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Mon 1 Jan 2007 12:00 AM

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Secure supply chains

Following a series of terrorist attacks around the world, the international logistics industry must unite to prevent the tools of trade from becoming the tools of terror, writes Issa Baluch.

The September 11 attacks in the US, along with later bombings in Madrid and London, demonstrated serious holes in our transport networks. In response, governments around the world have acknowledged that all modes of passenger and cargo transport are potential terrorist targets.

The cargo security regulations that have been developed in response to these threats are still evolving, and in the past few years the international trading community has had to learn a list of new acronyms like CSI (Container Security Initiative), ISPS (International Ship and Port Facility Security Code), AMS (Automated Manifest System), ACI (Advance Commercial Information), and C-TPAT (Customs-Trade Partnership Against Terrorism). Because these regulations mean more work, time, and costs for each company in the supply chain, their implementation has been met with industry grumbling.

It is clear that cargo security is costly and time consuming. It requires steps like extra screening, new record-keeping processes, background inspections, investment in new technology, and the re-training of staff. However, it has become an undisputed part of international trade.

Cargo security can be broadly divided into three categories: corporate security, cargo theft, and anti-terror. As we will see, it makes sense to leave the latter to the government agencies that are best equipped to confront the terrorist threat, and to leave corporate security issues to private companies — the daily practitioners who own assets and manage transport.

Recommendations for freight logistics providers

Many freight logistics providers do not yet understand their role in keeping freight secure. They have not yet been convinced that supply chain security should be their primary responsibility, not the government’s, and that they need to saturate their business environments with security measures. When the private sector understands these two concepts, it will be more likely to make the necessary investments in security measures.

There are two helpful ways of looking at cargo security in the private supply chain. First, it can be thought of as a value addition.

Freight logistics providers know that in today’s global economy they must add more to their customers’ supply chains than the limited value found in basic clearing and forwarding tasks. The FLP must recognise that comprehensive cargo security measures are value additions themselves, which will increase customer confidence.

Second, creating a culture of security must become a corporate objective. It is time to create a culture of security in the freight forwarding profession — and you do not have to be registered with the United States’ C-TPAT programme to do so. FLPs should recognise that implementing standard security steps throughout their business practices will make them stronger forwarders, add value to their service offerings, and prepare them for the day when these steps are required of all supply chain participants.

What are these standard security steps? How can freight logistics providers help secure the supply chain? There are a growing number of high-tech tools available for cargo security assurance, such as electronic container seals, tracking devices, radiation detection pagers, and x-ray and gamma ray scanning. Tracking systems such as RFID, GPS, and barcoding increase visibility in the supply chain and can therefore aid in the global tracking and identification of certain cargoes and containers.

However, beyond these tools, there are some basic, low-tech steps that companies should take to maintain this culture of security. These include assessing personnel background checks,, assessing real estate (implementing physical security measures across all facilities, and controlling access to facilities); assessing security in the procurement process (gathering information on the security measures taken by suppliers in order to identify weaknesses and gaps); assessing the security of IT systems; and finally, ensuring accurate descriptions of cargo and the identification of all parties involved in transactions.

These are basic steps, but together they help monitor all the processes and events in the supply chain and increase visibility.

Companies that undertake such an evaluation process will discover what security gaps they have and how to close them. All departments will better understand their role in keeping freight secure, and companies as a whole will be better prepared for the day when these measures are required of them by a national or international regulatory agency.

Recommendations for government and regulatory bodies

It is clear that supply chain security should primarily be the concern of the private sector. However, because global supply chains travel through publicly controlled transport infrastructure, and because cargo has been recognised as a threat to national security, governments also play an important role in securing trade lanes. The tasks of government are to identify the terrorist threat, set standards, certify known shippers and regulated agents, create incentives for participation in such programmes, and convince the private sector of the importance of securing their supply chains. In undertaking these tasks they must balance trade facilitation with cargo security, and ensure that trade can flow smoothly even when it becomes more closely monitored.

Governmental development of new transport security measures began in the United States after the events of September 11, 2001. A new agency called the Department of Homeland Security was created, incorporating various departments that oversee transport and border security. Other countries and regions followed suit, implementing their own regulations for passenger and cargo transport.

The prospect of every country, region, or trade bloc developing its own regulations is frightening. Will there be one set of standards for the United States, one for the United Kingdom, one for the European Union, one for Japan, and one for Australia?

Will one country’s rules take precedence? It is therefore likely that international standardisation in cargo security will become a necessity. Just as container size, customs classifications, and international commerce terms (incoterms) were standardised to facilitate international trade, so global standards for cargo security must be implemented. This task should not be left to a country acting unilaterally. Eventually, we will need a regulatory body in the tradition of the International Organisation for Standardisation (ISO) to harmonise security measures on a global level.

The major challenge facing international standardisation is drawing up minimum standards when there are vast differences in the technological capabilities of different countries. Is it feasible for the Brest airport in Belarus to operate with the same security technology as the Los Angeles airport? While IT does not necessarily make security operations watertight, it is a prerequisite for harmonisation, and as such, it must be utilised in developed and developing countries alike. As new security regulations are fashioned, developed countries must take into account the limitations of under-developed countries: a lack of IT systems, poor infrastructure and facilities, and prohibitive bureaucracy. Unless these limitations are addressed and corrected, they will hinder the ability of poor countries to comply with new ordinances and will put other countries at risk.

Too many individuals on both sides of the debate have set up the situation as a public versus private battle. However, free-fl owing, closely monitored trade will only be possible when we stop looking at the situation as us-versus-them. Cargo security requires much higher levels of public-private cooperation than we have seen so far.

Governments and regulatory agencies may not be able to convince the private sector that there is a probable threat to their individual companies. But with properly engineered security accreditation programmes (which will eventually exist on a global level), the private sector will be empowered to take responsibility for the security of its livelihood — its supply chains — and governments will be free to concentrate on utilising information and intelligence to counter the terrorist threat.

Issa Baluch is chairman and CEO of Swift Freight International and immediate past president of FIATA. The above is an excerpt from his book, Transport Logistics, Past, Present and Predictions (
www.transportlogistics.com

)

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