Cargo Targeting and the Trade Environment of the 21st Century

Since day one, as world traders and the U.S. Customs and Border Protection (CBP) alike will admit, the 24-Hour Rule and container targeting have been far from perfect in design and implementation. In the weeks following 9/11, CBP didn’t have the luxury of time in formulating a grand design for cargo security. Instead, the agency had to use an “implement and amend” approach, getting regulations on paper quickly and adapting them as real-world conditions dictated. That adaptation has only just begun. Current economic, geographic, and political trends indicate that the world trade environment only a short time into the future will be very different than it is today. And that’s in a good scenario—one without a major terrorist strike at intermodal commerce. If the United States and its trading partners are to protect supply chains and keep trade flowing smoothly, today’s container targeting and inspection capabilities must deal with enormous challenges ahead.

Increasing Trade Volume

To begin, the tide of imports into the United States is rising quickly. U.S. industries expect maritime trade to double by the year 2020, while some economists have predicted that doubling may occur as early as 2014 due to marketplace demands. (1)? Already ocean container inspection rates have increased from less than 2 percent before 9/11 to between 5 and 6 percent, meaning that CBP inspects at a current rate of 400,000 or more containers each year. (2)? Meanwhile, there is great political pressure to increase the number of inspections further, especially among lawmakers trying to appear tough on homeland security during election years.

Even at current rates of inspection and trade growth, will CBP have the personnel and resources to inspect one million containers annually by 2014 and still keep trade flowing smoothly? Will the 24-Hour Rule and ATS as they stand today be able to provide and process enough information to pinpoint threats before ships depart foreign ports? Looming over these questions is the fact that a successful attack on maritime commerce, a thwarted attempt, or even a severe threat based on credible intelligence would likely trigger a sudden, sharp increase in the rate of inspections that might never subside. Backlogs of suspect containers waiting for inspection both overseas and in U.S. ports could be a very real possibility.

High-tech, non-intrusive inspection technologies are an oft-mentioned solution to inspection delays, but the systems alone aren’t a complete answer. Crowded port terminals, mechanical breakdowns, bad weather, and safety concerns of longshoremen at some ports are among the constraints on these technologies. (3)? And they simply can’t detect all kinds of weapons, all the time. The simple, hard truth is that CBP will require corresponding increases in its budget and workforce to keep pace with the need for more inspections. Targeting and inspection initiatives will have to reach out to international partner agencies in a standardized effort to protect more trade. Programs designed to increase supply chain security and decrease targeting risk, such as the Customs-Trade Partnership Against Terrorism, will require additional resources to respond to the higher trade volumes. And the CBP information network and the data it requires from private industry (i.e., the 24-Hour Rule) will have to expand for the timely, precise prescreening of millions of additional containers.

Limited Port Capacity

Aside from the implications for importers who depend on the timely delivery of their inventory, inspection backlogs are an alarming prospect simply because there isn’t room for them. Diminishing space and finite port throughput in urban areas in the United States and abroad are a growing problem. Increased inspections will further reduce the productivity of space-starved ports, translating into larger backlogs and wait times. The Port of Long Beach, for example, recently phased in longer operating hours, including nights and weekends, as a way to increase terminal capacity and reduce daytime trucking congestion. The port will offset the cost of weekend and night operations by assessing a $20 fee on all loaded international containers. (4)? As trade volumes continue to rise, smaller ports will have to take on an increasing amount of trade diverted from megaports operating at capacity. Ports of all sizes around the globe are in need of massive investment in infrastructure, dredging to accommodate larger vessels, and more personnel to cover expanded operations based on trade growth alone. New security mandates and increased inspections only exacerbate the need for expansion and investment.

Yet sustained government assistance for ports is far from certain, as demonstrated by widely divergent views in Congress and the executive branch over who should pay and how much. Between 9/11 and September 2004, the DHS Port Security Grant Program provided ports with a total of some $488 million in grants divided among four rounds—despite the fact that the U.S. Coast Guard has estimated that port investments needed for compliance with the Maritime Transportation Security Act will be $1.125 billion in 2004–05 and an additional $5.4 billion over the next 10 years. (5)? The four rounds of grants have diminished markedly from $179 million in the first round, to $168 million, $92 million, and $49 million in subsequent rounds. “Without adequate help, ports will struggle to make the needed [security] improvements,” says Kurt Nagle, president of the American Association of Port Authorities. “Ports are already diverting funds from other infrastructure improvements necessary to meet the continuing growth in trade, which is expected to double or even triple in certain ports over the next 10 years.” (6)

Again, the hard truth comes down to time and money. Smaller ports in the United States and overseas will have to process a growing share of trade in the years ahead, yet these ports today are unable to accommodate such volume in a secure manner. U.S. ports of all sizes will have no choice but to pass along much of the cost of expansion and security in the form of higher user fees, a trend already underway. Furthermore, limits on how much trade U.S. ports can process will place new pressure on CBP to prescreen and inspect more containers on foreign soil, meaning costly expansion for programs like CSI. Ports around the world face similar challenges of space and throughput, however. To cope with potential container pileups at foreign ports, the filing of shipment data and cargo targeting will need to move back in the supply chain—from today’s 24 hours before lading toward the time of container stuffing and sealing.

Uncertain Political Support

As shown by the port security example, Washington expects industry and, ultimately, American consumers to pay their share of supply chain security. It’s fair to ask the private sector to bear part of the cost, since it profits from secure and efficient trade. On the other hand, because of the threat that a trade-related terrorist incident poses to the general public and the U.S. economy, the government also has a responsibility for general protection. The problem, however, is that no one knows what their share of the cost is, because federal authorities have been too vague, or downright evasive, when it comes to clearly defining public versus private responsibilities in supply chain security. (7)

In addition, political support for even basic security initiatives related to supply chain security is far from guaranteed throughout changing U.S. administrations and congressional election cycles. The same can be said for the cooperation of foreign governments and customs agencies, on whom the success of any comprehensive cargo security effort depends. Some observers on Capitol Hill, for example, have already expressed skepticism over federal efforts to strengthen trade security since 9/11. (8)? One such program, Operation Safe Commerce (OSC), was championed by some members of Congress and derided as pork-barrel spending by others. Although the research initiative achieved its mission and compiled a final report, for two years the Bush administration and congressional advocates often sparred over funding and the program’s very existence. With America’s post-9/11 bipartisan unity now a thing of the distant past, political squabbling over program results and annual budgets threatens to undermine the layered approach to security. If one of the layers like OSC should falter under political pressure, what would be the effect on related initiatives, such as CSI and the 24-Hour Rule?

Keeping cargo security focused and well funded will require consistency among future DHS administrations and effective performance measures for winning over Congress. But the alarming misunderstanding of logistics issues in Washington begs the question of whether or not Congress will ever truly “get” cargo security. (9)? More government openness to industry leadership, allowing companies who trade to take on more responsibility for protecting the system, could be one solution that achieves better, more cost-effective results. As security efforts threaten to grow beyond federal coffers in budget-conscious times, it may also be time to call on U.S. allies in trade to take on more of the task and foot more of the bill. A global standard uniting world customs agencies into one system may be an idea whose time will come.

Footnotes:

1. Testimony of Noel Cunningham (director of Operations and Emergency Management, Port of Los Angeles, speaking for the American Association of Port Authorities), House Subcommittee on Coast Guard and Maritime Transportation, Transportation and Infrastructure Committee, 108th Congress, June 9, 2004, p. 2.
2. Koch, p. 3.
3. Testimony of Richard Stana (director, Homeland Security and Justice, U.S. Government Accountability Office), House Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, Port Security: A Review of the Bureau of Customs and Border Protection’s Targeting and Inspection Program for Sea Cargo, 108th Congress, December 16, 2003, p. 12.
4. Port of Long Beach, “Terminals Unveil ‘Pier Pass’ Program to Shift More Truck Activity to Off-Hours,” www.polb.com, August 23, 2004, p. 1.
5. Federal Register, Vol. 68, No. 204 (October 22, 2003), p. 60465.
6. Kurt Nagle to Harold Rogers, chairman of the House Homeland Security Subcommittee, and Martin Olav Sabo, ranking member of the House Homeland Security Subcommittee, part of the Committee on Appropriations, May 26, 2004, p. 1. Available at www.aapa-ports.org.
7. The danger in leaving too much of the funding responsibility to the private sector, of course, is that the capital needed to make improvements fast enough to thwart imminent threats simply won’t be available. For example, passenger aviation security received billions of new government spending, the lion’s share of the required investment, immediately following 9/11, with positive results. One must wonder, however, how safe air travel would be today had airports and the cash-strapped airlines been required to shoulder most of the bill.
8. Testimony of Sen. John McCain (chairman), Senate Committee on Commerce, Science, and Transportation, The State of Maritime Security, 108th Congress, March 24, 2004, p. 1.
9. Consider, just as one example, the number of lawmakers who have called for the physical examination of all arriving containers—an impossible task.

This section appeared in Manzella Trade Communications' report Averting Disaster: The Future of Cargo Security and How Supply Chain Managers Must Prepare, 2005.

About The Author James Burroughs

James Burroughs is a writer based in California.