Adapt to the New Security Regulations or Prepare for Costly Delays and Supply Chain Headaches

With America’s terrorist alert system recently reaching “orange/high risk,” and staying there for a few weeks before returning to “yellow/elevated risk,” many Americans are thinking more and more about security. And company managers, too, are especially wondering how all the new security measures will impact their supply chain systems.

Overall, the recent passage of both the Homeland Security and the Maritime Transportation Security bills has already created some major changes for importers, exporters and supply chain managers. So, what do these changes mean for you and your business operations?

New Security Department Created

The Homeland Security department, which combines more than 20 homeland security agencies into one Cabinet department, became a reality in December 2002. To date, the new department’s responsibilities include analyzing threats, guarding U.S. borders and airports, protecting America’s critical infrastructure, and coordinating responses to future emergencies.

On February 7, 2003, Homeland Security Secretary Tom Ridge said, “As a result of the increase in the threat level from yellow or elevated risk to orange or high risk, specific protective measures will be taken by all federal agencies, both to reduce vulnerabilities and serve as a deterrent. The nation’s Homeland Security Advisory System provides a national framework to inform and to facilitate actions appropriate to different levels of government and to private citizens, either in their workplaces or in their homes.”

Some examples of the protective measures include the following: increased security personnel at points of entry, limited points of entry and exit, enhanced identification checks, and restrictions to travel around federal facilities and airports.

Homeland Security’s Responsibilities

In general, the Homeland Security Department is charged with analyzing intelligence information on terror threats collected by the CIA, FBI, National Security Agency and other intelligence organizations, as well as combating nuclear, chemical, biological and cyber-terrorism.

The new department also brings together the agencies responsible for border, coastline and transportation security. This means that a greater coordinated effort to safeguard America’s transportation systems and secure its borders will take place. And, this effort may mean longer delays in receiving goods, which may mean businesses can no longer rely on a just-in-time inventory strategy.

The Impact of the Maritime Transportation Security Bill

America’s 361 sea and river ports handle the vast majority of U.S. global trade. The Maritime Transportation Security Act addresses the security of these ports. Prior to September 11, 2001, less than 2 percent of the containers that arrived by sea were inspected by U.S. Customs or other law enforcement officials. And although some security improvements have been made, what changes are taking place within maritime security in order to ensure exporters and importers are protected?

U.S. Customs is currently focusing on three general categories: risk reduction, inspections and container security. Since these categories will definitely impact shippers, intermediaries and carriers, what happens in each category is important to everyone in the supply chain.

Risk and Information Gathering

Information gathering is quickly becoming an important piece of the U.S. Customs’ puzzle. In fact, as of February 2, 2003, after a 60-day phase-in period, U.S. Customs enacted a rule that requires sea carriers to electronically send detailed manifest information at least 24 hours in advance of loading cargo on a ship bound for the U.S.

The rule is designed to allow U.S. Customs officers to analyze container content information and identify potential terrorist threats before the U.S.-bound container is loaded at the foreign seaport, not after it arrives in a U.S. port. Initially, enforcement efforts are focusing on significant violations of the cargo description requirements of the 24-hour rule. For example, the use of such vague cargo descriptions as “freight-all-kinds,” “said-to-contain,” or “general merchandise” are no longer acceptable.

When vague descriptions are used, ports will issue a “do not load message” on the shipments. And once ports have issued this message, cargo should not make its originally intended voyage. Carriers should only load the cargo after Customs has given approval to load; if cargo is loaded without prior approval by Customs, the container will be denied permit to unload at any U.S. port.

Some of the other required manifest information includes the date of scheduled arrival in the U.S., the foreign port of departure, the shipper’s name and address, and the vessel’s name and number.

According to Customs Commissioner Robert Bonner, compliance with the 24-hour rule is a matter of national security and is essential to help secure the global supply chain. Bonner further said that he “applauds the efforts of those sea carriers, non-vessel operating common carriers and other parties who have taken implementation of the rule seriously.” For those who do not comply, U. S. Customs is prepared to impose hefty fines and demonstrate that 100 percent compliance is expected.

Although this protective measure makes excellent sense and should deter terrorists hoping to hide nuclear weapons and radiological or biological materials in U.S. bound containers, the new rule is creating some unrest. In short, many carriers fear that Customs will be unable to process the manifests in a timely manner, which in turn will mean costly delays.

C-TPAT Program Shows Promise

One new program that appears to be working is the Customs-Trade Partnership Against Terrorism (C-TPAT), a voluntary program designed to increase supply chain security. Businesses who participate agree to self-assess their supply chain security under C-TPAT guidelines, submit a supply chain security profile, create and implement a supply chain security program, and communicate C-TPAT guidelines to other businesses with which they work. For doing so, participants may have fewer Customs inspections when their cargo arrives in the U.S.

Technology Grows for Cargo Inspection

Traditionally, physical inspection was the U.S. Customs’ primary means of identifying what was entering the country. But, since only 2 percent of cargo is routinely inspected, leaving 98 percent to chance, what’s now being done to improve the inspection process? Today, technological inspections are increasing, and this technology, such as x-ray and gamma ray machines, is not only making inspections quicker, it is also making it easier to detect dangerous substances and/or suspicious materials. However, technology is not without fault.

For example, last summer a random x-ray examination took place in Miami of a container from Israel. The x-ray indicated the container was filled with explosives, but it was later determined by the bomb squad that its contents included two metal flower pots made from an artillery shell and a piece of an exploded test missile. During the lengthy inspection, the port was shut down, which caused delays and added costs.

Inspections at Home and Abroad

A new program called the Sea Cargo Targeting Initiative is designed to identify suspicious cargo entering the U.S. This initiative adds new criteria to Customs automated systems, ensures that all manifests are processed through the Automated Targeting System and standardizes Customs procedures and practices.

For instance, soon all high-risk containers will be examined by non-intrusive technology; container seals also will be inspected. The goal is to quickly separate cargo into general and high-risk categories, so general cargo doesn’t experience delays. Furthermore, two programs are now in place for containers scheduled for shipment to the U.S. from foreign countries. They are the Container Security Initiative (CSI) and the U.S.-Canada Smart Border Plan. Under CSI, U.S. Customs personnel are scheduled to be stationed at key ports, such as Antwerp, Hamburg, Rotterdam, Le Havre, and Singapore.

These personnel, in coordination with the host country, will identify and pre-screen U.S. bound containers before they are even loaded. Although anticipated to send a strong message to potential terrorists, this approach is causing concern. For example, some smaller foreign ports believe they will suffer if they do not have a U.S. Customs employee on site. Furthermore, will U.S. importers not using those ports be penalized by having to endure longer inspection times and increased delays?

Because so much cargo intended for Canada enters via a U.S. port and vice versa, the U.S. and Canada have agreed to assign Customs personnel to various ports, where they inspect the cargo bound for each others’ countries. The ports currently involved in the Smart Border Program are Newark and Seattle in the U.S. and Halifax, Montreal and Vancouver in Canada.

Improving Container Security

The U.S. government isn’t the only group working at improving U.S. security. Private businesses also are developing both new containers and tamper-proof seals for containers. Plus, global positioning system transponders are being developed for containers in order to track them in real-time to see if they alter their original track or are delayed for an excessive amount of time.

Lead the Pack

Security requirements and needs are changing at warp speed. Businesses must plan for and implement their changes just as quickly. This means exporters and importers must be proactive and make changes that make good business sense. For instance, experts recommend making changes to your security plans, even if it means a great deal of up-front costs. To remain competitive, you have to lead the pack.

About The Author John Manzella [Full Bio]

John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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