Pending Security Policy May Unkink Global Supply Chain

By Jacqueline Emigh  |  Posted 06-02-2005

Pending Security Policy May Unkink Global Supply Chain

Terrorism worries are adding new dimensions to the job of supply chain manager, according to Theo Fletcher, one of IBM's own supply chain managers.

Fletcher has been working with the WCO (World Customs Organization) lately to help support a proposed global cargo security standard that comes up for a big vote later in June.

"Supply chain managers have always put a lot of focus on security, [in the sense of] preventing theft or vandalism of goods," said Fletcher, IBM's vice president of import compliance, in an interview with CIO Insight.

"But now, we also need to make sure we're keeping things out of our shipments that shouldn't be in there. We have to be prepared for any sort of [terrorist] supply chain disruption that might occur."

Since Sept. 11, 2001, many world governments have been coming up with procedures for providing cargo manifests lists of a container's contents and where it came from in advance of cargo's arrival at international borders, according to Fletcher.

For example, since 2004, U.S. Customs has required 24-hour advance notification of the contents of a ship's cargo, and four-hour advance notification for air shipments, according to Robert Caton, an analyst and consultant specializing in the cargo transportation industry.

More than 200 million containers are shipped internationally each year. The United States alone receives about 17,000 containers per day, according to statistics compiled by Stanford University.

Fletcher told CIOInsight.com that he believes it would be much easier for shippers to conform to regulations if they were relatively uniform worldwide.

"Almost every government understands the need to make supply chains more secure. Yet some governments are still working their way through validation [procedures]," Fletcher said.

Supply chain managers face other issues associated with cargo and container validation, too.

"How will one government recognize the validation work that another has already completed, for instance?" Fletcher asked.

The Framework of Standards to Secure and Facilitate Global Trade - a set of rules designed to provide an international standard is due for a vote by the WCO Council in meetings slated for June 23 to 25.

"If the framework is adopted, we'll only need to be validated once, instead of going through 165 different [types of] validation processes," Fletcher said.

The effort which also stipulates advance alerts about "high-risk" shipments is being forged by the 165 nations belonging to the WCO, in partnership with private industry.

For example, during mid-May in Amman, Jordan, the Jordanian customs administration held an awareness session about the framework in conjunction with the Jordan Business Confederation.

"It [is] essential to ensure the understanding and support of the framework by the business sector in order to realize and maximize its benefits," said WCO Deputy Secretary General Kunio Mikuriya, in remarks prepared for the event in Jordan.

The meeting in Jordan took place during the same time frame as the WCO's release of the final framework document that will be voted on in June.

Next Page: Core elements.

Core Elements

The framework consists of four core elements: harmonization of electronic cargo requirements; adoption of a consistent risk management approach for handling security threats; an agreement that sending nations will perform outbound inspections of high-risk cargo; and a definition of benefits to be received by businesses adhering to the standard, such as expedited customs processing.

Earlier in May, the WCO announced plans to include customs officials from the nation of Dubai in its list of experts on customs security. Dubai's customs agency has been building an electronic customs clearing system known as the e-Mirsal.

Most containers received into the United States now receive some level of government screening, according to Caton, who is president of CSTA Cargo Shipping Transportation Analysts.

The level of screening used is determined by U.S. Customs officials, who have been specially trained to detect signs of suspicious activities.

Since U.S. companies are now required to comply with advance notification requirements, they do not receive expedited processing at U.S. ports simply for sending in their manifests on time, Caton said.

But some companies that voluntarily comply with another U.S. Customs initiative&#151the still emerging C-TPAT (Customs Trade Partnership Against Terrorism)&#151 will be "greenlighted" for faster processing through U.S. Customs.

"However, C-TPAT is more about physical security around the supply chain, such as having access control systems in place at plant facilities," the analyst told CIOInsight.com.

The "greenlighted" companies will need to meet the requirements of both C-TPAT and the recently unveiled C-TPAT Plus, which calls for the use of tamper-proof seals on shipping containers.

For its part, IBM submitted a CT-PAT profile in February 2003, and won CT-PAT certification for its profile two months later, an IBM spokesperson said.

C-TPAT's plans include sending teams of supply chain specialists around the world, to visit members and freight carriers, and to make sure facilities meet minimum supply chain security criteria, according to a C-TPAT document.

Other goals and objectives for C-TPAT include requiring participants to "leverage partners" in their supply chains; developing a C-TPAT "secure communication platform"; creating criteria for "smart" shipping containers; conducting anti-terrorism training seminars; and internationalizing C-TPAT's principles through "cooperation and coordination" with other nations.

But David Schrier, an analyst with ABI Research, said that the WCO's framework encompasses more basic supply chain security requirements, which will be easier for other nations to meet.

The ABI analyst sees more parallels between the WCO's initiative and CSI (Container Security Initiative)&#151still another U.S. Customs program&#151than with C-TPAT, at this point.

"Under CSI, U.S. Customs has sent agents to foreign ports to work with domestic customs agents, and to sort of help things along on shipments bound for the U.S.," Schrier told CIOInsight.com.

Yet some of the language in the WCO's documents indicates there's also an intention to build a secure supply chain platform at some time in the future, according to the analyst.

Meanwhile, during 2005, IBM's Fletcher has been meeting with customs officials for several member nations to talk about IBM's position on the WCO's proposed international security framework.

"I've already met with eight of the 20 countries that are critical to IBM's [import] operations. I expect to meet with six more by the end of June, and the remainder by the end of this year. We are interested in partnering with them," he told CIOInsight.com.

Fletcher added that he views compliance with the WCO's emerging measure as more than just a "cost of doing business" for IBM.

"When we implement this, it will create efficiencies for U.S. around the world, with fewer inspections and quicker clearance through international customs. Compliance will be voluntary. But over time, companies that comply will gain a competitive advantage, because they'll be viewed as the kinds of companies others will want to do business with," said IBM's Fletcher.

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