cargo security

Cargo Security

Cristiane R. de Freitas of 11

Cargo Security


Def init ion

Air cargo (or freight) = goods or product transported, generally for commercial gain, by

aircraft.

A b it about air cargo his tory

Although limited air freight services were tried prior to World War I, it was not until the end of the

war that such services were first offered in any significant way. Primarily due to the availability of

surplus airplanes and trained military pilots, most of those early commercial services were made

possible by subsidies provided by national governments, most directly by postal services. Allaz

notes that four important lessons arose from these early years of air freight services, as follows:

Military aircraft were not suitable for commercial air service. Although the cost of

purchasing surplus military aircraft was very low, the maintenance costs, especially for

engines, were prohibitively high.

Safe air travel during this period needed infrastructure—e.g., airfields, traffic control

systems, weather services, marshaling yards. Very little of this was in place.

The transport of mail was the major, if not the only, source of income. From 1919 to

1939, post offices around the world provided commercial aviation companies with more

than half of their revenues.

Commercial aviation was not a profitable business unless government subsidies or

favorable postage rates were used to prop up the service.

How the economy grows

As per IATA Air cargo transports goods worth in excess of $6.8 trillion on an annual basis. This

is approximately 35% of world trade by value. The sector itself generates nearly $70 billion

every year and is an important component of the aviation industry which collectively supports 57

million jobs worldwide.

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Growth in air cargo service is critical to worldwide trade and investment and for building strong

regional economic ties. Beneficiaries of increased air cargo service include manufacturers, air

carriers, and communities. Communities in particular gain the jobs and revenue that come with

increased cargo operations, especially at air cargo hubs and container ports.

For example, today, the Asia-Pacific region accounts for almost 40 percent of global air cargo

traffic. The Boeing Company’s most recent World Air Cargo Forecast projects that air cargo

markets linked to Pacific Rim economies will grow faster than other international air cargo

markets over the next two decades. In particular, Boeing forecasts an average of 8 percent

annual growth in intra-Asian air freight traffic, and nearly 7 percent annual growth for Asia-North

America routes through 2029. (Krishna R. Urs - Deputy Assistant Secretary for Transportation, Bureau of

Economic and Business Affairs - Annual General Meeting of the Global Shippers Forum - Atlanta, GA - November 16,

2011.)

In this picture we

can see a

projected 2011

international air

freight share made

in 2007.

Despite the economic and political instability in the Middle East, the region has been growing

rapidly. As the United Arab Emirates vies to diversify its economy, it is making massive

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investments to shift traffic hubs for cargo and passengers away from Europe to the Middle

East. Making use of liberated markets, it is gaining market share from the European carriers.

Countries such as United Arab Emirates and Qatar are investing billions of dollars in major

infrastructure developments.

Among the ambitious projects currently underway is Dubai World Central, which is expected to

become the biggest air freight hub in the world, capable of handling a massive 12 million tons of

cargo annually.

According to the International Air Transport Association’s (IATA) chief economist, Brian Pearce,

the Middle East’s growth trend is significantly higher than projected, with the robust oil-based

economies contributing to an increase in both passenger and cargo transport.

These market changes will probably cause cargo traffic to lean toward those emerging markets.

New cargo hubs and a stronger fleet will position the new carriers to take advantage of a strong

regional and international cargo market.

Threats to Air Cargo

Terrorism has emerged as a serious threat to the safety and security of air cargo shipping. The

threat of terrorists using air cargo as a weapon to bring down a plane was brought into sharp

focus in October 2010 when al-Qaeda in the Arabian Peninsula (AQAP) attempted to ship

explosives and detonators in printer toner cartridges as cargo on both passenger and cargo

aircraft. This evoked memories of the bombing of Pan Am 103 over Lockerbie in 1988. AQAP

later boasted in its ―in-house‖ magazine that the whole plot cost only $4,200.

Following the terrorist attacks on September 11, 2001, the entire aviation industry had to

undergo major changes.

In the United States, the Department of Homeland Security was established on November 25,

2002, by the Homeland Security Act of 2002 (Public Law 107-296). The Transportation Security

Administration (TSA), formed in 2002 and initially part of the Department of Transportation, is

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responsible for all aviation security measures; in March 2003, TSA become a part of the

Department of Homeland Security.

The Implementing Recommendations of the 9/11 Commission Act of 2007 (Public Law 11-053)

require 100% screening of cargo transported on passenger aircraft within three years of the

law’s passage—i.e., August 2010. The European Union and other government entities have

imposed similar security directives to improve aviation security.

The events of 9/11 led the United States and its trade partners to re-assess and strengthen the

global cargo security regime, resulting in new protocols for tracking, screening, and inspecting

containerized imports and exports (Schmitz 2007).

The United States Government (USG) has developed a unified approach to secure business

supply chains. The Administration is working to finalize a National Strategy for Global Supply

Chain Security. We anticipate that it will be released publicly by the end of this year. The

strategy defines the U.S. approach to what is, at its core, a global issue: the safe, efficient

movement of legitimate commerce through a system that is resilient in the face of catastrophic

disruptions, whether caused by terrorist actions or natural disasters.

Though this is a U.S. initiative, once implemented, its effects will reverberate around the world.

Trade is not only important to major economies but to emerging and developing markets as

well. Kenya, for example, suffered losses of $2 million per day during the Icelandic volcanic

eruption because flowers grown there for export couldn’t reach their destination. The plot to

blow up cargo jets by concealing bombs in printer cartridges being shipped as air freight hurt

developing economies far more than developed ones. Those kinds of events – natural and man-

made – have made it much more difficult and expensive for goods to transit developing

countries which are less able to cope with such shocks to the system.

Since supply chains stretch across nations, between countries, and around the globe, the

overall goal is to work with our international partners and through the appropriate multilateral

form to promote global supply chains that:

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are secure against threats that could cause large-scale death, destruction, and/or

disruption;

are resilient in response to large-scale events; and

maintain the expeditious and reliable flow of lawful commerce.

The United States is interested in working with the international community to enhance the

security of goods en route from point of origin to final destination.

We hope to strengthen the supply chain’s intermodal components via air, land, and sea through

three major goals:

Preventing terrorists from exploiting vulnerabilities,

Identifying and protect the most critical elements, and

Bolstering the supply chain’s resiliency so that it can recover quickly.

Risk Management for cargo

Risk management focuses on identifying and implementing measures to limit exposure to risk,

or the likelihood of an event occurring with a negative or unwanted outcome. In trade, the focus

of risk management is to systematically identify imports and exports that represent the greatest

risk of noncompliance of customs laws and regulations, as well as the greatest risk to national

security and safety.

By using multiple risk management strategies, U.S. and foreign customs agencies can identify

and target those areas that pose the greatest risk, and allocate resources accordingly. U.S. and

foreign cargo security programs generally implement similar risk management strategies based

on the following: collecting data elements and detailed shipment information from a variety of

sources; analyzing and assessing risk using rules-based computer programs and customs

targeting teams; prescribing action, such as undertaking non-intrusive or physical inspection or

seizure; and tracking and monitoring the risk management process and its outcomes (Laduba

2005).

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In the United States, trade data and detailed shipment information are gathered from various

government data sources in the Automated Targeting System (ATS), a vast database that uses

targeting rules and criteria based on intelligence to filter through cargo data and flag high-risk

shipments. Electronic manifests submitted 24 hours prior to foreign lading allow U.S. Customs

and Border Protection to assess cargo risk earlier prior to U.S. arrival (CBU, n.d.). In addition,

U.S. cargo security partnerships such as C-TPAT and CSI aim to mitigate risk by strengthening

supply chain security in the case of the former, and by prescreening U.S.-bound cargo at foreign

ports prior to departure for the latter.

Risk management techniques allow customs to identify shipments that represent little to no risk,

and thus focus limited resources on shipments that pose the greatest risk of noncompliance. In

contrast to inspection based on a shipment’s risk profile, the aim of full inspection is either to

physically inspect or scan 100 percent of imported containers. The 9/11 Commission

Recommendations Act of 2007, signed into law August 3, 2007, mandates the scanning of 100

percent of all maritime cargo containers entering U.S. ports by 2012. Some industry observers

believe that cargo inspection based on risk management is a more practical method to balance

cargo security with the flow of legitimate (i.e., low or no risk) trade than 100 percent inspection

of imported containers (Anderson 2007). Others question the cost of implementing 100 percent

inspection, and who should pay for it (e.g., importers or exporters) (Lane 2007).

1 Risk management procedures had been used by cus toms administrations prior to 9/11, but their use has

expanded w ith the introduction of post-9/11 programs such as CSI and C-TPAT.

Air Cargo Security Measures

Post-9/11 security measures on air cargo have been discussed both at the national

and international level, but unlike measures for maritime cargo such measures

have not been codified under a single agreement. Prior to 9/11, the International

Civil Aviation Organization (ICAO) established standards for shippers, freight

forwarders, and transportation firms to maintain the security of cargo while in

transit. The standards also included recommendations to facilitate the cross-border

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movement of goods.

Among the recommendations established by ICAO and

outlined in the Chicago Convention are, where possible, the use of risk

management techniques over the physical inspection of cargo, the acceptance of

customs documentation in electronic formats, and the use of ―authorized importers‖

to expedite customs processing. In addition, the Chicago Convention mandates that

both airports and airlines establish security programs and that contracting states to

ICAO cooperate in matters of air cargo security (Buzdugan 2006).

More recently, the International Air Transport Association (IATA), whose

membership includes 250 global airlines, developed a list of best practices with

regard to the protection of air cargo and created an internal working group to

establish a strategic plan on air cargo security and trade facilitation (IATA 2006; and

IATA 2007). IATA initiatives emphasize all-cargo versus passenger air

transport15

and aim to ensure that cargo security measures, such as screening

and clearance procedures, are harmonized across countries both to ensure

their maximum efficacy and their minimal interference with air transport

operations (Task Force 2007; Peck 2006).

The events of 9/11 precipitated a change in cargo security measures at national borders. Prior

to 9/11, customs authorities were responsible primarily for clearing imported goods after such

goods arrived at the border. They did so through the review of entry documentation

accompanying such goods at the time of importation and, if necessary, their physical inspection.

In contrast, the cargo security programs developed after 9/11 emphasize preshipment

examination of exports. In particular, these programs require that exporters provide customs

documentation in advance of their shipment of goods to the importing country. Such advanced

documentation assists customs authorities employing sophisticated and multilayered risk

assessment techniques to determine whether to admit goods at the border or to hold them for

further inspection.

Although advance information requirements and mandatory screening procedures can disrupt

the flow of cross-border trade, recent international conventions aim, for example, to harmonize

customs practices across countries and to require that individual customs administrations

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employ efficient, technologically advanced, and unburden some procedures for inspecting and

clearing cargo (De Wulf and Sokol 2005, xv).

Although cargo security programs had been in place prior to the events of September 11, 2001,

post-9/11 cargo security initiatives differ from earlier programs in three important ways. First,

although like previous programs, post-

9/11 efforts generally target the movement of illegal or dangerous cargo, their primary emphasis

is on preventing the cross-border transport of terrorist weapons of mass destruction (WMD).

Second, while earlier cargo security programs focused on the role of national customs

administrations in policing the transborder movement of goods, post-9/11 programs have

engaged private-sector supply chain participants-—from manufacturers to importers to

transportation providers—in achieving this objective. As such, post-9/11 programs offer a

more holistic approach to cargo security by recognizing both the need for cooperation between

private-sector entities and customs administrations and by acknowledging the importance of

―behind-the-border measures‖ in securing the international supply chain. Finally, whereas post-

9/11 programs have introduced new and additional procedures for screening and clearing cargo

through customs, many of these programs also contain trade facilitation components. As noted,

such components may be based on the pre-authorization of shippers the use of risk

management techniques, or the simplification of customs documentation requirements. Post-

9/11 programs therefore attempt to strike a balance between security and facilitation,

recognizing that rather than being mutually exclusive, the two objectives may be mutually

reinforcing.

Conclusion

Although post-9/11 programs have as their primary focus preventing the cross- border

movement of dangerous cargo and, in particular, terrorist-related weapons via the

international supply chain, they also contain trade facilitation measures designed to

expedite customs processing and enhance trade. Nonetheless, current cargo security

programs face certain implementation challenges that some claim may compromise their

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effectiveness and minimize their potential benefits to participants. Overall, however, as

many cargo security programs continue to be refined, conclusions regarding their efficacy,

their costs to business, and their effects on trade will likely change, in turn influencing the

future direction of these programs.

References

Allaz, C. The History of Air Cargo and Air Mail from the 18th Century. London:

Christopher Foyle Publishing, 2005.

Bonner, Robert. 2004. Homeland security: The U.S. and the EU are working to protect global

trade from terrorism. European Affairs. Spring.

http://www.ciaonet.org/olj/ea/2004_spring/2004_spring_15.html (accessed September 12,

2007).

Buzdugan, Maria. 2006. Existing and emerging air cargo security and facilitation issues and

concerns. http://www.tiaca.org (accessed June 20, 2007).

European Union Regulation (EC) No. 2320/2002 of the European Parliament and of the

Council of 16, Dec. 2002, Establishing Common Rules in the Field of Civil Aviation Security.

Joann Peterson and Alan Treat, for United States International Trade Commission - Journal of

International Commerce and Economics, March 2008.

Lobdell, Karen. 2007. Race for global trade security: Taking security to the next level,

presentation. 86th Annual Conference and Expo, American Association of Exporters and

Importers (AAEI), Drinker Biddle Gardner & Carton, June 18. New York, New York.

Websites:

https://www.iata.org/whatwedo/cargo/Pages/index.aspx

http://www.state.gov/e/eb/tra/rm/229216.htm

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