It’s daybreak at a major Asian seaport and there’s a dirty bomb in a shipping container. The sealed container looks exactly like the thousands of worn boxes that move in and out of the port each day on truck and train. And aside from a single lead-lined crate that conceals the deadly explosive, there is nothing sinister about this container’s contents: name-brand consumer electronics and spare parts destined for Los Angeles. The container’s ship, in fact, loads later this morning.

Security precautions among Pacific Rim trading partners have become tighter in recent months. Even a U.S. senator, during a photo-op at the same Asian port the week before, praised new efforts to safeguard supply chains. And yet, a huge cash bribe had been too much to resist for one truck driver on the mainland. Two days earlier he had turned a blind eye at a dark roadside stop as three men opened the container, loaded the crate from an adjacent truck, and resealed the container with a state-of-the-art mechanical seal. Within 10 minutes they had disappeared into the night and the container had resumed its journey to the busy port. Now a bomb sits in line for the gantry crane, undetected by overworked customs officers.

The bomb’s detonator, assembled 10 months ago, waits patiently in an operative’s apartment in Long Beach ….

This frightening scenario, completely fictional and yet all too plausible, is exactly the kind of nightmare that has weighed heavily on lawmakers, customs officials, and the global trading community since September 11th. It isn’t difficult to see why intermodal trade is so appealing to the terrorist mind. For an enemy with the express goal of crippling Western economies, what better target than the very bloodstream of those economies? Ninety percent of the world’s cargo moves by shipping container. More than nine million containers arrive by sea in the United States each year, carrying more than 95 percent of the nation’s non-North American trade by weight. The ubiquity of these identical containers that makes modern trade so efficient and cost-effective also makes it ripe for exploit. And a strike at the heart of the system would have disastrous consequences.

In a 2002 war game involving government and industry leaders, a dirty bomb scenario similar to the one above prompted decisions to close two U.S. ports for three days and all U.S. ports for nine days thereafter. During the first three weeks of the imaginary crisis, major stock indices plummeted, trading halted, gas prices spiked, and more than half of the Fortune 500 firms issued earnings warnings. As the game played out, it took three months to clear the container backlog resulting from the closings, with a total cost to the U.S. economy of $58 billion. (1)? Another study estimates that costs following a detonated weapon of mass destruction shipped by container could reach $1 trillion. (2)? “A successful attack would make us all victims,” says Christopher Koch, president and CEO of the World Shipping Council. “It would affect every supply chain, every carrier, every port, and every nation’s trade and economy.” (3)

In the days following 9/11, the U.S. Customs Service—reorganized in 2003 as U.S. Customs and Border Protection (CBP)—began to implement a host of trade security initiatives with its government partners and its new parent organization, the Department of Homeland Security (DHS). Those initiatives continue to expand in scope and authority more than three years after 9/11, in harmony with similar safeguards around the world. In general, security measures are designed to impede the two most-feared terrorist approaches to supply chains: 1) the “hijack” scenario, like the one above, in which terrorists intercept a legitimate shipment and tamper with it; and 2) the “Trojan horse” scenario, in which a terrorist organization usurps or develops a legitimate trading identity to ship dangerous cargo. (4)? Yet, because there is no single system that governs the global movement of containers—it is instead an amalgam of thousands of business and government entities—developing a seamless defense is impossible without bringing trade to a grinding halt. The approach must instead be one of prioritizing risks and managing them with finite resources.

The Department of Homeland Security’s “layered” approach to supply chain security is a combination of programs and initiatives spearheaded by CBP and related agencies. Implemented at different times, with different methodologies, and with different goals, the measures often overlap one another in their attempt to protect a vast, multifaceted industry. One of the earliest such efforts following 9/11 was the formation of a system that could target U.S.-bound maritime shipping containers posing a terrorist threat. In effect, by pushing the U.S. border across the oceans, CBP could inspect high-risk containers before they departed for America, where traditional dockside inspection of a dangerous shipment might be too little, too late.

Gradual implementation of these targeting and prescreening efforts, as follows, laid the groundwork for the familiar system in place today.

• November 2001: CBP establishes the National Targeting Center (NTC) in Washington, D.C., to conduct cargo targeting in coordination with the intelligence community.
• January 2002: CBP announces the Container Security Initiative (CSI), a program designed to identify and examine high-risk containers at foreign ports with the cooperation of foreign customs agencies.
• June 2002: The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 becomes law to protect food and drug imports. Administered by the Food and Drug Administration (FDA) and jointly enforced by CBP, the Act requires that advance notice be given to the FDA prior to all food imports. (5)
• August 2002: As part of its Sea Cargo Targeting Initiative, CBP modifies its Automated Targeting System (ATS) computer model. Originally designed to identify illegal narcotics in container shipments, ATS incorporates terrorism-related targeting tools to look for red flags in shipping manifests, combined with intelligence, suspicious trading patterns, and warnings from other government agencies. CBP also standardizes procedures for handling high-risk shipments.
• December 2002: To make shipment data available to CSI inspectors overseas in time to prescreen cargo before departure, CBP implements the “24-Hour Rule.” (6)? Sea carriers and/or automated non-vessel-operating common carriers (NVOCCs) begin submitting vessel manifests to CBP 24 hours before lading at foreign ports. Enforcement begins in February 2003. Generic cargo descriptions on manifests are prohibited, and carriers whose descriptions are found to be inaccurate are held liable.
• May 2003: CBP begins sending “Do Not Load” orders in response to invalid cargo descriptions. CBP ports are authorized to issue monetary penalties for 24-Hour Rule violations.
• January 2004: The Required Advance Electronic Presentation of Cargo Information rule, pursuant to the Trade Act of 2002, extends the advance manifest filing requirement to incoming and outgoing trade by air, truck, and rail carriers, though the advance notice for these other modes of delivery is only a matter of hours prior to arrival in the United States.
• March 2004: Sea carriers and/or automated NVOCCs are required to submit an electronic cargo declaration using the Sea Automated Manifest System. Full enforcement begins in July 2004, including denial of preliminary entry, issuance of penalties at each port of arrival, and denial of unlading.

CBP and its partners have little choice but to use such high-tech methods to find the poisoned needle in the haystack, since the enormous volume of maritime imports coupled with the agency’s limited resources make it impossible to inspect each arriving container manually. Although, at present, CBP inspects only 5 percent of imported maritime containers, the agency insists that it prescreens 100 percent of the manifests of incoming vessels and thus, somewhat indirectly, the contents of each container before lading overseas. Meanwhile, in the United States, the agency is providing all ports of entry with radiation-detection portals, through which each inbound container moves before leaving the port for U.S. destinations. Inspectors may also carry detection devices as a second way to discover smuggled radioactive material, though neither method is foolproof. (7)? U.S. and foreign customs officers may employ similar technologies overseas, though the rate of implementation is slower than it is in the United States.

If at any point officials decide a container warrants further attention, they might first use non-intrusive inspection equipment such as the Vehicle and Cargo Inspection System (VACIS) to look for any visual anomalies without opening the container. (Such systems, which employ x-ray or gamma ray radiation, are not perfect, either.) Whether or not inspectors first use a VACIS-like system, they can choose to open a container and examine it manually if prescreening has aroused suspicion. Such an inspection could delay a shipment by one day or more.

But does this system of targeting and prescreening as it stands today actually work? The fact that three years have elapsed since 9/11 without a trade-related terrorist incident is not enough, by itself, to prove the system is effective, especially given the patience and advance planning of enemies like al-Qaeda. CBP has done an admirable job of converting customs methods to today’s threat of global terrorism in a relatively short time; yet to achieve measurable improvements in targeting, further changes in the overall CBP strategy must occur. For example, a 2004 report by the Government Accountability Office (GAO) ?states that the current CBP strategy does not fully incorporate all necessary elements of a risk management framework needed if the agency is to achieve optimum results with limited resources. (8) In addition, the report says, the CBP strategy and ATS are not fully consistent with recognized modeling practices, such as the incorporation of additional trade documentation and the widespread use of random inspections. (9)

The bottom line for supply chain managers, therefore, is that CBP and international efforts are only beginning, and the evolution of cargo targeting will have serious and costly implications for all businesses engaged in world trade in the future. Already the 24-Hour Rule (“the Rule”) and container targeting in general have added significant new costs throughout supply chains, such as investments in information infrastructure, new personnel hiring and training, delays due to inspection, container backlogs at departure ports, documentation fees, liabilities and fines, increased lead times, and increased inventories. These costs are likely to continue and expand as the Rule changes over time. According to one study, the estimated annual cost of the Rule could range from $280 million up to $10 billion. (10)? Tempering this amount are the cost benefits that some firms will realize from reduced cargo theft and pilferage, which total in the billions of dollars annually, as well as significant increases in supply chain visibility and logistics efficiency.

Meanwhile, government costs also are expanding, as is the debate concerning the appropriate level of federal spending for supply chain security. The 9/11 Commission has pointed out, for example, how more than 90 percent of the government’s annual $5 billion investment in the Transportation Security Administration goes toward passenger aviation—“to fight the last war,” despite the reality that “opportunities to do harm are as great, or greater, in maritime or surface transportation.” (11) Others have criticized a lack of long-term funding strategies for such essential programs as CSI, while ports continue to shoulder the burden of what they call an unfunded port security mandate. Such debate over federal funding may continue, ironically, as long as world commerce eludes a direct terrorist attack, since loose purse strings in Congress have proven to be largely behind the curve when it comes to homeland security. (12)

The purpose of this report, however, is not to critique the approach of the Department of Homeland Security and its agencies toward supply chain security, to evaluate its spending priorities, or to determine the effectiveness of security initiatives. Nor is its purpose to explain the day-to-day workings of the now familiar 24-Hour Rule, in operation since December 2002. It is instead designed to provoke discussion about how and why maritime cargo targeting, in particular, will evolve over time due to 1) economic, geographic, and political forces of the next decade and beyond, and 2) CBP measures to strengthen inherent weaknesses in the system as it stands today. Accompanying this evolution will be profound changes in the two burdens that targeting places on business: the 24-Hour Rule on the front end of shipments, and cargo inspections on the back end. Only by considering these changes will supply chain managers be able to plan effectively for safe and efficient trade in the coming years.

Footnotes:

1. Mark Gerencser, Jim Weinberg, and Don Vincent, Port Security War Game: Implications for U.S. Supply Chains (McLean, Va.: Booz Allen Hamilton, 2002), p. 3.
2. Michael E. O’Hanlon et al., Protecting the American Homeland: A Preliminary Analysis (Washington, D.C.: Brookings Institution Press, 2002), p. 7.
3. Testimony of Christopher Koch, Senate Committee on Commerce, Science, and Transportation, The State of Maritime Security, 108th Congress, March 24, 2004, p. 5.
4. Organisation for Economic Co-operation and Development, Report on Container Transport Security Across Modes, Executive Summary and Conclusions (Paris: OECD, 2004), p. 2.
5. While the Bioterrorism Act is a crucial part of protecting the nation’s food supply, its enforcement is beyond the scope of this report. For more information, see www.fda.gov/oc/bioterrorism /bioact.html.
6. The final 24-Hour Rule, officially titled “Presentation of Vessel Cargo Declaration to Customs Before Cargo Is Laden Aboard Vessel at Foreign Port for Transport to the United States,” was published in the Federal Register in October 2002, with an effective date of December 2, 2002. For text of the final rule and CBP commentary, see Federal Register Vol. 67, No. 211 (October 31, 2002), pp. 66318-66333.
7. Government Accountability Office, Container Security: Current Efforts to Detect Nuclear Materials, New Initiatives, and Challenges, GAO-03-297T (Washington, D.C.: GAO, November 18, 2002), pp. 4-5.
8. In July 2004, the General Accounting Office changed its name to the Government Accountability Office.
9. Government Accountability Office, Homeland Security: Summary of Challenges Faced in Targeting Oceangoing Cargo Containers for Inspection, GAO-04-557T (Washington, D.C.: GAO, March 31, 2004), p. 5, pp. 9-10.
10. Philippe Crist, Security in Maritime Transport: Risk Factors and Economic Impact (Paris: Organisation for Economic Co-operation and Development, 2003), p. 57.
11. The 9/11 Commission, Final Report of the National Commission on Terrorist Attacks Upon the United States (Washington, D.C.: U.S. Government Printing Office, 2004), p. 391.
12. Take, for example, the overwhelming attention paid to aviation security only after 9/11, or the overnight surge of interest in rail security following the March 2004 train bombings in Madrid. In the days following the train bombings, Congress drafted the Rail Security Act of 2004 and proposed expenditures of more than $1 billion on U.S. rail security.

About The Author James Burroughs

James Burroughs is a writer based in California.