Rigsecure Documents

The Mechanics of Supply Chain Theft

Tue, 30 Jun 2009 05:16:51 -0400

Given an opportunity most people will steal something at some point in their lives. It could be from their employer, a business, or even a friend or neighbor. As abhorrent and cynical as it may sound, theft is a condition of life to which we have seemingly adapted. We have grown up in a culture of theft and theft-related events our entire lives. From television to movies and from to music to media, property theft is truly woven into the fabric of our lives.

Children tend to adopt certain behaviors from what they see in the media and what they learn on the street. At times they act out criminal behavior as part of their learning and growing experience. Unfortunately these behaviors tend to remain with some individuals throughout adulthood and can manifest themselves at any time and place. It is only through ones personal morality or fears that these inclinations are suppressed.

Although many view stealing from an individual or a business as unconscionable, little thought is given to purchasing goods previously taken by others. Purchasing a stolen item is not a victimless act. Although the purchaser of stolen goods may not realize it, this act drives an underground criminal network. The scope of this network encompasses everything from the single theft of a retail item through the funding of terrorist organizations via cargo theft.

Engaging in this activity is commonplace for many people, primarily due to the prevailing lax prosecutorial remedies for property crime in the United States.

This chapter will deal with the issues surrounding theft and the distribution of stolen property. It will discuss who steals, buys, sells, distributes, and transports stolen goods and what their unique individual motivation is to be party to this type of illicit activity. Nowhere in the narrative do I discuss any particular person or event but rather the discussion is a culmination of years of supply chain theft experience and accumulated statistical data from sources such as insurance companies, investigators, law enforcement agencies, and documentary studies by industry-specific trade organizations and consultants.

There are less visible forms of theft that go beyond commonly stolen tangible goods such as computers, cell phones, and jewelry. The theft of energy, transportation services, or intellectual property account for additional billions of dollars lost to property owners. Another form of transparent theft is the replication of branded goods, more commonly referred to as counterfeiting. All of these criminal acts are defined as theft as they erode corporate profitability, put users at risk, and dramatically affect the economy.

Because of their inherent transparency, many types of theft become lost in an attempt to quantify them. There is no actual reporting mechanism to calculate theft-based losses or is there a repository for such data. Theft can have numerous categories and collaterally affect many more individuals than the brand owner, insurance company, or victim. Collateral losses due to theft cannot be assessed with any degree of accuracy. Even your neighbor who steals cable, water, or electricity commits a blatant act of invisible theft that goes undiscovered, unreported, and unaccounted for in theft calculations.

Who doesn�t know someone that got a great deal on something that fell off a truck? Who doesn�t know someone that has not gotten an equally great buy on branded merchandise on-line or at a flea market? If these scenarios are familiar, you probably have been touched by a theft-related event. The hidden economic impact of this condition is devastating. Its scope affects nearly every product brand, manufacturer, and retailer. The volume of financial loss and the negative economic impact it has on consumers is tremendous, but it is generally transparent. Few people know the level that theft recuperation plays in the retail price of goods. Product theft can impact jobs, employers, our economy, our way of life, and even our country�s well being. The nexus between terrorists being funded by product thieves is a risk to us all.

THE UNDERGROUND SUPPLY CHAIN

Our transportation industry serves as the pulse of commerce and the heart of our economy. Collectively, we move food, clothing, and most other essential goods by truck, rail, and air. The transparent nature of logistics makes for an invisible or, dark side, of an otherwise innocuous industry. The black side that no one sees is the illicit movement of stolen goods through a normal, legitimate transit process, and it is all happening right under our noses! Besides stolen commodities of every description, contraband drugs and illegal weapons are also commonly transported using commercial trucks and courier services.

The sheer volume of stolen goods handled by thieves, buyers, and fences requires a network of people far too encumbered for an illegal organization. Because of this dynamic, most movement of goods, even those stolen in trailers and on the highway, wind up moving by a legitimate carrier to their final destination. Of course, this is unbeknownst to the receivers. There are billions in counterfeits filling our stores and pharmacies that have been delivered seamlessly along side of legitimate cargo. Untold billions in illegal drugs and laundered currency take the same distribution channels to market as would any normal legitimate product.

How is this done? Who is responsible? Who makes it happen? Who profits and who looses? How long has this been going on?

Because of the need for speed in illicit logistics, impulse planning is almost never a consideration. Thieves plan and execute these moves as well as any logistic provider ever could. There are many truckers who inadvertently provide this service without knowing they carry stolen merchandise. Many hands touch the cargo, but most eyes look the other way. Transportation providers, eager to satisfy a client or attract new ones, will take on freight moves without ever recognizing or analyzing the facts surrounding the cargo. Even the FBI has a diminished interest in the interdiction of stolen cargo as their resources are now focused on more conventional counter terrorism. No one in our industry is immune and no one can be that vigilant all of the time or to see through these clever plans.

Regardless of the origin or ownership, freight will move through our normal logistic system and be delivered to markets throughout the country on a daily basis. Goods destined for export move in the same way. The underground supply chain is truly transparent to us all. It will continue to increase costs for shippers and put many innocent drivers at risk until controls are developed to reduce these incidents.

At one point after 9/11, the Department of Transportation began a program known as Highway Watch. This, now terminated program, was designed to make drivers and carriers aware of potential threats and terroristic activities. It helped create a security standard for drivers and became the eyes and ears of law enforcement. The program was just getting momentum when it was terminated for budgetary reasons. Had the program continued, many illicit cargo moves and suspect loads would have been discovered and the risk to thieves and terrorists multiplied many fold. Having a million savvy drivers on the street and looking for transit anomalies would have been a tremendous benefit to us all.

Perception of value is the driving factor for most purchases. Little regard is given to the intrinsic value of a quality, authentic product over the low price of these knock-off products. There is a major market for aircraft, car, and truck parts throughout the world. In cases where such parts are just unavailable, sales are easily generated. However, in areas where legitimate parts are plentiful, the substandard, stolen or remanufactured parts businesses still thrive. Besides the significant level of lost opportunities for the sales of these goods by their rightful owners or resellers, the commercial supply chain is flooded with suspect products causing unjustified claims against the original manufacturer. These claims have to be vigorously defended in courts causing further economic harm to the original product owner. Discovery of most counterfeit goods in the field, whether stolen, diverted, or substandard is next to impossible. This is due to the sheer volume of products and the lack of track and trace capabilities of governing authorities.

Factors that affect risk are: the timing of the shipment of certain goods from the manufacturer, their availability in the market place or in transit, level of protection given to the products when unattended, the level of market demand, and the profit associated with the sale of that commodity. These components round out the characteristics of what I call the product risk factor. The greater the product risk factor, the greater the need to address protection of that product while in transit and at the retail level. Rarely do organized thieves play in the speculative theft arena because their marketing and supply chain just do not support this platform. The smaller the organization the more random the theft and product base, however, the larger the organization the more item-specific their targets are.

THE CRIMINAL ENTERPRISE AND ITS UNDERGROUND ECONOMY

The term underground economy defines the entire scope of illicit operations which involve the theft of physical and intangible products and some types of product-associated fraud. The term criminal enterprise describes the organized groups who engage in stealing and distributing stolen goods and whose efforts perpetuate the problem internationally.

Looking at theft from the monetary rewards prospective is generally easy to comprehend. You steal goods, you sell them, and you make money. The risk is low, the opportunity is pretty consistent, and the demand is high. But what about other motivations that drive industrial, personal, and supply chain theft? How do these areas of concern go far beyond the simple theft, sale, and subsequent purchase of stolen goods? Is the criminal thief on a par with the buyer of stolen merchandise?

Criminal motivation seems to inherently stem from greed, but based on current events, one can make the argument that theft is a direct result of our tenuous economic times. The thief, who claims to steal for survival, appears to be a basis for the problem at the lowest (street) level, where supply chain theft is a totally different condition. Most psychologists say that theft is a subculture -- a way of life and even a turn-on to some. It provides a rush through the need for risk in certain personality types. While other more liberal interpretations of lower-level industrial theft motives rationalize theft based on grudges with employers, personal debt, dissatisfaction with their socio-economic level, or salary but many investigations show that greed was the driving force. Some people seem to get a primal satisfaction from beating the system but bottom line, they are still turning the product into cash. The ease with which goods are available to take, and the lack of risk when taken, remains an underlying factor in most industrial thefts. Some other theft motivational factors can include excessive gambling, high personal debts, financial losses, living far beyond ones means, extramarital involvement, blackmail, excessive use of alcohol or drugs, resentment of management, frustration with the job, the threat of job loss, greed, and peer-group pressures. Any of a variety of circumstances can impact a person�s life to a serious enough of a degree where the person�s long standing attitudes, morality, and values may be changed. This change does not necessarily mean they will steal, but it does open the door to that possibility. Therefore companies need to defend their assets at all times. In many companies, theft in small volumes has been on-going for years. This type of theft is at an almost unrecognizable level and dismissed or written off and rarely investigated. It is not until the level escalates does the company realize the impact of what has been going on and takes action. Embezzlement is just as common an act of theft as stealing tangible products. In many cases the most trusted employee of a company is found culpable for these behaviors. No one is above theft, and no one should be overlooked in any investigation. Cargo, cash, or data does not disappear on its own.

Criminal behavior at an industrial level is a learned skill yet somewhat latent in everyone. It applies to both the thief and the buyer at different levels although unsuspecting buyers hardly ever see the inherent risks. Both morality and rationalization seem to be easier on the part of the buyer as he feels he has done nothing wrong.

The lack of corporate risk awareness and the use of security processes and controls within an organization can bring out this behavior or create it. When people begin to steal successfully they invite others to emulate the behavior which subsequently exacerbates the condition until it becomes a part of the landscape. The snowball effect costs victim companies millions of dollars in losses before they can react. A report prepared by Donald Cressey in 1998 on industrial and supply chain theft identified three conditions which must be met in order to allow theft to grow within a business. These conditions were motivation, opportunity, and rationalization.

Motivation speaks to the issue of simple greed which supersedes any rational thinking in new criminals and sets the stage for rationalization of the theft. People are very complex. The ease that one can extract goods from a business provides ample opportunity for everyone to get in on the action. Since people are uniquely motivated by different conditions in different environments, opportunity driven by motivation yields costly results to victim companies. By being able to steal easily without risk and to self-rationalize your actions, even the generally honest person will steal. Some exit interviews with common industrial thieves imply that they were just simply emulating what others did, and that they felt justified in that they thought the business �could afford the loss�.

Larger product thefts are typically attached to a criminal enterprise. These criminal groups can be large or small, simple or sophisticated, and organized or randomly formed. Most groups use trusted personnel with certain skills which are germane to the particular targeted product, supply chain, region, location, modality, or theft category. Regardless of the scale of the enterprise, the focus is consistent and the goals are clearly defined. Their focus is stealing targeted products of all types and descriptions and not getting caught. Like any business their motivation is the creation of profit. Their individual skill and success is commensurate with their rewards. The broader the base of operations and the more dynamic the enterprise, the greater their profits become. Size of the operation or targeted category of goods does not correlate directly to profitability.

Many lower level thefts which include home invasions, break-ins, some type of ship-lifting, and smash-and-grab street thefts are typically done by drug users or unsophisticated criminals and do not account for any significant percentage of the billions lost to property thefts. These thieves tend to be more brazen, and the thefts random and rarely organized. These potentially violent criminals basically steal and fence items in order to generate cash or to support their habits. When these criminals escalate their scope of targets beyond petty theft they become a public risk. Law enforcement is more apt to focus in on these crimes rather than simple product disappearance.

Petty thieves can find immediate buyers for almost any commodity. Recently car jackings, theft of copper wire and metals, manhole covers and fire hydrants, guardrails and construction truck theft have become more common and visible. As these targeted products become more in demand, the public becomes an active participant in the commission of crime and tend to become collateral victims.

The risks in property crime theft cannot be minimized. Stolen trucks can be driven into crowds, circuitry and wire theft can cause critical infra-structure electronic systems to malfunction, such as in the case or traffic lights and rail signals, stolen valves can open pipes and create costly or dangerous spills, and when manhole covers are removed from streets, drivers and passengers are unnecessarily at risk. Most of these types of criminal acts encumber law enforcement�s time and erode their limited resources.

The so called non-traceable events of industrial pilferage include items such as meat and liquor which are distributed to restaurants and barrio stores where the evidence is quickly consumed. The duplication of movies and their distribution here and abroad is a common untraceable practice. Software and toy replication and resale using inferior components and even book reproductions are just some of the other notable non-traceable product events that occur each and every day.

Because the volume of these losses is totally conjecture, industry estimates are the only way to get a theoretic dollar loss volume. Organizations such as The National Retail Federation (NRF), various insurance groups, the music and recording industry, and even consumer protection groups maintain theories on the financial impact of these events but cannot quantify them with any tangible data.

These losses have a cumulative effect and cannot be attributed to any one single event, entity, market, or product. Even manufacturers who are being targeted cannot precisely quantify the impact supply chain theft has on their bottom line. In some cases brand owners research certain international and domestic markets to find that more of their goods seem to have been sold than what they feel were actually manufactured. This discrepancy is due to the blending of stolen goods with replications and diverted goods and the re-introduction of previously stolen goods into the market over time.

The resources needed by law enforcement and local governments to combat, investigate, and prosecute these offenders is also a cost of loss that is most often ignored or overlooked when considering the general impact of inconsequential property theft.

OPERATIONAL FACTORS

The black market which operates to resell stolen products is arguably its own free market economy. The world of distribution of stolen goods is made up of a number of �businesses�, all of which have the key elements of any �for-profit company� but without any manufacturing, administrative or marketing costs. They have no liability or tax responsibility. They do not positively contribute to any local or national economy and additionally, they employ few workers, pay no benefits, and typically have no permanent facilities. These criminal enterprises have no appreciable overhead, although they do have some inherent storage, transportation, and distribution expenses. The companies offer nothing to bolster commerce or create national wealth, but rather drain local resources and erode commercial brand integrity and confidence.

In certain areas of the country many of these criminal enterprises employ and harbor illegal immigrants and gang members. Their identities are transparent to law enforcement and their backgrounds are unknown. Factors such as this can lead to unpredictable and uncharacteristic violent behavior in the commission of thefts. Most property-oriented crime is nonviolent and occurs while goods are unattended. Some larger, more organized groups are made up of active criminals and operate on a national scale.

We do know that theft-based transportation is frequently masked by clever thieves who move these goods with reputable carriers in normal distribution channels. For example, a truck might be followed from its distribution center and then stolen at a truck stop. The goods are rushed to a public warehouse, and they are quickly off loaded. A fictitious company account is set up in advance for the arrival and short term storage of these goods at a public warehouse or distribution center. That location is now used as the transship point and the new shipper (the thief) becomes the carrier client. In this loosely termed cross-dock operation, goods are never repackaged, but rather quickly reshipped as a full truckload to a port of debarkation, or to another break bulk facility on a clean bill of lading but under another shipper�s name. Carriers have no reliable way to vet new clients, but rather accept the goods, move the freight and are paid by the phantom new shipper, at times in advance. In the case of counterfeits or in more sophisticated criminal enterprises, goods may be further broken down and possibly blended with legitimate goods to mask any chance at traceability prior to re-shipping. In either instance, goods may be trucked to any where in the United States, Canada, or even Mexico. Some export goods are either taken through Miami on the east Coast and Long Beach on the west coast, then loaded on containers destined for South America, Russia, India, or other foreign ports in the world for further distribution.

By now, the picture should be getting pretty clear. Stolen goods have suddenly assumed another identity and appear to belong to someone else. This makes those goods the newest members of the underground economy. At the same time, counterfeit goods, posing as legitimate products, are moving to U.S. markets from foreign ports to be blended with prime product. This new dimension further complicates any chance to unmask the stolen shipments. Upon arrival they are distributed by otherwise authorized resellers to retailers or manufacturers just as if they were legitimate, thus becoming a second element of the underground economy.

In the case of stolen meats, produce, fish, and other temperature sensitive commodities, the speed with which they are repacked for a quick sale is remarkable. Unless they are sped off to market they will be worthless. These time or temperature sensitive goods give a new meaning to �custom critical� deliveries. Few cases are made by law enforcement after the evidence is consumed! If you cannot catch thieves in the act, or dissuade them from taking the loads in the first place, these goods are long gone. Many of the products are ethically purchased drugs that may have been removed from proper storage conditions for a period of time and potentially cause great public harm when resold. Additionally, many of these drugs loose their efficacy and when used in hospitals or by patients, either offer no relief or benefit or harm the users significantly.

Distribution channels for some goods such as designer clothes, over- the-counter pharmaceuticals (OTC), prescription drugs, fragrances, beer, cigarettes, shoes, sneakers, jewelry, and electronics of all types have very specific brand sensitive outlets. These are painstakingly chosen by the brand owner and monitored by them regularly. Investigators on the staffs of most brand holders consistently research the market, web, and trade associations for unknown and unauthorized distributors. In certain cases the same companies distributing stolen, diverted, or even counterfeit goods can be authorized resellers. This makes flushing out a bad apple from a trusted source a difficult process. Since access to private records is impossible, investigators find it hard to determine anomalies such as volumes of certain goods sold versus those legitimate goods purchased by the vendor for resale.

OUTLETS

The National Retail Federation is quoted as saying �People have quickly learned that the internet presents a low-risk way to sell stolen goods. �More disturbing, however, is that the internet seems to be contributing to the creation of a brand-new retail thief. These are people who have never stolen before but are lured by the convenience and anonymity of the internet.� eBay currently has about 2000 paid employees whose job it is to investigate reports of stolen goods, fraud, and other illicit activities that may be using their good name and brand as a sales vehicle. Interestingly enough, many retailers and few buyers would seek this information out. A good deal is simply a good deal and investigating the lineage of a product is unnecessary.

In many cases recovery after a loss may not be desirable to the affected party. This is due to a number of factors besides the possible compensation received from insurance. In cases where manufacturers have dated items such as current fashion styles in clothing and shoes, or if the item has an expiration date, the recovery of such goods months after the theft puts the owner and retailer in a tough spot. The goods have either gone out-of-season, style, or they have missed the advertising window. Hence, the goods are more valuable to them if they remain stolen rather than recovered. In the case of electronics, the rapid change in technology advancements in any one area such as cell phones or cameras can literally make a device undesirable. Software can be outdated months after its initial release and copies of competitors can make such recovery unwelcome for those already compensated for the theft. Because of these factors, some stolen property is best left unrecovered.

Efforts by law enforcement and some corporate investigations meet with resistance when and if the goods are found. In many cases the retailer, who may have owned the goods in transit reject the recovery and defers them back to the original manufacturer. The ability of law enforcement to sort out the rightful owner, or at minimum the party willing to take the goods, can be costly. These products, once recovered as evidence, must be stored and such expenses revert back to the product owner if he is found. Because of the issues with ownership, many such goods are sold at police auctions on eBay. Law enforcement has the right to sell for a profit any articles recovered by them in the course of an investigation that have not been identified as the property of a specific person or entity. The municipality recovering the goods is also obliged to store these products and make an effort (in accordance with their specific ordinances on stolen goods) to find the rightful owner. If the rightful owner cannot be located in that period of time the goods are sold.

The proceeds of stolen and recovered items benefit the law enforcement agency selling them. The dichotomy is that the original theft, now sold twice and paid for twice, has both positively and negatively affected all parties who have come in contact with the cargo. Most recovered property is discovered during routine investigations and is not typically tied to any one crime, therefore finding the owner becomes complex.

ASSESSMENT

Theft is arguably one of the oldest crimes. When the risk is low enough and the reward great enough, theft will always take place. Whether in the workplace, at school, or at home in your neighborhood, some form of theft is consistently present. Theft has been a human condition since the beginning of time, but affects us all more now than in the past and not just the victim. Supply chain theft is no longer the stepchild of corporate losses, but a prime factor in reducing business profits at every level. This otherwise transparent condition goes far beyond tangible monetary losses. The relationship of many types of theft to drug smuggling, terrorism, and money laundering will become clear.

Most attempts to statistically quantify the volume of property theft in terms of dollars lost, the types of products stolen or the resulting costs to industry is conjecture. The enormity of the negative affect that supply chain theft has on our economy is catastrophic.Yet industry studies are inconclusive and specific loss data is both hard to come by and difficult to validate. Collected data from insurance losses, law enforcement recoveries, and public information sources is suspect because it is impossible to interpret or verify. Since most industrial and supply chain theft is unreported, specific data does not exist.

Industry associations such as the National Retail Federation (NRF), American Trucking Association (ATA), pawnshop associations, jewelry and electronic vendor groups, governmental agencies such as the Drug Enforcement Agency (DEA), Customs, and the Federal Bureau of Investigation (FBI) do try to maintain theft data when reported to them. Most law enforcement data is not available to the public. However, that data is only a small portion of actual theft losses and its impact theoretic and unsubstantiated. Since the vast majority of supply chain theft is not reported, the collected data cannot be audited. Because of these factors, the impetus of law makers to enact more severe remedies to property crime fails to gain the support it needs to be passed. Most states are considering supply chain theft laws, but few have enacted them with the teeth needed to make an impact on the criminals. Lack of remedy creates a positive and virtually risk-free environment for thieves.

There are accurate data resources to quantify shoplifting losses, including basic retail frauds such as credit card and other white collar retail crimes because this data is consistently reported and meticulously maintained by retailers and their credit card processors. Supply chain theft, which is the larger problem, remains obscure. Because retail theft data is well known, industry and government do more to address these conditions. Retailers spend millions to create in-store risk of loss but little to protect their supply chain.

In the transportation industry, data on cargo theft loss is extremely hard to come by as it adversely affects the logistics company�s reputation as well as that of the brand owner. No one wants to air their dirty laundry. Industry associations such as the Eastern and Western States Cargo theft task forces as well as the ATA try to quantify loss data to help member companies understand the risks and advise them on suitable best practices for cargo protection. Most of that data is client specific and unavailable for sharing. Few carriers actually do much to protect cargo in their care.

The Government Accounting Office (GAO), the Inland Marine Underwriters Association (IMUA) for insurance data, and law enforcement at the state and federal levels, also track and document reported losses in the supply chain. These organizations only collect data on about 10 percent of the reported losses and do not interface with one another. Collectively, all of these groups are privy to different data, both reported and secret, and in their own way try to couch the problem in a manner that best �sugar coats� their respective risk. No one wants to ship with a carrier who has been a target for thieves and no carrier wants to accept loads of potentially targeted goods in certain high risk shipping lanes.

The collected data is rarely made public as that could seriously affect any national brand or transportation provider. Revealing general facts to the public about certain product theft can cause panic and therefore unnecessary risk to the general public. In certain instances where stolen ingestibles such as foods and pharmaceuticals are immediate risks, brand owners can do a product recall rather than identify the root cause of the problem. Additionally reporting theft data associated with a public company could adversely affect their stock price and ultimately their investors.

Although you would think law enforcement would be more focused on this problem, they are not. Federal law enforcement has all they can do to address terrorist and cross border issues. Most states� limited resources are primarily focused on local violent crimes. Property crime, as described to me by a prosecutor is �just not sexy.� The question most prosecutors ask is, �where would you better use resources, in a rape or murder case or a pallet of stolen cell phones?� Because most states, and especially municipalities, have limited funds to prosecute and incarcerate offenders, many of these property criminals fail to serve any appreciable jail time.

THEFT HAS A COST TO ALL OF US

Let there be no confusion on the magnitude and devastating economic effect property crime has on our Gross National Product. The numbers rival the largest economic downturn possible but on a consistent annual basis. No bailout can address the unknown factor of the loss of jobs, profits, and taxes that are the direct result of theft. The federal focus today is on antiterrorism and protecting infra-structure such as water supplies, ports, bridges, tunnels, rail, highway, and inner cities from acts of terrorism. We have lost focus on the bigger picture of how these terrorists are funded. The Federal Bureau of Investigation (FBI) dissolved all of their cargo theft task forces shortly after 9/11. No one there seemed to understand the overall problem! We must realize just how the activities of cargo thieves facilitate their terrorist activities both here and abroad.

Ideologically terrorists look to harm their enemy either physically or economically. Economic terrorists can impact the fiscal well being of a country by eroding business and negatively impacting a tax base. Although most of the annualized dollar volume data of product theft is conjecture and �guesstimates�, its significance is no less compelling.This consistent growth of product theft losses for the past fifteen years is the basis for evaluating this threat as the largest single economic risk to legitimate business that exists today. In short, the perceived sanctity of the commercial supply chain is all but nonexistent and has been replaced by a level of risk which must be accounted for and paid for in any logistical, retail, or manufacturing operation. You and I pay for theft losses with each item we buy and from each service we use from manufacturing to insurance and from transportation to retail goods. Each costs a bit more because of theft.

THEFT ARCHITECTURE

In many cases those who hijack trucks and cargo watch these vehicles from where they originate and throughout their routes in order to better study the practices of drivers and to assure themselves that the trucks are not being escorted. Many warehouses are unmarked and thieves must survey these buildings in order to assess the cargo coming and going from these centers before deciding on a target.

Most truck drivers are creatures of habit and stop to eat and sleep in the same places. Because of gas contracts they often get fuel from the same vendors and stay at the same predictable truck stops, thereby making surveillance easy. Given that information, taking a vehicle at a fuel island or when the driver is eating or showering becomes far easier than you would think. Almost all hijacked trucks and trailers are taken when the rigs are unattended. Most thieves avoid contact to avoid identification and resistance by the driver.

A driver moving a load may purposely discuss the nature of the goods with someone who offers him cash for leaving his vehicle unattended. Many warehouse workers offer up information on their jobs and products at bars or restaurants, where this information is overheard and gathered by thieves.

A driver giving up his load in route may agree to be tied up or in some way delayed by the thief who takes his truck and load. At times even these trucks are stripped and broken down for parts or shipped outside the country, however it is usually the cargo in the trailer that is the ultimate target. Most often the cargo is removed, and the truck and trailer are returned to the street to be discovered by law enforcement in another state or county and returned to the owner.

This theft category does illicit both an internal investigation by the owners of the cargo and the trucking company and also triggers a law enforcement property case. Many times the driver is identified as the conduit to the theft ring and becomes legally culpable for the crime. Because of the employee infidelity clause in most carrier insurance contracts, insurance will not cover such product losses for the owner of the freight, the trucking company, or pay for the stolen equipment and downtime. Further the limits of liability on stolen goods may, absent specific coverages, revert to the Carmack amendment where freight is rated at $.50 per pound, making stolen computer chips and diamonds equal in value, by weight, to wood or steel. This inequity provides little remedy for victims of cargo theft.

Most cargo theft is litigated. Much of this litigation turns into subrogation because few carriers were alone in handling the goods. Many interline with other carriers, break bulk in warehouses, drop ship to multiple locations, and, as in the case of less than a truckload (LTL) of freight, have multiple loads on board each of which is owned by a separate party.

The Carmack Amendment governs the manner in which interstate cargo claims are handled by law 49 U.S.C �14706. Carmack controls and limits the liability of common carriers for in-transit cargo losses and absent specific peril insurance, preempts state law remedies that increase the carri�er�s liability beyond the actual loss or injury to the property. In many cases cargo theft and liability issues are settled using the standards of this law which relate to weight rather than commodity value and are always detrimental to the owner of the cargo.

LOGISTICS

Stolen goods have to be moved after they are taken. In the past when goods were distributed locally, the supply chain requirements of thieves and fences were manageable at the street level. Today things are radically different. Even at the lowest levels of theft, items are distributed anywhere they are needed. In many cases a fence or middleman facilitates the movement of goods from party to party until they reach a market. This could be regional or international. Buyers or end-use clients can be anywhere in the world. A fence�s response time must rival his legitimate �competitors� to reach the market so that the products can be turned back into cash.

During their travels stolen goods must be appropriately stored and in some cases repackaged before they can be reshipped. Certain goods are large and must be concealed or reduced to avoid detection. Items such as trucks themselves are stripped and sold for parts. Pharmaceuticals are broken into smaller packages for distribution and shipped to multiple locations. The network for the resale of stolen goods is as extensive as the legitimate supply chain in that it involves shippers, carriers, warehousemen, jobbers, and sales representatives commonly referred to as fences, media, internet, bulk buyers and direct clients. It must work under the radar of law enforcement and private investigative services from the intellectual property holder and insurance providers. None of this could happen without the inherent sophistication of skilled and educated thieves. The point is that most people engaging in the distribution and resale of stolen goods are highly intelligent and capable. The �on-the-ground� thieves who actually effectuate the theft are street smart and capable adversaries for business and law enforcement.

At lower theft levels like simple shoplifting and other non-organized petty crimes, the use of simple techniques to move goods is common. These include returning stolen goods to stores for cash credits, internet, or street selling. These direct individual product sales are barely visible on the law enforcement radar screen. If apprehended, the thief rarely serves jail time. The problem is that the actual volumes of goods moved back into circulation becomes staggering when multiplied by the amount of these �street� vendors.

Many cities have large areas where �black market� goods are sold freely on the streets, in flea markets, and always in plain view of law enforcement. In most cases resources for the apprehension and prosecution of this type of criminal is miniscule and most plea out, pay a fine, or serve minimal jail time and are back at their craft in days. The volume of goods and the revenue generated amounts to millions in lost sales and taxes but happens in small enough quantities to be inconsequential in the larger scheme of theft.

Thieves move items quickly through the system. Fencing or reselling stolen goods is a quick, cash-based process. There is almost no track and trace of the goods once taken. It is only after the re-distribution of these goods that the possibility of discovery exists. In some cases warehouses are raided and massive amounts of stolen goods are seized, however this is the exception rather than the rule. Thieves and fences earmark stolen items for sale, prior to the theft, so that long term storage becomes unnecessary. Even when theft is random, and the product taken is not already promised, the fence network quickly responds to find appropriate buyers.

Empirical product marketing theory can be tested in both the legitimate and illegitimate markets The notion of supply and demand, profit, unit price, distribution costs and outlets, supplier consistency, and delivery all play a role in the sale of goods, even ones with no base cost. If we are able to understand which factors drive the markets for stolen goods, beyond price alone, we can quickly determine theft trends and risk to some products. With this data we can more easily predict both the level of protection needed for some commodities and the likelihood they will be targeted in the supply chain.

Once stolen, goods have to be off-loaded into a temporary warehouse until they need to be relocated to a buyer. Stolen goods cannot remain in the trailer unless the trailer itself is concealed in a building. The infrastructure for the movement of stolen goods is sophisticated and dynamic. The efficiency and speed with which these goods are moved defies even the best logisticians and distribution enterprises. In many cases the goods are then moved by legitimate carriers who are paid for their services in cash, or, in some cases, even on account through shell businesses.

Most trans-shipping becomes quickly untraceable. For the most part, domestic carriers have little interest in who provides their next load. To keep their equipment on the road, carriers accept loads from many sources such as internet dispatchers and consolidators. The fact that much of this freight is nondescript, palletized, and destined for major cities makes contracting a carrier easy. This further complicates the tracking process, even if law enforcement has intelligence as to where the load is ultimately going or who the buyer may be.

WHAT�S BEING DONE LEGISLATIVELY?

Legislatively, we do little to protect businesses and individuals from this known peril. Even if appropriate laws were followed, the impact to reduce the condition would be negligible. Our jails are overflowing with violent criminals. With limited state resources to house offenders, many property criminals are merely fined and never actually serve time in prison. That condition is frustrating to law enforcement officers who risk their lives in apprehending these criminals and subsequently see them back in operation.

Because cargo theft is becoming a recognized issue, three bills are now under consideration by the House Judiciary Committee�s Subcommittee on Crime, Terrorism, and Homeland Security. The legislative subcommittee hearing testimony in October 2008 heard from many retailers, e-tailer, and manufacturers exhausted in their collective efforts to stop the selling of stolen property in on-line auctions as well as in normal retail establishments. The bills HR 6713, also known as the �E-fencing Enforcement Act of 2008,� and two similar bills, S 3434 and HR 6491 will be evaluated and plan to propose harsh remedy for those caught selling stolen products. The legislation proposed and backed by bricks-and-mortar retailers such as Wal-Mart Stores and Target, would require that on-line marketplaces like eBay and Overstock.com promptly investigate and pull down listings when retailers or manufacturers provide �credible evidence� that merchandise is stolen. The bills also make it a felony to sell stolen items on-line and give retailers new rights to sue internet companies in federal court if they fail to respond or promptly take down stolen merchandise from their sites.

Surprisingly enough, Steve DelBianco, executive director of Net Choice, an industry trade group whose members include eBay, AOL, and Yahoo, plans to testify against the legislation. He said his group was amenable to more severe criminal penalties for thieves and sellers who are fencing stolen goods on-line, but he was against the legislation. His contention is that there are other provisions of these proposed bills that amount to a creation of an �elite club of retailers that want to use their influence to bash their online upstart competitors.� He felt that such legislation would enable traditional retailers to get information about their on-line competitors and this information could help to figure out where a competitor is getting his low-cost supply, or to harass that competitor by complaining their goods are stolen when they are not. No legislation is going to please everyone. However, without such remedy theft just gets worse because we are not addressing the outlets or the source of the goods. These laws are also weak in addressing the remedy against the actual thief as they only focus on the fencing and distribution components of supply chain theft.

The Organized Retail Crime Act focuses partly on creating penalties for organized retail crime by defining what it is. The bill also requires on-line marketplaces to �expeditiously investigate� reports of stolen goods and to maintain records of high-volume sellers. Both bills allow retailers to file civil lawsuits against the operators of on-line marketplaces that offer stolen goods for sale. These laws do not require victim companies to report their losses. Such reporting would further exacerbate the negative effect the original theft had on the brand owner. It does allow the retail industry to challenge the lineage of the goods for sale by e-tailers as previously stolen without connection to the original owner. For example, a retailer selling a product at $100 is competing with an on-line e-tailer on the same goods at $25. The retailer knows his base wholesale cost is $40 and yet his on-line competitor can sell it at retail way below his cost. His ability to challenge the e-tailer, as created by this proposed legislation, allows an investigation of the origins of these products without the involvement of the original brand owner. Since the original brand owner may have already been reimbursed by his insurance carrier, getting these goods back would not be desirable.

According to Security Management magazine, �Theft costs retailers around $104 billion a year�, based on their annual Global Retail Theft Barometer. US retail theft in 2007-8 amounted to almost $45 Billion, or the lion�s share of retail shrink. Retailers reported that stolen merchandise accounted for 38.4 percent, or $14.6 billion, of internal fraud, while 23.8 percent of internal losses were in the form of stolen cash, coupons, vouchers, or gift cards comprising more than $9 billion. The Global Retail Theft Barometer is based on a survey of 920 large retailers around the world and is comprised of only reported data, both verifiable and unsubstantiated.

Employee theft is the leading cause of �shrinkage,� or stock lost from crime in North America. Authorities caught around 5.3 million people stealing from retail stores between July 1, 2007, and June 30, 2008. This includes anything from diamonds to chewing gum. It also includes goods recovered and those actually taken. Though 84.6 percent of the thefts were perpetrated by customers, the average employee who was caught stole much more and more often. Warehouse and general supply chain theft as well as higher bulk theft are not reported as part of this data and remain at a speculative level. The value of these employee losses far exceed the more voluminous but petty thefts.

The most popular products for retail thieves included cosmetics, alcohol, electronics, and watches; shaving products, cosmetics, meat, seafood, infant formula, CDs, DVDs, fashions, printer cartridges, shoes, computers, cell phones, mp3 players, computer games, and OTC drugs account for many other favorite targeted goods. Retailers estimated that they lost, on average, between two percent and five percent of new in-store product lines, while such popular products as Harry Potter books, electronic video games and recent music CD�s and DVDs collectively reached loss levels of up to eight percent of stocked items.

Some, but not all, products that are sold on-line, in auctions, and by phantom e-tailers are in fact stolen goods. Police auctions, which legitimately remarket recovered products (previously stolen) and some brand owners who sell their own diverted products do so legitimately and through many of the same sources used by criminals. Bulk buyers who purchase goods recovered from insurance carriers and truckers are legally selling branded products (some of which were previously stolen) on-line at drastic savings. Even abandoned goods, resold by warehouseman to recover storage costs, find their way to on-line auctions and become great consumer deals. It becomes very difficult to differentiate between these legal business transactions and those done by thieves. It seems unfair to collectively conclude that auction �great deal� sales are all suspect and compound the problem of legally enforcing on-line criminal activities.

Interestingly enough, there are means by which individuals and corporations can recover stolen property. Web sites and companies such as JustStolen.net and Propertyroom.com provide a novel service. For a price, they will return recovered goods to their rightful owners. The mechanics of this operation are that one need only register the goods initially and then prove the goods were theirs by either a preregistration listing, or by providing the company�s credible records to establish ownership which include police reports and transportation documentation.

The selling price of most legitimate products using this type of service incorporates the registration cost as well as insurance before items are even out for consumer sale.This increases the selling costs as a direct result of the perception of theft and inherent risk of supply chain loss but provides the buyer a sense of security that seems worth the cost.

As was previously mentioned, such recoveries en-mass can be detrimental to the original owner because he may have already been paid for these goods by his insurance provider. This makes their return, in whatever condition they may be, an act of futility and even results in a greater loss to the original owner thereby doubling his theft exposure. Because of this fact, many companies abandon their rights to the recovered property and allow them to be remarketed. The dichotomy is that the market wants laws to protect them and when they have them fail to use them because it is not in their best interest.

Despite the existence of viable legal remedies on the state and federal levels to ward off these conditions of theft, there has been no improvement in theft reduction over the last ten years. Property crime has in fact grown appreciably and diversified significantly to a point where even determining the economic scale is conjecture. Property crime is both lucrative and participants are less apt to be prosecuted than violent criminals who use a weapon or force. The lack of quantifiability of the actual theft-related losses, in terms of dollars, product volumes, and recovery costs is what makes law enforcement and law makers reluctant to address these matters more aggressively.

Most crimes are evaluated on an individual basis and not as a national economic threat. The futility of locating stolen goods is truly a waste of resources for most police departments and federal agencies. Recovery is typically the result of luck or as part of another criminal investigation. Goods such as food, drugs, refrigerated items, and many other types of time-sensitive materials are rarely if ever reported stolen and almost never recovered. Many of the victims basically accept the loss and move forward. The reason here again is that if you are lucky enough to be paid by insurance for the loss, recovery would mean that you would have to repay those funds and destroy the product anyway. If a food or an ingestible drug is out of the care and control of the owner, carrier or recipient, if recovered, it legally must be destroyed. When such goods are inadvertently found and attempts are made at returning them to the rightful owners, most law enforcement agencies find corporate victims reluctant to accept their return because of these ramifications. Most of us will never know if we are eating evidence or watching a bootlegged film because the event is basically victimless and not viewed by the public as serious.

A COMPLIATION OF FACTS

Kroll Associates is a large New York based security and risk consulting company that provides investigative, security, and technology services. A recent analysis by Kroll outlined the risks companies face with their global supply chains and the amount of fraud, product tampering, and theft theoretically taking place today. The report dealt with a worldwide analysis of most forms of supply chain theft and included retail fraud in that calculation. The bottom line, as reported, showed that these vulnerabilities are equally as common here in the United States, Mexico, and Canada as they are in the EU and in Asia. According to the report, �The scale of supply chain fraud is difficult to measure and too broad in scope to estimate meaningfully.� The Kroll report, as do other studies, failed to state with any specificity the precise dollar value of theft and fraud, but rather established the vulnerability of this form of loss to retailers, brand owners, and other supply chain components in terms of overall risk. Kroll data from its 2007/2008 �Global Fraud Report,� which surveyed 892 global executives, showed just how large an issue it is. The report stated that that 42 percent of companies worldwide had suffered from at least one incident of supplier fraud or the theft of physical assets; and while these are just two of the many ways to abuse supply chains, nine percent of companies had suffered both types of loss.

According to their analysis, the more complex the supply-chain of a company, the greater their risk of loss. �Fraud thrives on complexity,� notes the report. �Modern operational complexities make companies vulnerable to frauds committed many links back in the chain and beyond the scope of most internal controls.� Fraud can occur at any point in the shipment of goods including at the origin. Many companies use trust as the basis of imported shipments and fail to properly examine containers during stuffing or verify contents at delivery. Some companies become victims when goods are tendered to draymen and when these goods sit in unsecured yards prior to being loaded on to a ship. When inappropriate seals are used, domestic cargo can be removed easily by truckers from trailers and containers.

Once considered a mundane and victimless threat, cargo and supply chain theft has grown to a size that is almost one percent of the worlds GNP. Cargo theft has become increasingly well organized, sophisticated, efficient, and highly profitable. Few states have cargo theft specific laws and, therefore, cargo and supply chain thieves are rarely severely prosecuted, making the reward far greater than the associated risk.

According to the Kroll report, one additional area in supply chain theft and monetary loss does not specifically relate to cargo or product issues but rather occurs through document manipulation. Weaknesses in information technology, the lack of appropriate auditing for payments and analyzing billing processes are all areas ripe for theft. Unless a company is diligent in monitoring paperwork anomalies, it can easily fail to detect fraudulent payment patterns or phantom orders. �When controls around payment matching and approvals are weak, service providers will learn that a company does not notice when they are over billed, double billed, receive ghost bills, never receive product for bills received or they are billed for the wrong service or at the wrong price.� It continues, �Falsified invoices, however, rarely follow the same patterns as those from honest suppliers.� Most of these supply chain thefts are based on import or export operations of companies whose process controls and information systems are weak or poorly designed and monitored.

By its very nature, any freight conveyance, whether it is a truck, plane, railcar, barge, or ship is basically an unattended warehouse with one or no unarmed guards. It must be emphasized that most supply chain theft occurs when the cargo is unattended. The opportunity for thieves is almost overwhelming. The myriad of choices of different cargo is endless and the opportunities to take it plentiful. The risk of apprehension, much less prosecution for cargo thieves, is extremely low while the rewards are incredibly high. The notion of safety and security for most unattended goods in the international commercial supply chain is weak.

Regardless of shipped modality, the consistent lack of basic protection for the freight, both by the carriers and in the form of security procedures by the shipper, creates vulnerability. Shipped goods in the supply chain typically lack appropriate security measures. When these same goods are cross docked in distribution centers, carrier terminals, or public storage warehouses, they become even more vulnerable to theft or manipulation. The easier the access is to cargo the better the opportunity for thieves and employees of these facilities. The lack of recognition of the true threat of loss for cargo owners, warehousemen, and transportation providers causes little to be done by these supply chain components to protect goods when they are out of their care and control.

While the incentive and onus for cargo protection should rest with the owner of the freight, most shippers fail to apply appropriate security measures to the cargo. Most seek to meet minimum standards of security and fail to effectively contribute to the protection process. Carriers offer little to no effective remedy to theft as they are not only protected by liability laws such as the Carmack Amendment when it comes to freight claims, but the exclusions in the shippers own insurance coverage for theft losses make proactive security expenditures rare. Security countermeasures are typically the last expenditure carriers make to mitigate known risks of loss. Most even fail to adequately protect their own truck assets which in turn would benefit their clients and further secure their cargo.

Since cargo moves anonymously across the nation�s roads and highways, it is always passing through various state and local jurisdictions. Each state and local government has a different threshold for the investigation, apprehension, and ultimate prosecution of cargo thieves. Because of these known lax conditions, many cities and states become targets for thieves Areas like Atlanta, Georgia; Memphis, Tennessee; Los Angeles, California; Newark, New Jersey; New York City, New York; Miami, Florida; and Chicago, Illinois, are prime examples of targeted states for truck and cargo theft. The limited deterrent value of the threat from law enforcement to cargo thieves, mitigates cargo theft risk to them. In addition, there is an escape hatch created by federal value limitation legislation. This condition creates a base threshold for prosecutors to accept or plea cases. For example, Newark, New Jersey may have a threshold of $50,000 per incident while Memphis, Tennessee may be $150,000, making a theft in Memphis less likely to be actually prosecuted.

Insurance coverage is typically ambiguous on cargo theft and it creates a loophole for the nonpayment of claims. While most shippers believe that they have appropriate insurance coverage, many fail to recognize that in case of theft the claim may not be paid. Rarely if ever do shippers request a copy of the tariff of the carrier to determine his limits of liability, insurance coverage or any of the exclusions delineated in this document regarding freight liability claims.

TYPES OF THEFT CONDITIONS

Truck theft is by no means the only modality affected by cargo thieves. Air cargo theft, rail, and sea container loads are primary targets. In the late 1990s a famous band of rail criminals known as the Conrail Boyz, effectively stole millions of dollars worth of rail shipped goods (piggybacked trailers on flatcars) in both large and small events. Modern day criminals find that cargo theft represents easy money with little inherent risk of prosecution. The two-year Conrail Boyz investigation uncovered an extensive, well-coordinated, criminal cartel in the business of targeting freight trains carrying millions of dollars of consumer goods. These goods included designer clothing, electronics, cigarettes, and other merchandise. The investigation determined that members of the gang would leap onto the piggybacked trailers while on rail cars as they were moving at a relatively slow speed. Then using bolt cutters and other devices, they would breach the doors of the trailers or shipping containers holding the merchandise and extract it. While the train continued moving, the merchandise was thrown off the train onto the side of the tracks. Accomplices on the ground gathered the stolen items which were then moved to a secret collection point. There the products were staged and organized to be sold to local fences.

From 1992 through March 2003, the Conrail Boyz were responsible for committing hundreds of cargo thefts totaling over $20 million in stolen merchandise, at manufacturer cost, including such articles as:

� 17,496 Sony PlayStation electronic game consoles valued at more than $5 million

� Tommy Hilfiger clothing valued at more than $140,000

� theft of more than 1,000 Jones of New York brand women�s blouses valued at more than $49,000

� theft of 1,800 cartons of Wave brand cigarettes valued at more than $500 each

� theft of approximately $7,000 in cash from the Metro Freight Line

� theft of numerous tractor-trailers for use in transporting stolen merchandise

The 24 gang members each received 13 years in jail. The economic impact of their escapade reeked havoc in the transportation industry as well as in retail and commercial trade in the Northeast for years.

Periodically gangs using cargo theft as their main source of revenue create a criminal enterprise which becomes too large for them to handle. Such gangs tend to break apart fractioning out into smaller, and at times, more violent associations. These turf wars escalate into uncharacteristic violence and can be extremely dangerous to commercial truck drivers, rail yard personnel, warehousemen, and other unsuspecting supply chain and retail personnel.

Because they begin to run out of unattended loads to target, many of these gangs raid working warehouses. In some cases gang members infiltrate the companies, force in order to gain intelligence as to the location of valuable products such as chips and electronics in these facilities. In many large, diverse warehouses or retail distribution centers, high-value goods are dispersed randomly to avoid such smash and grab operations; therefore, location intelligence is paramount to a quick and fruitful robbery.

Most supply chain gateway cities such as Atlanta, New York, Miami, and Los Angeles experience tremendous thefts. Secondary air courier companies such as FedEx, UPS, and DHL have significant theft losses but limit their liability through their bill of lading and insurance requirements and exclusions. The random nature of courier goods makes specific product targeting difficult but not impossible. Without specific knowledge of the shipper�s packages and products inside, these packages become far more difficult to target for their specific goods.

Theft of goods from known shippers is relatively easy. However, even in

Statement of John Sammon

Wed, 05 Nov 2008 11:16:44 -0500

United States Department of Homeland Security Transportation Security Administration
Statement of John Sammon , Assistant Administrator, before the subcommittee on Transportation Security and Infrastructure Protection Committee on Homeland Security, United States House of Representatives
July 15, 2008
Good afternoon Chairwoman Jackson Lee, Ranking Member Lungren, and distinguished members of the Subcommittee. I am pleased to be here today to discuss the progress the Transportation Security Administration (TSA) is making toward fulfilling the air cargo security provisions of the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act), P.L. 110-53.
As you know, implementation of the 9/11 Act�s air cargo provisions�requiring the screening of 50 percent of cargo on passenger aircraft by February 2009 and all such cargo by August 2010�presents significant challenges. To meet these challenges, TSA is emphasizing effective security management of the entire air cargo supply chain by building upon our established programs: air cargo security regulations, standard security programs, security directives, information sharing, and increased use of TSA-certified explosives detection canine teams and Transportation Security Inspectors (TSIs) for cargo. Key to the success of our screening regime will be collaboration with stakeholders�U.S.-based shippers, freight forwarders, and passenger air carriers�through a program that will facilitate screening early in the supply chain using currently approved screening methods and stringent facility and personnel security standards.

TSA�s strategy involves every component of the air cargo shipping system�from the entity originating the freight to the freight consolidators/forwarders, airports, and finally to air carriers who transport the cargo�and the people involved in the process that have access to cargo at every point in the supply chain. The program is designed to harmonize with the international community, since a large portion of air cargo moves on international flights.

TSA is committed to meeting the 9/11 Act�s goals. And, when we meet the 50 percent goal, the vast majority of flights, carrying more than three-quarters of all passengers, will in fact be screened at the 100 percent level.
The 9/11 Act: Reinvention of Air Cargo Security

Approximately 12 million pounds of cargo is transported daily on passenger aircraft. To accommodate this considerable stream of commerce, TSA currently has in place a multilayered, risk-based system for securing cargo traveling on passenger aircraft. As required by applicable security programs and regulations, aircraft operators and foreign air carriers are now primarily responsible for screening a percentage of cargo transported on passenger aircraft. In addition, indirect air carriers (IACs) are required to screen or provide to TSA for screening, all cargo that meets certain high-risk criteria. Regardless of risk, TSA screens 100 percent of cargo at Category II-IV airports.

Currently, required cargo screening is conducted by aircraft operators and air carriers, using the following TSA-approved methods of screening: physical search with manifest verification, x-ray, explosives trace detection (ETD), explosives detection systems (EDS), and decompression chamber. Cargo consolidations built by aircraft operators and air carriers or accepted in that form from shippers and IACs are subject to random screening by TSA-trained and certified explosives detection canine teams. For unique cargo types that do not lend themselves easily to these established screening methods, TSA permits alternative screening methods to be employed, such as verification of the description of the cargo and matching the identity of the shipper with information contained in the shipping manifest.

Additional layers of security augment the required screening. For example, with very few exceptions, cargo may only be accepted for transport on passenger aircraft when there is an established business relationship between the shipper and accepting IAC, aircraft operator, or air carrier. Employees and authorized representatives of aircraft operators, foreign air carriers, and IACs with unescorted access to cargo must undergo a security threat assessment (STA), and the Security Identification Display Area (SIDA) security requirements at regulated airports have been expanded to include areas where cargo is loaded and unloaded. TSA has timely processed and adjudicated 170,000 STAs for IAC employees.

The 9/11 Act mandates significant changes to this regime. Section 1602 of the 9/11 Act amends TSA�s primary screening authority, 49 U.S.C. �44901, to require TSA to implement a cargo screening program that will, no later than August of 2010, achieve the screening of 100 percent of cargo transported on passenger aircraft in a manner that results in a level of security commensurate with that of checked baggage. The 9/11 Act defines the term �screening� to mean �a physical examination or non-intrusive method of assessing whether cargo poses a threat to transportation security� and includes within that definition x-ray systems, EDS, ETD, explosives detection canine teams certified by TSA, and a physical search combined with manifest verification. The 9/11 Act also provides TSA the flexibility to develop additional methods to ensure that the cargo does not pose a threat to transportation security, including a program to certify the security methods used by shippers.

The requirements are easily stated, but the enormity of the task cannot be overstated. Essentially, this legislation mandates the reinvention of air cargo security.

Considerable Challenges
The 9/11 Act�s mandate cannot be achieved by relying on the current system, whereby aircraft operators and air carriers are almost exclusively responsible for screening cargo. Currently, aircraft operators alone do not have the capacity to screen the volume of cargo that is now transported on passenger aircraft daily. Requiring passenger aircraft operators to screen 100 percent of air cargo would result in carrier delays, congestion at airport cargo facilities, backlogs of unscreened cargo, and missed flights�in short, such a requirement would significantly impede the flow of commerce. Likewise, requiring screening of the current volume of cargo carried on passenger aircraft at the airports by parties other than the aircraft operators would be impractical, if not impossible, if only because of the lack of space to accommodate such an operation.

Multiple Stakeholders
To fulfill the 9/11 Act�s requirements, TSA must rely on the wholehearted cooperation of industry. Success will only be achieved by augmenting current screening resources with those of multiple stakeholders and ensuring that screening is conducted at earlier stages in the air cargo supply chain. As discussed more fully below, in connection with the Certified Cargo Screening Program, TSA is working with aircraft operators, IACs, and shippers to create, pilot, and ultimately implement a program in which air cargo security is a responsibility shared by the entire air cargo industry.

Technology

A critical challenge in meeting the requirements of the 9/11 Act is the development of technology to accomplish the contemplated level of screening, particularly given current practices for packing cargo for transportation aboard passenger aircraft. Under current industry practice, a large percentage of cargo that will be placed aboard passenger aircraft, particularly wide-body aircraft, is tendered at the airport in a consolidated state, i.e., it has already been packaged on large pallets for transportation. Without the development of effective technology for dealing with cargo tendered in this manner, screening would require significant costly reengineering of existing packaging and shipping processes.

The new requirements for screening cargo commensurate with passenger baggage will have the biggest impact on cargo that is carried on wide-body aircraft. For efficiency in operation, wide-body aircraft utilize Unit Load Devices (ULDs) to transport the cargo in the lower holds of the aircraft. These ULDs can hold up to 11,000 lbs. of cargo comprised of literally hundreds of pieces/boxes. Some ULDs are hard sided (similar to baggage containers) where the pieces are hand-stacked inside, while other are flat metal pallets on which the pieces are stacked, contoured to the aircraft shape, then shrouded in plastic and covered in heavy netting to prevent shifting in flight. The majority of the wide-body flights are on international lanes. IACs control most of the market (most shippers work through an IAC for many reasons, and do not negotiate directly with carriers). As a result, a very high percentage of ULDs are filled/built by the IAC, not at the air carrier�s facility. This is done not only for efficiency, but also because it enables IACs to obtain better rates than when cargo is tendered �loose� (because less handling by the carrier is required). For international cargo, cut-off times for carriers to receive cargo from IACs (or shippers) is approximately 4 hours prior to departure time.

Without the development of technology to effectively screen cargo built into large pallets and ULDs, screening cannot be executed primarily at airports. If all cargo were to be screened only at airports by air carriers, they would have to either (a) break down/remove cargo from all ULDs previously built-up by IACs, screen the cargo, and re-build the ULDs, or (b) require the IACs to tender the cargo �loose,� and then the carrier would screen the cargo and �build up� all of the containers. Either scenario would be extremely labor intensive, be costly in time, and eliminate rate discounts for industry.

Meeting the Challenges

TSA is well on its way to meeting the 50 percent screening milestone and to having in place the critical regulatory pieces for meeting the 100 percent goal. There are several interlocking pieces that advance us toward the 50 percent goal in the short term and that lay the groundwork for the complete implementation of the 9/11 Act�s requirement for cargo screening.

Near-Term Elements: 100 Percent Screening for Vast Majority of Passenger Flights

A key component of achieving the 9/11 Act�s 50 percent milestone by February 2009 is a 100 percent screening requirement for passenger aircraft that comprise approximately 95 percent of all domestic passenger flights and carry approximately 25 percent of all cargo that is carried on passenger aircraft. This requirement, developed in coordination with air carriers and other appropriate stakeholders, is scheduled to go into effect in October 2008.

Most significantly, this requirement will cover flights that carry more than three-quarters of all passengers. This means that when this requirement becomes effective, the great majority of air passengers will be protected by enhanced screening measures, even in advance of full deployment of our air cargo strategy.

Near-Term Elements: Canine Program

Current TSA security directives and emergency amendments already require that bulk cargo consolidations be made available by aircraft operators and air carriers for screening by TSA-certified explosives detection canine teams. As of July 1, 2008, TSA has trained 450 teams that are deployed and operated by local law enforcement agencies at airports. Standard operating procedures governing these teams require that they devote at least 25 percent of their duty time in the air cargo environment. Canine teams generally are concentrated at or near airports where there are high volumes of passengers and cargo. Under the U.S. Troop Readiness, Veterans� Care, Katrina Recovery, and Iraq

Accountability Appropriations Act, 2007, P.L. 110-28, Congress provided TSA with additional funding to expand the explosives detection canine team program by 170 teams. Of these, half will be proprietary, that is, comprised of TSA-owned dogs and TSA handlers, and devoted exclusively to screening air cargo. The deployment of additional canine resources ensures that a greater number of cargo consolidations that are subject to screening will in fact be screened.

Near-Term Elements: Increased Cadre of Inspectors
At the beginning of FY08, TSA employed 300 Cargo TSIs exclusively dedicated to the oversight of air cargo. Since then, TSA has trained and deployed an additional 130 air cargo TSIs, and another 20 will be added by the end of FY08. Inspectors conducted more than 37,000 compliance reviews in FY07 and initiated more than 2,500 formal investigations based on suspected non-compliance with TSA requirements. Cargo inspectors operate under work plans to ensure that all aircraft operators, air carriers, and IACs are inspected regularly and that those that have had previous compliance issues are inspected more frequently and thoroughly. Cargo inspectors also conduct outreach to all regulated entities to ensure their ability and willingness to comply with the IAC program�s requirements prior to their approval. Along with performing daily oversight of cargo operators, inspectors also conduct covert testing of the air cargo system and participate in �cargo strike� surge activities at our Nation�s largest cargo airports.

Near-Term Elements: Elimination of Alternative Screening Methods
In addition to increasing screening across the board, TSA is in the process of reevaluating and eliminating many of the alternative screening methods previously used for ensuring the security of certain categories of cargo. TSA reported to Congress a comprehensive overview of alternative screening of specific commodities, as required by section 1602 of the 9/11 Act.

Looking Forward: The Certified Cargo Screening Program
TSA is diligently working with all of our partners across the air cargo community to establish the linchpin of our air cargo screening strategy�the Certified Cargo Screening Program (CCSP)�a voluntary program under which TSA will certify cargo screening facilities to screen cargo before it is tendered to aircraft operators for carriage on passenger aircraft. As authorized by the 9/11 Act, we are currently developing an Interim Final Rule (IFR) to implement the CCSP, which we hope to publish by the end of this calendar year. This program, which we anticipate deploying in FY 2009, will establish full supply chain security of air cargo and play a major role in overcoming the hurdles inherent in a 100 percent screening requirement.

Like TSA�s existing security programs, the CCSP will rely on layers of security to provide the best possible protection for cargo on passenger aircraft and the least disruption to commerce. Under the CCSP, facilities upstream in the air cargo supply chain such as shippers, manufacturers, warehousing entities, distributors, and third party logistics companies will be able to apply to TSA to be designated as certified cargo screening facilities (CCSFs). IACs and aircraft operators that screen cargo outside airport perimeters may also apply to be certified to become CCSFs in order to screen cargo for transport on passenger aircraft. CCSFs will be required to screen cargo using TSA-approved methods and to implement chain of custody measures to ensure the security of the cargo throughout the air cargo supply chain prior to tendering it for transport on passenger aircraft. CCSF employees and authorized representatives will be required to successfully undergo TSA-conducted STAs. Before being certified, and periodically thereafter, the CCSF will be required to undergo examination by a TSA-approved validator, who will also need to undergo a TSA-conducted STA. These facilities will also be subject to regular and random inspections by TSA cargo inspectors to ensure their adherence to CCSP requirements.

Once the program is implemented, CCFS-screened cargo will contribute greatly toward meeting the 50 percent and 100 percent cargo screening requirements of the 9/11 Act.

Certified Cargo Screening Pilot Programs
As part of the process of establishing this regulatory program, TSA is testing the concept of screening earlier in the supply chain by conducting two pilot programs: (1) the CCSP (Phase One) pilot involving shippers and other entities such as manufacturers, distributors and third party logistics companies, and (2) the Indirect Air Carrier (IAC) technology pilot. The pilot program with shippers is being conducted at the following major gateway airports: San Francisco, Chicago, Philadelphia, Seattle, Los Angeles, Dallas-Fort Worth, Miami, Atlanta, and New York/Newark. The pilot with IACs is running at these airports and additionally at Dulles, Honolulu, Intercontinental Houston, Boston/Logan, Detroit, Denver, San Juan and Orlando.

Over 65 percent of all cargo transported on passenger aircraft is from these 18 pilot airports. Approximately 61 percent of cargo transported on wide-body aircraft originates at just 6 of these airports. By focusing its outreach in the pilots on the entities using the airports with the highest volume of cargo transported on wide body passenger aircraft, we have been able to maximize the impact of the pilots.

The IAC technology pilot is evaluating the effectiveness of cargo screening equipment recommended by TSA, such as Advanced Technology X-ray (AT X-Ray), ETD machines, and EDS, by commodity class at each participant�s consolidation facility. Congressional appropriations provided TSA with funds for the screening of air cargo. TSA is using these funds to assist in the deployment of appropriate screening technology for use in the IAC pilot program. In addition to testing the equipment itself, the IAC pilot is also evaluating the volumes of cargo the IAC community is able to screen and the use of chain of custody procedures.

Industry has responded enthusiastically to TSA�s call for participation in the pilots. During the first 4 months of 2008, TSA teams met with over 225 shippers, 550 IACs, and 100 air carriers in these cities to explain the impact of the regulation as well as the solution provided by the CCSP. To date, TSA is working with over 70 IAC pilot locations as well as over 100 shipper locations that are undergoing the validation process to become certified to screen as part of the pilot. Fourteen major IACs are committed to participating in the pilot and are in various stages of certification. The final steps in the process will be their purchase of approved technology and subsequent completion of the necessary training on use of that equipment. In addition to the IACs who are formally participating in the pilot, we have received applications from 47 IAC facilities in the 18 cities that wish to become certified and plan to purchase the approved technology on their own.

We feel that this approach has many benefits, not the least of which is that moving the screening of cargo for these larger IAC operations away from the airports will allow the carriers to utilize their capacity to screen cargo from smaller IACs and shippers who do not have the volumes of cargo or the financial ability to invest in the infrastructure needed to screen cargo themselves.

Looking Forward: Research and Development
To address the technological challenges, TSA is working collaboratively with the DHS Science and Technology Directorate (S&T) to identify technology gaps and to prioritize research and development (R&D) requirements. Together, we are working to develop and qualify technologies in the areas of automated break-bulk and bulk explosives detection; trace explosives detection; alternative screening technologies such as metal detection, non-linear junction device detectors, and Improvised Explosives Device (IED) disruptor technologies; blast mitigation technologies; stowaway detection technologies; and supply chain integrity technologies. Our collaboration includes the conduct of laboratory and field assessments of AT X-Ray and pallet-sized x-ray technologies in conjunction with S&T�s Transportation Security Laboratory (TSL).

TSA and S&T completed technology readiness evaluations of bulk air cargo screening technologies last year, and research is continuing on promising technologies under Cooperative Research Development Agreements (CRDAs). Formal qualification testing of break-bulk (box/piece) air cargo screening technologies is scheduled to commence this Fall with a view toward adding successful technologies to an air cargo screening technology Qualified Products List (QPL). In addition, TSA is working with S&T to prioritize bulk (palletized/containerized) air cargo screening technology requirements for future investments.

TSA has been conducting a Hardened Unit Loading Device (HULD) Pilot Program for which interim test results were released in November 2007. Based on these results, TSA has decided to put the HULDs on a QPL. The final test results and report for the HULD Pilot Program are expected to be completed and released by August 31, 2008.

Finally, TSA is also working closely with the S&T Cargo Pilot Program, which assessed air cargo screening costs for three levels of automation. S&T will submit a report to Congress on the results of the pilot, after which TSA will report to Congress the cost 7
estimates for doing 100 percent screening of air cargo at various airports on all-cargo and on passenger aircraft.

Success Is the Only Option
TSA�s mission is to protect the security of the Nation�s entire transportation system. Our current risk-based, layered security approach has served us well in fulfilling that mission. We anticipate that the current program, along with the new CCSP, will enable us to achieve the 100 percent air cargo screening requirement envisioned by the 9/11 Act in a manner that does not disrupt the flow of commerce.

Thank you, again, for the opportunity to bring you up to date on our progress with this important mandate. I will be happy to answer any questions you may have.

Air Cargo Screening and Security: A Collaborative Solution for Compliance

Fri, 24 Oct 2008 13:34:10 -0400

Air Cargo Screening and Security: A Collaborative Solution for Compliance

Erik Hoffer, President, Rigsecure.

Walt Beadling, Managing Partner, Cayuga Partners LLC

Introduction

On August 3, 2007, President Bush signed the 9/11 Act (1) into law with the objective of protecting the United States from terrorist attacks. The legislation, nearly 6 years in the making and 286 pages in length, is well-intentioned, complex and sweeping in scope, yet often lacking in detail.

In particular, those sections related to improving air cargo security are long on what and when, but woefully short on how. Given the ambiguity of the legislation, enormity of the task and the cost and number of players involved, it is not surprising that little substantive progress toward compliance has been made to date.

The objective of this document is, therefore, three-fold:

1. To help both industry and the airlines to better understand the 9/11 Act as it relates to air cargo security, and how they can work within its provisions to help secure our borders and citizens from terrorist attacks using air cargo as a delivery method.

2. To propose a proven, cost-effective solution that can preempt, and prevent, terrorist attacks using air cargo, thereby protecting passenger aircraft carrying cargo, and meeting the objectives of the 9/11 Act within the stated time frames.

3. To establish a consortium of concerned parties � shippers, carriers, industry groups and technology providers � to endorse, and rapidly deploy, this solution as a de facto industry standard.

Overview of the 9/11 Act Legislation and Cargo Screening Program

Regarding improving air cargo on passenger jets and freighters, the law states that 50% of all cargo must be screened to provide a level of security �commensurate with that of passenger checked baggage� within 18 months of enactment (by February, 2009) and 100% within 3 years (by August, 2010). The 100% screening requirement has already taken effect for parcels on narrow body passenger aircraft.

The law places the onus of inspection on the shipper first, the carrier second and lastly those who would assist, for a fee, the other two in screening and subsequently securing cargo to be delivered to a commercial passenger liner for transport. The law does not deal directly with freighter aircraft or the goods that are shipped on freighters, nor does it address couriers, 3PL�s, forwarders and other consolidation facilities that ship air cargo throughout the United States. Further, the law applies only to domestic cargo; obviously we cannot impose, or enforce, U.S. supply chain security standards outside our borders. We must therefore rely on other countries, delivering cargo by air to our shores, to do it in a like manner

In an effort to increase screening capacity, relieve the burden on air carriers and expedite the �flow of commerce�, in early 2008 the Department of Homeland Security�s Transportation Security Administration (TSA) announced the Certified Cargo Screening Program (CCSP), a voluntary program designed to enable vetted, validated, and certified supply chain facilities to screen cargo and thereby increase screening capacity and expedite flow of commerce(2). The CCSP is a facility based program for supply chain entities located domestically, within the borders of the United States. Any facility that tenders cargo directly to an air carrier or indirect air carrier (IAC) may apply to become a CCSF, including manufacturers, warehouses, distribution centers, third party logistics providers (3PL�s), indirect air carriers, airport cargo handlers and independent cargo screening facilities.

The Problem

At this writing it appears highly unlikely that the program objectives will be met within the prescribed timeframes, despite the TSA�s efforts to develop, and pilot, viable screening solutions.

In 2008, an estimated 45 billion Revenue Ton Miles (RTMs) of cargo will be shipped by air within, to, and from the U.S. Given the sheer volume of cargo to be processed and loaded onto aircraft, full electronic screening, as required for passenger baggage, presents significant logistical and operational challenges - and the size and complexity of the air cargo system continues to grow (3).

The operational detail of the 9/11 Act regarding air cargo security, specifically how to inspect cargo and under what conditions, and then how to secure, seal and ensure the chain of custody for inspected cargo, is grey and undefined. At a U.S. Security Conference hosted by Lufthansa Cargo on September 30, 2008, Ed Kelly, the Transportation Security Administration's General Manager, declared that the specific inspection machinery to be used, and how to employ it, is still being determined (4). Adding to the confusion are different requirements and standards for screening shipments on passenger aircraft and cargo carriers.

Despite a lack of specifics regarding the process and an obvious need for clarification, elements of the law have not yet been challenged by shippers or carriers.

Vague, poorly defined processes and procedures

The problem begins with the vague definition of terms in the inspection process itself, e.g., what, exactly, is a �piece of cargo�? Is it an entire air pallet, or a single box? What happens when cargo is interlined, and the air pallet has to be broken? Does this mean that all of the cargo has to be re-screened as single parcels? If so, the argument can be made that all cargo in single units, or in bulk, be screened simultaneously as a unit of measure if destined for the same consignee. In any case, it is known that there are very few ways to securely seal a corrugated box that are compliant with this law.

The inspection process is further compromised by a lack in standardization and consistency of use among the various types of machines installed at different airports. The variability of an inspection process that uses different machines, inspecting different packages for different variables in different ways, calls into question the feasibility of the assumed process and controls mandated by law vs. the ability of personnel and availability of facilities and equipment to accomplish the task. Peter Harris, VP of Strategy and Development at Analogic Corporation, one of the manufacturers involved in screening equipment pilots, affirms that a �concept of operations� - how to do actually do this in and around an airport - has yet to be defined by the TSA(5).

Expensive, complex, unproven technology

The machinery required for inspecting a full air pallet or LD3, though similar to that used for passenger screening, is more massive, complicated, expensive and slow; the availability of space and facilities, throughput rates, cost of inspection and the ability to secure closures are l problematic.

If and when a particular type of equipment is specified, deployed and used by everyone equally, what will happen as technology advances, or the threat becomes more sophisticated, rendering the chosen technology obsolete? Who will fund the necessary modifications, upgrades or replacements, and moreover, who will fund the initial purchases and implementation, given the current state of the art and cost? Brandon Fried, Executive Director of Airforwarders Association (AfA), it may cost up to $200,000 per location to comply with CCSP, a heavy burden for small to medium-sized forwarders to assume without financial assistance, which can only come from our financially-challenged federal government.

Further, because the technologies currently in use have been designed to screen passenger baggage, it is not certain how effective they will be in air cargo applications. According to Fried, none of the technologies tested so far has proven suitable for screening the dense loads typical of industrial shipping, from stacked machine parts to boxes piled on pallets or tightly packed in metal containers(5).

Coordinating a multitude of new supply chain players

There are three supply chain communities that must adhere to the TSA�s CCSF mandate: the shipper, who will soon become known as a Certified Shipper (effectively eliminating the current �Known Shipper� Program); the Certified Screening Facility and the Certified Air Carrier.

The first line of defense is the Certified Shipper; to comply with the law he must:

1. In most cases, completely reengineer his infrastructure and facilities to create a secure environment with vetted personnel, fences, gates, locks, guards and cameras.

2. Ensure that no one is allowed into his facilities without authorization, and that no one except trusted employees inspect, pack and seal his cargo.

If this is done to according to TSA standards, his goods can pass �GO� and then be moved, by a secure, vetted and certified carrier, directly to the airlines for shipment. The Certified Shipper must also strictly adhere to the recommended best practices for secure sealing. The TSA has yet to produce a document that specifies exactly what these best practices are, however.

This next step in the process will come under purview of dedicated service providers soon to be known as Certified Inspection Facilities. These controlled access areas will be popping up throughout the USA, first at the major gateway airports - SFO, LAX, ATL, JFK, MIA - and later others, as they become necessary. Certified Inspection Facilities will be managed by independent companies that currently have locations at these airports, secure facilities or ones that will soon become secure, and also those eager to provide this service at a fee to any shipper or carrier in need of it .

This new process will totally disrupt commerce by air as we know it, because many items are shipped through non-gateway airports and by unwilling carriers and uncertified shippers, which will cause a great deal of cargo to be re-routed by unsecured surface transportation to its destination, or shipped as commercial freight, all at a higher cost and at a slower speed.

By necessity, Certified Air Carriers (to be) have been assuming the burden of compliance to this point, but this initiative will be short lived. The cost of such operations in manpower, infrastructure, machinery and facility space makes the prospect daunting for most carriers, and the costs for commercial shippers will be far higher than current levels; the current economic downturn further exacerbates this problem. Such cost increases will put many small shippers at a competitive disadvantage, and will move some portion of the supply chain flow to trucks and other modes of transportation. The next major shakeup in air cargo will come when air carriers are forced to reject tendered cargo because of they are unable to screen it in the volumes delivered thereby causing irreparable harm to shippers and lost revenues to carriers, all in the name of security.

Conflicting approaches and programs

Forcing compliance of foreign nations and carriers poses another difficult dilemma, and exposes further shortcomings in the legislation. Will U.S. carriers who interline be required to do the inspection job of their foreign counterparts when these good arrive and are trans-shipped domestically?

Concurrently, we are trying to protect our borders through the voluntary Customs-Trade Partnership Against Terrorism (C-TPAT)(6), first announced in November, 2001, that provides incentives for shippers to participate by expediting the passage of their cargo through customs and speeding supply chain flow. This �carrot� approach contrasts with the �stick� of 9/11 Act cargo screening provisions that allows no threshold for compliance; they are mandatory and absolute, failure to adhere will result in costly fines to those who ignore the law. Will these programs come into conflict, and if so, which will prevail? Whether we can harmonize the security countermeasures of our foreign partners into an effective, compliant system remains to be seen.

Poorly defined processes and procedures; complex, expensive, unproven technology; a multitude of players; conflicting approaches and programs; yet perhaps the greatest flaw in the legislation is its reliance on a single approach to air cargo security: screening, which may be suitable for human traffic, but, largely due to chain of custody issues, is problematic for air cargo.

A Proposed Solution

Speaking at the recent Lufthansa-sponsored security conference, R. John Hansman, Professor of Aeronautics, Astronautics and Engineering Systems at MIT, referenced Reason�s "Swiss cheese" model(7) to promote a more comprehensive approach to cargo security. It's a layered approach using multiple techniques; whereas one screening method might be 80% effective, it can be 99%+ effective when combined with other solutions that have different vulnerabilities. In other words, by adding layers � or �slices� - to the air cargo security system, it will be almost impossible for evil-doers to find any holes in it.

Also speaking at the conference, Dwayne Baird, TSA spokesperson and public affairs manager, noted that speeding up supply chain flow through commercial and cargo airlines while maintaining security is a recognized concern and key objective of the program. "We want [shippers] to have equipment that can screen large volumes of goods offsite and certify the cargo as secure. As long as they maintain the chain of custody from their facility to our airport, we can consider that shipment as screened and secure."(8) The critical, yet unanswered question is, how can the objective of establishing, and ensuring, the chain of custody be achieved?

Rigsecure.(9) and its partners propose establishment of a consortium to develop and rapidly deploy a layered solution, that will, together with the mandated screening, meet � and exceed - the objectives of the 9/11 Act regarding air cargo security: the �Cargo Brick�. In addition to enhancing the effectiveness of the screening-only solution by ensuring the chain of custody, the Cargo Brick will reduce costs of compliance to shippers, and speed the flow of cargo through the supply chain. This solution currently exists, is proven, uses recommended techniques and materials, complies with the law, and is affordable and immediately available for use to anyone, in a wide variety of formats and configurations.

The Rigsecure Cargo Brick Concept employs:

A pallet bag kit
A Topp Clip
Secure TRAC tape
Standard � � banding and crimping tool
A process for inspecting, securing cargo and ensuring the chain of custody

Pallet Bag

Pallet Bag sealed with Topp Clipp�

The pallet bag is a strong, clear poly bag made to accept a specific size of cargo units bundled into a consistent size bag and sealed for security as one unit. The ability of the bag to show tampering is excellent because it is clear, allowing for easy visual inspection of contents, and impenetrable without leaving an obvious mark. This also makes it compliant with the tamper evident mandate of the law, as described below.

The �Brick� concept also is a tremendous asset to air carriers in bulking out freight in a consistent form, making cubing out an aircraft, or an air pallet, becomes easier and far more efficient. It facilitates the carrier�s ability to visually inspect the freight throughout the logistical cycle in accordance with the mandates of the screening law. The Cargo Brick also reduces the time that carriers have to spend with the cargo, since it can be directly loaded without need of further scrutiny. The Cargo Brick can be made to comply with the size and weight parameters of the electronic inspection devices used by the air carriers or inspection facilities. This speeds up inspection flow as well as the loading and stripping out aircraft.

Indirect Air Carriers such as DHL, FedEx and UPS are perfect candidates for this type of packaging since many of their parcels are of a consistent size and shape and can be packed with this method seamlessly, with the equipment currently in place at their facilities. The USPS would also greatly benefit from this process as their mail sleeves are of a consistent size, weight and shape. These couriers can also create new services and profit centers by providing cargo inspection processes for their clients with a relatively small incremental investment.

Tamper evidency

At the recent Lufthansa Conference, Ed Kelly also said that sealing cargo with a tamper evident tape, such as that manufactured by CGM-AST and supplied by Rigsecure, is an approved method to secure inspected cargo, and compliant with the both recommendations of the TSA and the 9/11 Act itself; so we know that tamper-evidency for cargo is mandated, and that these products provide a level of protection acceptable to TSA as compliant with the law. Experience has shown that screening, together with security seals including Topp Clips� and tapes, is inherently beneficial to all members of the supply chain, and the recipient most of all, through theft reduction and ensuring a secure chain of custody for unattended and nondescript cargo.

The collateral functionality of CGM�s security products provides users with both enhanced security and direct cost savings. Because this base security platform provides intrinsic benefits to everyone, all shippers should employ secure packaging techniques; and since air carriers and their customers must comply with the imperatives of the 9/11 Act, what better way to do so than with components endorsed by the TSA?

The recommended process uses CGM-AST�s Secure TRAC self wound, tamper evident tape as the primary means of closing boxes. With the following features, Secure TRAC tape is the ideal solution for packaging tamper-evidency and reliability for security throughout the logistical cycle:

As a primary closure, the tape securely seals any corrugated box.
The tape is sequentially numbered and made indigenous to the shipper, thereby further insuring its security and propriety, no matter who handles the cargo.
The tape shows the word �opened�, in any language, if peeled and cannot be resealed in cut.
The tape is made of silicone and cannot be resealed with conventional clear carton sealing tape.
It can be custom printed to define the user, the gateway, the client or the product in any way the shipper deems appropriate or effective.
The tape is machine dispensable and far stronger that conventional clear or colored carton sealing tape.
The sequential numbers allow for specific track and trace of individual boxes and provides a clear evidence of attempted penetration even if you have no idea what the number of the tape should be.
This product is an approved and compliant tamper evident system that is seamless to use and facilitates expediting your cargo through your supply chain regardless if it goes by air, land, rail or sea.

Certified Inspection Facilities can employ security tape on individual packages, but larger freight volumes will require the bundled, Cargo Brick approach. For those applications, and for shippers with larger bulk volume consignees, (such as pharmaceuticals, automotive, clothing and cigarettes) the pallet bag and Topp Clip� can be used to bulk out such cargo.

In summary, post-inspection integrity can only be achieved and maintained through the use of a robust, seamless containment system such as the Cargo Brick and/or self-voiding security tape. The use of proven, tamper-evident security products such as these establishes a clear and visually verifiable chain of custody making the shipper and his carrier compliant, and inherently safer, against many threats than they will be without them. Visibility, consistency, and verifiability throughout the chain of custody are prerequisites for effective security; these products, properly applied, create that condition.

Collaterally, any means by which a shipper uses to secure his cargo from the introduction of contraband is also effective against the removal of goods in the form of cargo theft. Cargo theft in the air industry is rampant, and has no defined remedy. Due to the speed with which air cargo travels, combined with the anonymity of the cargo and difficulty of the inspection task, most air cargo theft goes undetected until it reaches its destination at which time the theft is usually written off as a �mysterious disappearance�. These incidents are rarely covered by insurance. Hence, reduced exposure to theft is another, and potentially substantial, benefit of this approach.

Summary and Recommendations

It is unlikely that the 9/11 Act, which demands 100% screening of cargo carried on passenger aircraft by 2010, will be successfully, and effectively, implemented within this timeframe due to a lack of definition and direction in the legislation. More importantly, the singular, mandated approach � screening air cargo in the same manner as passenger baggage � will not provide the presupposed level of security. In any case, it is apparent that the burden of implementing a system to enable compliance and to achieve the broader goal of securing cargo, aircraft and passengers from terrorist acts falls, by default, squarely on private industry. The sooner a viable solution is found, the better for all concerned.

We therefore urge government and industry and leaders, including the TSA, shippers, logistics services providers and air carriers, to endorse, and immediately commence usage of, the Cargo Brick concept and tamper-evident products described above, as appropriate, to secure cargo carried on passenger - and freighter � aircraft within the U.S. and overseas. Rigsecure will work with these leaders to develop and implement the protocols and support mechanisms required for rapid, effective deployment. The goal of this initiative is the adoption of these solutions, in concert with prescribed screening techniques, as standard operating procedures in the U.S. and, by extension, around the world.

Failing in this, it is hoped that the proposed solutions will be embraced as de facto industry standards, with the concomitant benefits of increased security from terrorist acts, prevention of theft, lower costs of compliance and expedited supply chain flow. Through a focused, collaborative approach to supply chain security we can quickly develop, manufacture and deploy the packaging solutions and processes needed to meet the requirements of the 9/11 Act and to better secure our world.

Notes

1. P.L. 110-53, �Implementing Recommendations of the 9/11 Commission Act of 2007�; http://www.ise.gov/docs/nsis/Implementing911_Act.pdf

2. Statement of Richard L. Skinner, Inspector General, U.S. Department of Homeland Security, before the Subcommittee on Homeland Security on Appropriations, U.S. House of Representatives, February 13, 2008; www.dhs.gov/xoig/assets/testimony/OIGtm_RLS_021308.pdf

3. CRS Report for Congress: Air Cargo Security July 30, 2007. http://www.fas.org/sgp/crs/homesec/RL32022.pdf

4. �TSA Ripped at Security Conference�, Air Cargo News, Volume 7, No. 110, October 6, 2008. http://www.aircargonews.com/081006/FT081006.html

5. �Security's Tools of the Trade�, Mike Seemuth, Air Cargo World Online, http://www.aircargoworld.com/features/0908_3.htm

6. �Securing the Global Supply Chain: Customs-Trade Partnership Against Terrorism (C-TPAT) Strategic Plan�, Customs and Border Protection, Washington DC, November 2004 http://www.cbp.gov/linkhandler/cgov/trade/cargo_security/ctpat/what_ctpat/ctpat_strategicplan.ctt/ctpat_strategicplan.pdf

7. James T. Reason, Human Error, Cambridge University Press, 1990. also: http://en.wikipedia.org/wiki/Swiss_Cheese_model

8. �Swiss Cheese Model for Cargo Screening? MIT Adds Voice to Security Debate�, Jessica Binns, Air Cargo World Online, http://www.aircargoworld.com/features/1108_3.htm

9. Rigsecure., www.secureaircargo.com

Security is a state of mind

Wed, 08 Oct 2008 04:33:42 -0400

Security is a state of mind. When the general shipping public looks at air cargo and its intrinsic vulnerabilities they see a dynamic system that moves freight efficiently throughout the world. Little or no consideration is ever given to any threat to commerce through theft of goods, shipping contraband and especially not terrorism. What the security professional sees is quite different. With air cargo�s vulnerability to a disaster being but moments away, any informed evaluation of the threat to world commerce through the use of air cargo is a given. The simple truth is that the commercial supply chain is far from safe and no where near secure, yet in all of this controlled chaos, the system performs efficiently. How air cargo functions within the world supply chain given these threats is the basis of this article.
This article was written by Erik Hoffer in 2007 for Aviation Security Management, a 3 volume set of articles on air cargo issues. The entire book can be purchased at www.greenwood.com/psi/book_details.aspx?sku=C34652 Andrew Thomas Publisher. Publication date 10/30/08

The elements of supply chain and logistical security in the air freight business touch issues such as the secure packaging, handling, storage, transfer, chain of custody and delivery of goods, basic transportation from shipper to client and all aspects of logistics needed to achieve operational efficiency as well as speed and safety. Supply chain security is a dynamic concept covering containment and control over unattended goods regardless of modality of transport as well as packaging. Since choices of boxes or containers are made by shippers, the choices of bundling of freight made by carriers and the lack of possible interaction unilaterally, air cargo remains innocuous and unidentifiable by design. Typically the smaller and generic package size and bundling technique associated with air cargo intensifies the risks to any single unit within that enclosure. Unlike containerized sea freight, which is typically palletized or floor loaded to the maximum cube of the enclosure, locked and sealed and nested aboard a ship; air cargo containers are unlocked, packed randomly and easily accessible before, during and after transport. The speed with which goods are transported, combined with the inherent risks of damage, theft, tampering, spoilage or the surreptitious introduction of contraband into a box, makes air cargo that much harder to monitor or secure. The possible introduction of a weapon, piggybacked into air cargo, is a far greater concern than in over the road goods as there is little time to interdict individual boxes when shipped with thousands of similar packages. The risk of loss or concealed damage is also intensified by the inability to monitor units until received at destination for sorting. Overall, the chances of discovery of stolen goods or tainted freight or the interdiction and remediation of a terrorist planted weapon in air cargo is a challenge. This problem is compounded because of the sheer volume of generic packages, the speed of movement and the lack of inspection before, during or after transport.

�Speed� is the operative word in defining air cargo risk, because the slower the speed of delivery the more apt you are to discover problems before they become disasters. The slower the freight moves, the more hands and eyes are on the cargo and cargo at rest is always cargo at risk! Combined with reasonable package scrutiny on the part of carriers and handlers, and the possible introduction of intelligence into the air cargo security equation, the greater the greater chances of averting an incident involving air cargo. Recently there has been a far greater effort put forth by executive order to examine cargo on commercial aircraft, but that task is both ambitious and surely doomed for failure.
This type of band aid approach to a tremendous problem again demonstrates the �for show only� approach to cargo security common to our government since before 911.

For the years before 911 and now for years after, cargo security has remained the stepchild of �supply chain best practices�. Air cargo is the biggest offender. Although the Known Shipper programs and greater passenger and baggage observation and inspection have been getting better, general air cargo, especially courier cargo and general consolidated air freight have little to no scrutiny coming into the United States or even boarding a plane from some countries. Cargo shipped from this country abroad do get some further observation and inspection, but moving tainted, illegal or hazmat cargo still remains easy for those with the know how to bypass the system. There are approximately 50 million cargo shipments started daily which deal with generic courier packs to boxes of every shape and size. Air cargo can be tendered as freight at an air counter, be shipped with a passenger or simply be dropped in an express box anywhere thereby making policy and scrutiny of parcels almost impossible without opening each and every one every time!

When dealing with effective remedy to supply chain security issues in any logistical environment, you must first have an idea of your adversary. In order to effectively plan for a threat, that threat must be defined and in order to effectively implement change (especially ion security) the process must be universally adopted and maintained. Unlike security for a home, an office or even a vehicle, that is fairly stable and predictable, supply chain security has a number of interdependent dimensions that render most general protective systems ineffective. Besides having freight constantly moving, the protection available at one location may be non-existent at another. Since air cargo rarely hits stop or choke points, implementation of interdiction and inspection techniques must be germane to each handing facility equally. In air cargo, the original carrier though to be hauling the freight may change numerous times for many reasons, all of which are unknown (and unnecessary to be known) by the shipper. Even during the final line haul from the airport by truck, the recipient or shipper may have no knowledge who is bring his freight to him nor what it looks like or how to inspect it before accepting it in good order. Therefore because of the lack of any cargo containment and handling integrity assurances, any logistical defensive strategy to securing your unique supply chain is fruitless.

In any product move or where a threat against specific cargo (such as pharmaceuticals or electronics) is high, you will need to know why someone wants to either steal it or taint it. Their motivation is in so far as ideology, determination, reward for success and skill will help you and your carrier to plan a suitable defense in the form of process controls or indicative packaging. In any adversarial analysis, knowledge of the persons ability to effectively get the quarry, his ability to access it throughout the transportation and storage phase of shipping, knowledge of the location and timing of the goods, the thief�s motivation and level of reward for success as well as his timeframe are all components that help to choose remedy. Additionally these facts or suppositions tend to help define how effective intelligence will be in reducing risk and or deterring the act itself by process with or without additional security technology. With air cargo�s speed as an additional adversary, the chances of deterring an act of terror (or theft) that is already in progress, is limited at best. Proactive planning for cargo security in any modality requires packaging consistency, carrier inspection processes and strict shipping and receiving practices.

The risks to people associated with tainted air cargo are somewhat greater than with other modalities since air cargo is predominately shipped with or near people, rather than simply as freight; and through airports rather than sea ports. Air cargo on freighters always lands at facilities where people are present where sea freight is far more isolated from human contact until it hits the highways. Terrorist threats to ports are of course of equal concern and exhibit an equal or greater economic impact. Regardless of the terrorist event, the commercial supply chain can take months to recover and the costs in commercial and economic losses are staggering. With any disruption in supply chain activities from a simple theft to a major breach, the costs of loss far exceed and proactive remedial action possibly required by the carriers, shippers or airside facilities.

Scrutiny of air cargo on both ends has seen some positive evolutionary changes but effectively not much has improved since pre 911 days. Physical cargo inspections are rare and one is more apt to have issues with classification falsification and tariff violations than with illegal drugs, contraband or weaponry. The implementation of inspection technology in the form of x-ray scanners, sniffers and intel scrutiny, can only address cargo in that particular airport, hence technological advances are not the answer unless they are universally deployed. Technology is still suspect when it relates to chemistry, micro electronics or other innocuous items that could be used as weapons and still seamlessly pass through any airport inspection station. Procedural standards of care such as the Known Shipper program have begun to take big bites out of the need for physical inspection, but they too bring about major issues. Physical inspection is as good as the operator, machinery and volume of items inspected from a particular shipment. Whether you know your client or not, his employees and operating practices make the introduction of a weapon or the theft of goods equally as possible in Known Shippers or unknown shippers.

Nothing short of 100% screening both physical (visual) and mechanical can prevent problems. Such an approach is not only impossible given the nature of the market, but impractical based on the sheer volume vs. time for such an inspection to take place. Proposed government projects such as the use of RFID proved ridiculous as no standards were set nor was there any way to achieve any viable nexus between RFID and cargo security. More about these programs later. There have been technology and process testing models dating back to 2002, some created by Battelle and others by various contracted facilities such as Lockheed Martin, to demonstrate the usefulness of certain inspection machines and security procedures to discover weapons and drugs introduced into cargo. Regardless of the results of any of these test programs, the TSA has chosen no universal process and they have given no viable plan to the industry to help focus us on a best practices model.

There are issues associated with the collection and interpretation of electronic data used to protect the supply chain that have been negatively received by industry. Since intelligence data was to be collected for National security review, industry was asked to make it available. No one bothered to make it secure and evaluation by the intelligence community made it open to the public. Macy�s doesn�t tell Gimbals�, we used to say in New York, hence many competing firms choose not to have their data available. If such data were intercepted by �competitors� it could be used against the contributing firm to derive marketing operation, define new markets, identify inventory levels or product volumes, or allow business intelligence and proprietary supply chain data to be viewed by unauthorized people. Data in this format can also be used by a terrorist to find patterns, products and volumes in order to use these logistic details to hide weapons or people under the radar screen of evaluators. Visibility of other data that industry feels is of a proprietary nature has put a damper on this form of intelligence gathering to the point where the data provided is almost worthless.

Diversity of cargo, generic packaging techniques, bundling on air pallets and in C containers contribute to the chaos involved with choosing a fixed inspection point or process. In many airports throughout the world, in-bond staged cargo means no more than unattended boxes out on the tar awaiting loading into aircraft. Very rarely is this staged cargo caged or securely controlled while awaiting loading. In many airports around the world, access to these staging areas is easy and therefore regardless of the security inspection program used when cargo is tendered, the possible introduction of a weapon or the removal of freight is high when it is unattended. The random nature of cargo in terms of size complicates any inspection processes. The lack of dedicated manpower funded by the airlines themselves at every station all but precludes 100% inspection of over the counter freight. The courier business is notorious for a complete lack of controls. Items picked up in drop boxes or given directly to couriers can seamlessly slip through into both commercial aircraft and freighters with little to no hands on inspection. The air cargo industry and all commercial freight relies predominately on faith to avoid catastrophic situations. A bomb can be delivered in any size parcel, containing a biologic or explosive, sufficient to disrupt the world wide commercial supply chain indefinitely. Air cargo could be terminated from certain points after an event but the negative affect on world wide commerce will be felt for years.

The value of air cargo industry hovers about $60 billion. One supply chain incident adversely effecting world commerce through a terrorist strike using air cargo as a vehicle can dwarf that amount in just a few days.

Carriers are constantly struggling with increasing fuel costs, salaries, personnel, equipment maintenance, regulatory barriers and stiff competition, so who can wonder why they balk about taking on the expensive function of cargo security. Notwithstanding their obvious self interest in security, brand and equipment protection and the potential loss of life which can be caused through a terrorist strike, air carriers still feel burdened by the lack of specific direction given to them by the TSA. The nebulous nature of government regulation regarding an approved definitive course of action to secure unattended air cargo is so illusive that carriers remain on the fence in terms of taking any action at all. Whether it is their job alone to screen cargo is also in question. Physical inspection vs. cursory screening was recently mentioned in an article by Bruce Butterworth, published through a think tank. Do we really want to bring commerce to its knees by opening and inspecting all cargo or do we find some mid-ground between intelligence and inspection. Our government is moving far too slowly in helping industry to choose a world wide course of action whereby the security process would be both predictable and consistent throughout the world and done in such a manner as not to be overly prejudicial to more advanced airports and more lax with others.

By definition both the Known Shipper Program and conventional cargo screening implies an administrative overview of a shipper, cargo and recipient, and tries to detect anomalies based on historic norms. This method is done completely in the back office and rarely if ever has �hands on� any box. The obvious flaw in this thinking is that even if the shipper is known, and the cargo and recipient are both innocuous, the box may still contain a bomb. In my personal experience with the package delivery business, even if a box was to be leaking powder or fumes, or if the box had battery cables hanging from it and it was poorly packed or labeled, it probably would still manage to arrive at a distribution hub, here in the USA and possibly even delivered to a client! Given that any unsecured and unchecked cargo can be transshipped numerous times to elude this form of intel detection, and once at an airport, it can be shipped over the road to further confuse the process, administrative scrutiny falls short of a true protection platform. The goal of economic terrorism is to deploy a weapon of mass destruction, or mass effect, here in the commercial US supply chain, such that it creates fear, disruption and costly remediation sufficient to stop commerce at some level. Providing protection against an ideological focus such as this is impossible.

The technique of tainting lots of cargo at one time is a reasonable terrorist approach given the speed with which air cargo moves. Inspection is the only way this can be stopped. Total physical inspection is considered unreasonable and cost prohibitive in our current world, yet without it, counteracting such a strike is unlikely. A terrorist attack using air cargo as the vehicle is and remains a critical risk to commerce.

Passenger protection, aka what is visible to the public as a confidence builder, is surely the focus of the TSA. In that they can control inspection and have written rules and criteria for passenger scrutiny, they have allocated $5 Billion in dedicated assets and infra structure to bolster this feel good fa�ade, yet they have spent only $55 million on like and kind protection technology for cargo. In many cases this �uninspected� cargo rides on the same aircraft along side passenger baggage and below passengers!

The TSA is well meaning but inept unequipped to mandate, choose or fund changes to the security process for cargo across the board. There is no reasonable system that can detect every form of contraband nor is there any way to guaranty 100% success in any security endeavor, however without challenging industry to step up, nor creating more stringent criteria for insuring the secure shipping of air cargo, little will be done to improve our current condition. Congress needs to empower those qualified to make such decision to act and mandate compliance. Industry has to understand that the speed of commerce is directly proportionate to the risks associated with a terrorist strike. Somewhere between 100% physical inspection and administrative scrutiny lies an acceptable and effective mix. Security is not a perfect science.

One plan which was briefly mentioned was the known shipper program, instituted shortly after 911 to curtail the random introduction of a bomb into the cargo of large volume shippers. The program uses information provided by the shipper himself to his forwarder or directly to the carrier to establish himself as a secure shipper and whose cargo is beyond reproach. This program is empirically reasonable assuming that every terrorist, thief or smuggler is always honest and forthcoming! It allows the shipper (even if it is a front operation, so long as they pay their bills) to demonstrate through the submission of a form the fact that he is a good guy and deserves a pass through the rigors of �air cargo security screening and inspection�! In these cases the shipper becomes the inspector, the wolf in the hen house technique. As the sea freights� �CTPAT� (Custom Trade Partnership Against Terrorism) program dictates, all signators to the document will have full background screening for their employees, secure yards and stuffing facilities and appropriate tamper evident security packaging and sealing. There is no such mandate for air cargo and even if there were it could not be universally enforced. C-TPAT is a voluntary program that again offers the Doctor Feel Good approach to security rather than a true effort to secure the world�s supply chain.

U.S. Customs and Border protection came out with the C-TPAT program some years ago as a means by which to ask industry to participate in securing the world of sea freight through the use of best practices. Since they had no real experienced personnel for sealing security nor any original ideas, they asked the International Standard Organization to use their seal criteria. Our of this fiasco, the ISO developed a set of recommended, not required, best practices and products to secure seal freight. Among these tainted recommendations was the infamous �bolt seal� recommendation. This was later (after 4 years of misinformation) withdrawn in August of �06 but it still exemplifies the worst our government has to offer in recommending appropriate remedy to supply chain threats. In the air cargo industry, no such recommendation was proposed because there is not one bundling technique as there is in containerized sea freight. There are no doors to close nor locks to apply when it comes to air cargo. Because of their inability to tackle the problem, they have effectively left remedial recommendations to chance

The only viable defensive strategy for air cargo security has to mimic sea and domestic truck protocols for integrity checks. Surely as soon as air cargo kicks up the bar so too will the threat rise among other modalities. Commerce cannot be inhibited by such a technique nor can the resources be in place for 100% inspection. What we need to have is a plan that creates risk for the would be perpetrator such that the deterrent value of any remedial or proactive countermeasures meets the threat head on thereby reducing (not eliminating) risk through such a plan. Defensive strength against terrorism and collaterally theft, can be achieved by establishing security packaging standards for all air freight, the use and deployment of inspection technology world wide and the creation of choke point inspections and process controls at each airport before and after screening. The randomization of security processes at world wide air facilities such as 100% opening and inspection vs. 40% or maintenance of a 24 hour rule for all air freight shipments complicates terrorist plans which rely on operational consistency and complacency as their best cover.

The fact that security plans require buy-in from the air carriers, governments and shippers is the fly in the ointment. Everyone wants positive change and no one wants to disrupt commerce or affect their bottom line. Not many air cargo companies are willing to fund remedy nor mandate the processes required to increase protection levels. Governments typically baulk about security expense while shippers never want to accept the inherent delays such inspections will surely cause. The carriers will always get their revenue regardless of timing of delivery of goods and therefore seem to be the course of least resistance. If Governments can contribute inspection technology in the form of machinery, a defined security plan and recommendations and funding for inspection personnel; while carriers and airport operators implement these systems; and if shippers can adjust their delivery schedules for the potential delays while revising their JIT inventory process, we can be well on our way to risk reduction in air cargo.

Our government has inherently failed miserably to produce and implement a viable cargo security plan in any modality. Shortly after 911 the C-TPAT concept was adopted by Congress and touted as the end all for cargo protection. It proved to be a tremendous proposal but failed to have tangible benefits to shippers or carriers and remains, after 5 years, a concept with 200,000+ people dedicated to its enhancement, but a process that has done little to reduce risk. The nebulous nature of is tenets, the lack of benefits and penalties to those not involved makes the legislation worth little more than the paper it is printed on. The CSI (Container Security Initiative) attempted to engage ports to provide control and inspections to cargo under the guidance and funding of CBP (Customs and Border Protection) however the issue there is the container has already been dispatched to a port somewhere in the world and then inspected randomly. Since in actual practice, less than � of one percent of sea containers actually get inspected (even less get opened) we cannot reliably insure our security anywhere based on this process. The issue we face with legislated guidelines is that without a full scale mandate, these systems fall flat on their face.

The United States has porous borders. We base security on blind trust because that is our societal norm. Based on our system we cannot integrate barriers to commerce without completely disrupting logistics as we know it. Logistics is the backbone of commerce and integrating walls and barriers to that system cannot come without significant push-back from all quarters of our system. Unfortunately terrorism gets press for as long as practical and fades from public view when sufficient time has elapsed to spin out its� media value.

The costs of loss to our economy and GNP through a terrorist strike can be catastrophic but proactive spending to reduce this known risk is non existent unless mandated. Take cargo theft for instance from air, truck or sea freight, combine its effects with smuggling, money laundering and other conditions of loss and you get numbers approaching $55 Billion. This type of information rarely hits the news media. The project costs to our government to deploy a viable technology based air cargo inspection plan would be $3.6 Billion. What could be a better use of funds? In addition to dealing with technology, mandated process controls to shippers and carriers needs to implemented. These controls would entail a 24 hour reporting system, significant data on the cargo, shipper and recipient as well as to establish cargo holds on random shipments for inspection purposes. The time impact from pre-notification in air cargo, like what is being done currently in sea freight, gives authorities time to filter intelligence into the security equation to help identify anomalies before these goods enter the supply chain.

The competitive nature of companies will help define this systems effectiveness. Everyone wants JIT cargo and inventory yet few will accept these internal changes. Air cargo still basically travels unencumbered with paperwork. E-Shipping is the standard and e-data is kept to a minimum by design. The more data needed the more cost. By maintaining the requirements for minimal data collection but enhancing the inspection process, shippers and carriers could reasonable enjoy some of the benefits they have now while decreasing risks. The added inspection process simply involves time, the component of air cargo which is least available! Bridging this gap can only be accomplished by creating efficiencies through packaging and loading consistencies and the ability to recognize packaging anomalies easily.

Air freight moves in predetermined cubes with rigid weight and volume constraints. By placing cargo into a consistent format would not only speed technology inspection and reduce load times, but so too would this format improve operational efficiency and throughput, it would create an increased revenue platform for freighters and commercial aircraft alike. By requiring bulk shippers to pack in a predetermined �brick� with the use of tamper evident shrink films, security tapes or other visibly inspectable components, we would move closer to assuring packaging integrity. By the use of airport choke point inspection for bulk cargo, rather than independent air line inspection, the costs of full inspection could be spread out to an acceptable level. Much like seaport screening, one point serving many, establishes consistent monitorable controls and thereby adds positive layers to the process at a lower cost while maintaining efficiency. If shippers were brought into this equation through reduced tariffs or other financial incentives for those that comply, they may be more apt to have an incentive to comply. For non bulk shippers, desk screening would be seamless as their expectation could easily be established to accept this additional processing. For the domestic and some foreign courier businesses, simple break bulk inspections are currently be done, which rarely if ever hold up cargo. The inspection process could be radically reduced by having these reasonable controls in place.

The author had written such a comprehensive plan for the TSA in 2005 who promptly tabled it and continues to fund non defined remedy which includes locks, building controls and more personnel to �define� the problems. There is a significant amount of proposed legislation which remains unaddressed. The disconnect between the need to act on passing legislation and actually implementing it is political. No one wants to be the bearer of change. The lack of such legislation precludes the air carriers and industry in general from purchasing appropriate (approved) technology nor implementing process controls to help reduce risk�. Hence we stay in our stagnant state of complacency. Isn�t government great!

When President Bush created the Department of Homeland Security (DHS) in 2002, his noble concept was to create a central hub for the implementation of remedy to a terrorist risk through our borders, commerce system and the world wide logistics. Through a central review of intelligence with our best and brightest tacticians, and with the ability to act unilaterally, he felt that such an agency would be the cornerstone of risk reduction. Instead of this concept we have over 350,000 people in a newly formed self contained bureaucracy that is so mired in their own layers, that action is the furthest thing from the truth. We have spent more money in defining the problems than solving them. We have dressed up thousands of untrained part time TSA inspectors in nice uniforms and armed them with state of the art screening for passengers and bags, but failed to consider the total picture of air security. Again security is a perception which seems to satisfy the traveling public but surely this facade will catch up with us very soon. The blame of course of a strike will revert to the airlines and their brand rather than the lack of ability of the TSA, DHS et al. to provide guidance and effective solutions.

Soon after the TSA was rolling, the Patriot Act was implemented giving law enforcement and our legal system both tools and remedy to those would world attempt to hurt the USA. This plan to disrupt a terrorist plot is a sound strategy as it accomplished the creation of useful data which could help determine shipping and cargo anomalies and thereby identify suspect shippers. The CSI also has been helpful in data creation. Both of these programs help identify smuggling, theft, contraband and drug importation as well as money laundering, conspiracies, trade fraud and terrorism. The issues however are empirical and rarely physical, hence while they are helpful and necessary they fail to address the hands on need of cargo for inspection. Other legislations in this regard include The Port and Maritime Security Act of 2001 and the Maritime Transportation Antiterrorism Act of 2002. The G-8 summits have always had cargo security on their agenda and participants have consistently expressed interest but little action has ever taken place. Operation Safe Commerce (OSC) was to be a public and private partnership dedicated to securing the worlds supply chain, but it has also failed to mandate a solution and has fallen short of being effective.

Intelligence aside, (and I really mean that) the TSA and industry partnership has attempted to address security through the use of space age technology which includes RFID. The TSA has spent multi-millions of dollars on studies of RFID as a security platform when they know full well that the technology is orientated toward data collection and transmission and not physical security. RFID provide no useful tools to secure parcels or bulk freight�.plain and simple. All of these highly funded RFID studies have failed for the same basic reasons having to do with the physical limitations of the technology and the fact that the technology is inappropriate for this purpose. Studies unto themselves create great press and therefore the hope of the �coming� of security without work. Again the doctor feel-good approach has kept the money flowing to favored Government vendors and has allowed there to be more studies than actual remedy. Senators have funded hundreds of shallow ill based studies based on their lack of knowledge in these areas. The TSA has helped proliferate this unsuccessful concept for the past 3 years as more studies yields bigger budgets, more people, more organization and therefore less need to implement remedy. That�s job security for you, plan plan, plan and never ever implement change. Minimizing effort to achieve greater security success can only be achieved through the use of deterrent and barrier packaging, pre board inspections and the collaboration of industry and carriers. There are currently 300- 400 cargo security agents of the TSA focused on the threats and vulnerabilities to cargo, that is 1% or less of their workforce. According to a report from the Center for American Progress, �The TSA allows the 1.5 million Known Shippers, 4000 freight forwarders with over (10,000 individual branches and millions of personnel) and 300+ commercial air carriers that form the air cargo supply chain, to largely police themselves.� Scary.

Air cargo risk can be viewed in many ways, however remedial action must be categorized in such a manner as to direct resources to the most critical areas first. By defining individual risks air carriers and their clients can leverage their choices of whose job it is to do which task and therefore collectively participate in reducing such risk. Areas such as security tapes and seals would automatically become the shippers responsible to apply while the carriers responsibility may be to visually inspect the boxes at each hub and prior to boarding. Courier box and envelope shipments should have an indigenous numbers and tamper evident seals and markings (tied to the bill of lading) so that replacement packaging with a similar box is harder to do. Carriers may elect to physically pack, inspect and seal counter tendered goods from certain shippers against theft and the introduction of piggybacked contraband. In this scenario the carrier would control the packaging components and security systems and bear the costs associated with this level of protection based, typically, on the volume and value of the shipper and his goods. Shippers would be charged for this just like the security add-on�s charged by the airports to passenger tickets. By offering a participatory plan whose outcome is mutually beneficial, carrier and shipper or carrier and government can cooperatively work to provide the unique component of security that they do best and at the least cost.

SPECIFIC RISKS AND THREATS:

THEFT: Cargo theft is alive and well in air shipping as well as in most other modalities. It is conservatively estimated at that air cargo theft is an annual world wide problem approaching $25 Billion, most of which occurs at unprotected airside facilities, distribution and sort hubs and at points before, during and after arrival. Luxury goods such as sun glasses, jewelry, electronics, watches, CD�s, software, designer clothes and pharmaceuticals are among the long list of targeted goods. Many of these items, like any air cargo are most vulnerable when left unattended in in-bond areas or unprotected airside warehouses. Theft can be easy fort those with access and almost impossible to detect due to the sheer volume and chaos associated with cargo sorting and staging. Theft can be both a total or partial removal of the contents thereby making detection even harder to notice. Small volume pilferage mounts up quickly when dealing with controlled substances, jewelry or electronics. Claims of this nature plague the shippers and the insurance industry tremendously but many never get filed simply because of the cost and affect of future business based on the negative press one receives when identifying that his goods were stolen and are now free astray in the market. This is especially true in ingestibles such as pharmaceuticals. Boxes can be surreptitious entered, items removed and resealed with little or no scrutiny because packaging is typically generic or has no viable or reliable means to detect entry and reclosure. Items can also be tampered with in the same manner. Tampering is usually undetectable until delivered, where many physical thefts are discovered at sort facilities. No mater how hard air carriers and air couriers try, this form of loss continues to escalate. There is little to no reliable data on the dollar volume of cargo theft on an international basis because no one wants to air their �dirty laundry�. Insurance data is also quite fuzzy since most transportation losses, where employee infidelity is the proven cause, is not an insurable event. The Carmack amendment covers many transportation losses by the �pound� rather than by value, making financial recovery through insurance impossible for most high value goods. Issues such as a companies reluctance to share critical loss or embarrassing data, further complicates the ability to actually assess the magnitude of air cargo theft losses. Many carriers still deny the problem since the problem is not specifically defined. Government statistics and industry available loss data fail to show the magnitude of the problem so little focus is placed on remedy by them. With the advent of government mandated counter terrorist activities, shoring up airport facilities, theft control was positively impacted but as a collateral rather than a primary focus. Theft control for air carriers has always been the stepchild of operational efficiency. Since they have little to no control of packaging, type of goods or daily volume, carriers must rely on the use of best security practices to effectuate theft avoidance rather than develop a focused approach to the problem.

Many air carriers sell cargo insurance as a profit center since actuarially this is a tremendous profit center. They sell the concept of protection at a shipper acceptable level and work the numbers and trends to bolster income. Insurance is also a state of mind! Most air carriers have security departments but many have these services under human resources rather than operations, since security requires operational inefficient protocols which are taboo in the air industry.

A lesser known theft condition is the compromise of intellectual data placed in courier boxes or envelopes and subsequently opened and read prior to getting to the recipient. This condition is prevalent in the courier business as generic courier packaging lends itself to this form of surreptitious penetration. Since most courier packaging is unmarked, unnumbered, generic by design and having no indigenous features, inspection for opening or replacement is impossible. Although noting physical is stolen, the data compromised can be significant. Data such as mergers, stock trades, contracts, litigation, medical and financial records and other sensitive information can easily be read in the field, copied and transmitted in minutes. This form of theft can do a considerable amount of harm yet it has never been acknowledged by carriers nor remedied although easy remedial action and technology exists for shippers. Items such as uniquely number packages would shut down the problem as would tamper evident tapes and seals and or technology to identify the packages as originals.

Law enforcement views cargo theft as the lowest priority possible. Cargo theft has few defined laws and consequently not many viable task forces are available to investigate crime or prevent it. Most cargo criminals are recidivists and most serve no time in jail if actually apprehended. Laws covering cargo theft or theft resulting in endangering human life now include the statutes contained in the Patriot Act which opens new avenues of prosecution and new resources to deter these conditions especially in air cargo incidents. There has been a good deal of positive fallout from 911 relating to the bolstering of air side security. The TSA has initiated requirements for any service industry relating to aircraft be located on a secured site with appropriate fences, locks, cameras, sign-in processes as well as background checks for employees. Planes overnighting outside the United States require self adhesive door seals. They have mandated more stringent requirements for vehicles moving freely on to airports from food suppliers, refuse companies as well as truckers, brokers and forwarders.

DAMAGE: Most cargo suitable for air shipping is highly valuable, critical by design, and or in some way sensitive or delicate. From body parts in coolers to newly calibrated devices, air cargo can be most anything. Blood, pharmaceuticals and foods that need constant refrigeration are vulnerable to damage through delays, electronics such as plasma TV�s are frequently damaged through rough handling where smaller items are frequently crushed or exposed to conditions that adversely affect their operation. Unlike palletized cargo moving in sea containers, air cargo is randomly packed for shipping at the time of loading. Cargo can be flung into C containers, loaded on air pallets and covered with 5000 pounds of non-descript cargo. Little to no priority is given to bulk air freight in so far as commodity classification or stacking priorities which is a condition that causes most damage.

Because of the speed with which air cargo navigates the supply chain, if damage is not discovered at a sort facility it is rarely if ever found until opened by the recipient. Air claims involving concealed damage or loss resulting from packaging deficiencies are hard to prove as shippers are frequently unable to document packaging specifics and therefore many claims are denied. Outside insurance on air cargo is harder to secure than truck or rail cargo and it is considerably more expensive and issue specific. Most air carriers offer the purchase of cargo insurance as an added profit center to their line haul. The Carmack amendment created bench mark valuations for lost or damaged goods which have little use in truly assessing the true cost of a loss. Values of $.25 per pound remain as active benchmarks for uninsured freight claims. Little can be done to improve or bolster packaging without a considerable increase in shipping expense as all air cargo is based on a cube/weight ratio. Light and bulky freight is equally as expensive as heavier goods and therefore offers little incentive to shippers to beef up packaging standards.

Damage claims in air freight out paces theft by a ratio of approximately 3:1 where damage in truck and rail is easily 10:1.

PIGGYBACKING; The introduction of contraband into legitimate cargo is a condition that has existed for many years, but not recognized as a problem until 911. Threat awareness brought this condition out into the open but agencies such as DEA and CBP have been dealing with it for 30+ years. Drugs and other contraband have moved freely in the world supply chain regularly inserted into cargo of every description. Interdiction technology ranging from x-ray and sniffer screening, which is recent, to dogs and hands on visual and physical inspection has only been recently adopted. More effort has been put into these areas in the last 10 years than has any theft controls. The collateral positive effect of this type of scrutiny has begin to yield a more viable means to discover weapons and drugs than any other tool. Passenger inspection personnel supplied by TSA have done little to enhance these areas as most are unskilled, poorly trained and unable to effectively deter smuggling since most of it is done in cargo which is outside their scope. The checking accompanied baggage and freight from passengers is only now being performed regularly. As a side bar, only 5 percent of the 2.8 million tons of air cargo carried on to commercial aircraft is screened for explosives and other dangerous devices, according to the Center for American Progress. That would mean that negligible to no screening is done to the almost 1 million tons of freight passing through passenger terminals. Illegal food, animal and agricultural cargo can also the basis of the deployment of a weapon of mass effect or mass destruction by air. Biologics and related chemicals are next to impossible to detect in the sea of small packages on an aircraft or in passenger baggage or freight. The fact that animals can be an effective terrorist tool makes all cargo suspect and no cargo inherently safe.

SMUGGLING: Can be defined as the introduction of contraband cargo into the United States that is either misclassified to avoid tariffs� and duties or are illegal or banned goods or people. Smuggling can be dangerous cargo, ethical drugs, controlled substances, animals or any type of innocuous cargo that is deemed an exception by our government as acceptable for importation. A creative terrorist can easily introduce a weapon, explosive or biologic inside cargo, nested as a piggyback to some approved shipment or inside a person or animal. Discovery of this form of smuggling is extremely difficult if not all but impossible. Intelligence typically is the key to discovery of this form of threat, where conventional physical inspection techniques are ineffective. This type of nesting is extremely common in drug or currency smuggling, where smaller bags are nested in larger cargo. This same method is used to extract goods. Reverse smuggling can move weapons, currency or stolen goods out of the country. Regardless of the size of the cargo, misclassification is an easy and reliable ploy to beat the system.

Passenger accompanied air cargo is a major profit center for the airline industry. It accounts for approximately 15% of their overall revenue with no additional expenditures required. To require more physical security in this one area of revenue would not only decrease profits but would add residual operational costs, slowdowns and dedicated personnel to administer. The balance between each revenue generating component in the air industry affects their willingness to fund and implement enhancements so unless mandated, there is no incentive to go overboard on shoring up this vulnerability.

Air cargo security is an uphill no-win battle between what is industry practical and what is mandated theory. Numerous congressional attempts have been made at mandating 100% inspection through legislation. The cost of 100% cargo screening on commercial passenger aircraft would be in the billions of dollars. Funding such an inspection mandate would be a challenge. It has been proposed that there be a fee charged for security, much like the airport security fee for passengers. With millions of air shipments daily, new funds would collect quickly. The issue is who administers these funds? What guidelines would be needed to purchase technology and of course, what technology would be purchased. Since there are really no answers to these questions, no one can begin this course of action.

According to the International Air Transport Association there will be a 26% increase in Asian air freight in the next few years resulting in a tremendous bottleneck if even a few percent increase in inspection is required. The issue with world wide air cargo inspections is also based on a countries ability to fund such inspection and if the current air side facilities can handle this in a secure manner. The EU certainly has a range of both excellent and suspect air facilities. Third world countries rarely if ever can provide minimal standards of care and inspection to air freight.

The Asian market is surely the greatest revenue generator in the air cargo industry. The growth rate of goods shipped by air from China and the Pacific rim is staggering with no end to that growth in sight. Every air freight carrier and every commercial passenger airline is embroiled in getting market share. The more encumbered air cargo becomes by inspection requirements the slower air cargo becomes. There is a delicate balance between what a shipper is willing to pay to move goods and what trigger he would have to alter his supply chain. Speed is value proposition for air freight however with the complex interconnection between modalities which exists today, switching from purely air to a sea/air or sea/land combination is tenuous. Price is always an issue but with the fluctuations in fuel costs and the possible implementation of security processes airlines are sensitive to the balance of freight rates with the possible new expenditures in mind. The higher cost of inspection combined with the possible security operational slow downs, could cost shippers more than they are willing to spend. The new developments in sea freight and dedicated sea lanes combined with the faster speed of sea cargo is a concern to the air industry. At what point do shippers bail out because of costs vs. speed considerations?

In spite what can be seen as slower transit times, the globalization of our supply chain is fixed and there are basically no choices for some shippers and commodities other than air regardless of the increases in cost, paperwork, time and reduced schedules. Commodities such as consumer electronics, high end apparel and foot ware are some of the time and market sensitive products that mandate carriage by air; so despite the pitfalls and increased costs, these items will continue to move by air. The higher costs of transit however will soon make its way to the market. Since the air cargo industries� infrastructure just cannot support the increased security requirements of a changing world, shippers will soon be seeing sur-charges on air freight and even higher premiums on smaller shipments. Since many Asian routes are growing faster than predicted these ship points will soon become choke points in order to accommodate security procedures and some shippers may be forced to change modality to get goods to market. Direct sailings from many Asian ports to the United States can reduce sea times significantly hence the declining delivery gap between air cargo and sea/land services will make financial sense to many/ The trend in choosing modality is the fine line between costs and time and is no longer clear cut.

The greater the need for compliance with laws to inspect and protect air cargo, the less air cargo will be effective in accomplishing it mission of speed. Choke point inspections at international airports could require air freight to be tendered 24-48 hours in advance of loading and combined with further inspection upon arrival air cargo could be set back 3-5 days. Specialized cargo such as blood, body parts, perishables and time sensitive items would therefore be charged a hefty premium to �move to the head of the line�. Traditional freight would need to be marked in such a manner as to insure the integrity of the pre and post inspections. Such indicative sealing technology would have to be placed on these items post inspection, which would enable all handlers to continue the inspection process visually throughout the system. Since air cargo can be in any form or package, tamper indicative tape sealing would be the only viable method to introduce this feature and mark items as inspected while protecting them en-route. Inspection with no in-bond controls or containment is worthless based on a sophisticated threat. If smaller airports fail to meet inspection criteria will they be precluded from shipping goods here? If we plan on this type of mandate the exclusionary result could be devastating to some smaller countries or smaller airports.

Legislation means different things to different countries. Laws created here have no binding effect elsewhere. Security systems such as background screening for transportation workers (TWIC cards) is an excellent way to know who is handing your cargo however it does not apply elsewhere. C-TPAT, best practices asks that over seas cargo container stuffers (packers) be vetted to insure compliance with anti-terrorist security procedures. This is a great concept that is all but impossible to guaranty. The Known Shipper program requires a complete background be done on volume air shippers in help speed their cargo through the system but fails to account for the thousands of consolidators who become the middlemen in these logistical moves. Here again, a great concept but easily corrupted by anyone able to infiltrate these companies and use their good name as a screen for covert activities. E-manifests have been proposed as a security tool but because these documents can say anything and are written by the shipper, their use as a security component is suspect at best.

Overall the air cargo industry provides a reliable and cost effective way to speed goods to market from world wide points. The industry recognizes it�s role in commerce and like any business views profitable operation as their main strategy. The fine line between our governments ability to alter the actions of private enterprise for the greater good is a gray and uncharted path. Given the changing world in which we live and threats we face to our way of life by terrorists, we must find a way to mandate changes to industry processes and thereby effectively protect our borders. Vulnerability is the new paradigm for long term business planning in any business, but especially in logistics. It need not take another 911 to motivate our law makers to act in this regard.

PDF Article List

Wed, 13 Aug 2008 05:49:49 -0400

The top of the supply chain

By Erik Hoffer

The Strongest Link.

Read Here in PDF format

Trying to separate fact from smoke:

A critical review of cargo security

Erik Hoffer, Seal Committee Chairman, International Cargo Security Council, NJ, USA

Read Here in PDF format

On the road security

Erik Hoffer

Read Here in PDF format

The costs of loss

Wed, 13 Aug 2008 05:39:37 -0400

Transport profitability is a delicate balance between ones ability to operate efficiently all the while avoiding adversity in the form of damage claims, theft control, asset management, fuel costs and driver turnover to mention a few. Besides being a formidable task, transportation providers seem to compete more on price than on the value added service they perform, therefore losses in any form reek havoc with their bottom line.
By dissecting some of the common pitfalls systemic to the transportation industry and evaluating their negative impact to profitability, it is likely that companies can look more critically at funding proactive operational changes to avoid losses than reactive remedies when losses happen. Many of these changes can be seamless to most companies culture, and by their implementation they are able to mitigate or at least reduce the propensity of many types of loss.

Most transportation providers are self insured at some level. Many have high thresholds where any short fall becomes their liability. Most contractual arrangements with larger shippers now include limited carrier liability for many conditions of loss including but not limited to damage, spoilage and theft. Many of these situations have contingent liability associated with them which compounds the negative impact should there be a claim.

Most asset based providers pay dearly for equipment, maintenance, fuel and infrastructure and view systemic proactive product oriented change as insurmountable and unnecessary. I have personally heard many companies say that they cannot afford a particular technology simply because of their size, yet the cost of loss or profit drain far exceeds the remedy. Telematic solutions have just now impacted the industry where those nay sayers are now outspoken advocates for such solutions. Countermeasure for theft are still a step child to logistic technology but will soon follow although far less expensive and far easier to implement. Physical asset monitoring technology such as measurement tools for brakes and many safety products are gaining acceptance rapidly. Of course GPS is not a security tool nor are door locks any help to operational efficiency yet both product types can easily enhance the profit picture of any company.

Theft related losses are particularly troubling as they damage both the brand and reputation of the company. No one wants to align themselves with a �target� as a carrier. No carrier wants to move only high profile and highly vulnerable cargo as his total diet. Theft losses in the US from domestic freight moves easily exceed five billion dollars and affect every facet of the industry. From a missing flatbed with a million dollar piece of construction equipment on it to shoes, food, electronics and of course pharmaceuticals, carriers engaged in the movement of these goods are particularly vulnerable to liability. The smaller the carrier, the higher the financial impact of a loss. The smaller the fleet the higher the cost of equipment related losses because of the impact of a tractor loss has on a companies overall productivity. Damage losses are additionally an undesirable moniker for anyone in transportation. Damage losses exceed theft related claims at a ratio of 5 to one and receive far more proactive attention than do theft losses. Remedy however is typically provided by the shipper and rarely is able to be implemented by the carrier where the inverse is true with theft.

Employees cause the vast majority of damage claims through rough or improper handling and operational laxity. Many times, mechanical failure, is a cause of damage but more often than not, damage is a preventable event with reasonable care while theft is uncontrollable and random. Carriers recognize this and can train for it where theft losses are 80% based on employee infidelity and change with operational area, equipment diversity, employee concentration, systems and operational procedures. The most common conditions leading the theft losses can in fact be planned for and many remedies have no physical cost but rather operational changes to address known threats. Losses associated with theft or damage affect the bottom line of the shipper, carrier and the insurance provider as each has a vested interest in seeking appropriate remedy. It is an imperative to choose remedy that benefits all concerned parties and that funding for such changes or products be spread out amongst those prone to bearing the loss. Insurance providers cannot institute remedy but rather incentivised companies through more attractive rates to implement the appropriate technology to reduce vulnerability. Likewise carriers need to explore the cost of loss vs. the cost of remedy to determine their respective role in protecting their interests and those of the client. Shippers have already been socialized into protective packaging and equipment choices to avoid damage yet they have done little to nothing to reduce their risk of theft related losses, even though their exposure is far more costly than the limited liability of the carrier and insurer.

By enhancing logistical efficiency, the value proposition to justify GPS and asset tracking technology, was embraced by the trucking community yet at far lower cost per unit, theft control countermeasures remain aloof.

FACT FROM SMOKE IN CARGO SECURITY

Wed, 13 Aug 2008 05:38:48 -0400

TRYING TO SEPARATE FACT FROM SMOKE IN CARGO SECURITY
By Erik Hoffer
The cargo security initiative is in the development and concept stages. Smoke and mirrors skew the discussions because recommendations presented by many of the experts asked to participate lack the core expertise required to recommend remedy against unforeseen threats. Many of these experts and officials lack a practical understanding of the physics behind seal security and cargo terrorism. Intimate knowledge of intelligence on threat issues is not sufficient background to recommend remedy. Specific knowledge of the physical attributes of security technology is not a substitute for understanding the threat. People who are finally asked to decide on the correct system and course of action may not be intimate with the nexus between science and viable mechanical remedy. Many of those in the know in our Government and those consultants to the government present options based on perceptions rather than facts which can cost everyone dearly. Any approved plan will ultimately attempt to establish a level of container sealing and monitoring integrity for the entire world supply chain. The system should ideally be able to enhance homeland security, by reducing the threat of attack through cargo entering or leaving any port. By developing a workable intelligence security program combined with viable security devices, we should be able to identify suspect cargo before it can be placed on a ship heading to the United States.

DHS and Customs and the Department of Border Protection, who seems to be spearheading the project which includes, the plan to cover procedural security for stuffing and shipping containers, physical security for containers in transit, access to ports and cargo yards both here and abroad, personnel integrity checks for cargo handlers, training of personnel on terrorists threats, awareness of the types of threat, secure manifest procedures and conveyance security dealing with the vessels, drays and ports handling, storing and moving cargo. This is a broad-based plan, which requires a considerable amount of technology and refinement before a suitable solution can be found. Implementation must include appropriate physical security products used to achieve containment and control of cargo. Such technologies must be suitable to the real world of container cargo shipping. They must be cost effective for both ports and shippers and able to be readily implemented world wide without development time. Any choice must focus on its ability to detect entry or manipulation of the doors from both an indicative and barrier prospective. Training of personnel must focus on simplicity and consistency which is often lost due to the urgency of this need. Systems that have proven to work in the here and now are the order of the day. Implementation of a system that requires a tremendous expenditure in infrastructure will limit approved ports, which will severely impact world trade. Such a system is both detrimental and prejudicial to shippers and ports that cannot come up to speed and thereby becomes the antithesis of free and open trade.

People whose jobs it is to secure cargo and whose goals it is to have a successful cargo security initiative are not the same people. Those who pay the bills to ship, carry, handle, receive or load cargo are truly ambivalent about the implementation of such security procedures, products and systems. Many, if not all of them, see such an implementation as an added cost not a necessary benefit. Since their reality is cost vs. profit, not security vs. an imploded economy due to an act of terror, their prospective is radically reduced.
Not that individually they are not concerned about Homeland security, but having 30+ years in speaking with these companies gives the author that skewed viewpoint. Shippers have always faced the threat of financial loss through theft and damage yet proactive reduction techniques are rarely used. Shippers who know the score on cargo theft in the United States, which exceeds 25 Billion dollars annually, still have inherently balked on use of the simplest tools available. The threat has never been higher for theft, tampering, drug smuggling or terrorism, yet the reluctance of most shippers remains consistently steadfast when it comes to the use of security tools at their expense. Even when confronted by a loss, most shippers complain vehemently about spending much more than a $1 on a bolt seal securing a container worth millions.

Now that the threat has become more public and it has grown to include terrorism on the list of loss conditions, have shippers begun to recognize their participation in the cure process? Not really. Tampering, smuggling (piggybacking) contraband into legitimate cargo and the use of your container to ship bombs and people around the world is suddenly real. Those who decide how much to spend for protection need to get on board with these initiatives and work as a team with our government to accomplish the mission at hand.

With that �penny wise dollar foolish� base mindset, let�s look back at the Customs initiative question and how that relates to the available technologies and viable solutions.

From the port prospective: In order for a port to offer any level of security containment without opening every box they must assume that the CSI will help shippers to provide the security sealing when the stuff the box. Cargo in a container is just that, inside a steel box, neither visible nor accountable and highly vulnerable. A total trust relationship must exist between the shipper, dray company, port and sea carrier, who in turn has an implied trust to the receiving port, dray carrier and ultimately to the recipient. If such a relationship were to exist it must be built on secure sealing methods and technology. The control element must be the process and the seal. The seal and system must preclude and easily identify surreptitious opening en route and it must offer a formidable barrier to those trying to open it for any purpose. The most common element for securing a container has been a bolt seal placed through the handle hasp. That product, regardless of brand, manufacturer, quality or features, has only ever been good as an audit tool, and certainly never has offered or claimed to offer security. Seals placed on door handles are so easily circumvented that their utility as a security device is ridiculous. Compromising of the handle bar itself is quite easy; hence any for of seal placed ion the hasp fails to offer and security.
Recently an ISO standard 177072 was developed over in Europe by a group of well intentioned scientists. Note that I did not say security professionals, since in my view they are anything but. The perception of the report, which was immediately embraced by many who also fail to have a proper understanding of the vulnerability of the door handle, was immediate. Because they chose not to solicit any other qualified forum, our Government created a mandate regarding the use of this standard and worked from that point forward.
Standard are necessary to achieve consistency in most things, however standards that deal exclusively with the physical attributes of a science and not the appropriate application of the technology fail on all front. They create a misperception which is then carried forward and thereby jaundices the process. The ISO standards are clearly a misrepresentation of the facts as they relate to vulnerability. They fail to account for the utility of a seal and focus on the physical attributes. As scientists and not security professionals, their lack of knowledge has set the standards for security back by 4 years.

When dealing with a threat such as cargo terrorism, expecting any security from the �now revered bolt seal� would be ludicrous.

The next area is the perceived need for real time security information on containers and their contents. It is obvious to anyone that has ever seen a port or a container yard or a ship is that the environment that these containers move and are stored in, is hostile at best. Salt, cold, heat, water, shock, rough handling, stacking and truck mounting are hard on steel much less electronics. Most technologies that have been tried in the past to transmit information from containers fail because they either break down in salt, rust, become damaged and unusable and or they are broken off during transit. To think that a delicate RFID tag could withstand this environment is questionable. The SAIC report dated July 11, 2003 clearly identified their short comings. The report is available on line.
CARGO HANDLING COOPERATIVE PROGRAM
Program Sector: Agile Port and Terminal Systems Technologies
Program Element: Cargo, Equipment Tracking and Identification Technology Demonstrations

Task Title:
Container Seal Technologies and Processes
Phase 1

Final Report
July 11, 2003

To try and place sensitive and expensive electronic elements into or on to a container and ask that they be monitored by a port security system would be asking for trouble. Who will pay for it? Can it be recovered? Who is responsible to monitor it and where? How will we affix it to the containers? Can it stand up? What will it take to read it? What frequency will it operate under? What are the standards? What software will be chosen? Who owns the problem it if it fails? Products such as active RFID tags have been touted as the coming technology for almost 5 years but they fall way short of viable in security. In fact they offer no security at any level. They barely have been used in any industry because they cannot be read around or in contact with metal, they cross talk, they break, the batteries wear out, they cannot take abuse, they are expensive and this just touches on some of their short comings. They are great in a controlled environment as locators, as inventory tools and as data collectors; they are not ready for security applications.

RFID tags are expensive to use, to own, to verify, to get back and to audit. To analyze the RFID industry as it relates to security you need to understand very basic electronics. Radio signals are blocked by metal such as containers are made of. Hundreds of containers in a yard facing different directions require many expensive antennas and a costly infra structure system. Each system of each manufacturer may be different so which will people use since there is no agreement on an electronic operating platform? Electronic readers needed to interrogate active tags are typically antenna based and must be deployed throughout a container yard. This infrastructure requirement would be extremely costly and provide little else than a location scan but with many serious shortcomings. RFID tags can be removed and replaced, they can be broken off and therefore not read at all, making that container invisible without a physical check, which makes the need for RFID redundant if you have to go out and find it. The tags need to be applied at origin. Can you see shippers in Jakarta holding up a shipment because they need tags! RFID tags have no relationship to the lock mechanism hence they provide no security at any level just location and data if they were to work. Tags are expensive and must be funded by shippers who will get no tangible benefit from them and no possibility of recovery and re-use, hence no cooperation. The tags must be able to be read at every port and by every carrier in order to render any level of reliable real time information. The infrastructure of many foreign ports has not reached the computer level much less RFID readers. The information is only as good as the software and interfacing software between many companies and operating systems is a joke. Rights of authorship on the choice of software and hardware out of all of the existing tag manufacturers would begin WW#3 in the industry. The requirements of a port to implement a new infrastructure to accept all possible tags and integrate them to one common LAN to read them would be a 5-year project at best. To accept RFID information implies that the tags would solve some portion of the problem when in fact they would create a logistic and data base nightmare. By the way, the data collection and retention element of RFID has now become a tremendous debate. No one wants their information regarding shipments, volumes, frequency, supplier and recipient data floating in cyber space. Without physical interaction with the container and its lock or seal you can never be certain that the box was never opened, only that the tag is somewhere in your yard hopefully still attached to the original container and not on the floor! Security can only be achieved when it begins at the beginning, offers the appropriate protection based on the threat and has audit characteristics and physical checks throughout the logistic cycle.

Being critical is only useful when you can support that doctrine with credible solutions. Containers are unprotected storage warehouses that have many ways to beat them. Nothing can be done to secure a container completely, however the fact that the doors are the easiest and most readily available portal of entry dictates that they be the first line of defense.
Barrier defense systems work best to keep people out yet indicative systems make it easier to detect if someone got in. To avoid surreptitiously entry, a good system will employ both indicative seals such as self voiding door seals and barrier seals such as cables or locking bars.
Locking bars secure the keeper bars of the container itself and prevent the door from being opened. The fact that lock bars keep out everyone without a dremil wheel means that they are the most suitable barrier device available. These are typically cost effective tools that area easy to apply and impossible to remove with common tools outside a cutting wheel. Cables seals which also wrap and retain the keeper bars present a reasonable second tier approach. They are removable with bolt cutters, but they typically cannot be replaced as a bolt can.
Last but not least are indicative self adhesive seals applied across the doors to indicate openings? Indicative sealing devices used without visual scrutiny yield no results. All security seals and security countermeasures require a detailed written plan, training and consistency. No security product can offer complete protection yet when used correctly, consistently and monitored bars, cables and seals can give us a leg up on protecting the worlds supply chain.

Selecting the Right Cargo Security Seals

Wed, 13 Aug 2008 05:37:24 -0400

Between terrorist threats and criminals looking to swindle goods, cargo security seals have grown increasingly more important -- and more sophisticated. Companies can now choose from a variety of mechanical and electronic seal options to protect their freight. To help narrow the choices, Erik Hoffer of CGM Applied Security Technologies Inc., a unit of New Jersey-based Digital Descriptor Systems, offers 10 tips for selecting the right cargo seals.

May 2006 | List all 10 Tips articles

Selecting the Right
Cargo Security Seals

By Deborah Catalano Ruriani

Between terrorist threats and criminals looking to swindle goods, cargo security seals have grown increasingly more important -- and more sophisticated. Companies can now choose from a variety of mechanical and electronic seal options to protect their freight. To help narrow the choices, Erik Hoffer of CGM Applied Security Technologies Inc., a unit of New Jersey-based Digital Descriptor Systems, offers 10 tips for selecting the right cargo seals.
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1.
Understand what you are protecting. Companies need to evaluate the nature and level of threats to their cargo and/or vehicles. Are you worried about theft or tampering? Do you own the goods or are you simply liable for theft or potential damage? Perform historical research on your products' vulnerability to theft, your carriers' theft history, and your supply chain vulnerability as it relates to packaging and unit volume. Evaluate each seal category for its relative effectiveness in the environment and conditions in which it will be used.
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2.
Determine the value of your loads to thieves or terrorists. Some products are more likely than others to be stolen. High-priced computer equipment, drugs, electronics and machinery are attractive to thieves, while terrorists may target explosives, gases, or corrosives. Where products fall on that scale can help determine the type and strength of seal you need. Different security threats require different seals. Many hazmat items, for instance, travel in tankers. Hatch seals for vehicle tankers require cables, but tanker railcars have built-in locking mechanisms that can only be opened with specialized tools. In these cases, a less robust steel cable seal should suffice.
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3.
Educate yourself about seals. How can you know what type of seal you need if you don't understand their differences? Indicative, barrier, and electronic seals are most commonly used. Indicative seals change shape or visual composition when tampered with, while locking bars and cable seals cannot be re-secured if cut. In both cases, it is necessary to visually inspect the seal, compare its numeric identifier, and determine if it was manipulated during transit. Bolt seals, lock bars, and cable seals are barrier seals but physical properties are not the criteria to judge their ability to defend your load. The seal's placement on the door is the main criteria for effectiveness. Electronic seals are embedded with an RFID chip that provides tracking capability, but they rarely provide physical barrier security.
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4.
Analyze your shipping modes. Do you move products via trailer, container, pallet, or small parcel? Perhaps you use a combination of shipping containers? The transport mode you use to ship products determines what kind of seal you need. For shipping small packages, such as jewelry, computer chips, or cameras, packaging seals -- either self-adhesive seals or pallet-locking steel topp clips -- enhance security and allow the consignee to see if a package was violated. When shipping a full truckload or containerload that moves from origin to destination without breakbulk, a locking bar or wrap-around cable seal effectively bundles the entire shipment. Pallet seals for these conditions are redundant and do not effectively secure the load. On the other hand, an LTL shipment of products such as pharmaceuticals or fragrances, is best secured by pallet covers and topp clips.
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5.
Get a handle on customs regulations. If you send shipments to international destinations, you need to understand Customs and Border Patrol's (CBP) shipping rules, and consequently purchase the correct seals. This is easier said than done. The recent ISO/PAS 17712 mandate, for example, requires carriers and shippers to secure cargo, but does not delineate any specific requirements for container shipments, or shipments that come from or go through Canada or Mexico. This mandate gives shippers a set of physical standards to adhere to but, as stated by ISO, they are minimum standards for seal choice, not seal application.
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6.
Analyze how easy a seal is to install and remove. It is challenging for many shippers to apply even a bolt seal correctly, and many consignees fail to understand how to inspect seals upon delivery. Though you may select a seal for its ability to secure a load, it does not mean your consignee will accept it. Provide carriers and consignees with training and a reasonable template to help them validate the seal at all times, and ensure that consignees have the proper tools and knowledge to remove the seal once a shipment is delivered. Select seals in concert with your carriers and consignees to help effectively protect the load, regardless of who has care and control of it.
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7.
Examine the seals' ability to be inspected outside the normal chain of freight custody. Can non-skilled inspectors look at the seal and understand that it was breached? Can an anomaly be easily detected even if the inspector is unskilled? Cable seals with expanding wrapped wires, for instance, will easily show a cut, just as a self-voiding indicative seal will say "opened" on its surface if anyone has attempted to remove it. Any aspect of the seal that can be implicitly understood as a possible breach is a positive factor in seal choice. If a seal is cumbersome or requires forensics to determine penetration or bypass, then it has limited utility as a security device.
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8.
Look beyond price. Too often, price is the deciding factor in seal selection. To ensure the security of freight in transit, you will have to spend money -- it is simply a cost of doing business. Select seals based on their quality and appropriateness for your cargo type, shipping mode, and physical environment first, then shop price. Look for vendors who help customers choose the correct seal, and use them as a free resource.
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9.
Understand the accountability of seals at origin. If a seal can be replicated or if sequential numbers are not used, it can become suspect. Without sufficient standards for the issuance and control of the seals, their effectiveness is diminished. When one or more sealing method or product is employed simultaneously, inspectors can validate containment throughout the logistics cycle. Each packaging and bundling component needs its own unique seal type. When an indicative seal is used in combination with a barrier seal, both threats are easily addressed and the load remains exponentially more secure.
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10.
Investigate quality and solicit quotes and data. Invite seal manufacturers to talk with your staff and demonstrate their products. Have vendors explain their lock and seal techniques, then do your own "black hat" comparison before making a choice. Examine their seals' compatibility with CBP requirements and suitability to your supply chain. In addition, explore remedy with your insurance carrier. Underwriters will help steer you in the right direction. Do not choose seals in a vacuum, as you may not be up to date on your cargo's "threat de jour."

TO EAR MARK OR NOT TO EARMARK, THAT IS THE QUESTION.

Wed, 13 Aug 2008 05:35:57 -0400

MANY OF OUR CLIENTS HAVE ASKED ME WHETHER OR NOT PUTTING A SUPER SEAL TAMPER EVIDENT MARKING ON A PACKAGE IS OF VALUE IN DETERRING CRIME. THEY WANT TO KNOW IF THE SUPERSEAL ITSELF BECOMES THE TRIGGER FOR A THIEF TO RECOGNIZE THAT THE PARTICULAR BOX CONTAINS VALUABLE GOODS. IS THE EARMARK THE SEAL OR IS IT THE GOODS? I HOPE THAT THE EXPLAINATION TOP FOLLOWS HELPS TO BRING OUT SOME ANSWERS TO THIS QUESTION.
THE NATURE OF A SECURITY TOOL SUCH AS OUR SELF VOIDING SUPERSEALS IS TO IDENTIFY CONTAINERS AS PILFERED. SUPERSEALS THEREBY ALLOW THE USER OR RECIPIENT TO CONTROL HIS LOSSES BY NOT ACCEPTING TAMPERED BOXES IN GOOD ORDER, EVEN IF THEY APPEAR TO BE IN TACT. SUPERSEALS EFFECTIVELY DO THIS IN TWO SIGNIFICANT WAYS. FIRST, BY CREATING A VISUAL CHAIN OF CUSTODY MONITORING TOOL IT ALLOWS THE SHIPPING, LOGISTIC AND RECEIVING PARTIES COLLECTIVELY, TO MONITOR THE BOX FROM POINT TO POINT. WITH A CLEAR VISUAL RECOGNITION OF A BREACH THE SEAL FUNCTIONS AS A SECURITY GUARD FOR THE BOX. SUPERSEALS EFFECTIVELY ALLOW THE BOX TO BE MONITORED BY EVERYONE COMING INTO CONTACT WITH THE BOX. ALL EYES LOOKING AT THE PACKAGE SHOULD BE MADE AWARE OF THE USE OF THE SEAL TO INCREASE ITS MONITORING POTENTIAL. POSSIBLE ENTRY INTO THE BOX CAN THEREFORE BE RECOGNIZED AND THEREBY ALLOW EACH OF THEM TO STOP THE BOX AT ANY POINT IN ITS MOVE. BY AFFORDING THE RECIPIENT A CLEAR VISUAL INSPECTION TOOL BY WHICH TO RECEIVE THE BOX IN GOOD ORDER, IT ENABLES A CHAIN OF CUSTODY LOOP TO CLOSE IN ON THE CONTAINER AND POSSIBLY THE THEIF.

THE USER OF THE SEAL ALSO GIVES NOTICE TO HIS CUSTOMER THAT HE IS TAKING A PROACTIVE APPROACH TO SECURITY TO INSURE THE INTEGRITY OF THE CONTAINERS HE SHIPS. BY DOING SO HE ALSO NOTIFIES THE CARRIERS THAT THEFT IN TRANSIT WILL NOT BE TOLERATED AND THAT LIABILITY FOR THESE LOSSES WILL FIND ITS WAY TO THE PERPERTRATOR RATHER THAN GO UNNOTICED AND BE WRITTEN OFF AS SHRINK. BY RECEIVING THE SEALED PACKAGE IN GOOD ORDER, THE RECIPIENT KNOWS THAT IF THE BOX DOES NOT CONTAIN THE MANIFESTED ITEMS, THEN THE HIGH LIKELIHOOD IS THAT THE BOX WAS SHORT PACKED. IT CONVERSLY CAN TELL THE CARRIER THAT HE IS CLEAR OF ALL LIABILITY OF SHORTED GOODS AS THE PACKAGE ITSELF, IS PROOF POSITIVE OF THE FACT THAT IT WAS DELIVERED IN GOOD ORDER AND SHORTAGE OCURRED ELSWHERE.

BY HAVING ALL PARTIES IN THE LOOP, IT INSURES THAT EVERYONE IS AWARE OF THE SYSTEM AND ITS USE IN MITIGATING TRANSPORT PILFERAGE. BY EDUCATING THE CARRIERS YOU INSURE THAT MORE POLICEMEN IN ROUTE ARE ACTIVELY MONITORING THE INTEGRITY OF THE FREIGHT. IF SUCH A SEAL IS NOT EMPLOYED, THE SPECIFIC BOX BECOMES JUST ANOTHER CONTAINER, LIKE ALL THE REST, THAT BLENDS INTO THE SHIPPING SCHEME MUCH THE SAME AS SINGLE ROCK DOES AMONG MILLIONS OF DRIVEWAYS STONES. WITH A SUPER SEAL IN PLACE, THAT ROCK STANDS OUT AS A BEACON AND IS AUTOMATICALLY SEEN BY EVERYONE HANDLING IT. SO TO MAKE A HIGH VALUE BOX MORE SECURE, YOU NEED TO ALLOW SOMONE OTHER THAN THE THEIF TO SEE AND MONITOR IT.

TO BE OF THE OPINION THAT A CARGO THIEF IS TAKING RANDOM SHOTS AT CONTAINERS TO HOPEFULLY FIND THE �GOLD�, IS TO BE NIEVE. CARGO THIEVES ARE AWARE OF THE GOODS THEY WISH TO STEAL WAY BEFORE YOU ARE! JUST THINK OF IT IN THIS LIGHT. THE PICKUP DRIVER KNOWS WHAT YOU MAKE OR DO. HE HAS THE DESTINATION, THE MANIFEST OF GOODS SHIPPED, THE WEIGHT OF EACH BOX, THE INSURANCE DOCUMENTS IF ANY, THE PACKAGE ITSELF AND THE TIME IN WHICH TO DETERMINE IF THERE WILL BE ANY PROBLEMS OPENING THE CONTAINER. HE HAS MORE OF THE SAME CONTAINERS, HE PROBABLY HAS MORE OF YOUR OWN TAPE, HE HAS A CLOSED TRUCK AND A TREMENDOUS AMOUNT OF PRIVATE TIME WHILE ALONE IN THE TRUCK TO MAKE HIS DECISIONS AND PILFER THE CONTAINERS. THE LOGISTICAL PEOPLE AT THE DISTRIBUTION CENTER FOR THE CARRIER HAVE THE BOX SEGREGATED INTO THE �HIGH VALUE� CAGE AND, ALTHOUGH THEY HAVE NO REAL PRIVATE TIME, THEY DO HAVE THE ABILITY TO SWITCH BOXES OR PASS THROUGH A DAMAGED BOX WITHOUT HAVING ANY IDENTITY OF THAT BOX TO THEM PERSONALLY. THE DELIVERY DRIVER KNOWS THAT HE IS DELIVERING TO A JEWELRY STORE OR LIKE HIGH VALUE RECIPIENT. HE HAS THE TIME, THE BOXES AND MORE LABELS AND CLEAR TAPE. HE KNOWS THAT IF HE GIVES YOU 20 BOXES AT ONCE IN A MANNER CONSISTENT WITH A CRIMINAL MIND, THAT THE SLIT BOX, BURIED ON THE BOTTOM, WILL PROBABLY GO UNNOTICED. HE KNOW YOUR SYSTEM AND HIS. HE HAS HAD A REASONABLE AMOUNT OF EXPERIENCE TO TELL HIM THAT HE CAN GET AWAY WITH IT AND HE IS BRAZEN ENOUGH AND SMART ENOUGH TO STEAL AT ALL THE RIGHT TIMES.

BY AND LARGE, MOST EVERYONE IN THE MOVEMENT CYCLE KNOWS WHICH BOXES TO HIT AND WHICH ONES TO LEAVE. IF GUESSWORK WERE THE ONLY ACTIVE INGREADANT TO CRIME, NO ONE WOULD HAVE ANY APPRECIABLE THEFT. BY PLACING A SEAL ON THE BOX, YOU THEREFORE DO NO MORE TO IDENTIFY THAT BOX TO THE PERPETRATOR, THAN JUST THE MERE PICK UP DID. THE FACT THAT HE NOW HAS A BARRIER TO THE THEFT OF YOUR PRODUCTS, WILL ALMOST ALWAYS, FORCE HIM TO RECONSIDER THE THEFT OR GO TO ANOTHER MORE EASILY COMPROMISED BOX OF LIKE PRODUCT. A PICK UP DRIVER IN THE JEWELRY DISTRICT OR IN SILICONE VALLEY AS AN INNUMERABLE AMOUNT OF CHOICES. HE DOES NOT CARE IF IT IS YOUR COMPANY OR THAT OF YOUR COMPETITORS, HE TREATS ALL OF YOU THE SAME. THE THEIF IS AFTER GOODS TO CONVERT TO CASH AND DOES NOT CARE WHOSE THEY ARE. WHY RISK HIS JOB, HE WILL THINK, OVER A PROTECTED PACKAGE WHEN THERE ARE SO MANY MORE FISH!

WE HAVE HAD MORE THAN 2 MILLION SEALS USED DURING 1994 AND WE HAVE FOUND THAT STATISTICALLY YOU CAN ALL BUT ELIMINATE THEFT FROM THE CONTAINER WITH THE USE OF SUPERSEALS. WE HAVE FOUND THAT PACKAGE THEFT ALL BUT DISAPPEARS IN THE FIRST SIX MONTHS. WE HAVE FURTHER FOUND THAT A MISSING BOX IS THE FIRST APPRACH TO A THEFT OF A PROPTECTED PACKAGE, BUT THAT AFTER A FEW TURN UP MISSINGH, THEFT DECLINES TO ZERO. THIS FACT, DEVELOPED THROUGH OVER 50 CLIENTS, PUTS TO REST THE NOTION THAT AN EARMARK IS CREATED BY THE USE OF A SEAL. THE BARRIER TO CRIME GAINED BY THE USE OF THE SEAL RENDERS IT AN EXCELLENT CHOICE IN AN OVERALL SCHEME OF PACKAGE SECURITY.

THE USE OF A SUPERSEAL IS QUITE SIMPLE. BY REMOVING THE SEAL, A PERMANENT WORD APPEARS ON THE CONTAINER MARKING IT AS SUSPECT TO THE RECIPIENT. BY SLITTING THE SEAL OPEN AND THEREBY OPENING THE CONTAINER, THE THIEF MUST RESEAL THE BOX TO AVOID DETECTION. BY SO DOING, A WORD, TYPICALLY �OPENED� APPEARS IN THE CENTER PORTION OF THE TAPE, OBER THE BOX OPENING JOINT, AFTER APPROXIMATELY A FEW HOURS. THIS GIVES THE THIEF PLENTY OF TIME TO REPLACE THE PACKAGE TO AND FEEL THAT HE HAS AVOIDED DETECTION. AFTER A FEW HOURS, IF HE APPROACHES THE CONTAINER AGAIN HE WILL SEE THE WORDS OPENED HAVE APPEARED IN YELLOW ON A WHITE FIELD IN THE CENTER OF THE SEAL. IF HE THEN TRIES TO REMOVE THE TAPE, THE WORD OPENED APPEARS IN WHITE ON AN ORANGE FIELD, GIVING SUPERSEALS THREE BASIC LEVELS OF REDUNDANCE. AS SEALS ARE TYPICALLY NUMBERED AND THEY ARE ALWAYS MADE INDIGENOUS TO EACH CLIENT COMPANY, CONTAINER TAKE ON THEIR OWN PERSONAL IDENTITY. AT THIS POINT THE THIEF MUST CHOOSE WHETHER OR NOT TO LEAVE THE TAMPERED BOX AS EVIDENCE OF THE CRIME OR DESTROY IT. IF THE BOX IS REPLACED, IT WILL ARRIVE WITHOUT A SUPERSEAL IN PLACE, RENDERING IT PILFERED. IN EITHER CASE THE CHAIN OF CUSTODY LOOP IS EFFECTIVEY BROKEN AND THE CARRIER BEARS THE RESPONSIBILITY FOR THE LOSS.

IN USING A SYSTEM SUCH AS THIS THE SHIPPER BENEFITS BY SECURING HIS BOX IN A PROVEN WAY SO AS TO REDUCE HIS LOSSES BY PILFERAGE. THE CARRIER BENEFITS BY BEING ABLE TO HAVE A FORENSIC PROOF OF TAMPERING SO THAT HE CAN TAKE STEPS TO FIND THE THIEF. THE INSURANCE COMPANIES BENEFIT BY HAVING SPECIFIC INFORMATION ON WHO STOLE THE GOODS SO AS TO RELIEVE NON INVOLVED PARTIES FROM LIABILITY. THE RECIPIENT BENEFITS BY BEING CERTAIN THAT GOODS RECEIVED ARE IN GOOD ORDER AND HAVE NOT BEEN TAMPERED WITH.

THE USE OF SUPERSEALS IS THEREFORE A WIN ALL AROUND SYSTEM. WHAT MAKES SUPERSEALS EVEN MORE ATTRACTIVE IS THEIR LOW COST OF USE. WITH A TOTAL UNIT COST OF APPROXIMATELY $.20 CENTS PER SEAL, NO ONE SHIPPING HIGH VALUE GOODS CAN JUSTIFY WHY NOT TO USE IT. THE NORMAL COST OF INSURANCE IS FAR GREATER THAN THIS AND THAT DOES NOT ELIMINATE OR REDUCE THEFT, IT MERELY HIDES IT BEHIND A �SHRINK ELIMINIATION SYSTEM, THAT IS HIDDEN BY MOST COMPANIES AS A WRITE OFF. BY LOOKING AT ITS USE IN TERMS OF INCREASED EARNINGS PER SHARE ITS USE BECOMES AN EASY DECISION. WHILE NO PRODUCT CAN STOP THE THEFT OF THE ENTIRE BOX, THIS PRODUCT IS THE BEST APPROACH TO PLACING THE APPROPRIATE BARRIER TO THEFT AND TAMPERING THAT EXISTS ON THE MARKET TODAY.

DETERRENCE VS RECOVERY

Tue, 12 Aug 2008 17:54:39 -0400

In the most personal sense, getting your possessions back after a theft is of real importance. The memories, the attachment, the sense of closure and the reversal of the personal violation make recovery the most important factor in the tragedy. This is debatable however in a corporate sense.
Recovery of items such as computers, pharmaceuticals, specialized machinery, and time dated items such as clothing, explosives or cosmetics is less than favorable. For example if a theft of a container of non prescription drugs combined with personal health care items was taken on 1/1/01 the investigation, claim application and reporting mechanism would basically begin a few days thereafter. The shipping company would soon receive routing information, values, contents, carrier documentation and like information and then their investigator would begin his project. He would notify the appropriate police and federal authorities, he would call his insurance company and get an assigned claim, and he would interface with his logistic department or outside source and coordinate the project. This all takes time. The typical assembly of data, reporting and coordination cycle takes weeks, if in fact this person has the appropriate time to begin this project immediately. These responsibilities are frequently divided up among risk departments, security, logistic and outsourced groups which are tasked with other jobs and often fail to respond immediately to the incident.

The collection of data is by far the most time consuming and cumbersome endeavor of the survey. Tracking the cargo especially in intermodal moves is difficult. Chain of custody data rarely is easy to come by and the time it takes to collect that data can be week. By the 3rd or 4th weeks after the initial claim the investigator has assembled his work sheet and begins to travel to the last point of recorded custody. His time is now consumed with interviews, copying documentation, checking signatures, evaluating the practices of the carriers and handlers of the cargo and interfacing with local law enforcement. As any investigator will tell you, local law enforcement in cargo theft situations is less than responsive to your requests for help. Property crimes in the US rank right near parking violations and j-walking. Exceptions for explosives, crimes of violence and the like are dismissed as extra work and rarely produce results. The occasional recovery of an empty trailer and tractor make the papers, but these recoveries are fortuitous and typically happen by luck rather than by design.

Data collected, the investigator begins tracing and doing interviews with sites handling the cargo. Availability of personnel is difficult at best and his costs of travel begin to mount. Other claims are building up on his desk back at the office and he is constantly reminded of priorities and organizational responsibilities.

In the weeks that follow, the original client has received a replacement shipment. The company has disrupted their manufacturing and warehouse operations to replace the lost lots and the reshipping and rebilling processes are completed. The investigator has a line on a possible gang operating in one of the intermediate terminals of the carrier. He has singled out a person and he has a lead on the cargo. The interview yields a give up and results in three arrests and a 25 percent recovery of the truckload of products. Because the fence was filling orders, he had broken down many of the pallets and repacked some of the products to meet demands of his clients. He had removed some labels that would have assisted investigators in tracing items and he sold 75 percent of the cargo locally.

These goods made the streets quickly and were sold competitively by reputable companies at deep discounts. The manufacturer certainly was not aware of these sales partially due to his size and market share but also due to the fact that he has a tolerance for 2 percent shrinks on an annual basis. This tolerance makes thefts such as this disappear on the balance sheet and are no real cause for alarm.

In the mean time the arrested thieves are released on bond and are free to return to the work force. The reporting mechanism for people such as this s rarely in force and they are quick to find other work in a competing carrier to reorganize and get back to business. The investigator returns to his home office to begin the process again. His expenses now total to $7500 for the 3 weeks of road work and he has successfully recovered 25% of the cargo.

The recovered materials are collected, repacked and palletized and moved to a storage warehouse where they will remain for some time as physical evidence. The report of the recovery is shared with the insurance carrier who promptly updates his records deducting the value of the goods from the claim settlement proposal.

The goods were originally shipped at a contract rate which was negotiated by the traffic department. The rate and valuation were done at a cost base far below retail or wholesale value. The goods were therefore classified as below their rightful value. The recovery gave the goods back to them to resell but such a sale is difficult to do at the original price. The client, if you recall, had already gotten his shipment and the goods now need be released from impound and then repacked, re-inventoried and resold, if possible, from stock. The goods now have to be evaluated for quality assurance; defacing, possible tampering, contamination, and the vast array of problems that can ensue from misappropriate storage, handling or shipping.

The goods now have at least tripled in cost, but reduced by more than half in real value. The net result is that they may have to be destroyed, but only after significant resources are put into their evaluation and reconditioning. The basis for the recovery and associated expense has a truly negative impact on the bottom line of the company. If the goods had been completely lost, insurance payment made less deductible, the company would be ahead of the game. Now with the recovery, which is incumbent on any security department to do, the company has gone deep in the hole financially speaking.

The nature of theft control is most often misunderstood. Had the company researched the costs of loss vs. the costs of preventing the loss in the first place they would find that the value of prevention is miniscule by comparison. The fact that recovery after theft with many products can never be deemed financially sound speaks to the fact that most corporate logistics department does not understand the process.

By seeking out proven methods of containment, setting shipping standards, creating appropriate documentation for carriage, assigning liability parameters to carriers and their agents and by protecting goods physically one can save money in the long run.

Many organizations exist to aid shippers in accomplishing these tasks. Groups such as TAPA the Technology Asset Protection Association recommend best practices in shipping and help you to do carrier audits. The TCPC or Transportation Consumer Protection Counsel Help develop appropriate shipping documentation and to assess threats and liabilities of goods out of their control. Finally the basic understanding o the true costs of theft losses, help decision makers create more secure shipping environments.

The costs of loss for items stolen in the supply chain include the following items: remanufacturing, disruption of normal business activities, human resources dedicated administration of the loss, claims, client relationships, reselling, investigation, increased insurance costs, loss of markets and sales controls, liability due to misuse, misrepresentation, tampering, loss of trucks and trailers in addition to cargo, dissatisfied clients, unavailability of goods, venue for seeding counterfeits and or diverted gods into these shipments and many more. The costs of protection are dwarfed by these real expenses. The negative however is that protection must be consistent. It must be used throughout the operation since theft can happen any where at any time, based of course on the vulnerability and desirability of the goods. The cost of prevention needs to be compared to the costs of loss to make a decision. The tolerance level of loss acceptance plays a significant role in this decision process.

Either way the decision to protect ones interest should always focus on what is best for the business. Protection costs rarely are out of the reach of any manufacturer from the lowest cost to the highest cost item. Protection techniques at times have no real cost as they are protocol of documentation based. These items should never be omitted from any company�s logistics procedures.

How can deterrent type proactive technologies address cost savings when they are extraneous costs of products, rarely define in the cost of goods equation. The costs of protection can be both as simple as process controls and as complex as using tamper evident devices on goods, containers or rail cars.

Once a deterrent is put in place it sends a message to the delivery carrier that some degree of scrutiny will be given to insure te integrity of the load he is to deliver. It also tells pick up drivers and carrier agents that the company is proactive in security and that theexpectation is made to include them in this endeavor. The risk established by putting carriers, shipper agensts and manuactiring personnel on notice is imeasureable in deterring theft. By establishing a clear auditable chain of custody handler of cargo recognize their risk of getting caught and find easier targts of opportunity. This condition permeates throughout the logistic chain and causes each handler to recognize the risk of getting caught if he attempts t steal.

Risk creates a more secure environment for goods and facilitates the cargo protecting itself while out of your care ad control. By deterring theft you create wealth. By reducing the propencity for loss you create profits, based again on the understand that inherent business risks of losses do ext all of the time.

By understanding that lost or stolen goods adversely affct your ability to be profitable, you actually create profits by reducing loss.