Tuesday, August 19, 2008

100% - A Solution?

Containers can be scary. Containers are the vehicles of villainy in films like “Sum of All Fears” and “Lord of War”. In this imaginary world, terrorists fill containers with nuclear bombs, armaments, and warriors, then ship them into our unsuspecting and unguarded ports.

In the real world, this has never happened. However, drug dealers and human traffickers are able to move contraband into America with dismaying regularity.

Over 30,000 containers arrive at U.S. ports every day. We are the world’s largest economy. Our economy relies on timely arrival of material from all over the world. It also relies on seamless interactions between U.S. companies and their overseas partners. Any disruption of this vast supply chain would cripple us.

Therein lies the dilemma. How to be safe without crippling our economy?

In the wake of the 9-11 attacks, the Congress passed various laws mandating increased port security. The 9-11 Commission recommended 100 per cent inspection of containers before they reach American soil. In 2007, the Congress passed this mandate.

Now the Government Accountability Office (GAO) has issued a report stating that the 100 per cent inspection mandate might actually make our ports less safe. They assert that 100 per cent inspection is (1) very difficult to achieve, (2) hamper cooperation from our trading partners, and most importantly (3) divert resources from looking at truly at-risk containers and shippers. http://www.gao.gov/new.items/d08538.pdf and http://www.gao.gov/new.items/d08533t.pdf

Welcome to the world of risk management.

The U.S. Customers and Border Protection Service (CBP) of the Department of Homeland Security has been highly successful in working with our trade partners to improve port security standards and practices. This includes an “alphabet soup” of organizations and programs: the World Customs Organization (WCO), the Container Security Initiative (CSI), Customs-Trade Partnership Against Terrorism (C-TPAT), and the framework of standards to Secure and Facilitate Global Trade (SAFE Framework).

The bottom line – not all containers, ports, or shippers are created equal. To treat every container and shipper as an equal threat would mean having inspectors devote an equal amount of time to every container in every port. In reality, there are some very safe and secure ports and many well-managed and secure shippers. 100 percent inspection would be like police breaking into every home in a city looking for a robber they suspected may be hiding in just one neighborhood.

The other reality is that CBP has to depend upon other nations’ customs units to comply. There are 173 members of the WCO and, as of July 2008, 154 of them have signed agreements to implement the SAFE Framework.

The SAFE Framework is not 100 percent inspection. It is an approach based upon state-of-the-art inspection techniques and the highest standards of risk management. Risk management is used by companies and governments the world over. It identifies, assesses, and prioritizes risk and then develops the means to reduce and eliminate that risk. Risk management is used in assuring the safety of aviation, food, pharmaceuticals, and every manufactured product. Is it perfect? Of course not. Does it assure the integrity of what we use and consume? Absolutely.

Think of your home. You can never prevent every accident. You and your family would have to wear heavy protective clothing and add guardrails and safety enclosures around everything from your stairs to your toaster. It would be prohibitively expensive, but worse, it would cripple your daily lives to the point of nothing getting done. However, you can take basic, ongoing, precautions that eliminate hazards and prevent accidents. You can also raise awareness among family members, and educate them in safe procedures, so they act in a safe manner. Splinters and paper cuts may still happen, but serious injuries will be avoided.

Port operations are the same thing. A few years ago, I worked with Dubai Customs on conducting critical risk self-assessments (CRSA) to assure port security. They were very focused as (1) they handled over 75% of all shipping in the Persian Gulf, (2) Dubai was committed to becoming the top center for world trade, and (3) they were only 100 miles from the Iranian coast. Zero tolerance of security gaps was their goal. CRSA was their approach, not 100 percent inspection. To this day, no security issues have arisen, while port operations and Dubai’s reputation as a leading trade center continue to expand.

The US needs its overseas partners to embrace the SAFE Framework to assure their port security. It depends on the hundreds of legitimate cargo companies to embrace improved inspection standards to maintain the integrity of packing and shipping containers. The GAO is correct in stating that demanding 100 per cent inspections at all foreign ports is methodologically unsound, undermines these critical partnerships, and focuses scarce resources on the wrong problem. I am a big fan of Lou Dobbs, but in this one instance, he and the 9-11 Commission are wrong. We should worry more about terrorists bringing in weapons on a chartered fishing boat from the Caribbean than in a Maersk container shipped from Sydney.

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