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Constructing a Secure Trade Corridor

Author: Stephen E. Flynn
March 11, 2002
Foreign Affairs

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A paper by Dr. Stephen E. Flynn
Senior Fellow, National Security Studies
Council on Foreign Relations
sflynn@cfr.org

presented to:
The Ports of Los Angeles and Long Beach,
The Marine Exchange of Los Angeles and Long Beach,
U.S. Coast Guard, U.S. Customs Service, and U.S. Immigration Service

March 11, 2002

Note: Remarks as prepared for delivery

To a large extent, America does not need to “protect” its borders— Canada and Mexico are not trying to take them from us! What we need is to enhance the security within the global trade and travel corridors upon which our economic prosperity depends. This is for two reasons. Bad people and things don’t fall out of the sky and arrive at our national frontiers. Invariably they start their journey far from our borders, traveling on legitimate transportation conveyances. Thus it makes sense to develop some “strategic depth” by bolstering our means to detect and intercept illicit and dangerous travelers and cargo at the point of origin and within the global transport network before they reach our borders. Second, whenever the trade corridor is used as a conduit for carrying out a terrorist act, the subsequent investigation and the efforts to respond to public fears will likely produce the kind of mass disruption we witnessed immediately following the September 11 attacks. After that tragic event, we did to ourselves what no nation could aspire to do to a great superpower— we effectively imposed an economic blockade on the United States by grounding all aviation, closing the major seaports, and sealing the border with Mexico and Canada.

We need to develop a practical alternative to traditional security measures that present a substantial risk of disruption of trade. Manufactures, importers, commercial carriers, and terminal operators must be enlisted in constructing dependable arrangements for securing, monitoring, and sharing information about commerce from the overseas point of origin to its final destination prototype. Constructing a secure trade corridor requires that the U.S. government recognize and capitalize on the opportunities presented by the revolution in supply-chain management. We can do this by constructing a prototype that does the following:

  • Pushes the borders out all the way to the manufacturer, validating security in the loading of intermodal containers at the point of origin;

  • Pilots the use of off-the-shelf technologies such as GPS transceivers, sensors, and data querying to monitor the movement of legitimate cargo in transit and prior to reaching the border;

  • Focuses initially on international commercial cargo containers that originate by a manufacturer in Europe or Asia, are transported through a mega-port like Rotterdam or Singapore, and transit through Canada before arriving in the northeast or northwest.

VULNERABILITY OF THE GLOBAL TRADE CORRIDORS:

Following the September 11 attacks, Americans are faced with four unpleasant facts:

  • There will continue to be anti-American terrorists with global reach for the foreseeable future;

  • These terrorists will have access to the means— including chemical and biological weapons— to carryout catastrophic attacks on U.S. soil;

  • Some of those terrorists and their weapons may attempt to gain access to the United States via an intermodal container originating overseas;

  • The initial post-September 11 response of stopping global commerce from entering the United States demonstrated a lack of confidence by border enforcement agents in the routine measures used for policing the inbound flows of people, goods and conveyances in the face of a heightened terrorist threat.

The economic and societal disruptions created by the September 11 attacks plus the subsequent anthrax mailings have opened a Pandora’s box. Future terrorists bent on challenging U.S. power will likely draw inspiration from the seeming ease with which the United States can be attacked, and they will be encouraged by the mounting costs to the U.S. economy and the public psyche exacted by the rushed and chaotic efforts to restore security.

The trade corridor security challenge is daunting one. U.S. Customs inspectors rely on targeting systems to help identify the 1-2 percent of containers they are able to physically examine. Unfortunately, when trying to identify the high risk as opposed to the low risk, customs analysts are currently poorly positioned to ascertain three things: First, was the container loaded at a secure loading dock that presents little opportunity for the shipment to be compromised by a criminal or terrorist? Second, can the movement and condition of the container from the point of origin to its arriving destination be accounted for with sufficient detail as to support a conclusion that it is unlikely the box was intercepted and tampered with enroute? Third, was there sufficiently timely and detailed information about inbound containerized shipments to allow authorities to conduct a “virtual inspection” in advance of arrival, using existing databases?

RISK OF DISRUPTION

The absence of a robust capacity to filter the illicit from the licit in the face of: (a) a heightened terrorist threat environment, and (b) the growing volume of people and goods moving through international trade corridors, places U.S. and global commerce at frequent risk of disruption. Absent alternatives, when confronted with credible intelligence of a terrorist attack or an attack itself, authorities will find themselves compelled to order a shut down of our transportation systems as one of their first preventative or responsive measures. Executing this order will have the net effect of creating a self-imposed blockade on the U.S. economy. The ripple effect throughout the international trade corridors will be immediate and painful because there is no alternative to a container for moving over 90 percent of general cargo between North America and Europe, Asia, Africa and Australia. Working towards building a secure trade corridor is intended to provide a counter-terrorism alternative to such a draconian and disruptive response.

STRATEGY FOR SECURING INTERNATIONAL TRADE CORRIDORS

Any strategy for securing the cross-border flows of commerce from the threat of terrorism must balance the imperatives of adequate control with sustaining economic and societal openness. Rethinking supply-chain security, therefore, is one part about preventing terrorists from gaining access to the United States to cause catastrophic harm, and the other part about sustaining the continued viability of the global transportation lifelines that support international commerce.

The way to accomplish this is to move away from placing primary reliance on a system of controls at the ports of entry that lie within U.S. jurisdiction, and towards point of origin controls, supported by controls developed within international supply chains, and accompanied by a concentric series of checks built into the system at points of transshipment and at points of arrival.

Effective international trade corridor security must rest on a foundation of credible risk management; i.e.; a regime that can reliably identify the people, goods, and conveyances that are legitimate, so their movements can be facilitated. Then regulators and inspectors could focus on the smaller number of participants about which they know little or have specific concerns. This requires a layered public/private approach. One such approach would be to inaugurate an “Operation Safe Commerce” initiative that does the following:

Identifies appropriate security practices to govern the loading and movement of cargo throughout the supply chain. The goal is to ensure that an authorized packer of a container knows what is in that container and can report those contents accurately. A second objective is to ensure the electronic documentation that goes with the container is complete, accurate and secure against computer hackers. A third objective is to reduce the risk of a container being intercepted and compromised in transit. Achieving these aims will require developing and complying with:

  • Secure packing requirements for loading intermodal containers along the lines of ISO9000, Quality Assurance rules.

  • Maintaining secure loading docks at manufacturing plants or at shipping facilities that restrict access to only authorized individuals and include the use of cameras to monitor the loading process. Loading docks would be subject to periodic, random, independent inspections to assure compliance.

  • Outfitting containers with theft-resistant mechanical and electronic seals.

  • Installing a pressure, light, temperature, or other sensors in the interior of the container, which would be programmed to set off an alarm if the container was opened illegally at some point of transit

  • Conducting background checks for operators that transport goods along the intermodal transport chain and outfitting them with biometrically-based identity cards.

  • Attaching an electronic transponder (such as those used for the “E-Z-pass” toll payment system in the northeastern United States) and global positioning system (GPS) devices to the truck cab and chassis or railcar carrying containers and use intelligence transportation system (ITS) technologies to monitor in-transit movements to and within the port terminal.

  • Maintaining the means to communicate with operators from their pick-up to offload destinations.

  • Providing tracking information to the appropriate regulatory or enforcement authorities within the jurisdictions through which it would be destined.

  • Requiring all participants in the supply chain cycle to provide advance notice of the details about their shipments, operators, and conveyances in accordance with agreed upon protocols. This early notice would give inspectors the time to assess the validity of the data, to check it against any watch lists they may be maintaining, and provide timely support to a field inspector deciding what should be targeted for examination.

THE “OPERATION SAFE COMMERCE” PROTOTYPE

The goal of the Operation Safe Commerce prototype is to involve, as partners, companies that routinely move time-sensitive goods originating from overseas and using a megaport such as Rotterdam or Singapore as a port of transshipment and arriving in the United States in the northeast and southern California. The aim is to develop incrementally, in a layered, multi-tiered approach, to include several international supply chains.

OPERATION SAFE COMMERCE BETA PROJECT:

In order to identify, test, adopt and refine Safe Commerce Standards, the beta project will start with two international supply chains— one originating in the Europe and the other in Asia— and:

  • Form a West Coast and East Coast regional task force, with the explicit endorsement of the Office of Homeland Security, that includes border control agents and other relevant security, law enforcement, and regulatory authorities. These groups should also enlist the support of appropriate academic and technical experts.

  • Task the regional task force members to examine for security gaps: (1) the entire design-to-delivery product flow; and (2) the means of conveyance – maritime, rail, truck, and air; and (3) the “who and how” connected with the operators who move the products.

  • Have the regional task force prepare recommendations they believe might redress the gaps they identify. These recommendations should fall under three groupings: (1) off-the-shelf technologies for securing and tracking shipments, (2) improvements to existing data-collection and sharing arrangements, and (3) process changes that would close opportunities for compromise at the point of origin or in transit.

  • Conduct a trial of new technologies, data arrangements, or process changes using volunteer manufacturers, importers, surface shippers, freight forwarders, maritime shipping lines, and terminal operators.

ASSESSING SUPPLY CHAIN SECURITY:

Each stage of the manufacturing process adds value through specialization. From design to delivery, different private companies move a product along a path towards the end consumer. Where the model once was of centralization and vertical integration, the new global economy model is decentralized. Many different companies often control a product through subcontracting drop shipping and franchises. These multiple points of entry increase a system’s vulnerability as the number of hand offs increase. Therefore, recognizing the need to identify security at each sequential stage in order to validate the entire delivery system, the beta project will examine as discrete stages of the product flow (Supply Chain):

  1. Product Origination (the factory and/or subcontract manufacturing)

  2. Product Shipping to export facility (transportation company)

  3. Export Stage repackaging and shipping (export broker)

  4. International Transport (freight company)

  5. Export Arrival and Storage (warehouses, customs facilities)

  6. Cargo Break-up into multi-product facilities (drop centers, distribution warehouses)

  7. Product Arrival and Storage at the buyer’s facility.

While appearing to be complex, existing tariff, customs, tax reporting and theft deterrent practices can provide many of the ingredients for tracking a product flow to significant degree. Thus, issues of coordination and the timing in which this data is collected and shared will receive the greatest attention versus calls for additional data. In addition, the Operation Safe Commerce beta project will emphasize low-cost technology approaches to redressing gaps in the current product delivery system.

OPERATION SAFE COMMERCE – PHASE II:

After completing the beta projects, the task forces should seek to recruit additional companies with supply chains using other originating and transshipment ports. The task forces should also seek to include Canadian participation in concert with the Ridge-Manley “Smart Border Accord.” As with the beta project, these companies would agree to have their supply chains analyzed for possible security gaps, and volunteer to participate in field tests for new technologies, data-management arrangements, or process changes.

Step1 – GAP ANALYSIS

By enlisting business sector partners involved with all stages of product flow, Operation Safe Commerce will tap ongoing efforts to construct a process flow map for the physical movement of the container as well as the information flow to identify security gaps, and how they can be redressed.

Step 2 – REMEDIATION (Field Testing)

A support group, comprised of academic and private sector partners, will develop technological applications for testing as gaps are identified by the regional Operation Safe Commerce task forces. An outreach effort will be made to other government sponsored R&D efforts which are field-testing tracking and sensor technologies that support a demonstration of how secure in-transit visibility and accountability can be achieved. “Red-team” exercises will be conducted to test the systems integrity.

Step 3 – OPERATION SAFE COMMERCE PROTOTYPE OUTREACH & GROWTH:

To capture and quickly relate lessons learned from the security gap analyses and the testing and refinement of technological applications, reports will be prepared after the beta project and the Phase II. These reports will aim to provide guidance for a layered, multi-tiered approach for replication and standardization of policy approaches to securing trade corridors. The audience includes policy makers and participants involved in formulation national counter-terrorism initiatives and international initiatives under consideration by the International Maritime Organization, the World Customs Organization, the International Standards Organization, and other relevant multilateral and international bodies.

CONCLUSION

Demonstrating a prototype that features point of origin and supply chain controls, the use of new technologies, and bilateral and multinational cooperation promises to enhance the ability of securing our international trade corridors in the face of a heightened terrorist threat. This approach precludes the need to disrupt trade moving through the U.S. seaports, or at U.S land-border crossings, and thus adverts all the subsequent adverse economic consequences for United States and global trade. In the end, developing a model for constructing a secure trade corridor is about sustaining the vital national security imperative of to preserve an open and secure system for global trade and travel upon which the economic basis of American prosperity and power ultimately rests.

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