DO YOU KNOW WHERE YOUR CARGO IS?

Jul 01, 2005 9:30 PM  By

The 2002 movie The Sum of All Fears — based on the 1991 Tom Clancy novel of the same name — depicts what is surely a supply chain manager’s worst nightmare: someone hiding a bomb in a seemingly innocuous vending machine, shipping it in a standard ocean container to a U.S. port, plant-ing it at the Super Bowl, and detonating it, leaving hundreds of thousands dead or wounded. Though such an act may have been thought to be the stuff of spy thrillers in 1991, the attacks on the World Trade Center 10 years later brought the security question to the top of the agenda of numerous boardrooms.

Initiatives implemented in the wake of 9/11 have made international cargo more secure. But despite — or perhaps because of — the greater restrictions on overseas shipments, there’s been a rise in domestic cargo theft.

In 2002 the U.S. government undertook a major supply chain security initiative along with private industry, forming the Customs-Trade Partnership Against Terrorism (C-TPAT). Companies that are certified enjoy expedited customs processing, saving time and ultimately money.

And certification is not relegated to billion-dollar importers. Smaller companies can benefit as well. Nicole Hagerman, director of international sourcing for surplus inventory e-tailer Overstock.com, says that getting C-TPAT certified is worth the effort “in the sense that Customs doesn’t hold your shipment. You now have this red flag from Customs saying things can go through, so your shipments get processed much faster. And with the port delays that have been happening for the past year and a half, that’s a huge thing for your business.”

That said, getting certified is no small task. According to the U.S. Customs and Border Protection Website (www.customs.gov), to become C-TPAT certified, a company must

  • conduct a comprehensive self-assessment of supply chain security using the C-TPAT guidelines regarding procedural security, physical security, personnel security, education and training, access controls, manifest procedures, and conveyance security.
  • complete a supply chain security profile questionnaire and submit it to Customs.
  • develop and implement a program to enhance security throughout the supply chain in accordance with C-TPAT guidelines.
  • communicate C-TPAT guidelines to other companies in the supply chain and work toward building the guidelines in to relationships with these companies.

In short, a company seeking certification must be able to prove that not only is it implementing all the appropriate security measures but that all of its suppliers and carriers, from point of origin to destination, are too.

That’s why Overstock.com isn’t yet certified, says logistics manager James Floyd. Although Overstock.com’s security protocols exceed C-TPAT standards, he says, international vendors not yet compliant are holding up the company’s certification process.

“Particularly with shipments coming from overseas,” Hagerman says, “what we’ve seen from an industry standpoint is that you have U.S. Customs and Border Protection now saying, You have to have your C-TPAT certification, you have to use ‘smart’ containers.” A smart container features intrusion sensor systems that can detect hazardous chemicals, radioactivity, and changes in temperature, humidity, light, and other physical parameters. It can also include RFID tags to enable real-time, item-level visibility of the contents and communicate that information to a global network. Such containers are still in the development stages, however, and are not widely available for commercial use — and that, says Hagerman, is part of the problem with C-TPAT.

“You have to do all of this stuff, which is great,” she says, “but there’s a waiting list to get certified for C-TPAT. So it is kind of frustrating in the sense that the government is imposing all these laws and regulations, but then it’s not so easy to get those things they’re saying you have to have.”

But C-TPAT has done much to keep The Sum of All Fears from becoming reality, according to Barry Brandman, president of Midland Park, NJ-based corporate loss prevention specialist Danbee Investigations. It’s nearly impossible for Customs to physically inspect more than 3%-5% of the imports coming into the U.S. due to the enormous volume of goods arriving daily, he says. “What they need to do is to profile low- vs. high-risk imports, and in that regard, C-TPAT has enabled them to do that. There are thousands of companies since C-TPAT’s inception that have upgraded their supply chain security programs and qualified for C-TPAT certification, thereby allowing the customs inspectors to focus their attention on companies that are most vulnerable to major security breaches.”

Another program that has tightened security among overseas shipments is the Cargo Security Initiative (CSI). The CSI’s aim is to increase container security by allowing Customs officials to work at foreign ports to inspect cargo before it departs from its point of origin.

Generally speaking, the U.S has done well in its efforts to balance trade facilitation with security, says Earl Agron, vice president of security for container transport services provider APL Ltd., a unit of Singapore-based global logistics giant Neptune Orient Lines. “We’re balancing how much security costs with keeping trade flowing. We’re certainly more secure than we were before 9/11, with all the different security initiatives that have taken place.”

NOT SO SAFE AT HOME

But while initiatives such as C-TPAT and CSI have dramatically tightened up security for international cargo, Brandman says, domestic cargo is disappearing much more often than it was prior to 9/11. “It’s not unusual for a company to lose a container in Texas on a Monday, and a container is found three states over on Wednesday,” he says. “The contents of that cargo can be found 500 miles away or 5,000 miles away from where it was originally stolen. We frequently will track the product down outside the U.S. because the professional rings have distribution channels that are extremely well connected. They can move large quantities of almost any type of finished goods from coast to coast or to Latin America, Europe, or the Middle East.”

Brandman says the economy’s recent softness may have driven up cargo theft: “A lot of employees who have lost their overtime, seen their stock options decline, or feel that their jobs are in jeopardy have a different mentality. They justify in their minds that it’s okay to do something against their company before their company does it to them.”

Other factors contributing to domestic cargo theft are inflation and the emergence of the Web as an easy way to hawk wares. Legitimate e-merchants can unwittingly be selling stolen goods online. “If you look at electronics, home entertainment equipment, computers, fragrances, tobacco, wine, liquor, and food, all these products have gone up in value, and it’s extremely easy to sell them,” Brandman says. “Your marketplace now has become the world — anybody that’s connected to the Internet.” Most online auction sites are unknowingly serving as conduits for stolen goods, he says: “We have come across over two dozen Websites that have predominately been set up for the sole purpose of fencing stolen merchandise.”

And ironically, because tighter international cargo security has stemmed the tide of illicit narcotic imports, he adds, organized crime entities have turned to domestic cargo theft as an alternate source of funds.

“If you look at theft of cargo in transit, these are essentially warehouses on wheels that are carrying anywhere from an average of $200,000-$2 million worth of goods on 53 ft. of container, and there are more trucks on the road than ever before in our history,” Brandman notes. “So the number of targets has dramatically increased, and when you have these professional crime organizations that used to be responsible for importing illegal narcotics turning their attention to cargo theft, you’re contending not just with your employees but also with professional crime organizations.”

Incidents of cargo theft are much higher in some states than in others. “If you’re going to be transporting cargo through states that are known to have high incidents of cargo theft, such as Florida and California, you really need to make sure that the vehicles all have GPS technology built in,” Brandman advises. “You need to have electronic monitoring of those containers 24 hours a day.” He also suggests using truly anonymous tip hotlines. Though many companies operate these internally, employees who may have information about cargo theft often decide not to come forward due to fear of retribution. Danbee Investigations hosts a tip hotline for clients, easing that fear for potential whistleblowers.

“Any time there’s a major crime — if you look at Oklahoma City, if you look at the Chandra Levy disappearance, if you look at the Baltimore snipers from a year and a half ago — the first thing that the federal government does is put up an 800-number,” Brandman says. “The reason they do that so quickly is that most of the major crimes today are solved by anonymous calls. So the same concept holds true in the private sector.”


David Pluviose is a business writer based in Nashville, TN.