Who pays? How much?

Who pays? How much?

U.S. efforts to secure global supply chains after the Sept. 11 attacks were stunning in their scope and initial success. The establishment of C-TPAT, CSI and the World Customs Organization Framework for Secure and Facilitated Trade were milestones in protecting U.S. borders from terrorist attacks and securing supply chains worldwide.

These efforts, led by U.S. Customs, were characterized by partnership with industry and cooperation and support from international organizations such as the WCO and the International Maritime Organization. This foundation of government-business and international cooperation was vital to the success of supply-chain security efforts.

Five years later, the war on terror continues. The wars in Afghanistan and Iraq drag on. The threat of global terrorism remains. The effort to secure global supply chains continues with the excitement of the initial successes being dimmed by the difficult and costly work of implementation.

The global security effort and the wars in Iraq and Afghanistan share some common issues. Initially, the Iraq war budget estimate from the Pentagon was $50 billion. Lawrence Lindsay, the White House economic adviser, was fired for predicting the costs could approach $200 billion. Conservative estimates now place the costs of the Iraq war at more than $1 trillion. Support for the war has declined as cost in lives and dollars increase. Controversy over strategy and opposition in Congress and the public are dividing the country.

Although not nearly as controversial, efforts to secure our borders and improve global supply-chain security have lost some of the initial momentum and support and show evidence of disagreement between the executive and legislative branches and some skepticism on the part of industry.

Three supply-chain security issues need to be addressed. The first has to do with differences regarding tactics to strengthen security on the part of Congress and the executive branch, the second with the cost of the effort, and the third with who pays.

Customs and the Department of Homeland Security have provided outstanding leadership by creating business and international cooperation and partnerships to secure supply chains. One element of the strategy is risk management. Customs is fast becoming an information-based organization with deep knowledge of global supply chains and the art and science of risk management. Customs has been able to minimize risk by focusing on its knowledge of the supply-chain participants, by gathering intelligence and information on suspect entities and shipments, by implementing more sophisticated risk-management technology, by introducing proven technology to detect suspect shipments, and by testing new systems and technology to determine potential and suitability for implementation.

Congress, however, seems to want to eliminate - rather than manage - risk. Lawmakers have proposed various approaches, including 100 percent inspection of import containers and/or radiation scanning of all boxes. While appealing on the surface, neither approach is satisfactory in the real world. Physical inspection of all import containers is impractical and would bring trade to a standstill.

Congress has substantial support among technology companies to require radiation scanning prior to export from a foreign country or import into the U.S. This still does not eliminate risk and has other shortcomings such as performance of the technology in the real world, the cost and time to scan every container, the burden this places on countries trading with the U.S., and the question of who pays for the technology.

The underlying issue of who pays is not resolved and cannot be until there is a clear definition of international supply-chain security. If that requires that all imports require scanning at the port of export, the use of sophisticated electronic seals, shipment in a "smart box," more information prior to import and export, a verification of the security of all foreign suppliers, and review of the exporters' security procedures and premises, the costs should be calculated and the country and business entities responsible for paying should be identified.

We should look at the consequences of such an approach and consider the ramifications if the U.S. were required to inspect all exports and to verify the security practices and procedures of every U.S. export-er. The costs would be astronomical. Worse, it would be an indication that Osama bin Laden is winning.