July 8, 2010
transportation report | Infrastructure

Failure to prescreen air freight could mean added costs, delays

An Aug. 1 deadline looms for screening all U.S. cargo carried in passenger aircraft. If more shippers don't sign on to the government's prescreening program, chaos could ensue.

By Mark B. Solomon

It is the supply chain equivalent of putting a square peg in a round hole: An industry built on speed of delivery is being forced to stop in mid-process and examine every piece of cargo before it is loaded into the bellies of passenger planes.

Starting Aug. 1, all shipments to be carried on passenger aircraft—3 billion pounds each year moving in U.S. domestic or export commerce—must be screened or physically inspected prior to loading. Compliance with that mandate may prove to be the air-cargo industry's biggest challenge of the post-9/11 era.

Ready or not?
The Transportation Security Administration (TSA), which oversees the program, said it is prepped for show time. "Both we and the industry are ready" for the Aug. 1 deadline, John Sammon, the Department of Homeland Security's assistant administrator, transportation-sector network management, said at a June 30 congressional hearing. "All segments of the cargo community are prepared, and we expect that [the Aug. 1 transition] will happen with little disruption." But the industry has yet to walk the walk, and the path is littered with mines. On May 1, TSA announced that the industry had met a key milestone by screening three-fourths of all cargo transported on passenger aircraft. That cargo, however, probably represents the air freight equivalent of "low-hanging fruit."

The remaining 25 percent consists of multiple pieces that are shrink-wrapped on pallets or loaded into containers. Those are expected to be difficult to inspect without disrupting flight schedules and deliveries. The problem is that cargo must be examined at the individual piece level before it goes aboard a plane, and no government-approved technology exists to screen goods in palletized or containerized form. Unless the shipments have been screened before they reach the airport, the carrier will have to break down the pallet or container, examine the cargo, and then rebuild the unit load before moving it onto the aircraft.

In an effort to divide up the screening burden and avoid having mountains of unscreened cargo piling up at airports, the government created what it calls the Certified Cargo Screening Program (CCSP). Under this voluntary initiative, participants certified by the government—shippers, freight forwarders, airlines, and third-party facilities—would be authorized to screen cargo in their custody.

To date, there are 440 government-licensed forwarders enrolled in the program, as well as 60 independent screening facilities—informally known as "car washes"—that are certified to screen the cargo but may not deliver the screened cargo to the airlines.

But shipper enrollment has fallen short of expectations. As of mid-June, the TSA said 237 shippers had registered for the program. That's well below the thousands of shippers agency officials had hoped would be participating by that time.

The industry worries that a lack of significant shipper involvement will lead to chaos. Airlines fear they will be inundated with unscreened cargo that they will be obliged to examine. For their part, freight forwarders are concerned their shipper customers will dump the screening burden on them under the premise that it is part of the forwarders' job description.

Those concerns appear to be justified. A recent survey conducted by the Airforwarders Association found that 70 percent of shippers believe that forwarders should assume the responsibility for screening or inspecting shipments. "It has become very clear that the task of screening is going to fall largely on us," said Brandon Fried, the association's executive director.

The Government Accountability Office (GAO) said at the June 30 congressional hearing that shippers' participation would need to increase sixteenfold by Aug. 1 to achieve TSA's goal of having each group bear an equal share of the screening burden. The watchdog agency questioned whether the industry could meet the deadline without the flow of commerce being impeded.

Despite the concerns, the forwarder survey found most respondents "cautiously optimistic" that the industry will be able to manage effectively through the mandate.

Slow on the uptake
Why have shippers been so slow to sign up for CCSP? Some say it's because they have no real inducements to participate. During the June 30 hearing, the GAO noted that shippers have neither regulatory incentives to join the program, which is voluntary, nor economic incentives to do so because the airlines have yet to impose significant screening costs.

Freight forwarder and airline executives call that flawed thinking. As they see it, a shipper's ability to control the screening and inspection of a shipment—rather than having someone else do it for them and risk damaging a fragile, high-value product—should be enough of an economic incentive to enroll in the program.

Shippers would also benefit from prescreening their cargo themselves because it would reduce the risk of having their shipments held up at the airport. Shippers already pay a premium for the speed of air transportation, so they should examine the "opportunity costs" they would incur if their cargo should miss a scheduled flight because the airline couldn't examine it in time, said Ken Konigsmark, senior manager, supply chain & aviation security compliance for the Boeing Co., a large air-freight shipper. "To the supply chain professional, time is as important as cost," he said.

Art Arway, who heads security for the Americas for Deutsche Post DHL, which owns the world's biggest air forwarder, said shippers are taking a big chance by not joining CCSP and certifying their security processes. "The airlines have said they will accept certified cargo first and then [screen] as they are able," he said. "Shippers will definitely run the risk of missing an airline's cutoff" if their cargo reaches an airport unscreened, he added.

In for a rude awakening
Although some shippers may have hesitated to join CCSP out of concerns about cost, forwarders say such fears are overblown. The cost of participating in the CCSP program varies widely by industry sector, they say, and while forwarders are likely to face significant expense, shippers are apt to get off relatively lightly.

What makes participation so costly for some forwarders is the equipment they have to buy. To accommodate large volumes of cargo, some might end up building stand-alone screening areas, complete with X-ray or explosives trace detection (ETD) machines that identify high-risk cargo. The cost could range from $30,000 to $500,000 per facility, depending on the quantity and sophistication of the equipment, according to Fried of the Airforwarders Association.

At the June 30 hearings, Mike Middleton, executive vice president of Secure Global Logistics, a Houston-based integrated logistics company, told lawmakers that his firm had spent about $400,000 on equipment, staff training, and implementing security measures to comply with the inspection mandate. And the tab can run much higher. Arway said Deutsche Post DHL spent millions of dollars in 2009 to purchase ETD machines after deciding that X-ray equipment produced too many false positives.

Shippers, on the other hand, may not have to go to such lengths. Many shippers already examine their shipments as part of their daily manufacturing processes and have security equipment installed and inspection procedures in place. In some cases, joining the CCSP could be as simple and inexpensive as erecting a fence around an open area and having it designated a certified screening facility, according to Fried.

"Shippers face very little cost in getting certified. The challenge is that they're not registering," he said.

That could be a big mistake. Shippers that haven't registered for the program or made other arrangements to have their freight prescreened could be in for a rude awakening next month, when new fees and requirements kick in. For example, American Airlines on Aug. 1 will double its security charges for goods it is required to screen. It will also add two hours to flight cutoff times for unscreened cargo, meaning the goods must hit American's docks six hours before the flight's scheduled departure, according to Dave Brooks, head of the airline's cargo unit. However, for cargo that has been screened or inspected before it reaches the airport, the airline will keep the four-hour cutoff times and waive the additional screening fees, he said.

Lest anyone think that American's policy is an anomaly, Arway offered a warning. Virtually all U.S. airlines will follow the carrier's lead—if they haven't already, he said.

More articles by Mark B. Solomon

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