Securing the Air Cargo Supply Chain, Expediting the Flow of Commerce: a Collaborative Approach

 

John A. Muckstadt

Cornell University

Cayuga Partners LLC

Sean E. Conlin

Deloitte Consulting LLP

Walter H. Beadling

Cargo Security Alliance

Cayuga Partners LLC

 


 

 

  1. Executive Summary

 

 

The Congressional mandate for 100% screening of air cargo carried on passenger aircraft originating in the U.S. takes full effect in August, 2010. This event has the potential to seriously disrupt the air cargo supply chain with severe economic consequences. Timely, effective implementation of the TSA’s Certified Cargo Screening Program (CCSP) promises a solution, but only if shippers, industry associations and the air cargo industry work together to take quick action. Successful deployment of the CCSP depends upon adherence to, and the rapid adoption of, the “5 Principles of Secure Supply Chain Design and Operation”, described herein.

 

 

 

How can CSA help? CCSF Plan/Build/Run

The Cargo Security Alliance can take your company through the process of evaluating, applying for and implementing the CCSP.  From initial application to setting up your Certified Cargo Screening Facilities (CCSF) and optimizing operational efficiency, CSA has the tools and expertise necessary to make this a one-stop shopping process.  We will help get you up and running as quickly as possible with our three phase CCSF Plan/Build/Run Program:

  • PLAN
    • Evaluation: should I screen in-house or outsource?
    • CCSP Cost /Benefit analysis
    • CCSP Application to TSA 
    • Certified Cargo Screening Facility Design
    • Screening Technology Analysis and Selection
    • Screening Process and Security Protocol Development
  • BUILD
    • CCSF Security Coordinator Training
    • CCSP Application
    • Employee Vetting and STA Cards
    • Facility and Yard Security Equipment and Devices
    • Driver/Cargo Data and Image Capture Systems
    • Screening Employee Training
    • TSA or TSA 3rd Party Validation Firm (TAVF) Certification
  • RUN
    • CCSF Operations Reporting
    • Facility operations optimization
    • Tamper-Evident Tape, seals and vehicle locking devices
    • Best Practices Benchmarking
    • On-going training, operations and compliance consulting

 

Click here to learn more, or begin the application process…

 

Should my company participate in the CCSP?

In determining if your company should participate directly in the CCSP, some key factors need to be considered.  Among these are:

  • Do I ship a significant volume of my freight via air, and is it carried on passenger aircraft? (PAX)
  • Will my shipments be compromised if opened?
  • Do your volumes justify in-house screening?

 

If your company currently participates in cargo security programs like C-TPAT and TAPA FSR or ISO 9000 quality programs, the move to in-house screening and CCSP participation may be relatively quick and painless.  CSA can help you make these decisions. 

What is the Certified Cargo Screening Program (CCSP)?


 

As part of the 9/11 Act Congress passed a law in 2007 requiring that ALL cargo transported in the holds of passenger airplanes originating in the US must be screened at a level commensurate with passenger luggage.  The deadline for meeting this mandate is August 3rd, 2010, and the Transportation Security Administration (TSA) is charged with enforcing it.  

Recognizing that the problem of screening a wide variety of dievrse cargos and packages is much more complicated than screening passenger baggage, and the potential bottleneck in the global supply chain that will be created if all cargo has to be screened at the airport, the TSA has evised the Certified Cargo Screening Program (CCSP) as a solution.  Under the CCSP shippers, freight forwarders, logistics services providers, IAC’s, independent cargo screening firms and air carriers can screen cargo and pass it along the supply chain via a secure chain of custody to the airport, where it can go directly onto the aircraft without undergoing additional screening. 

This approach effectively creates a distributed screening network, allowing screening to be performed at the most cost-effective point in the supply chain, mitigating the impact on system performance and thereby expediting the flow of commerce.

The CCSP is a flexible, voluntary program specifically designed to allow shippers with unique requirements to find the approach that best meets their needs

What is the Certified Cargo Screening Program (CCSP)?

As part of the 9/11 Act Congress passed a law in 2007 requiring that ALL cargo transported in the holds of passenger airplanes originating in the US must be screened at a level commensurate with passenger luggage.  The deadline for meeting this mandate is August 3rd, 2010, and the Transportation Security Administration (TSA) is charged with enforcing it.  

Recognizing the vastly greater complexity of screening cargo as opposed to passenger luggage, and the potential bottleneck in the global supply chain that this would be created if all cargo had to be screened at the airport, the TSA developed the Certified Cargo Screening Program (CCSP).  Under the CCSP shippers, freight forwarders, logistics services providers, IAC's, independent cargo screening firms and air carriers can screen cargo and pass it along the supply chain via a secure chain of custody to the airport, where it can go directly onto the aircraft without undergoing additional screening.  This approach effectively creates a distributed screening network, allowing screening to be performed at the most cost-effective point in the supply chain, mitigating the impact on system performance and thereby expediting the flow of commerce.

The CCSP is a flexible program specifically designed to allow shippers with unique requirements to find the approach that best meets their needs. 

Should my company participate in the CCSP?

In determining if your company should participate directly in the CCSP, some key factors need to be considered.  Among these are:

  • Do I ship a significant volume of my freight via air, and is it carried on passenger aircraft? (PAX)
  • Will my shipments be compromised if opened?
  • How sensitive is my business or products to shipping delays?

If your company currently participates in cargo security programs like C-TPAT and TAPA FSR or ISO 9000 quality programs, the move to in-house screening and CCSP participation may be relatively quick and painless.  CSA can help you make these decisions. 

How can CSA help? CCSF Plan/Build/Run

The Cargo Security Alliance can take your company through the process of evaluating, applying for and implementing the CCSP.  From initial application to setting up your Certified Cargo Screening Facilities (CCSF) and optimizing operational efficiency, CSA has the tools and expertise necessary to make this a one-stop shopping process.  We will help get you up and running as quickly as possible with our three phase CCSF Plan/Build/Run Program:

  • PLAN
    • Evaluation: should I screen in-house or outsource?
    • CCSP Cost /Benefit analysis
    • CCSP Application to TSA 
    • Certified Cargo Screening Facility Design
    • Screening Technololgy Analysis and Selection
    • Screening Process and Security Protocol Development
  • BUILD
    • CCSF Security Coordinator Training
    • CCSP Application
    • Employee Vetting and STA Cards
    • Facility and Yard Security Equipment and Devices
    • Driver/Cargo Data and Image Capture Systems
    • Screening Employee Training
    • TSA or TSA 3rd Party Validation Firm (TAVF) Certification
  • RUN
    • CCSF Operations Reporting
    • Facility operations optimization
    • Tamper-Evident Tape, seals and vehicle locking devices
    • Best Practices Benchmarking
    • On-going training, operations and compliance consulting

 

Click here to learn more, or begin the application process…

 

Security is a State of Mind.

By Erik Hoffer

DEFINING VULNERABILITY: The overwhelming perception is that the global air freight system is both dynamic and efficient as it moves millions of packages worldwide on a daily basis. Little thought is given to possible disruptions in service or to the vulnerability of our fragile supply chain, especially as it relates to an airfreight based catastrophe. Logisticians routinely discount the myriad of threats to commerce as they use the air cargo system. Air cargo’s intrinsic vulnerability to financial loss seems to be almost transparent to them and therefore little is done or funded by business to reduce these perils at a corporate level. Only recently has our government dedicated resources to identify these risks worldwide and, unfortunately, has yet to create oversight standards to mitigate them. To the security professional, air freight is a highly vulnerable modality that can deliver a threat faster and more efficiently than a truck, sea container or rail car. With air cargo’s vulnerability to a disaster being but moments away, any informed evaluation of the threat to world commerce, through the use of air cargo as a vehicle, is a given. The simple truth is that the commercial supply chain is far from safe and no where near secure; yet in all of this controlled chaos, the air freight system performs efficiently and losses somehow are maintained at tolerable levels. How air cargo functions within the world’s supply chain, given these threats, is the basis of this chapter. THE COSTS OF LOSS The value of air cargo industry hovers about $60 billion dollars, exclusive of the tangent industries such as packaging material suppliers, insurance carriers and ancillary administrative functions. The industry outside of direct shippers is comprised of domestic passenger air carriers, dedicated air couriers, private air freight airlines, forwarders, brokers and consolidators to mention a few of the people who comprise the air matrix. One terrorist based supply chain incident could have a devastating affect on world commerce and effectively shut down commerce as we know it in all modalities. As an example, the port strike in California of 2003 cost the commercial supply chain billions in losses daily and crippled sea imports world wide for six months. Imagine the magnitude of financial losses if an act of terror was perpetrated on the United States using air cargo. The speed by which tainted freight can hit our shores is frightening and the fact that little is being done to reduce that risk as equally as disturbing. AN OVERVIEW There are many elements of supply chain and logistical security in the air freight business. Physical issues such as secure packaging, handling, storage, transfer, chain of custody and delivery of goods just begins to scratch the surface where vulnerability is a concern. Weakness in any one area can lead to disaster. No matter how hard we try there is no reasonable way to control all aspects of unattended cargo and air facilities. Transportation of air cargo from shipper to carrier presents a dynamic threat as chain of custody is rarely verified in lieu of basic cargo transfer methodology. Cargo is typically seen as a unit with no particular emphasis on physical or x-ray inspection of any one box or pallet, hence the ability to surreptitiously introduce a weapon or contraband into an innocuous bundle is basically easy. Individual courier packages get somewhat more inspection than bulk freight, but because of the generic nature of the packaging, little is really done inspection wise until the final sort, at which time it is too late to interdict such tainted cargo. Since most air cargo screening is done at sort facilities at destination, interdiction of a weapon would be done after arrival in which case it would be far too late! Security, containment and control of unattended cargo can only be achieved when all aspects of logistical move can be verified right down the pre-inspection and final verification of boarded cargo. In order to achieve operational efficiency however, air cargo gives a tremendous amount of latitude to its biggest clients. More about these policies later. Regardless of the modality of transportation secure packaging, sealing and inspection of cargo is a mandate. Without it, no one is ever sure if the packaging is original, if the goods are actually still in the box or if the box was switched with a weapon or loaded with drugs. Since choices of shipping boxes or containers are made by shippers, and the choices of bundling of various random freight is made by carriers, little can be done to create a standard by which inspection procedures could be established. The inherent lack of possible interaction unilaterally between all cargo handlers makes most air cargo transparent and unidentifiable by design. Typically the smaller and generic packages are placed in C containers, or air totes, with as many as 1000 individual small size boxes inside. The chances of discovery of stolen goods prior to delivery, tainted freight or the interdiction and remediation of a terrorist planted weapon in air cargo is a challenge. The random bundling technique associated with air cargo intensifies the risks to any single unit within that enclosure since each looks the same. Unlike containerized sea freight, which is typically palletized or floor loaded to the maximum cube of the enclosure, locked and sealed and nested aboard a ship; air cargo is randomly stacked and net strapped on aircraft pallets which creates easily accessibility by skilled thieves or terrorists before, during and after transport. The speed with which goods are transported, combined with the inherent risks of damage, theft, tampering, spoilage or the surreptitious introduction of contraband into a box, makes air cargo that much harder to monitor or secure. The fact that as many as 5 different companies may have handled, packed or sorted cargo with none of them responsible for the security function, makes for a perfect environment to steal goods or worse. Since most air carriers transfer cargo by trucks for delivery, there is little nexus or shared intelligence possible from the original shipper to the handlers with which to recognize anomalies. The ability to deploy a deadly device quickly is the crux of the issue. “Speed” is the operative word in defining air cargo risk, because the slower the speed of delivery the more apt you are to discover problems before they become disasters. For this reason, interdicting truck or sea cargo is far easier than air. The slower the freight moves, the more hands and eyes are on the cargo and the greater the need to examine paperwork and supporting security protocols. The axiom that “cargo at rest is always cargo at risk” seems to imply that air cargo is less apt to be a target but this is not the case. The difference between air cargo and other modalities is that in air freight, commodities become blended with hundreds of other packages in a consistently random order, shipped by anyone, anywhere in the world, making each box a mere drop in a sea of similar looking packages. There is a critical need to establish basic security packaging mandates on the part of shippers such that carriers and handlers stand the best chance at discovering anomalies in cargo prior to their being boarded at the embarkation airport. The more recent introduction of intelligence monitoring into the air cargo security equation has begun to help identify potential threats to help reduce the chances of tainted cargo being blindly accepted by air carriers. Only through these basic methods of risk reduction can we avert a terrorist incident involving air cargo. There has been a far greater effort put forth to examine passengers than cargo. In October 2007, the Bush administration created an executive order mandating the 100% examination of cargo on commercial aircraft by 2010. That task is both ambitious and surely doomed for failure, as deploying such a system world wide is unachievable. The executive order mandates that all cargo boarded on to passenger aircraft, here in the United States, be examined, x-rayed and evaluated. Funding has yet to be provided nor has responsibility been allocated to do this inspection. The failure to have such a global, rather than regional policy, basically negates its effectiveness and thereby minimizes the domestic effort. Air cargo is cog in a world wide supply chain and without addressing it globally, any such proposal is doomed to failure. In any form of transportation, solutions that fail to become all encompassing are rarely effective. This band aid approach to a tremendous problem once again demonstrates the ‘for show only’ approach the TSA (Transportation Security Administration) and DHS (Department of Homeland Security) takes to cargo security. THE UGLY STEP CHILD For the years before 911 and now for years after, cargo security has remained the stepchild of the worlds supply chain. Funding has been non-existent and policy undefined. Logisticians somehow failed to become proactively involved with loss control in their quest for speed, cost reduction and operational efficiency. Since governmental oversight into the commercial supply chain is taboo, no effective protocol has been established leaving the problem to fester and the criminal elements to mature and perfect their craft unabated. When the DHS (Department of Homeland Security) established programs such as C-TPAT (Customs Trade Partnership against Terrorism) and the Known Shipper Program, which is an equivalent design for air cargo, best practices were defined for signators to implement and compliance was to be rewarded with operational efficiency. Although no laws were passed to mandate compliance with C-TPAT standards, the threat to shippers of ‘slower passage of cargo’ for those not willing to sign on, was the stick that made compliance with C-TPAT principals a viable carrot. No TSA, DHS, DOD or CBP programs or policies however have addressed air transportation vulnerability to a point where any of them has required, legislated or mandated by policy, any risk reduction component. No best practices have been recommended or adopted at the federal level and neither carrot nor stick have been offered up to participants. It seems that ‘do the right thing’ was implied in the air cargo industry, but since it was not defined, industry has become their own monitor resulting in no action by anyone. The lack of specificity in policy results in a nebulous interpretation of requirements making the proposed governmental programs ineffective and inconsistent. Consistency is a basic tenet of effective security. Just because we have not had a supply chain incident, most Americans, in their complacency, feel confident that the Government is actively participating in securing our homeland. Air cargo is potentially the biggest offender and therefore the greatest economic threat. Although the Known Shipper programs and soon to be effective, Certified Shipper Program, have aided in establishing best practices for containment and control of unattended goods, little is really being done to close these security gaps. Our borders are more porous than ever and with more air freight volume being established daily, we must focus on effective screening techniques and become more flexible in relaxing our need for speed. Greater passenger and baggage observation and inspection have been getting better, general air cargo, especially courier cargo and most randomly consolidated air freight, still have little to no scrutiny coming into the United States or even boarding a passenger plane from some countries. Cargo shipped from this country abroad does get some further observation and inspection, but moving tainted, contraband, illegal, or hazmat cargo still remains easy for those with the know how to bypass the system. With approximately 50 million domestic cargo shipments started daily and twice that internationally, the problem is acute. Air vulnerability is not exclusively limited to terrorists and thieves; cargo can contain contraband foods, illegal animals, artifacts, skins, drugs, currency, counterfeits and even items as small as insects or fruit flies all present a real risk to our country and to our National economy. Although some domestic and international passenger baggage is checked with dogs, x-ray, reviewed intelligence and visually inspected, air cargo is more often than not given a green light through most U.S. airports with little or no real chance to interdict dangerous materials. A BOARD ROOM DECISION Vulnerability to any type of loss presents a real problem to business who use importation or export by air as their modality of choice. To accept risk without remedy is one course of action. “Wait and see” is a dangerous platform because certain types of losses can balloon exponentially causing at times, irreparable financial harm to the shipper or owner of the goods. Brands can be compromised when consumer confidence is shaken due to a theft, contamination or terrorist act using a National Brand as a cover. For example the failure to protect certain drugs or controlled substances from theft can result in death and personal injury that can be traced back to the manufacturer or shipper. Besides contingent financial losses, ingestible goods out of the care and control of the owner or carrier must, by law, be destroyed thereby negating insurance as a financial remedy. Recovery of lost assets, especially in air cargo is rare, since discovery is rarely made until the item does not show up for delivery at which time the thief is long gone and the goods are distributed throughout the supply chain. Issues involving the illicit use of cargo to attack the United States or its assets can, under the Patriot Act, result in prosecution of the original owner of the cargo or asset used by the perpetrators. Logisticians must continually make supply chain decisions based on routes, times, nature of goods and of course the carriers. In many cases carriers, fearful of theft, reject certain types of goods, hence certain types of shippers, due to the inherent nature of theft with regard to their products. Items such as jewelry, electronics, chips, ethical drugs and even eyeglasses often times are the core of carrier losses. Many shippers choose to insure cargo based on route criteria. Goods originating in or delivering to certain countries present more of a risk than others. Goods staged by forwarders for consolidation frequently are kept in facilities where security is suspect. Insurance is typically focused on conditions of loss. Many supply chain managers make assumptions that once a carrier has is goods in their care and control that both their insurance and the extra policy taken out by the shipper cover all possible conditions of loss. This could not be further from the truth. Losses that occur on carrier property, be they theft or damage typically are covered to the extent of the carriers stipulated limits of liability. Insurance taken out at origin is rarely extended to all handlers of the cargo. Since air cargo may be taken by truck (drayage) to an airport, moved by one or more carriers and then delivered by yet another third party trucker; conditions of loss and the magnitude of vulnerability to perils is multiplied many times. Unless specific insurance is taken out by the shipper for any and all conditions of loss, the shipper may suffer. Carriers are liable for cargo based on cents, calculated by the pound, except as specifically noted in the contract of carriage. Unless the air bill covers special conditions, many limits of liability take effect against the cargo are based on the handler’s insurance coverage, or lack of it. WHO IS THE THREAT: When dealing with effective remedy to supply chain security issues, regardless of the logistical environment, you must first have an idea of your adversary. In many cases time can be an adversary in situations regarding time sensitive goods such as body parts, vaccines or blood. In some cases damage based on rough handling can contribute to many conditions of loss as well as mysterious disappearance of cargo due to clerical errors. Losses can occur in warehouses, on trucks, on airport property such as in-bond facilities or in any modality handing the cargo. Cargo in transit is always accessible to people; and many of these handlers do not have appropriate vetting to guaranty security for the goods or physical containment on the property. Many airside employees lack the skill to handle sensitive goods according to a given procedure. Just think about the trucking industry for instance, remembering that almost all air cargo moved by truck at some point in its cycle. The annual driver turn over rate in most common carrier companies is approaching 125%. Just to keep the trucks on the road, business has had to accept applicants with tainted or criminal records, people with no permanent residences and some who are hired on a day to day basis thereby creating havoc in investigating losses associated with these employees. Training and company integrity is consistently lacking with transient labor pools making internal theft and vulnerability from within a significant concern. In the forwarding business, many carriers are unknown to the shipper or recipient because of interlining. In some cases air carriers can legally choose to move your cargo by truck or even rail without our permission or knowledge also intensifying the risk of loss. In order to effectively plan for a threat, that threat and adversary must be defined. Defining threats begins with enumerating eminent issues and potential issues into a matrix weighing each component in regard to costs of loss and the reasons and speed with which to provide remedy. As countermeasures are developed to tighten supply chain security, the overall effect gradually reduces each specific vulnerability to manageable levels. At times however the trade off is increasing security is operational inefficiencies which defeat the purpose of moving cargo by air. Because a terrorist need only be successful once to achieve his goal, the triage approach to controlling the security of your supply chain seems futile. By degree, controlling the international supply chain is all but impossible. As stated not all threats are terrorist based, yet conditions of loss are prevalent to any cargo at any time. Most companies address threats to cargo in a declining order hoping that each selected remedy collaterally addresses lower level issues without convoluting the system. In order to effectively implement systemic changes to enhance supply chain security, businesses must adopt the mandated programs set forth by our Government. Programs that do not echo such Federal mandates will become redundant and money invested in them lost. For this reason many in the air cargo, truck and steam ship freight industries have failed to solidify on, and implement a remedy to terrorism. Basically no one wants to start a program to be told later on that it fails to comply with the ‘recommended’ governmental programs. Since no programs actually exist, no one is rushing to create their own! Whether funded internally by the carrier, provided for by shipper or clients or provided by the sea ports and airports, most modalities use little real effort to protect freight. Because no consist programs apply, cargo remains at risk from origin to destination. Unfortunately little is being done by the U.S. Government beyond studies and non binding suggestions to secure our National supply chain. The process eventually chosen must be universally adopted specific to each mode of transport and maintained throughout that industry on an international basis. Many countries fail to require any such measures since they may not be able to fund them or to technologically implement them. Just because the United States wants to benchmark technology does not make for blind international compliance. Before considering the implementation of a security process most countries will focus their efforts and on what is practical for their conditions, culture and funding. In many cases this will not even come close to US standards. Should we exclude these countries from accepting freight because they do not meet our benchmarked standards? Unlike security for a home, an office or even a vehicle, that is fairly stable and predictable, supply chain security has a number of interdependent dimensions that render most general protective systems ineffective. The dynamic differences in the approach to security and operational efficiency of each vendor differ so radically that ultimate agreement on security measures would be almost impossible. Besides having freight predominately unattended, constantly moving and changing hands, the protection available at one location may be non-existent or unavailable at another. Since air cargo rarely hits stop or choke points until it reaches a delivery airport sorting center, implementation or interdiction and inspection techniques must be germane to each vendor and handing facility and consistent for all cargo entering it. In air cargo, the original carrier thought to be hauling the freight may change numerous times for many reasons, all of which are unknown (and unnecessary to be known) by the shipper. If delivered on time, client expectations are met. Shippers must rely on the integrity of carriers just as carriers must rely on their shippers in accepting freight initially. This mutual trust has become the backbone of the air cargo industry, albeit self policing. In any product move or where a threat against specific cargo (such as pharmaceuticals or electronics) is high, you will need to know why someone wants to either steal it or tamper with it in order to develop a deterrent strategy to avoid or avert the problem. Terrorist threats are far less convoluted, their purpose is clear and direct, yet their technique, intricacy of the action plan and methodology is far more sophisticated and professionally orchestrated. Their motivation, in so far as ideology, determination, reward for success and skill will typically prevent you or your carrier from planning a suitable or sustainable defense. There is no doubt however that whether the threats is theft or terrorism, your adversary is none the less a major concern. If this paradigm is not in your business strategy, it should be. ADDRESSING THE THREAT Indicative packaging is a classic approach to cargo security since it provides a unique identity to each package. By providing visually inspectable packaging such as security tapes and self voiding seals, an anomaly or obvious breach becomes apparent to each handler thereby reducing risk. By providing a feature showing a package has been attacked, handlers stand a better chance of finding pilfered cargo. As the saying goes, ‘it is harder to beat you if you know what you are looking for’. If recipients are aware of a particular package’s appearance, unique markings, numbers or designs, receiving that package in good order is far easier that with generic boxes. By using tamper indicative packaging, the user sets a benchmark of characteristics which enable inspection at any point in the supply chain by any handler. This ability to universally visually inspect cargo is beneficial to shipper, carrier and recipient as each benefits from the technology. The more user friendly the technology is to supply chain members the more effective it will be in deterring problems. Most indicative packaging devices are in the form of tamper or shock indicating self adhesive seals or tapes that help to visually identify possible penetration in, or manipulation of a box, pallet, envelope or container. Self adhesive seals and tapes are the predominate closure method for most cargo in boxes or envelopes. When applied onto a bundled asset such as a C container door, trailer door or aircraft hatch, the device effectively offers containment to all the products inside. Devices such as tamper evident tapes and self voiding security seals help uniquely identify parcels as well as indicate penetration. These types of seals are both cost effective and highly deterrent in nature. They are typically applied at origin and provide inspectability throughout the supply chain. The more simplistic (kiss principle) they are, the greater their use and effectiveness becomes. By creating risk of discovery for the thief or terrorist, you lessen your risk of an event or loss. Adversarial analysis requires a working knowledge of the person’s ability to effectively complete his mission. Whether that is get the quarry or planting a bomb, his ability to beat you rests with a mixture of his skill and your countermeasures as well as your inherent complacency. Your ability to mitigate loss revolves around your choice of countermeasures, training and reliability of your handlers and the complex coordination required when cargo changes hands. Theft or acts of terrorism occur when the perpetrator surreptitiously gains access to cargo either en-route or prior to shipping or delivery. These situations can occur at any point throughout the transportation and storage phase of shipping. Knowledge of the location, movement and timing of the goods, the level of risk the person is willing to take and his motivation combined with his expertise play a significant role in his success or failure. Your best defense is to plan for problems before they arise and gear your best practices to deter these activities. Neither theft nor terrorism are conditions that anyone can completely eliminate regardless of the technology used, the security plan or its practical application. A perpetrators reward for success, as well as his ability to choose his timeframe, are all components that give him an upper hand. With air cargo’s speed as an additional adversary, the chances of deterring the timing of an act of terrorism (or theft) that is already in progress, is limited at best. WHAT’S BEING DONE TO SECURE THE SUPPLY CHAIN ? When President Bush created the Department of Homeland Security (DHS) in 2002, his concept was to create a central hub for the sharing of information and the selection, choice and implementation of remedy to terrorism. The concept was designed to reduce the risk of a terrorist strike on our soil by stepping up the processes need to discover problems before they can do harm. The concept further was directed at reducing the vulnerability of an attack through the commercial world wide supply chain by sharing and analysis of business data. By combining all government efforts into a centralized review process for cargo, and intelligence, President Bush felt that the deterrent value would be overwhelming and thereby curtail the threat. His goal would be achieved, at least initially, by the use of the intelligence services and analysis of data relating to inbound cargo designed to identify suspect shipments and shippers and interdict associated cargo. With selective physical inspection and assuming commercial participation, he felt his program would become the standard by which our country would secure its borders and thereby establish logistical security against another 911. By using our best and brightest tacticians reviewing inbound cargo data, the DHS could theoretically identify shipping anomalies and interdict suspect cargo before it reached our shores. The creation of the 24 hour reporting rule for containerized cargo set the stage for data verification and began to offer hope to the shipping public of an effective security effort being passed along to air cargo. With the ability to act unilaterally, Bush felt that these policies administered by this central agency would be the cornerstone of risk reduction world wide. Instead of this focused succinct concept, we now have over 350,000 people in a newly formed, self contained bureaucracy, called the TSA/DHS that is so mired in their own layers interpreting the President’s simple original security plan, that have effectively done nothing to secure our supply chain or our borders. There has been no positive or effective action especially in air cargo or in domestic trucking and only some basic improvements in containerized sea freight. We have spent more money in defining and analyzing the potential problems than solving known risks, by a ratio of 5000 to one. We have dressed up thousands of untrained part time TSA passenger air inspectors and armed them with state of the art screening technology for passengers and bags, but failed to consider the total picture of air security with relation to cargo which sits directly below these passengers. We now permit Canadian and Mexican trucks to cross our borders with minimal inspection and no basic rules for safety or security. We have almost zero security on the passenger rail system and less on water craft. Passenger protection, aka what is visible to the public, is simply a confidence builder with a very low effectiveness against a professional adversary. With over $5 Billion in dedicated assets to secure our skies, the TSA have spent only $55 million on like and kind protection technology for air cargo. The TSA is well meaning but have shown themselves as organizationally inept and ill equipped to mandate, implement, select or fund changes to the security process for cargo across the board. There is no reasonable system that can detect every form of contraband nor is there any way to guaranty 100% success in any security endeavor, however without challenging industry to step up self imposed systems and to create more stringent criteria for insuring the integrity of air cargo, little will be done to improve our current condition. Congress needs to empower those qualified to make such decisions to act and mandate compliance without regard to politics. Industry has to understand that the speed of commerce is directly proportionate to the risks associated with a terrorist strike. Somewhere between 100% physical inspection and administrative scrutiny lies an acceptable and effective mix. If cargo were to be slowed to avoid it being stopped, would that not be a better alternative to cargo security? SECURITY IS NOT A PERFECT SCIENCE A number of programs have evolved from the original DHS premise. By definition both the Known Shipper Program and conventional cargo screening programs imply an administrative overview of a shipper, cargo and recipient. The collected data would then be used to detect anomalies based on historic shipping and commodity norms or other criteria that would indicate a noticeable change in behavior. This method is done completely in the back office and rarely if ever has “hands on” any box. The obvious flaw in this thinking is that even if the shipper is known, and the cargo and recipient are both innocuous, the box may still contain a bomb. In my personal experience with the package delivery business, even if a box was to be leaking powder or fumes, or if the box had battery cables hanging from it and it was poorly packed or labeled, it probably would still manage to arrive at a distribution hub, here in the USA, and possibly even get delivered to a client! Some news networks have shown this scenario in practical terms by shipping a restricted (non-lethal) package and having it arrive at their offices just as if they shipped apple pie! Given that any unsecured and unchecked cargo can be transshipped numerous times to elude this form of intel detection, and once at an airport, it can be shipped over the road to further confuse the process, administrative scrutiny falls short of a true protection platform. The goal of an economic terrorist is to deploy a weapon of mass destruction, or mass effect, here in the commercial US supply chain, such that it creates fear, disruption of business and costly remediation sufficient to stop commerce at some level. Providing protection against an ideological focus such as this is impossible. AN AMBITIOUS BUT UNACHIEVABLE GOAL Nothing short of 100% screening both physical (visual) and mechanical can prevent problems. Such an approach is not only impossible, given the nature of international commerce, but impractical based on the sheer volume vs. time for such an inspection to take place. Air freight moves in predetermined cubes designed to fit the belly of the aircraft with rigid weight and volume constraints. Rarely if ever does a package or pallet move independently. Bundling is the norm but typically without respect to the nature of cargo. In many cases liquids move in close proximity to other cargo and hazmat is rarely if ever segregated among freight on air pallets. Proposed government projects such as the use of RFID as a quick fix to identify individual packages amongst the sea of like and kind cargo, proved ineffective and impractical. Because in theory RFID was viewed as a security rather than a logistic tool, millions of dollars were spent by government and industry to attempt to implement this technology. The goal was to screen cargo, bundled in containers or on pallets in such a manner as to identify if something was added or removed during transit. Because RFID has severe limitation on reading tag density, through metallic enclosures or with metallic interference and surely not through liquids, this attempt failed! RFID is available in two forms, passive and active. A signal emitting or battery operated RFID seal sends a signal to a receiver where a non powered tags simply receives and returning a signal through an antenna. Active RFID proved unsuited for many reasons, especially cost and the inability of users to effectively return these devices. Security for all practical purposes was not achieved with RFID devices simply because they could not be shown to identify a single box as original, thereby failing to achieve its goal of packaging identity. The infrastructure needed to use such a system world wind presented a dynamic problem because not ever tag operates at the same frequency. Since curtailing a focus on RFID as a solution, our security gurus have failed to adopt more practical policies and materials and have basically done nothing since these studies. Diversity of cargo, generic packaging techniques, bundling of hundreds of packages on air pallets and in C containers contribute to the chaos involved with choosing a fixed inspection (choke) point, product or process. In many airports throughout the world, in-bond or staged cargo means no more than unattended boxes out on the tar or in uncontrolled warehouses and in many cases loose boxes, awaiting palletizing and loading onto aircraft. Very rarely is this staged cargo caged or securely controlled while awaiting loading. In many airports around the world, access to these staging areas is easy and therefore regardless of the security inspection program used when cargo is tendered, the possible introduction of a weapon or the removal of freight (while being staged) is always prevalent. The random nature of cargo in terms of size complicates any inspection processes. The lack of dedicated manpower funded by the airlines themselves at every station all but precludes 100% inspection of over the counter freight. The courier business is notorious for a complete lack of controls. Items picked up in drop boxes or given directly to couriers can seamlessly slip through into both commercial aircraft and freighters with little to no hands on inspection. A bomb can easily be delivered in any size parcel, containing a biologic or explosive. AN IDEA TO HELP THE INSPECTION PROCESS By placing pre inspected cargo into a consistent contained format would not only speed technology inspection and reduce load times, but so too would this format improve operational efficiency and throughput for the carrier. Secure packaging done after inspection at airside would create an increased revenue platform for freighters and commercial aircraft alike because the cube and weight of each ‘brick’ could be preplanned. The contents of each ‘brick’ would already known on the manifests and the visual ability to discover penetration would be simple and universally understandable. The use of these so called cargo bricks would give carriers boarding and offloading cargo a visual inspection point for all cargo in the bundle, thereby speeding the offload process. By requiring bulk shippers to pack in a predetermined ‘brick’ format, using tamper evident shrink films, security tapes or other visibly inspectable components, we would move closer to assuring packaging integrity. These requirements will compliment the Known and Certified shipper initiatives and benefit the carriers tremendously. The use of airport choke point inspection for bulk cargo could be achieved since all cargo would be similar in size and therefore fit on pre-designed conveyors using appropriate sniffer and x-ray screening technology. Much like seaport screening, one point serving many, establishes consistent monitorable controls and thereby adds positive layers to the process at a lower cost while maintaining efficiency. If shippers were brought into this equation through reduced tariffs or other financial incentives for those that comply, they may be more apt to have an incentive to buy into the process. For non bulk shippers, prescreening at time of delivery to the air carrier would be seamless. These screening items would then be bulk packed by the carrier into containers, using these bricks or some other acceptable bundled container. BUY IN The risks to people associated with tainted air cargo are somewhat greater than with other modalities since air cargo is predominately shipped with or near people. Air cargo on freighters always lands at facilities where people are present where sea freight is far more isolated from human contact until it hits the highways. Terrorist threats to ports are of course of equal concern and exhibit an equal or greater economic impact. Regardless of the terrorist event, the commercial supply chain can take months to recover and the costs in commercial and economic losses are staggering. With any disruption in supply chain activities from a simple theft to a major breach, the costs of loss far exceed and proactive remedial action possibly required by the carriers, shippers or airside facilities. The fact that security plans require buy-in from the air carriers, governments and shippers is the fly in the ointment. Everyone wants positive change and no one wants to disrupt commerce or affect their bottom line to achieve it. Not many air cargo companies are willing to fund remedy nor mandate the processes required to increase protection levels. Governments typically baulk about security expense while shippers never want to accept the inherent delays such inspections will surely cause. The carriers will always get their revenue regardless of timing of delivery of goods and therefore seem to be the course of least resistance. If Governments can contribute inspection technology in the form of machinery, a defined security plan and recommendations and funding for inspection personnel; while carriers and airport operators implement these systems; and if shippers can adjust their delivery schedules for the potential delays while revising their JIT inventory process, we can be well on our way to risk reduction in air cargo risks. WHAT’S BEING DONE? Law enforcement views cargo theft as the lowest priority possible. The Federal Government has seen fit to remove all FBI personnel from cargo theft operations and reassign their members to anti terrorist task forces. They have effectively let the current ineffective screening and inspection process discover any cargo perils including theft, terrorism, smuggling and contraband. Cargo theft has few defined laws and consequently no real deterrent value against theft. There are few convictions and most theft based prosecutions are limited to the States rather than at the Federal level. No one seems to realize the nexus between cargo theft and cargo terrorism??? In air security, most investigations are left to the air carrier security personnel, further diluting the risk to thieves and subsequently terrorist. Most cargo criminals are recidivists and most serve no time in jail if actually apprehended. Laws covering cargo theft or theft resulting in endangering human life now include the statutes contained in the Patriot Act which opens new avenues of prosecution and makes available new resources to deter these conditions especially in air cargo incidents. There has been a good deal of positive fallout from 911 relating to the bolstering of air side security through the Patriot Act, but almost zero reduction in vulnerability or interdiction. The TSA has initiated requirements for any service industry relating to aircraft be located on a secured site with appropriate fences, locks, cameras, sign-in processes as well as background checks for employees. Planes overnighting outside the United States require self adhesive tamper indicative door seals to identify unauthorized penetration. They have mandated more stringent requirements for vehicles moving freely on to airports from food suppliers and refuse companies as well as truckers, brokers and forwarders. Food carts must be sealed as well as the trucks delivering them airside from off site warehouses. The Patriot Act was implemented giving law enforcement and our legal system the tools to help identify to those would attempt to hurt the USA both internally and abroad. The legislation gave law enforcement the ability to verify the identity of a potential terrorist through access to records and to personal information, searches and verbal communication that heretofore were only available through subpoena and more fact based legal order. This law actively helps to disrupt a terrorist plots and organizational development by stifling the movement of financial resources internationally. This is a sound strategy as it accomplished the creation of useful data which could help determine shipping and cargo anomalies and thereby identify suspect shippers and cargo. The CSI (Container Security Initiative) also has been helpful in data creation on the sea port side. Both of these programs help identify smuggling, theft, contraband and drug importation as well as money laundering, conspiracies, trade fraud and terrorism. The issues however are empirical and rarely physical, hence while they are helpful and necessary they fail to address the hands-on need of cargo for inspection. Not all intelligence results in finding tainted cargo and although a strong platform, it fails to account for problems occurring en-route or after delivery to a sort facility. Other legislation in this regard includes The Port and Maritime Security Act of 2001 and the Maritime Transportation Antiterrorism Act of 2002. The G-8 summits have always had cargo security on their agenda and participants have consistently expressed interest but little action has ever taken place. Operation Safe Commerce (OSC) was to be a public and private partnership dedicated to securing the worlds supply chain, but it has also failed to mandate a workable solution and has fallen short of being effective. Carriers are constantly struggling with increasing fuel costs, salaries, personnel, equipment maintenance, regulatory barriers and stiff competition, so who can wonder why they balk about taking on the expensive function of cargo security. Notwithstanding their obvious self interest in security, brand and equipment protection and the potential loss of life which can be caused through a terrorist strike, air carriers still feel burdened by the lack of specific direction given to them by the TSA. The nebulous nature of government regulation regarding an approved definitive course of action to secure unattended air cargo is so illusive that carriers remain on the fence in terms of taking any action at all. Whether it is their job alone to screen cargo is also in question? Physical inspection vs. cursory screening was recently mentioned in an article by Bruce Butterworth, published through a think tank. “Do we really want to bring commerce to its knees by opening and inspecting all cargo or do we find some mid-ground between intelligence and inspection. Our government is moving far too slowly in helping industry to choose a world wide course of action whereby the security process would be both predictable and consistent throughout the world and done in such a manner as not to be overly prejudicial to more advanced airports and more lax with others.” One plan is the Known Shipper Program, instituted shortly after 911 to curtail the random introduction of a bomb into the cargo of large volume shippers. The members need only sign up online and declare their personnel are vetted, facilities of their shippers secure and their cargo is safe. The program uses information provided by the shipper himself to his forwarder or directly to the carrier to establish himself as a secure shipper and whose cargo is beyond reproach. This program is empirically reasonable assuming that every terrorist, thief or smuggler is always honest and forthcoming! It allows the shipper (even if it is a front operation, so long as they pay their bills) to demonstrate through the submission of a form, the fact that he is a good guy and deserves a ‘pass’ through the rigors of ‘air cargo security screening and inspection’! In these cases the shipper becomes the inspector, I call it the wolf in the hen house technique. As the sea freights’ ‘CTPAT’ (Custom Trade Partnership Against Terrorism) program dictates, all signators to the document will have full background screening for their employees, secure yards and stuffing facilities and appropriate tamper evident security packaging and sealing for their containers and trailers. There is no such mandate for air cargo and even if there were, it could not be universally enforced based on the diversity of air cargo. C-TPAT is a voluntary program that again offers the Doctor Feel Good approach to security rather than a true effort to secure the world’s supply chain. The C-TPAT program has been in effect for almost 4 years however little is being done to actually validate members, systems, processes or containers. Currently, less than ½ of 1 percent of sea containers are actually opened for inspection. U.S. Customs and Border protection came out with the C-TPAT program some years ago as a means by which to ask industry to participate in securing the world of sea freight through the use of best practices. Since they had no real experienced personnel available for designing sealing security programs nor any original ideas, they asked the International Standard Organization to use their seal criteria as a basis for securing containers. Out of this fiasco, the ISO developed a set of recommended, not required, best practices and products to securely seal sea freight containers named ISO 17712. Among these tainted recommendations was the infamous ‘bolt seal’ recommendation. This was later (after 4 years of misinformation) withdrawn in August of ’06 but it still exemplifies the worst our government has to offer in recommending appropriate remedy to supply chain threats. Standards used to recommend best practices dealt only with their physical characteristics rather than their functional effectiveness. In the air cargo industry, no such recommendation was proposed because there are far too many bundling techniques available for air cargo and none can be sealed permanently as can sea freight. Cargo handlers must have access to air cargo at all times thereby requiring the use of self adhesive seals rather than barrier type products. There are no doors to close nor locks to apply when it comes to air cargo. Because of their inability to tackle the problem, they have effectively left remedial recommendations to chance. THE COSTS OF LOSS There is no denying that the United States has porous borders. Regardless of the level of inspection at crossing points, trucks with cargo and at times people move into and out of the United States daily. In the transportation industry and especially in air cargo, we base much of security on blind trust because over the years that is our societal norm. Based on our economic system we cannot integrate barriers to commerce without completely disrupting logistics as we know it. Logistics is the backbone of commerce and integrating walls and barriers to that system cannot come without significant push-back from all quarters. Unfortunately terrorism gets press for as long as practical and fades from public view when sufficient time has elapsed to spin out its’ media value. As a consequence funding for a cross border event is precarious and prone to mimic public awareness rather than consistent real world threats. The fact that billions are being expensed for the Mexican Fence project clearly shows that money is dedicated when there is a direct correlation between political benefit and public outcry. It seems the illegal immigrant worker issue became the instigating factor rather than the fact that a terrorist can get on to United States soil with little skill and effort. The costs of loss to our economy and GNP through a terrorist strike can be catastrophic but proactive spending to reduce this known risk is currently non existent and will not be employed unless mandated federally. Take cargo theft for instance from air, truck or sea freight, combine its effects with smuggling, money laundering and other conditions of loss and you get numbers approaching $55 Billion. This type of information rarely hits the news media. The disconnect between the need to act on passing of legislation and actually implementing it is political. No one wants to be the bearer of change, hence we stay in our stagnant state of complacency. Isn’t government great! The project costs to our government to deploy a domestic technology-based air cargo inspection plan would be about $3.6 Billion. These funds would be dedicated to the purchase of automated inspection equipment and its deployment to major air hubs both here and eventually world wide. The effect of funding such a move would establish benchmark inspection techniques that could be enhanced by carriers and governments and subsequently benefit world commerce. The initial program is clearly designed to bolster security of US bound cargo. What could be a better use of funds? In addition to dealing with technology, mandated workable process controls to shippers and carriers need to be both designed and implemented. These controls would entail a minimum of 24 hour reporting of cargo data as well as to establish cargo holds on suspect or non compliant shipments for 100% inspection. The time impact from pre-notification in air cargo, like what is being done currently in sea freight, gives authorities time to filter intelligence into the security equation to help identify anomalies before these goods enter the supply chain. The competitive nature of companies will help define this systems effectiveness. Everyone wants JIT cargo yet few will accept these internal changes. Air cargo still basically travels unencumbered with paperwork. E-Shipping is the standard and e-data is kept to a minimum by design. The more data needed the more cost and time delays. By maintaining the requirements for minimal data collection but enhancing the inspection process, shippers and carriers could reasonable enjoy some of the benefits they have now while decreasing risks. The added inspection process simply involves time, the component of air cargo which is least available! Bridging this gap can only be accomplished by creating efficiencies through packaging and loading consistencies and the ability to recognize packaging anomalies easily thereby increasing throughput. Data has currently become a point of contention among shippers and carriers as cargo data is tad amount to the compromise of business intelligence. Who maintains the data, who has access to it and how will it be evaluated are all questions that have been raised? Collectively industry has resisted data collection because of the uncertainty of its use or impact if compromised. Intelligence aside, (and I really mean that) the TSA and industry partnership has attempted to address cargo security through the use of studies rather than action. The TSA has spent multi-millions of dollars on these studies with Deloitte, Lockheed and other think tank consortiums with little to show for the investment. There are currently 300- 400 cargo security professionals at the TSA focused on the threats and vulnerabilities to air cargo, however that is 1% or less of their workforce. What it has come down to is that, according to a report from the Center for American Progress, “The TSA allows the 1.5 million Known Shippers, 4000 freight forwarders with over (10,000 individual branches and millions of personnel) and 300+ commercial air carriers that form the air cargo supply chain, to largely police themselves.” Scary. Air cargo risk can be viewed in many ways, however remedial action must be categorized in such a manner as to direct resources to the most critical areas first. By defining individual risks, air carriers and their clients can leverage their choices of whose job it is to do which task and therefore collectively participate in reducing such risk. Areas such as security tapes and seals would automatically become the shipper’s responsibility to apply, while the carriers responsibility may be to visually inspect the boxes at each hub and prior to boarding. Carriers would be ultimately responsible for the x-ray inspection of cargo prior to boarding and during a delivery sort while CBP (Customs and Border Protection) would pick up the oversight at both ends as well as act as the enforcement arm if problems are identified. POSSIBLE UNILATERAL SOLUTION Courier boxes and envelopes supplied by carriers should be required to have an indigenous number and (if possible) a tamper evident seal and markings (tied to the bill of lading) so that replacement packaging with a similar box is harder to do. Recipients would have the ultimate responsibility to compare manifest numbers with packages before accepting them. Carriers may elect to physically pack, inspect and seal counter tendered goods from certain shippers against theft and the introduction of piggybacked contraband. In this scenario the carrier would control the packaging components and security systems and bear the costs associated with this level of protection based. Shippers would be charged for this service just like the security add-on’s charged by the airports to passenger tickets. By offering a participatory plan whose outcome is mutually beneficial, carrier and shipper or carrier and government can cooperatively work to provide the unique component of security that they do best and at the least cost. SPECIFIC RISKS AND THREATS: THEFT: Cargo theft is alive and well in air shipping as well as in most other modalities. It is conservatively estimated at that air cargo theft is an annual world wide problem approaching $25 Billion, most of which occurs at unprotected airside facilities, distribution and sort hubs and at points before, during and after arrival. Luxury goods such as sun glasses, jewelry, electronics, watches, CD’s, software, designer clothes and pharmaceuticals are among the long list of targeted goods. Many of these items, like any air cargo, are most vulnerable when left unattended in in-bond areas or unprotected airside warehouses. Theft can be easy for those with access and almost impossible to detect due to the sheer volume and chaos associated with cargo sorting and staging. Theft can be both a total or partial removal of the contents, thereby making detection even harder to notice. Small volume pilferage mounts up quickly when dealing with controlled substances, jewelry or electronics and because many companies fail to keep these records the small leakage continues on unabated costing businesses millions in hidden losses. Chips are often more valuable than diamonds and cash is no longer king in theft targeting. Claims of mysterious disappearance plague the shippers and the insurance industry tremendously but many never get filed simply because of the cost and affect of future business. No business wants to air their dirty laundry by informing the public that some ethical drug, blood, cell phone or commodity has been stolen and available for sale by thieves. The negative press one receives when identifying that his goods were stolen and are now free astray in the market can ruin a brand and bring their stock to its knees. This is especially true in ingestibles such as pharmaceuticals, baby formula or foods. Boxes can be surreptitious entered, items removed and resealed with little or no scrutiny because packaging is typically generic and opaque and has no viable or reliable means to detect entry and reclosure. Items can also be tampered-with in the same manner. Tampering is usually undetectable until delivered, where many physical thefts are discovered at sort facilities. No mater how hard air carriers and air couriers try, this form of loss continues to escalate. There is little to no reliable data on the dollar volume of cargo theft on an international basis because no one wants to take that data public. Insurance data is also quite fuzzy since most transportation losses, where employee infidelity is the proven cause, is not an insurable event. The Carmack amendment covers many transportation losses in compensation by the carrier based on the ‘pound weight’ of the item rather than by wholesale or market value. This biased approach to compensation makes financial recovery through insurance impossible for many high value goods. Issues such as a companies reluctance to share critical loss or embarrassing data, further complicates the ability to actually assess the magnitude of air cargo theft losses on a national basis. Without access to such data, government programs are far more difficult to propose since they are not viewed as critical. Many carriers still deny the problem exists in their company as the exposure of a theft problem could ruin their business. Government statistics and industry available loss data fail to show the magnitude of the problem so little focus is placed on creating legal remedy by them. With the advent of government mandated counter terrorist activities in shoring up airport facilities, theft control is being positively impacted, however as a collateral rather than a primary focus. Theft control for air carriers has always been the stepchild of operational efficiency. Since they have little to no control of packaging, type of goods or daily volume, carriers must rely on the use of best security practices to effectuate theft avoidance rather than develop a focused approach to the problem. Many air carriers sell cargo insurance as a profit center since actuarially this is a tremendous profit center. They sell the concept of protection at a shipper acceptable level and work the numbers and trends to bolster income. Insurance is also a state of mind! Most insurance in the cargo area, unless issue specific, is rarely an effective remedy. CONDITIONS OF LOSS DEFINED BY CATEGORY A lesser known theft condition is the compromise of intellectual data placed in courier boxes or envelopes and subsequently opened and read prior to getting to the recipient. This condition is prevalent in the courier business as generic courier packaging lends itself to this form of surreptitious penetration. Since most courier packaging is unmarked, unnumbered, generic by design and having no indigenous features, inspection for opening or replacement of the original box with an exact replica is impossible to detect. A perfect example happened some years ago on Wall Street. Venture data involving mergers and acquisitions were becoming known prior to the event taking place because couriers were able to open, read and replace documents in overnight letters. Couriers were also caught using boxes to transport drugs through the air system by replacing a letter pack with a box filled with the original document and dope and then recovering the dope before delivery, thereby using the shippers account to move the drugs transparently to the courier service. Although in these examples nothing physical is stolen, the data compromised can be significant. The covert movement of illegal drugs was simple and easy to effectuate thereby causing all parties to suffer a loss. In many of these so called victimless crimes people are in fact negatively impacted but not to the level where exposure of the problem will be the catalyst for change. DAMAGE: Most cargo suitable for air shipping is highly valuable, critical by nature and design, and or in some way sensitive or delicate. From body parts, blood and vaccines in coolers to newly calibrated electronic devices, air cargo can be most anything. Blood, pharmaceuticals and foods that need constant refrigeration are vulnerable to damage through delays or equipment failures. Electronics such as plasma TV’s are frequently damaged through rough handling where smaller items are frequently crushed or exposed to conditions that adversely affect their operation. Unlike palletized cargo moving in sea containers or rail cars, air cargo is randomly packed for shipping at the time of loading on air pallets. Cargo can be flung into C containers, loaded on air pallets and covered with 5000 pounds of non-descript cargo on top of them. Little to no priority is given to bulk air freight in so far as commodity classification or stacking priorities is concerned. The random nature of loading and stacking has become the major condition that causes most damage. Because of the speed with which air cargo navigates the supply chain, if damage is not discovered at a sort facility, it is rarely if ever found until opened by the recipient. Air claims involving concealed damage or loss resulting from packaging deficiencies are hard to prove as shippers are frequently unable to document packaging specifics and therefore many claims are denied. Outside insurance on air cargo is harder to secure than truck, sea or rail cargo and it is considerably more expensive and issue specific. Most air carriers offer the purchase of cargo insurance as an added profit center to their line haul. The Carmack amendment created bench mark valuations for lost or damaged goods which have little use in truly assessing the true cost of a loss. Values of $.25 per pound remain as active benchmarks for uninsured freight claims regardless of commodity. Little can be done to improve or bolster packaging without a considerable increase in shipping expense as all air cargo is based on a cube/weight ratio. Light and bulky freight is equally as expensive as heavier goods and therefore offers little incentive to shippers to beef up packaging standards. Damage claims in air freight out paces theft by a ratio of approximately 3:1 where damage in truck and rail is easily 10:1 over theft. PIGGYBACKING; The introduction of contraband into legitimate cargo is a condition that has existed for many years, but not recognized as a problem until 911. Threat awareness brought this condition out into the open but agencies such as DEA and CBP have been dealing with it for 30+ years. Drugs and other contraband have moved freely in the world supply chain regularly inserted into cargo of every description. This underground supply line is all but invisible to inspection as in many cases the product masks the content. Coffee blocks smells, drugs encased in tile makes them invisible and nested cargo (cargo placed inside larger items) is rarely examined because few parcels are opened. Interdiction technology ranging from x-ray and sniffer screening, which is recent, to dogs and hands on visual and physical inspection, has only been recently adopted. More effort has been put into these areas in the last 10 years than has been allocated to any theft controls. The collateral positive effect of this type of scrutiny has begin to yield a more viable means to discover weapons and drugs over any other tool. Passenger inspection personnel supplied by TSA have done little to enhance these areas as most inspectors are unskilled, poorly trained and unable to effectively deter smuggling. Since most smuggling it is done in cargo which is outside their scope of passenger inspection systems, screeners fail to make an impact on interdicting these nested goods. The programs requiring checking accompanied baggage and freight from passengers is only now being performed regularly. According to the Center for American Progress, only 5 percent of the 2.8 million tons of air cargo carried on to commercial aircraft is screened for explosives and other dangerous devices. That would mean that negligible to no screening is done to the almost 1 million tons of freight passing through passenger terminals. Illegal food, animal and agricultural cargo can also be the basis of the deployment of a weapon of mass effect or mass destruction by air. Biologics and related chemicals are next to impossible to detect in the sea of small packages on an aircraft or in passenger baggage or freight. The fact that animals can be an effective terrorist tool makes all cargo suspect and no cargo inherently safe. SMUGGLING: Can be defined as the shipping of contraband cargo into the United States that is either misclassified to avoid tariffs’ and duties or is made up of illegal or banned goods or people. Smuggling can be dangerous cargo, ethical drugs, controlled substances, animals or any type of innocuous cargo that is deemed an exception by our government as acceptable for importation. Counterfeiting is fed by smuggling efforts. A creative terrorist can easily introduce a weapon, explosive or biologic inside cargo, nested as a piggyback to some approved shipment or inside a person or animal. Discovery of this form of smuggling is extremely difficult if not all but impossible. Intelligence typically is the key to discovery of this form of threat, where conventional physical inspection techniques are ineffective. This type of nesting is extremely common in drug or currency smuggling, where smaller bags are nested in larger cargo or vast amounts of contraband cargo is sent to many locations to be then combined and transshipped elsewhere once inside the United States. This same method is used to extract goods. Reverse smuggling can move weapons, currency or stolen goods out of the country. Regardless of the size of the cargo, misclassification is an easy and reliable ploy to beat the system. INDUSTRY OVERVIEW Passenger accompanied air cargo is a major profit center for the airline industry. It accounts for approximately 15% of their overall revenue with no additional expenditures required. To require more physical security in this one area of revenue would not only decrease profits but would add residual operational costs, slowdowns and dedicated personnel to administer. The balance between each revenue generating component in the air industry affects their willingness to fund and implement enhancements, so unless mandated, there is no incentive to go overboard on shoring up this vulnerability. Air cargo security is an uphill no-win battle between what is industry practical and what is mandated by law. Numerous congressional attempts have been made at mandating 100% inspection through legislation. The cost of 100% cargo screening on commercial passenger aircraft would be in the billions of dollars. Funding such an inspection mandate would be a challenge. It has been proposed that there be a fee charged for security, much like the airport security fee for passengers. With millions of air shipments daily, new funds would collect quickly. The issue is who administers these funds? What guidelines would be needed to purchase technology and of course, what technology would be purchased and from whom? Since there are really no answers to these questions, no one can begin this course of action. According to the International Air Transport Association there will be a 26% increase in Asian air freight in the next few years resulting in a tremendous bottleneck if even a few percent increase in inspection is required. The issue with world wide air cargo inspections is also based on a countries ability to fund such inspection and if the current air side facilities can handle this in a secure manner. The EU certainly has a range of both excellent and suspect air facilities. Third world countries rarely if ever can provide even minimal standards of care and inspection to air freight. The Asian market is surely the greatest revenue generator in the air cargo industry. The growth rate of goods shipped by air from China and the Pacific rim is staggering with no end to that growth in sight. Every air freight carrier and every commercial passenger airline is embroiled in getting market share. The more encumbered air cargo becomes by inspection requirements the slower air cargo becomes. There is a delicate balance between what a shipper is willing to pay to move goods and what trigger he would have to alter his supply chain and modality. Speed is value proposition for air freight however with the complex interconnection between modalities which exists today, switching from purely air to a sea/air or sea/land combination is tenuous. Price is always an issue but with the fluctuations in fuel costs and the possible implementation of security processes, airlines are sensitive to the balance of freight rates with these possible new expenditures in mind. The higher cost of inspection combined with the possible security operational slow downs, could cost shippers more than they are willing to spend. The new developments in sea freight and dedicated sea lanes, combined with the faster speed of sea cargo, are major concerns to the air industry. At what point do shippers bail out because of costs vs. speed considerations? In spite what can be seen as slower transit times, the globalization of our supply chain is fixed and there are basically no choices for some shippers and commodities other than air, regardless of the increases in cost, paperwork, time and reduced schedules. Commodities such as consumer electronics, toys, high end apparel and foot ware are some of the time and market sensitive products that mandate carriage by air; so despite the pitfalls and increased costs, these items will continue to fly. The higher costs of transit however will soon make its way to the market. Since the air cargo industries’ infrastructure just cannot support the increased security requirements of a changing world, shippers will soon be seeing surcharges on air freight and even higher premiums on smaller shipments. Since many Asian routes are growing faster than predicted these ship points will soon become choke points in order to accommodate security procedures and some shippers may be forced to change modality to get goods to market. Direct sailings from many Asian ports to the United States can reduce sea times significantly hence the declining delivery gap between air cargo and sea/land services will make financial sense to many. The trend in choosing modality is the fine line between costs and time, and it is no longer clear cut. CONCLUSIONS: Legislation means different things to different countries. Laws created here have no binding effect elsewhere. Security systems such as background screening for transportation workers (TWIC cards) is an excellent way to know who is handing your cargo, however it does not apply elsewhere. C-TPAT, best practices asks that over seas cargo container stuffers (packers) be vetted to insure compliance with anti-terrorist security procedures. This is a great concept that is all but impossible to guaranty. The Known Shipper program requires a complete background be done on volume air shippers to help speed their cargo through the system but fails to account for the thousands of consolidators who become the middlemen in these logistical moves. Here again, a great concept but easily corrupted by anyone able to infiltrate these companies and use their good name as a screen for covert activities. E-manifests have been proposed as a security tool but because these documents can say anything and are written by the shipper, their use as a security component is suspect at best. The technique of tainting lots of cargo at one time is a reasonable terrorist approach given the speed with which air cargo moves but the fact that one small envelope of a bio weapon can shut down commerce is a precarious concept.. Inspection is the only way this can be stopped. Overall the air cargo industry provides a reliable and cost effective way to speed goods to market from world wide points. The industry recognizes it’s role in commerce and like any business views profitable operation as their main strategy. The fine line between our governments ability to alter the actions of private enterprise for the greater good is a gray and uncharted path. Given the changing world in which we live and threats we face to our way of life by terrorists, we must find a way to mandate changes to industry processes and thereby effectively protect our borders while not disrupting commerce. Vulnerability is the new paradigm for long term business planning in any business, but especially in logistics. It need not take another 911 to motivate our law makers to act in this regard.

The Underground Supply Chain

By Erik Hoffer

Our transportation industry serves as the pulse of commerce, and the heart of our economy. Collectively we move food, clothing, and most other essential goods by truck, rail and air. The question I propose here deals with the transparent nature of logistics masking the fact that we are not alone in our efforts. There a black side to logistics and no one sees it. There are contra-logistic forces out there which replicate our processes for their personal gain. and commonly deliver stolen, diverted and counterfeit goods to clients right under our noses! Besides essentials, contraband drugs and illegal weapons are also commonly transported using commercial trucks and courier services. It is estimated that stolen goods have an annual world wide value of approximately $50 billion dollars, and they have to be moved to market somehow! There are billions in counterfeits filling our stores and pharmacies that have been delivered seamlessly along side legitimate cargo. There are also untold billions in illicit heroin, cocaine, ecstasy and even laundered currency which take same the distribution channels to market as any normal product. How is this done? Who is responsible? Who makes it happen? Who profits and who looses? How long has this been going on? More often than not, the same routes, modes, carriers and methods employed by legitimate businesses, transportation companies and supply chain participants are the conduit to market for these products. Unfortunately, this seamless system has been employed for years and defines the dark side of logistics. We do know that theft-based transportation is frequently masked by clever thieves who move these goods with reputable carriers in normal distribution channels. For example, a truck is followed from it’s Distribution Center and then stolen at a truck stop. The goods are rushed to a public warehouse, and they are quickly off loaded. A fictitious company account is set up in advance for the arrival and short term storage of these goods. That location is now used as the transship point. In this so called cross dock operation, goods are almost never repackaged as they are quickly reshipped as a full truckload to a port of debarkation or to another break bulk facility. In the latter case, goods will be further broken down and possibly blended with legitimate goods to mask any chance at traceability prior to re-shipping. In the first instance, goods may be trucked to Miami and loaded on containers destined for South America, Russia, India or other foreign ports in the world for further distribution. By now, the picture should be getting pretty clear. Stolen goods have suddenly assumed another identity and appear to belong to someone else. This makes them the newest members of the underground supply chain. At the same time counterfeit goods, poising as legitimate products, are moving to U.S. markets from foreign ports to be blended with prime product and resume their travels. This new dimension further complicates any chance to unmask the stolen shipments. Upon arrival they are distributed by otherwise authorized resellers to retailers or manufacturers just as if they were legitimate. They are then moved to their client’s locations by honest carriers, who are p[aid for their efforts, all the while abusing the system. Products traveling in this manner pose as authentic to carriers who would otherwise not touch them. Stolen goods in some cases may have to be repackaged or unpackaged but without an inspection template, defining these anomalies is impossible. In the case of meats and fish, they are repacked for a quick sale and rarely spend 2 days in transit after the heist. These time or temperature sensitive goods give a new meaning to “custom critical” deliveries. No cases are made by law enforcement after the evidence is eaten! If you cannot catch them doing it or dissuade them from taking the loads in the first place, these goods are long gone! Many of these products are ethical drugs which may have been out of proper storage conditions for a period of time making them potentially useless or dangerous, yet the packaging remains untouched and therefore the goods move normally. Because of the need for speed in illicit logistics chance planning is almost never a consideration. Thieves plan and execute these moves as well as any logistic provider ever could. There are many truckers who inadvertently provide this service unknowing that this freight is suspect. Many hands touch cargo but most eyes look the other way. Transportation providers, eager to satisfy a client or attract new ones, will take on freight moves without ever recognizing or analyzing the facts surrounding the cargo. As a prime example, imagine that I am a NJ trucker. I gave been asked to pick up a load of J and J products from a public warehouse in Baltimore and move it to Miami for export. Does this ring of a possible problem? Does he call the police who will probably not give him the time of day? Or, does he accept the move and get paid for his services and keep on truckin’? Other cases, where goods are imported and cleared at the port or border crossing, are actually in the process of be being diverted back to the USA, right under the nose of our Customs’ officials. A situation of low risk freight from a low risk shipper in a busy port puts time on the side of the criminal. The risk lessens based on his choice of ports. The more active the port the less likely an inspection opening. A thief’s overall risk is diminished by the fact that even if he is caught, or one load is detained, the legal remedies are light. There may be simply a fine and slap on the risk, making crime a profitable gamble. No one in our industry is immune and no one can be that vigilant all of the time. Regardless of their origin or ownership, freight will move through our normal logistic system and be delivered to markets throughout the country daily. The courts, police or government have not facilitated a remedy or dissuaded the criminal element from using the commercial supply chain for their ends. The underground supply chain is truly transparent to us all.

When the Threat Has No Face

By Erik Hoffer

November, 2001

The 911 attack created a new reality and a broad-based credible fear in America. The awareness of terrorism has spread from the living room to the boardroom. Business is suddenly acutely aware of terrorism as a major threat to profitability. Before 911 business risk usually dealt with lost sales, not death or destruction. Today, the threats of biologics or explosives infiltrating our plants and offices is real. Media feeds the paranoia but the basis of concern is genuine. Those who were prone to dismiss certain threats to personnel and profits now open their mail with apprehension! Times have changed. In commercial transportation, we have seen passenger inspection reach new heights. It is now common to see a National Guardsman with his M-16 at Newark Airport where just 2 months ago, we would have seen a complacent untrained and typically non-English speaking inspector! The fact that we now have openly addressed the fears of the travelling public is good, but that is merely the first drop in an ocean of need. Clearly every plan to totally eliminate risk falls short. I believe that the people who changed our way of life are somewhat less likely to repeat that game plan. We know they are neither naive nor foolish. We also know that they are well funded and that they have access to weapons of mass destruction. In order to prevent a second attack, we have to think as they do. Preplanning a threat assessment strategy can prevent another tragedy. A repeat of 911 is far less likely by someone but something such as a pallet, sea container, rail car or letter. How do you plan for a threat when the threat is yet undefined and faceless? With the current level of awareness and many physical countermeasures in place, we should not have to concern ourselves with a terrorist easily able to penetrate air, rail or bus security. We should be able to ferret out suspicious types and prevent them from getting on board! The complacency that was pervasive in all forms of transit has now been forever altered. What happens when the threat has no face? How do we offer a level of protection that addresses homeland security when the dynamics of such all-encompassing protection is inconceivable and probably unattainable? The only way to get your hands around this gorilla is to think about each threat independently. One area of real concern is unattended cargo, which moves freely throughout the United States at the rate of over 40 million cargo shipments daily. Just as simple letters were able to quickly penetrate an unsuspecting postal system, so can tainted cargo penetrate an unprepared logistic infrastructure. The supply chain has never had to deal with this level of security and unfortunately they are unprepared. What are we doing about examining unattended cargo entering our borders or being shipped domestically? What can be done to insure a device or biologic does not manage to surreptitiously board a commercial jet or trailer? What scrutiny do we offer our respective companies as cargo receivers, shippers or carriers to insure that tendered cargo is free from contamination or worse? The answer to all is typically nothing. The paranoia against a faceless cargo infiltrator has yet to translate itself into action on the part of government or business. The reason is simple, when the problem appears reaction is immediate, no problem therefore no remedy. Both large and small business run an equal risk as any threat would be random. Some Government agencies have instituted programs requiring driver checking and even reissuing of CDL’s. Hazmat carriers are instituting employee background checks and the FBI has audited trucking companies to do basic vulnerability studies of their business practices and personnel. The FAA has created a “known shipper” program requiring air cargo carriers to know their clients before accepting goods, but little has been done to inspect the cargo itself. Trucking deals in expedited cargo. They have little time to X-ray packages, much less open cargo as an integrity check. Receivers at larger companies that allow cargo on site before checks are made become vulnerable. Ferreting out “bad cargo” among good cargo is all but impossible without some protocol basis of evaluation prior to accepting tendered cargo. Is there a fix? It is obvious that companies naïve to the threat or unwilling to acknowledge it will take no action, as that action comes at a price. Conversely, companies who view the problem as acute may wind up spending resources they could have allocated elsewhere. Overkill in addressing these problems can take its toll on staff, workflow and profits. What is the correct level of risk, and at what threshold should companies seek solutions? Should solutions be physical or protocol based and who should determine the action plan? The answer to all of these questions comes with a simple axiom. Risk planning is a basic fiduciary responsible of employers. The need to facilitate basic levels of protection of your human, intellectual and physical assets is a clear mandate. With even a basic proactive effort to reduce risk in place, your employees and your clients can feel safer and inherently more secure. The system should assess the way you ship and the way you receive cargo and mail. It should attempt to find procedures that offer some level of inspection before unaccompanied cargo gets on your site or picked up by your driver. Any good system should promote physical containment during transit and an inspection template upon delivery. It should create awareness. Whether it is a carrier instituting a preferred client system to a shipper requiring pallet locks, each transportation provider or user needs to be aware that cargo can quickly become a vehicle of destruction. Plan accordingly!

Cargo Security a Debatable Concept

By Erik Hoffer

Remarkably, the need to protect and secure unattended transported cargo, seems to be a debatable concept? Documented losses through damage far exceed those from theft. In fact losses in some industries and from certain products through counterfeiting, diversion and all forms of fraud, also seem to exceed those quantifiable losses from supply chain theft. So where should business rank theft, and a secure supply chain, in terms of a budgeted priority and corporate strategic focus against other known threats? Is it worth caring about this problem at all? Who is financially responsible for remedy and then who is responsible for the loss? Is it smart to seek remedy proactively or do you wait to become a victim before taking action? Does the same entity pay when goods are stolen as when goods are damaged? What role does the shipper have vs. the carrier in reducing or assuming risk? All of these questions elicit a variety of unrelated answers depending on who is being asked and what products they transport or ship. This array of answers defines the dilemma of where does cargo security fall in corporate strategic planning from a shipper or carrier prospective? Cargo losses can fall into a two main categories, those recoverable and those not. Losses through cargo theft can collaterally and exponentially escalate the actual cost of loss to many times that of the initial cargo itself through supply chain chaos and the consequential disruption of normal business caused by the initial event. Some cargo losses however are simply written off, based on the value of goods in question. Financial remedies such as insurance and litigation, in some cases, are ineffective in making a victim whole yet through leverage and carrier intimidation, some of these ‘unrecoverable’ claims miraculously get settled. The Carmack amendment defines limits of liability to carriers and allocates cents on the pound for freight regardless of the commodity, its actual loss value or the collateral effects of the loss. Based on this theory, carriers can reduce their insurance coverage to bare minimums. From their prospective why invest in security when the financial remedy to a loss to them is $.10 per pound? Simple employee infidelity on the part of anyone in the supply chain can negate an insurance claim completely, hence appropriate remedy to conditions of loss need to be established by the shipper and implemented throughout the supply chain. Because of the legal limits of liability, carriers are typically desensitized about theft losses and fail to implement remedy unless it is tangibly beneficial to their operational efficiency and collaterally helpful to their clients. The rule of thumb is that shippers need to protect their interests against any condition of loss (including theft) independent from any perception of external remedy by carriers, 3PL’s or their agents and certainly not from law enforcement. Law enforcement was once intimately involved with cargo theft as a means to control the illicit transfer of stolen goods. Recovery in some cases means more problems to some shippers than the loss itself. Ingestibles need to be destroyed if recovered by law. The cost of destruction is then born by the shipper compounding their loss even more. Today, most federal funds once earmarked for cargo security have been redirected to address National security issues although cargo poises one of the greatest threats possible to our economy. Supply chain disruption, through an act of cargo terrorism, will bring the economy of the free world to its’ knees. The relationship between cargo theft and cargo terrorism is exactly tangent, where you find one you will always have the propensity to find the other. Cargo theft therefore is clearly a fallout component in addressing National security but it has somehow been left out of this equation? In today’s economic climate, where a JIT (Just In Time) supply chain is the norm, losses of any kind radically disrupt a companies business logistic continuity. The severity of these conditions are typically based on the nature of your product. Many types of loss are more oriented toward consumer perception than short term economic fallout. For example the potential contamination of a food or an ethical drug can cause massive recalls and loss of consumer confidence which then exponentially exceeds the original value of the stolen goods. It is funny however that you rarely, if ever, hear of these conditions, yet there are easily $10+ Billion in cargo stolen annually moving through the domestic commercial supply chain, whether owned by the original shipper or not. Theft losses are typically suppressed from the public by businesses for obvious reasons. No one wants to air their dirty laundry and concede that their product is out of their care and control. Stolen freight presents a dilemma to both the owner and consumer of these goods because if it were known that certain goods in certain venues were stolen or potentially tampered with, sales would evaporate quickly and their stock values would soon follow. Vulnerability to theft, product contamination and now economic terrorism is not related to the value of goods. It is equally as necessary to protect a truck load of chewing gum as a truck load of pharmaceuticals or a tanker loaded with gasoline vs. a trailer of cameras. Millions of people could easily be exposed to tainted gum or aspirin and that tanker parked on a bridge can function as a weapon of mass effective shutting down a city for days. Chemicals, foods, fragrances, electronics, cigarettes and computer chips may be the most theoretically vulnerable items, but in reality an items’ vulnerability to the threat of theft, is a direct correlation to the speed with which the product can be fenced or absorbed into economic obscurity. The value of some products and vehicles as terrorist tools spans everything from fire engines and garbage trucks to gasses and pesticides. Soap powder, diapers and toilet paper can be as vulnerable to theft as computer chips in certain areas. Meat, seafood and cigarettes can be targets for theft while a container of lawn chairs can be a conduit for the introduction of a weapon into our country. Nothing in a container, rail car, air freight shipment or trailer is immune to any condition of loss or worse. The less scrutiny the unit receives the higher the probability of a problem; yet in industry the lower the value of the item, the less attention is paid to protecting it. Complacency seems to foster ambivalence at the board room level hence remedy to this form of loss becomes an economic obstacle rather than a mandate. The filtering process business management uses in selecting “cargo security” as a budgeted platform has been obscured because data brought up the corporate ladder is tainted. Decisions on how to couch theft loss data are administered by those unaware and not responsible for the threat or consequence and often protective of any facts that bode poorly against their own corporate function. The fear of domestic terrorism through the use of cargo containers, tankers and trucks is just making its way into the public eye, although that 911 reality has been with us for years. The change in our domestic business culture from a pure security department to a multi tiered venture between logisticians, HR, risk managers and purchasing has moved remedy from prudent functional choices made by experts to economic based decisions by disinterested third parties. In many cases, purchasing decides what is bought to reduce risk vs. what is actually needed. Remedy to conditions of loss has changed in recent years to this knee-jerk approach after an event, rather than a more proactively planned security approach to supply chain issues. This attitude is pervasive in the truck, air and rail industries and with many shippers, although they are all equally linked to the fallout from a theft or terrorism related supply chain loss. Issues involving the vulnerability of intermodal freight have also been consistently ignored because of the lack of specificity to viable remedy outlined by our government officials. C-TPAT (Custom Trade Partnership Against Terrorism) is a tremendous preventative theory with no current viable benefit and no specific mandate for compliance. The promise of the carrot and the absence of a stick has made what was a credible program into a sham. With thousands of signators, all trying their best to do what is needed to protect our borders, DHS et al, in their collective wisdom, have failed to take any decisive action and, like many programs before them, fallen apart and been mired in bureaucracy. This nebulous logistic security plan has left many shippers and transportation companies with little to show for their compliance costs and no tangible results. Many remain using little or no viable protection technology for their sea cargo awaiting Big Brother to show them the way. Born and developed with the Countries best interests at heart CBP (Customs and Border Protection), TSA (Transportation Security Administration) and DHS (Department of Homeland Security) have all been radically remiss in allowing such a well intentioned program to be left out to dry with nothing behind it but words. Technology is available to secure cargo throughout any supply chain both from container losses and the introduction of contraband into cargo. Simple physical barrier technology such as container locking bars needs to be set as a minimum standard of care to control access to containerized cargo the world over. Appropriate security choices need to consider the level of potential loss, degree of risk and severity of the threat against the reasonableness of cost vs. benefit of the technology. Penny wise and pound foolish is usually the rule of thumb. What can business get away with to perceptively meet compliance vs. what they really need to do to secure their supply chain usually comes down to cost. In cases where no particular remedy is prescribed or known, industry best practices should be sought. Hardening the target to avoid theft is the best and most effective approach. Conditions of theft and terrorism CANNOT be stopped by seals, electronics, intelligence protocols, armed guards or even superman because a determined predator will always somehow win. He typically has the time, the skill and the expertise to wear you down and get what he wants. Remember you have to be perfect and he has to be just lucky. Creating a situation that dissuades him, moves him elsewhere but rarely mitigates the condition. Countermeasures reduce your risk. There are associations such as TAPA (Technology Asset Protection Association) and the ICSC (International Cargo Security Council) that have specific expertise in choosing the appropriate physical protection technology for you, your supply chain and your product. Many lazy shippers have looked to ISO standards such as 17712 to choose a protection technique because, like CBP, they choose to use a standard of care without regard to its viability of effectiveness. When choosing a seal, a shipping or inspection protocol, or a best practice to secure your product, vehicle, pallet, or supply chain, the best choices specifically address the threat head on, and not the particular physical attributes of the seal. A simple threat matrix will identify the severity and components of your threat such that you can make an informed choice of a seal or technique. ISO, for instance, recommends a bolt to secure a container, when everyone knows a bolt can be bypassed surreptitiously in seconds on any swing door trailer or container. By their very nature as a testing and not security organization, with no tie in or responsibility for any condition of loss, their product based recommendations have no real bearing on loss control but merely on the physical attributes of the seal type. Blindly following a program puts you at risk. This does not mean the bolt is not a viable physical seal, but it does mean that a bolt cannot effectively secure a trailer or container against a thief or a terrorist. You have to decide if this fits your plan or not. Hard wired electronics in the form of seals and entry detectors have been proposed to secure containers and domestic trailers, but in reality they cannot be effectively deployed or monitored. Domestic portable electronic truck and cargo tracking has come a long way and is ideal in many cases for certain cargo under certain conditions. The speed with which an effective response to a breach can be addressed is still questionable. Certain devices will help to possibly recover the cargo but not much else. Electronics used in a sea and salt environment is not viable, nor practical. Although there are situations where specialized military technology has been used effectively to secure sea cargo, the practical nature of this technology in the world supply chain is remote. RF Signals emitted through or on metals are attenuated and therefore not effectively read or able to be monitored. Deployment in a dynamic sense, world wide, is unlikely due to cost. (Just imagine how long and at what cost retrofitting millions of containers would take!) What would happen in the interim 10 years to cargo shipping? Who has used a secure container and who is not? Monitoring of these devices by handlers and ports is impractical due to the myriad of infrastructure requirements needed throughout the world. No one has chosen a recommended frequency much less a viable product. Recovery of the device, ownership and legal responsibility has yet to be worked out and of course there is always the battery going dead to contend with! Even the ethics associated with electronically monitored cargo has been brought into question. Who is the caretaker of the data and is the network secure to outsiders? Cargo theft as a quantifiable dollar amount is dwarfed against the issues of economic terrorism. Each of us needs to spend a few minutes thinking of what would happen if we had a massive seaport or airport closure due to another 911 tragedy resulting from tainted cargo. The costs of loss to all of us and our National economy would be massive, yet not many companies have adopted appropriate security countermeasures to protect us much less themselves. This ambivalence seems to be more denial based than truly a lack of caring or insensitivity to a potential catastrophe, yet inaction seems to be the rule. It is my perception that we as a country are slow learners and that without governmental intervention with specificity regarding cargo security processes and technology, that the domestic supply chain will remain fogged in, loss prone and remedy challenged.

Deterrence vs Recovery

By Erik Hoffer

In the most personal sense, getting your possessions back after a theft is of real importance. The memories, the attachment, the sense of closure and the reversal of the personal violation make recovery the most important factor in the tragedy. This is debatable however in a corporate sense. Recovery of items such as computers, pharmaceuticals, specialized machinery, and time dated items such as clothing, explosives or cosmetics is less than favorable.

For example if a theft of a container of non prescription drugs combined with personal health care items was taken on 1/1/01 the investigation, claim application and reporting mechanism would basically begin a few days thereafter. The shipping company would soon receive routing information, values, contents, carrier documentation and like information and then their investigator would begin his project. He would notify the appropriate police and federal authorities, he would call his insurance company and get an assigned claim, and he would interface with his logistic department or outside source and coordinate the project. This all takes time. The typical assembly of data, reporting and coordination cycle takes weeks, if in fact this person has the appropriate time to begin this project immediately. These responsibilities are frequently divided up among risk departments, security, logistic and outsourced groups which are tasked with other jobs and often fail to respond immediately to the incident. The collection of data is by far the most time consuming and cumbersome endeavor of the survey. Tracking the cargo especially in intermodal moves is difficult. Chain of custody data rarely is easy to come by and the time it takes to collect that data can be week. By the 3rd or 4th weeks after the initial claim the investigator has assembled his work sheet and begins to travel to the last point of recorded custody. His time is now consumed with interviews, copying documentation, checking signatures, evaluating the practices of the carriers and handlers of the cargo and interfacing with local law enforcement. As any investigator will tell you, local law enforcement in cargo theft situations is less than responsive to your requests for help. Property crimes in the US rank right near parking violations and j-walking. Exceptions for explosives, crimes of violence and the like are dismissed as extra work and rarely produce results. The occasional recovery of an empty trailer and tractor make the papers, but these recoveries are fortuitous and typically happen by luck rather than by design. Data collected, the investigator begins tracing and doing interviews with sites handling the cargo. Availability of personnel is difficult at best and his costs of travel begin to mount. Other claims are building up on his desk back at the office and he is constantly reminded of priorities and organizational responsibilities. In the weeks that follow, the original client has received a replacement shipment. The company has disrupted their manufacturing and warehouse operations to replace the lost lots and the reshipping and rebilling processes are completed. The investigator has a line on a possible gang operating in one of the intermediate terminals of the carrier. He has singled out a person and he has a lead on the cargo. The interview yields a give up and results in three arrests and a 25 percent recovery of the truckload of products. Because the fence was filling orders, he had broken down many of the pallets and repacked some of the products to meet demands of his clients. He had removed some labels that would have assisted investigators in tracing items and he sold 75 percent of the cargo locally. These goods made the streets quickly and were sold competitively by reputable companies at deep discounts. The manufacturer certainly was not aware of these sales partially due to his size and market share but also due to the fact that he has a tolerance for 2 percent shrinks on an annual basis. This tolerance makes thefts such as this disappear on the balance sheet and are no real cause for alarm. In the mean time the arrested thieves are released on bond and are free to return to the work force. The reporting mechanism for people such as this s rarely in force and they are quick to find other work in a competing carrier to reorganize and get back to business. The investigator returns to his home office to begin the process again. His expenses now total to $7500 for the 3 weeks of road work and he has successfully recovered 25% of the cargo. The recovered materials are collected, repacked and palletized and moved to a storage warehouse where they will remain for some time as physical evidence. The report of the recovery is shared with the insurance carrier who promptly updates his records deducting the value of the goods from the claim settlement proposal. The goods were originally shipped at a contract rate which was negotiated by the traffic department. The rate and valuation were done at a cost base far below retail or wholesale value. The goods were therefore classified as below their rightful value. The recovery gave the goods back to them to resell but such a sale is difficult to do at the original price. The client, if you recall, had already gotten his shipment and the goods now need be released from impound and then repacked, re-inventoried and resold, if possible, from stock. The goods now have to be evaluated for quality assurance; defacing, possible tampering, contamination, and the vast array of problems that can ensue from misappropriate storage, handling or shipping. The goods now have at least tripled in cost, but reduced by more than half in real value. The net result is that they may have to be destroyed, but only after significant resources are put into their evaluation and reconditioning. The basis for the recovery and associated expense has a truly negative impact on the bottom line of the company. If the goods had been completely lost, insurance payment made less deductible, the company would be ahead of the game. Now with the recovery, which is incumbent on any security department to do, the company has gone deep in the hole financially speaking. The nature of theft control is most often misunderstood. Had the company researched the costs of loss vs. the costs of preventing the loss in the first place they would find that the value of prevention is miniscule by comparison. The fact that recovery after theft with many products can never be deemed financially sound speaks to the fact that most corporate logistics department does not understand the process. By seeking out proven methods of containment, setting shipping standards, creating appropriate documentation for carriage, assigning liability parameters to carriers and their agents and by protecting goods physically one can save money in the long run. Many organizations exist to aid shippers in accomplishing these tasks. Groups such as TAPA the Technology Asset Protection Association recommend best practices in shipping and help you to do carrier audits. The TCPC or Transportation Consumer Protection Counsel Help develop appropriate shipping documentation and to assess threats and liabilities of goods out of their control. Finally the basic understanding o the true costs of theft losses, help decision makers create more secure shipping environments. The costs of loss for items stolen in the supply chain include the following items: remanufacturing, disruption of normal business activities, human resources dedicated administration of the loss, claims, client relationships, reselling, investigation, increased insurance costs, loss of markets and sales controls, liability due to misuse, misrepresentation, tampering, loss of trucks and trailers in addition to cargo, dissatisfied clients, unavailability of goods, venue for seeding counterfeits and or diverted gods into these shipments and many more. The costs of protection are dwarfed by these real expenses. The negative however is that protection must be consistent. It must be used throughout the operation since theft can happen any where at any time, based of course on the vulnerability and desirability of the goods. The cost of prevention needs to be compared to the costs of loss to make a decision. The tolerance level of loss acceptance plays a significant role in this decision process. Either way the decision to protect ones interest should always focus on what is best for the business. Protection costs rarely are out of the reach of any manufacturer from the lowest cost to the highest cost item. Protection techniques at times have no real cost as they are protocol of documentation based. These items should never be omitted from any company’s logistics procedures. How can deterrent type proactive technologies address cost savings when they are extraneous costs of products, rarely define in the cost of goods equation. The costs of protection can be both as simple as process controls and as complex as using tamper evident devices on goods, containers or rail cars. Once a deterrent is put in place it sends a message to the delivery carrier that some degree of scrutiny will be given to insure te integrity of the load he is to deliver. It also tells pick up drivers and carrier agents that the company is proactive in security and that theexpectation is made to include them in this endeavor. The risk established by putting carriers, shipper agensts and manuactiring personnel on notice is imeasureable in deterring theft. By establishing a clear auditable chain of custody handler of cargo recognize their risk of getting caught and find easier targts of opportunity. This condition permeates throughout the logistic chain and causes each handler to recognize the risk of getting caught if he attempts t steal. Risk creates a more secure environment for goods and facilitates the cargo protecting itself while out of your care ad control. By deterring theft you create wealth. By reducing the propencity for loss you create profits, based again on the understand that inherent business risks of losses do ext all of the time. By understanding that lost or stolen goods adversely affct your ability to be profitable, you actually create profits by reducing loss.