Trade and Terrorism
People ask me what I do, and I tell them I work in trade compliance. That usually gets a blank stare-even though people generally know what "trade" and "compliance" mean, they still don't have a good idea of what I do. I could also tell them that I'm a Licensed Customs Broker, but nobody knows what the hell that is, either. I usually just end up saying I help get things into and out of the country, in a nice and legal way.
My (un)chosen career puts me in constant contact with U.S. Customs, as well as the various government agencies that deal with export licensing. I also have to know a fair amount about the logistics and supply-chain business.
Having that background really put 911 into perspective for me. There is a persistent fear in the industry about dirty bombs, and the fact that our global supply chains are extremely vulnerable. "Extremely" is a matter of context, of course, but I for one am not heartened to know that only 4% of ocean containers go through a physical inspection. That rate will almost certainly never be doubled, just due to resource constraints.
Resource constraints, and business. Just about all of the large industries in the world today operate on a Just In Time basis. Meaning, they only order their products at the last minute, so they don't have to deal with inventory carrying costs. In turn, that means that any slowdown in the supply chain, even if only for a day, means that lines will shut down. There aren't all that many production lines left in the U.S., but if the ones that are here shut down for any length of time, it's bad news.
The solution? A first step has already been taken: Customs has developed a cooperative program with industry called the Customs-Trade Partnership Against Terrorism (C-TPAT), which gives industry a collaborative role in helping to secure their own supply chain. Basically, each company does a self-audit, then they report their findings to Customs and they tell Customs what they have to improve on. Then Customs comes in and makes sure that they are doing that. See the problem there? There are no objective standards for companies to meet. They are only required to show "progress" against their own self-survey. Essentially, industry sets the grading scale, and knows that Customs doesn't want to kick people out of the program.
The next step is more interesting. Customs agencies around the world, driven largely by the U.S. model, are starting to require shipment information up to 24 hours before the material is loaded on a vessel. This is significant. Requiring shippers (or carriers, they haven't decided who will bear the burden yet) to get all of the various data elements to Customs 24 hours before the material is loaded on the boat effectively slows down the supply chain by a day, if not more, not to mention the HUGE investment in systems for both industry and Customs to accommodate the new data.
Naturally, industry is balking at this. "We can't slow down business." Ultimately, business will always win this fight because, well, that's how our economy runs, folks. The total amount of material coming into (and out of) this country each day just boggles the mind. When the Oakland port shutdown happened last summer, it was a huge deal, but the economy managed to survive because other ports were open, and companies had a chance to plan ahead for the anticipated strike by dockworkers. Believe me, if trade into this country were stopped, even trade into one coast, the effects would be far-reaching. Under no circumstances would this country tolerate a prolonged stoppage or slowdown in container shipping. Just wouldn't happen. Even if the containers are known to be at risk (as they are now), we can't stop the shipments. You might as well blow up the stock exchange, Alan Greenspan, Bill Gates and ground all air traffic while you are at it.
Big-time container shipping runs, feeds and clothes this country. Every day. Period.
So, Customs is in the position of having to appear to be tackling the problem, all without slowing anything down much, if at all. It's a tough job.
Check out the incentives Customs uses to get business to sign on to these programs.
The first is a very common statement which you can find in any trade magazine. I'll just take this quote from the August 2003 American Shipper, p. 24:
"Imagine what will happen if a container with cargo of a particular company explodes with a bomb inside. Companies want to protect the good will of their name, their brand."
That sentiment drives virtually every supply-chain improvement effort in the U.S. right now. You know what? I think it's bunk, really. You're telling me that if a container from, say, Ford Motor Company had a dirty bomb in it that people would stop buying Fords? Did people stop flying United after 911?
Absolutely, being involved in a trade violation can give a company damaging press. But the fact is, the supply chain has a ton of players involved. Any given shipment has to start from an overseas supplier, come out of their plant, sit on their dock, get picked up by a local cartage company, go to the carrier, sit in their yard for days, get on the boat, where it is subject to piracy, get to the U.S., where it is subject to the Teamsters AND the Longshoremen, and then go across the U.S. via truck or rail, all before it gets to Ford.
Talk about running the gauntlet. C-TPAT purports to take all of those players and make them the responsibility of the company, Ford in our example. I don't buy that they can make that stick, and I don't buy that the public would blame Ford if a dirty bomb found it's way into a shipment headed for Ford, while it was sitting in a shipper's yard in Singapore. Why? Because terrorists, by their very nature, infiltrate. They overcome obstacles.
Do you think people in Oklahoma City refuse to rent Ryder trucks? Sometimes, reasonable care just isn't enough when you're dealing with determined, smart people.
Then there are the bogus Customs incentives regarding the "fast track". This is their contention that if your company will sign up for these collaborative security programs your goods will simply flow through the borders. You'll never have to be inspected again, you see. You'll just move right through, like the guys went through the back door to the club in Swingers.
OK. Hmmm... Let's see...
If I'm a terrorist, which container do I want to put my bomb on? How about the one that's just going to "breeze through"? Probably.
So what does Customs do about this little problem? It's genius, really. They keep the membership list secret! But that has a problem, too. You see, virtually every large U.S. company is now joined up for C-TPAT, and Customs is in the position of needing to tout it's enrollment numbers to make it appear that they are taking decisive action to protect supply chains. So you have this dramatized scenario:
Reporter: How do we know our supply chains are secure?
Customs: Well, look at the membership list for the C-TPAT program. Virtually all the heavy hitters are there.
Reporter: What do you mean? I can't see the membership list.
Customs: That's true, you can't. We don't want terrorists to know which companies are on the list.
Reporter: But it's a lot, right.
Customs: Yes. Virtually all of them.
Reporter: So, does that mean everybody is getting the fast track?
Customs: Oh, no. We still inspect vigilantly.
Reporter: Can't terrorists just see which containers are going through unimpeded?
Customs: I have to go eat lunch now.
There IS no fast track through the border. Ask anybody in the forwarding or trade compliance industry. They'll tell you firsthand that at most ports the inspections continue at roughly the same rate, and mostly of the same shipments as before.
Customs is offering a carrot (fast track) that everyone knows won't exist, and they offer a stick (bad pub) that isn't much of a stick at all.
Customs will get membership to C-TPAT. Will it make us any safer? Perhaps marginally, but I have my doubts. Because no matter how many companies do their self-audit, there are too many holes, too many hand-offs on each shipment, and not enough resources to check everything before it moves.
The only guarantee is that stuff will move through our ports. Every day. Safe or not.
3:25:22 PM 
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