Wednesday, February 22, 2006

Sale of Ports: Bush didn't know....Where's that asshole been?

Port Security Is Still a House of Cards
Author: Stephen E. Flynn, Jeane J. Kirkpatrick Senior
Fellow for National Security Studies

January/February 2006
Far Eastern Economic Review

As one of the world’s busiest ports, it is fitting
that Hong Kong played host to the World Trade
Organization’s December 2005 meeting. After all,
seaports serve as the on- and off-ramps for the vast
majority of traded goods. Still, the leaders of the
145 delegations that convened in Hong Kong undoubtedly
did not have much more than a sightseer’s interest in
the host city’s magnificent and frenetic harbor. For
the most part, finance and trade ministers see trade
liberalization as involving efforts to negotiate rules
that open markets and level the playing field. They
take as a given the availability of transportation
infrastructures that physically link markets separated
by vast distances.

But the days when policy makers could take safe
transportation for granted are long past. The Sept.
11, 2001 attacks on New York and subsequent attacks on
Madrid and London show that transport systems have
become favored targets for terrorist organizations. It
is only a matter of time before terrorists breach the
superficial security measures in place to protect the
ports, ships and the millions of intermodal containers
that link global producers to consumers.

Should that breach involve a weapon of mass
destruction, the United States and other countries
will likely raise the port security alert system to
its highest level, while investigators sort out what
happened and establish whether or not a follow-on
attack is likely. In the interim, the flow of all
inbound traffic will be slowed so that the entire
intermodal container system will grind to a halt. In
economic terms, the costs associated with managing the
attack’s aftermath will substantially dwarf the actual
destruction from the terrorist event itself.

Fortunately, there are pragmatic measures that
governments and the private sector can pursue right
now that would substantially enhance the integrity and
resilience of global trade lanes. Trade security can
be improved with modest upfront investments that
enhance supply chain visibility and accountability,
allowing companies to better manage the choreography
of global logistics—and, in the process, improve their
financial returns. In short, there is both a public
safety imperative and a powerful economic case for
advancing trade security.

A Brittle System
Though advocates for more open global markets rarely
acknowledge it, when it comes to converting free trade
from theory to practice the now-ubiquitous cargo
container deserves a great deal of credit. On any
given day, millions of containers carrying up to 32
tons of goods each are moving on trucks, trains and
ships. These movements have become remarkably
affordable, efficient, and reliable, resulting in
increasingly complex and economically expedient global
supply chains for manufacturers and retailers.

From a commercial standpoint, this has been all for
the good. But there is a problem: as enterprises’
dependence on the intermodal transportation system
rises, they become extremely vulnerable to the
consequences of a disruption in the system. To
appreciate why that is so requires a brief primer on
how that system has evolved.

Arguably, one of the most unheralded revolutions of
the 20th century was the widespread adoption of the
cargo container to move manufactured and perishable
goods around the planet. In the middle of the last
century, shipping most goods was labor intensive:
items had to be individually moved from a loading dock
at a factory to the back of a truck and then offloaded
and reloaded onto a ship. Upon arrival in a foreign
port, cargo had to be removed by longshoremen from the
ship’s holds, then moved to dock warehouses where the
shipments would be examined by customs inspectors.
Then they were loaded onto another transportation
conveyance to be delivered to their final destination.
This constant packing and repacking was inefficient
and costly. It also routinely involved damage and
theft. As a practical matter, this clumsy process was
a barrier to trade.

The cargo container changed all that. Now goods can be
placed in a container at a factory and be moved from
one mode of transportation to another without being
manually handled by intermediaries along the way.
Larger vessels can be built to carry several thousand
containers in a single voyage. In short, as global
trade liberalization accelerated, the transportation
system was able to accommodate the growing number of
buyers and sellers.

Arguably, East Asia has been the biggest beneficiary
of this transportation revolution. Despite the
distance between Asia and the U.S., a container can be
shipped from Hong Kong, Shanghai, or Singapore to the
West Coast for roughly $4,000. This cost represents a
small fraction of the $66,000 average value of goods
in each container that is destined for the U.S.

However, multiple port closures in the U.S. and
elsewhere would quickly throw this system into chaos.
U.S.-bound container ships would be stuck in docks,
unable to unload their cargo. Marine terminals would
have to close their gates to all incoming containers
since they would have no place to store them.
Perishable cargo would spoil. Soon, factories would be
idle and retailers’ shelves bare.

In short, a terrorist event involving the intermodal
transportation system could lead to unprecedented
disruption of the global trade system, and East Asia
has the most to lose.

What Has Been Done?
The possibility that terrorists could compromise the
maritime and intermodal transportation system has led
several U.S. agencies to pursue initiatives to manage
this risk. The U.S. Coast Guard chose to take a
primarily multilateral approach by working through the
London-based International Maritime Organization to
establish new international standards for improving
security practices on vessels and within ports, known
as the International Ship and Port Facility Code
(ISPS). As of July 1, 2004, each member state was
obliged to certify that the ships that fly their flag
or the facilities under their jurisdiction are
code-compliant.

The Coast Guard also requires that ships destined for
the U.S. provide a notice of their arrival a minimum
of 96 hours in advance and include a description of
their cargoes as well as a crew and passenger list.
The agency then assesses the potential risk the vessel
might pose. If the available intelligence indicates a
pre-arrival security check may be warranted, it
arranges to intercept the ship at sea or as it enters
the harbor in order to conduct an inspection.

The new U.S. Customs and Border Protection Agency
(CBP), which was established within the Department of
Homeland Security, mandated that ocean carriers must
electronically file cargo manifests outlining the
contents of U.S.-bound containers 24 hours in advance
of their being loaded overseas. These manifests are
then analyzed against the intelligence databases at
CBP’s National Targeting Center to determine if the
container may pose a risk.

If so, it will likely be inspected overseas before it
is loaded on a U.S.-bound ship under a new protocol
called the Container Security Initiative (CSI). As of
November 2005, there were 41 CSI port agreements in
place where the host country permits U.S. customs
inspectors to operate within its jurisdiction and
agrees to pre-loading inspections of any targeted
containers.

Decisions about which containers will not be subjected
to an inspection are informed by an importer’s
willingness to participate in another post-9/11
initiative, known as the Customs-Trade Partnership
Against Terrorism (C-TPAT). C-TPAT importers and
transportation companies agree voluntarily to conduct
self-assessments of their company operations and
supply chains, and then put in place security measures
to address any security vulnerabilities they find. At
the multilateral level, U.S. customs authorities have
worked with the Brussels-based World Customs
Organization on establishing a new framework to
improve trade security for all countries.

In addition to these Coast Guard and Customs
initiatives, the U.S. Department of Energy and
Department of Defense have developed their own
programs aimed at the potential threat of weapons of
mass destruction. They have been focused primarily on
developing the means to detect a “dirty bomb” or a
nuclear weapon.

The Energy Department has been funding and deploying
radiation sensors in many of the world’s largest ports
as a part of a program called the Megaport Initiative.
These sensors are designed to detect radioactive
material within containers. The Pentagon has
undertaken a counterproliferation initiative that
involves obtaining permission from seafaring countries
to allow specially trained U.S Navy boarding teams to
conduct inspections of a flag vessel on the seas when
there is intelligence that points to the possibility
that nuclear material or a weapon may be part of the
ship’s cargo.

Finally, in September 2005, the White House weighed in
with its new National Maritime Security Strategy. This
purports to “present a comprehensive national effort
to promote global economic stability and protect
legitimate activities while preventing hostile or
illegal acts within the maritime domain.”

A House of Cards
Ostensibly, the flurry of U.S. government initiatives
since 9/11 suggests substantial progress is being made
in securing the global trade and transportation
system. Unfortunately, all this activity should not be
confused with real capability. For one thing, the
approach has been piecemeal, with each agency pursuing
its signature program with little regard for other
initiatives. There are also vast disparities in the
resources that the agencies have been allocated,
ranging from an $800 million budget for the Department
of Energy’s Megaport initiative to no additional
funding for the Coast Guard to support its
congressionally mandated compliance to the ISPS Code.
Even more problematic are some of the questionable
assumptions about the nature of the terrorist threat
that underpin these programs.

In an effort to secure funding and public support,
agency heads and the White House have oversold the
contributions of these new initiatives. Against a
backdrop of inflated and unrealistic expectations, the
public is likely to be highly skeptical of official
assurances in the aftermath of a terrorist attack
involving the intermodal transportation system.
Scrambling for fresh alternatives to reassure anxious
and angry citizens, the White House and Congress are
likely to impose Draconian inspection protocols that
dramatically raise costs and disrupt crossborder trade
flows.

The new risk-management programs advanced by the CBP
are especially vulnerable to being discredited, should
terrorists succeed at turning a container into a poor
man’s missile. Before stepping down as commissioner in
late November 2005, Robert Bonner repeatedly stated in
public and before Congress that his inspectors were
“inspecting 100% of the right 5% of containers.” That
implies the CBP’s intelligence and analytical tools
can be relied upon to pinpoint dangerous containers.

Former Commissioner Bonner is correct in identifying
only a tiny percentage of containers as potential
security risks. Unfortunately, CBP’s risk-management
framework is not up to the task of reliably
identifying them, much less screening the low- or
medium-risk cargoes that constitute the majority of
containerized shipments and pass mostly uninspected
into U.S. ports. There is very little counterterrorism
intelligence available to support the agency’s
targeting system.

That leaves customs inspectors to rely primarily on
their past experience in identifying criminal or
regulatory misconduct to determine if a containerized
shipment might potentially be compromised. This does
not inspire confidence, given that the U.S. Congress’s
watchdog, the Government Accountability Office (GAO),
and the U.S. Department of Homeland Security’s own
inspector general have documented glaring weaknesses
with current customs targeting practices.

Prior to 9/11, the cornerstone of the risk-assessment
framework used by customs inspectors was to identify
“known shippers” that had an established track record
of engaging in legitimate commercial activity. After
9/11, the agency expanded that model by extracting a
commitment from shippers to follow the supply chain
security practices outlined in C-TPAT. As long as
there is no specific intelligence to tell inspectors
otherwise, shipments from C-TPAT-compliant companies
are viewed as low-risk.

The problem with this method is that it is designed to
fight conventional crime; such an approach is not
necessarily effective in combating determined
terrorists. An attack involving a weapon of mass
destruction differs in three important ways from
organized criminal activity.

First, it is likely to be a one-time operation, and
most private company security measures are not
designed to prevent single-event infractions. Instead,
corporate security officers try to detect infractions
when they occur, conduct investigations after the
fact, and adapt precautionary strategies accordingly.

Second, terrorists will likely target a legitimate
company with a well-known brand name precisely because
they can count on these shipments entering the U.S.
with negligible or no inspection. It is no secret
which companies are viewed by U.S. customs inspectors
as “trusted” shippers; many companies enlisted in
C-TPAT have advertised their participation. All a
terrorist organization needs to do is find a single
weak link within a “trusted” shipper’s complex supply
chain, such as a poorly paid truck driver taking a
container from a remote factory to a port. They can
then gain access to the container in one of the
half-dozen ways well known to experienced smugglers.

Third, this terrorist threat is unique in terms of the
severity of the economic disruption. If a weapon of
mass destruction arrives in the U.S., especially if it
enters via a trusted shipper, the risk-management
system that customs authorities rely on will come
under intense scrutiny. In the interim, it will become
impossible to treat crossborder shipments by other
trusted shippers as low-risk. When every container is
assumed to be potentially high-risk, everything must
be examined, freezing the worldwide intermodal
transportation system. The credibility of the ISPS
code as a risk-detection tool is not likely to survive
the aftermath of such a maritime terrorist attack, and
its collapse could exacerbate a climate of insecurity
that could likely exist after a successful attack.

Moreover, the radiation-detection technology currently
used in the world’s ports by the Coast Guard and
Customs and Border Protection Agency is not adequately
capable of detecting a nuclear weapon or a lightly
shielded dirty bomb. This is because nuclear weapons
are extremely well-shielded and give off very little
radioactivity. If terrorists obtained a dirty bomb and
put it in a box lined with lead, it’s unlikely
radiation sensors would detect the bomb’s low levels
of radioactivity.

The flaws in detection technology require the
Pentagon’s counterproliferation teams to physically
board container ships at sea to determine if they are
carrying weapons of mass destruction. Even if there
were enough trained boarding teams to perform these
inspections on a regular basis—and there are not—there
is still the practical problem of inspecting the
contents of cargo containers at sea. Such inspections
are almost impossible because containers are so
closely packed on a container ship that they are often
simply inaccessible. This factor, when added to the
sheer number of containers on each ship—upwards of
3,000—guarantees that in the absence of very detailed
intelligence, inspectors will be able to perform only
the most superficial of examinations.

In the end, the U.S. government’s container-security
policy resembles a house of cards. In all likelihood,
any terrorist attack on U.S. soil that involved a
maritime container would come in contact with most, or
even all, of the existing maritime security protocols.
Consequently, a successful seaborne attack would
implicate the entire security regime, generating
tremendous political pressure to abandon it.

The Way Ahead
We can do better. The Association of Southeast Asian
Nations should work with the U.S. and the European
Union in authorizing third parties to conduct
validation audits in accordance with the security
protocols outlined in the International Ship and Port
Facility Security Code and the World Customs
Organization’s new framework for security and trade
facilitation.

A multilateral auditing organization made up of
experienced inspectors should be created to
periodically audit the third party auditors. This
organization also should be charged with investigating
major incidents and recommending appropriate changes
to established security protocols.

To minimize the risk that containers will be targeted
between the factory and loading port, governments
should create incentives for the speedy adoption of
technical standards developed by the International
Standards Organization for tracking a container and
monitoring its integrity. The technology now used by
the U.S. Department of Defense for the global movement
of military goods can provide a model for such a
regime.

Asean and the EU should also endorse a pilot project
being sponsored by the Container Terminal Operators
Association (CTOA) of Hong Kong, in which every
container that arrives passes through a gamma-ray
content-scanning machine, as well as a radiation
portal to record the levels of radioactivity within
the container. Optical character recognition cameras
then photograph the number painted on several sides of
the container. These scanned images, radiation
profiles, and digital photos are then stored in a
database where they can be immediately retrieved if
necessary.

The marine terminals in Hong Kong have invested in
this system because they hope that a 100% scanning
regime will deter a terrorist organization from
placing a weapon of mass destruction in a container
passing through their port facilities. Since each
container’s contents are scanned, if a terrorist tries
to shield radioactive material to defeat the radiation
portals, it will be relatively easy to detect the
shielding material because of its density.

Another reason for making this investment is to
minimize the disruption associated with targeting
containers for portside inspection. The system allows
the container to receive a remote preliminary
inspection without the container leaving the marine
terminal.

By maintaining a record of each container’s contents,
the port is able to provide government authorities
with a forensic tool that can aid a follow-up
investigation should a container with a weapon of mass
destruction still slip through. This tool would allow
authorities to quickly isolate the point in the supply
chain where the security compromise took place,
thereby minimizing the chance for a port-wide
shut-down. By scanning every container, the marine
terminals in Hong Kong are well-positioned to
indemnify the port for security breaches. As a result,
a terrorist would be unable to successfully generate
enough fear and uncertainty to warrant disrupting the
global trade system.

This low-cost inspection system is being carried out
without impeding the operations of busy marine
terminals. It could be put in place in every major
container port in the world at a cost of $1.5 billion,
or approximately $15 per container. Once such a system
is operating globally, each nation would be in a
position to monitor its exports and to check their
imports against the images first collected at the
loading port.

The total cost of third-party compliance inspections,
deploying “smart” containers, and operating a cargo
scanning system such as Hong Kong’s is likely to reach
$50 to $100 per container depending on the number of
containers an importer has and the complexity of its
supply chain. Even if the final price tag came in at
$100 additional cost per container, it would raise the
average price of cargo moved by, say, Wal-Mart or
Target by only 0.06%. What importers and consumers are
getting in return is the reduced risk of a
catastrophic terrorist attack and its economic
consequences.

In short, such an investment would allow container
security to move from the current “trust, but don’t
verify” system to a more robust “trust but verify”
regime. That would bring benefits to everyone but
criminals and terrorists.

View full text of article
March/April 2006
Can Hamas Be Tamed?

History shows that political participation co-opts
militants only under very specific conditions—and
almost none of those exist in the Palestinian
Authority today. A special preview of the next issue
of Foreign Affairs.

Go to Foreign Affairs


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