Next up on the agenda

Two weeks ago in this column we began delving into the biggest question in regard to security of international trade: Simply, what's next? Fifteen months removed from Sept. 11, a number of programs (such as C-TPAT, CSI, 24-hour rule) are up and running, courtesy of the Bureau of Customs and Border Protection and its predecessor, U.S. Customs. It's a good start, but just that; Hardly anyone believes supply chains have been adequately secured from terrorism.

We discussed how some of the initial, post-Sept. 11 visions for an overarching Big Brother system that watches all international shipments every moment from origin to destination are now seen as unrealistic by senior government officials. With supply-chain security having emerged as a lonely stepchild in Washington's funding priorities, any solution must be cost-effective, probably to the point that it can be paid for by the private sector.

So what is next? A good place to start is with Customs and Border Protection Commissioner Robert C. Bonner, the individual who more than anyone else has set the agenda and tempo in this area. Reached by phone the other day, he could not have been more clear in answering that question. Simply put, information provided to the agency about the contents of shipments will only go so far. Bonner wants to be certain a container has not been tampered with en route.

"There is a minimum requirement, and that is that we have a smarter container that can essentially tell us, and other people that have an interest in the container, whether it has been tampered with," Bonner said. "This is just taking forever. We need to infuse a greater sense of urgency in actually deploying a smarter container."

Bonner believes the technology exists, and that it's relatively inexpensive. That is important for what he has to say later. "There are reasonably good electronic seals that can tell you whether or not the door has been opened. And there are other devices that can tell you if the container has been opened even without the seal being broken," he said. "The real issue is developing a willingness on the part of the owners of the supply chain to adopt tamper-evident technology."

Some are well under way in developing containers with interior sensors. A collaboration was announced in late March between China International Marine Containers (Group) Ltd. in Shenzhen, the world's largest marine-container manufacturer, which claims a 38 percent global market share, and All Set Tracking AB of Sweden to introduce a smart container later this year.

Here is why cost is key: Bonner indicated he does not foresee the government funding the implementation. "It is certainly not government-funded. I don't see that. I believe that for this to happen, it has to be absorbed." He noted that it is possible the technology can be deployed for as little as $20 per container, marginal compared to an average $1,500 freight rate. It would also cut down on theft and perhaps reduce insurance rates, he said.

The commissioner clearly hopes this can be accomplished voluntarily. "It is an expectation that this will become a part of the Customs-Trade Partnership Against Terrorism, that we will develop and implement a smart container," he said.

The industry appears ready to go down this road, though clearly many issues remain unresolved. "This is another big step, and it's a step that everybody understands is going to be the one that is looked at," said Chris Koch, chief executive of the World Shipping Council. "Going from concept into operation will take some definition and some work, but the industry is ready to have that conversation."

One issue is how ambitious to be. The smartest sensors can detect chemical and radiological material as well as light, movement and changes in environmental conditions. Others are more limited. Bonner appears to favor speed of implementation over sophistication. "What we don't need is the gold-plated version of this, whatever that is," he said.

Other issues involve adoption of standards and responsibility for operation. "You would need the software" to read the sensors, said John Lewis, director of imports for Dollar Tree Stores Inc. "Who has the mechanism to monitor and analyze the data, and who is going to pay for that?"

It's an open question whether a transition of this magnitude can be accomplished voluntarily. Customs needs to provide a lot of guidance to keep this moving down that road. But as the 24-hour rule showed, if Bonner decides a job needs to get done, he won't let much stand in his way. As he said of the smart container, "This is one of the important incremental steps in supply-chain security."

Peter Tirschwell is editor of The Journal of Commerce. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.

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