Ports challenged to meet 2012 box scan deadline, WCO study says

There is only a tiny chance that all foreign ports serving the United States will be ready to apply controversial security legislation requiring the scanning of all containers before arrival into the United States by the July 2012 deadline, a new report commissioned by the World Customs Organization claims.

U.S. Congress passed the law last July as part of the 9/11 Commission Implementation Act of 2007 designed to protect the country from another terrorist attack.

The study by the University of Le Havre said 100 percent scanning would cause an immediate slowdown in world trade and snarl port operations in the short term. However, the study didn't quite deliver the outright dismissal the WCO might have hoped for.

The author, Frederic Carluer, professor in territorial management at the university, outlined his findings at a WCO seminar in Brussels on Tuesday.

The study puts the direct unit cost of scanning a container at about $30 if more than 100,000 TEUs are scanned annually by a port, although this figure will vary markedly depending on the volumes and equipment used.

At the present time I am convinced that technology will not be the barrier to 100 percent scanning. The training of customs officers and data analysts will be a bigger problem, Carluer said.

According to the study, the United States imported 18.5 million containers in 2006, up 10.2 percent over 1997. During that time frame Asia's U.S.-bound market share has risen from 61.9 percent to 74.4 percent. China alone has increased its share to 45.7 percent from 19 percent. As a consequence all regions outside of Asia have suffered a shrinking in market share with Europe down from 21 percent to 13.4 percent.

Carluer said Europe is in danger of losing further share of the traffic in part due to the passive& attitude of the European Commission towards scanning.

They work on the position that it's not going to happen although we saw some change in attitude during our conversations, he said.

Asian countries are fairly open-minded. Even Indian customs who previously didn't care about security are now fully behind the idea.

Carluer argued the United States would be better served signing bilateral agreements with its major trading partners than to push on with its unilateral approach that is unlikely to succeed globally. For example, even based on the most pessimistic forecasts, China and Hong Kong will be the origin for a minimum of half of U.S. imports in 2012, he said.

The French academic predicted with strong probability that U.S. law will lead to a very limited club of ultra secure ports made up of the biggest gateways in Europe and Asia. That club will also include other ambitious smaller avant-garde ports such as in the Philippines, which have gambled on becoming a major regional hub through heavy investment in scanning equipment.

Carluer conceded this could effectively create a Black List of non-Container Security Initiative (CSI) rated ports that will be denied business. This would be especially hard on developing countries that will be unable to attain even 20 percent scanning capability for the foreseeable future, he said.

CSI is a U.S. Customs and Border Protection cargo security program designed to push the borders out to foreign ports for pre-departure inspections. Customs officers are stationed in 58 ports through bilateral agreements where they use risk analysis of shipping data to identify a small subset U.S.-bound volume for automated scanning by local authorities.

Other direct costs to be considered, according to the study, include the necessary investments in dedicated infrastructure and port organization, a short slow-down in operations, and the expense of establishing a new framework of standards to govern the process.

Indirect costs include the potential disruption to the logistics supply chain from port congestion and certain non-compliant ports and countries being increasingly disadvantaged.

On the plus side, the scanning law will renew confidence in containerized transportation and result in extra productivity in the medium term due to port reorganization. It will also boost digital technology development leading to new market entrants and time savings which should also enhance other sectors of the supply chain.

Carluer warned U.S. ports wouldn't be able to cope if they were asked to reciprocate.

They would be terribly affected. They are not in a position to do it themselves. In that scenario I would expect to see ports in Mexico and Canada used as enclaves to reduce the impact.

The WCO is among a number of international organizations to have spoken out against the 100 percent scanning law and has tried convincing U.S. authorities to seek a harmonized solution with its SAFE Framework of Standards, in which container scanning is only one element of a process based on risk management.

WCO Secretary General Michel Danet said he plans to submit to the U.S. administration positive counter-proposals, such as acceptance of the 10+2 advance information requirement, to get the scanning legislation repealed.

There is no question that we are all determined to find the best practical solution; one that will provide the U.S. with the added security it seeks to prevent any act of terrorism from being carried out using international shipping channels, but which will not burden global trade unnecessarily, Danet said. 

Michael Mullen, CBP's assistant commissioner for international affairs and trade relations, said preliminary results from the Secure Freight Initiative where three scan-all pilot locations are taking place revealed significant challenges and higher costs than originally imagined. The scanning project is under way at three relatively low-volume locations: in Southampton in the United Kingdom, Puerto Cortes, Honduras, and Port Qasim in Pakistan

Issues encountered included the technology used not being rugged enough to operate 24/7 as well as extreme weather conditions that lead to high maintenance costs. Other problems were difficulties securing the wide communications channels needed to send data back to the U.S. National Targeting Center and trouble finding adequate staff in the United States and at foreign ports to operate the program.

One-hundred percent scanning is only justified in high-risk trade corridors. That's relatively few places in the world. That's the only way that this process will pay any return on the investment, he said.

Mullen said he hopes Congress will agree to make the key conclusions of the trial project publicly available and offered hope to opponents of the scanning law of a back-track in the United States.

There will soon be a new administration and several new members of Congress. We feel quite confident from the pilot projects that we抮e going to have a significant volume of data that indicates clearly to any reasonable person that this is the wrong way to go.

I don't want anyone to walk out of this room and say that Mike Mullen says this isn't going to happen because there's no way we can say that at this particular point. But our confidence level is increasing.

Antonis Kastrissianakis, director of international affairs and tariff matters at the European Commission, expressed the concerns of the EC.

We consider that it has not been based on any proper assessment of its impact. It will create a false sense of security at high cost, he said.

We fundamentally object to what is happening with 100 percent scanning and we do not contemplate it happening in Europe.

We consider that 100 percent scanning from a European perspective will raise sovereignty issues and also require Europe to invest massively in a measure which is designed to protect the U.S. At the same time it will divert resources in Europe away from measures designed to strengthen security in the EU as well as the security of international trade.

We also find it difficult to imagine a situation when the 100 percent scanning requirement will be applied in one direction only. One-hundred percent scanning would also imply systematic transfer of sensitive information which would only take place in the context of a new international agreement between the U.S. and the EU.

Our priority is to strengthen the SAFE Framework of standards and will be looking very constructively at the proposal to go ahead and see how the 10+2 rule might be introduced.

Kastrissianakis added the U.S. law would have serious repercussions on maritime transport and also divert trade.

You can see what will happen if only some ports apply 100 percent scanning that will certainly increase congestion and reorder transport routes in Europe.

We consider 100 percent scanning as a new trade barrier and we have to be very careful when we go in that direction, if ever.

Danet also expressed fears that European ports will fall behind those in Asia.

The rest of the world is investing. Ports in Europe don't know whether to take the plunge or not. There will be some winners and losers. Carluer said the scanning law would require a fundamental shift in trading relationships.

American's have shown that they don't trust their trading partners by sending out their own officials to foreign ports under CSI. They will need to start trusting them again with 100 percent scanning just as happens when you arrive in a U.S. airport from abroad.

Source: American Shipper