unrest are tightly controlled in a more reactive than preventative mode, while inconsistencies and unpredictability in regulatory enforcement is the norm.

Although in previous years cargo theft was considered a very low risk in China, corporations saw a definitive increase in cargo theft numbers in 2008,

though these rates remained steady in 2009.

Cargo theft in India has increased by a steady 12% per year from 1998 to 2008. A large portion of the various patterns of cargo theft are opportunistic and involve a significant measure of collusion with the transporters as well as security and enforcement personnel.

According to reports, at least some sectors of industry – in particular the movement of coal in India – are dominated by well organised gangs working in tandem with corrupt officials, and the illegal appropriation and movement of coal in India is immense, and has occasionally been estimated to be as high as half the total output of some of the coalfields located there.

A recent study found that 24% of cargo thefts occurred on highways and 2% on railways. The remaining cargo thefts are believed to be occurring at freight yards and warehousing facilities, largely through pilferage, including those adjacent to sea and airports.

CARGO THEFT

‘Recent trends indicate that the risk is starting to increase throughout

Asia. In almost every Asian country,

organised crime targets cargo for theft, although on a scale much lower than in other regions’


Bryn Heimbeck of Trade Tech reviews how the transportation and

logistics industry is adjusting to the new era

of ISF compliance

We have quickly moved past the debate as to whether or not 10+2 would become a reality

and into the era of Importer Security Filings (ISF) – the Customs’ transmission at the heart of 10+2. According to US Customs and Border Protection’s (CBP), Richard DiNucci, over 80% of the importers in the United States are now filing ISFs.

This is not to say that 80% of the market is filing ISFs for every shipment or that all of them were filed on time. However, it is a major step toward informed compliance. The question now will be about process improvement so that compliance does not create a negative impact on the supply chain.

A quick note of caution; don’t be lulled into thinking that there will not be costs for non-compliance until the end of 2010. While the CBP has said that it will not be moving rapidly to the penalty phase of ISF enforcement, the agency has clearly stated it will begin holding and inspecting cargo as it arrives in the US (for supply chains which are materially out of compliance with 10+2). Real supply chain costs, particularly in demurrage - the penalty ocean carriers charge when cargo is not picked up quickly from their terminals - could rapidly create a significant penalty of their own and one with far less chance for mitigation. The best strategy is to be stipulating compliance within your supply chain today rather than waiting any longer.

That note of caution said, what are the issues facing those who are implementing 10+2 compliance? The biggest issue centres on knowing the right Bill of Lading number that was used to manifest the shipment via the Automated Manifest System (AMS). This is primarily an issue for importers and Customs brokers who are working to re-create what transpired at origin from the perspective of the US destination.

There are two main issues here. Firstly, a large number of non vessel operating common carriers (NVOCC) are still not automated to file via AMS. Approximately 40% of the NVOCC registered to do business in the US with the Federal Maritime Commission

(FMC) are registered to be an automated NVOCC with CBP. The rest turn over their Bills of Lading to the carrier to manifest on their behalf. The carriers don’t actually manifest the NVOCC’s Bill of Lading, they simply take the actual shipper and actual consignee, which would have been masked to them by the NVOCC’s Bill of Lading. They, in turn, put these names on their own Bills of Lading so that CBP gains the visibility to trading partners required by the 24 Hour Rule. The result is that the underlying carrier’s Bill of Lading, known as the Master Bill of Lading (M.B/L), is the actual Bill of Lading Number manifested via AMS and not the NVOCC’s Bill of Lading Number.

Secondly, NVOCC and freight forwarders work rapidly in the final one to two days before the cargo cut-off to maximise the load for a full container consolidation. This often means working among themselves or with larger, neutral NVOCC consolidators, to build a full container load consolidation to achieve the lowest cost per cubic metre of cargo.

Known as co-loading, this is a major practice in the trade. The NVOCC managing the container will most often want to be the AMS manifest filer to ensure that the security process is completed smoothly for all of the cargo in the container so that there will not be any uncontrolled delays. This natural market aggregation helps to keep costs low for over-flow or small shipments. It also creates significant confusion about where the cargo was loaded into the container and whose Bill of Lading was represented for the AMS manifest.

Another key issue is capturing the data in order to make a timely filing. Over 80% of importers are using their Customs house brokers to file their ISF. The brokers are working hard to capture the data from the shippers and suppliers at origin and then re-keying the information into their systems in order to manifest the cargo. They often have to scamper or delay the filing when key information is missing and their contacts at origin have gone home for the night.

At the same time, a number of best practices are rapidly appearing:

Checks and balanc

Trade Tech is an internet-based supply chain and transportation solutions company owned and operated by industry professionals. It is an Application Service Provider which licenses and delivers applications in key areas including 10+2 rule solution provision, supply chain and purchase order visibility (tracking and tracing), and AMS/ACI and security relating to ocean and air transportation, including all Cargo Security Filing requirements.The company was established in 1997 by Bryn Heimbeck who has more than 20 years of experience in the transportation and logistics field.

Contact: Bryn Heimbeck Trade Tech Tel: +1 425 837 9000 Email: [email protected] Web: www.tradetech.net

SUPPLY CHAIN SECURITY


cesCapturing ISF information on- ●

line via web-based applications at the origin, either from the freight forwarder, NVOCC, or shipper working in an on-line application is creating the smoothest transition to compliance. This practice avoids taking the time to key stroke all of the information from scratch in the US into a US Customs compliant system. It also allows the participants closest to the cargo as it is being exported to participate directly in the security clearance process. This will become even more critical later if, and when, CBP begins issuing Hold messages;

Pre-classifying the purchase order ●and sending it to the supplier is a significant step in the right direction. Pre-classification does not have to happen prior to sending the purchase order to the supplier as long as the purchase order

is classified before the cargo is ready to ship. This avoids rushing to classify the cargo at the last minute, especially when there is a lengthy or complex list of items in the shipment. This practice is especially powerful when working with a supplier, freight forwarder, consolidator, or NVOCC who is working directly with CBP from origin as this gives them the tools to manifest the ISF directly with the greatest expediency;

Setting up a review centre, or ●bringing your broker on-line with you to review the information captured from origin before it is transmitted to CBP, is another significant step in streamlining the effort to ensure that information is both complete and accurate during this phase-in to compliance time. This practice allows a much smaller group of users, who are most familiar with

SUPPLY CHAIN SECURITY



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Volume 8 Number 1 February / March 2010

WATERSIDE SECURITY:Uncharted

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ELLIGENCEY INTE

N A LNO NO N AN A LLme 8me 8 Number 1Number 1 FebruaFebruary / March 2ry / March 20101

SECURITY:UnchartedUncharted

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Inside:

• TWIC Update• Counter-Piracy• Asset Tracking

• Risk Analysis• Security Training• Conference Diary

Y:Y:Y:Y:Y: INTERMODAL TRANSPORT SECURITY INTELLIGENCE


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Volume 8 Number 2 April / May 2010

CARGO SCANNING:Time for a new approach?

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the new requirements, to add critical expertise to the process while not having to be tasked with the effort of undertaking data capture and data entry. This has been especially powerful for larger companies with a multitude of offices or a large number of offshore suppliers where training becomes the biggest issue.

These security processing centres focus on missing data, deal with rejected transmissions, ensure that partial filings are completed on time, and are set up to deal with negative status messages before they become a bigger problem.

Overall, the era of debate as to whether or not 10+2 would come to pass is far behind us. ISFs are now the standard and the industry is now focused on how to employ best practices as part of their compliance process.

Documents

csi v8n2 standard res - SIMMof the supply chain to transport illegal chemical, biological, radiological or nuclear (fissile) materials or, in the worst case, deliver a weapon of mass