Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
In the bustling Indonesian seaport of Surabaya, a truck driver with ties to al Qaeda turns into an alley and backs his rig up to a nondescript warehouse. His cohorts pry open the door of a container filled with designer sneakers and thrust a lead-shielded dirty bomb inside. The driver heads for the dock, where the container is loaded on a feeder vessel for the first leg of its voyage to the United States.
Some weeks later, the Chicago-bound container enters North America via the Port of Vancouver. Noting that it originates from a company that has joined the Customs-Trade Partnership Against Terrorism, U.S. Customs inspectors at the port wave the container through without inspection. It's loaded directly on a railcar for movement to a Chicago distribution center (the dirty bomb's lead shield prevents detection by the radiation pOréals deployed along the U.S.-Canadian border). When workers at the DC go to open the container, a device on the door triggers a violent explosion, releasing a cloud of industrial-grade radioactive material in the process.
That's the scenario that keeps Stephen E. Flynn awake at night. It may be a hypothetical account, Flynn said in testimony to the House Armed Services Committee this spring, but it's nonetheless plausible. That grim scenario is also what compels Flynn, a retired Coast Guard commander and senior fellow at the Council on Foreign Relations (CFR), to spend his days trying to convey the urgency of the port security problem to Congress and the American public.
Five years after the World Trade Center attacks, U.S. ports remain a security risk. Just about everyone who deals with security issues agrees on that. As a nation, we have yet to come up with an effective means of protecting our seaports, some of which are secured by nothing more than a chain-link fence. Perhaps more to the point, we have yet to find a way to ensure that none of the millions of containers entering the country each year harbors chemical, radiological, biological or nuclear weapons.
While everyone agrees port security is important, there's little consensus on what it will take to prevent terrorists from smuggling a dirty bomb into the country via an ocean container. Or how effective security programs implemented over the last five years have been. Or how to secure the vital cooperation of other nations. In the meantime, the debate continues. In fact, the issue of port security came to the fore just recently. In late September, Congress passed the SAFE Port Act of 2006, which among other measures, increased federal funding for port security, mandated nuclear and radiological container screening at 22 ports, and launched cargo-scanning pilot programs at overseas ports.
Are we safe yet?
If security efforts have fallen short, it's certainly not for lack of trying. In the last five years, the U.S. government, international organizations and the private sector have all taken steps to boost security. Ports have spent millions of dollars on security upgrades. Congress has passed legislation aimed at protecting U.S. ports and waterways from terrorist attacks, including the 2002 Maritime Transportation Security Act (MTSA). The International Maritime Organization has adopted security requirements for its 159 participating governments, which have now been codified as the International Ship and Port Facility Code (ISPS). And U.S. Customs and Border Protection (CBP) has established the Customs-Trade Partnership Against Terrorism (C-TPAT), a strategic plan aimed at getting U.S. companies to police their own supply chains.
But their efforts have met with decidedly mixed reviews.
Port executives would argue that the nation has made headway. In a statement last month on the eve of its annual meeting, the American Association of Port Authorities said, "In the nearly five years since 9/11, America's seaports and the federal government have joined forces to make major gains in fortifying and hardening port facilities against intruder attack. With the combined efforts of public ports, initiatives of federal agencies within the Department of Homeland Security such as the U.S. Coast Guard and Customs and Border Protection (CBP), ports are significantly safer now than prior to 9/11."
The CBP hews to the party line as well. Last spring, Deborah Spero, who was acting commissioner of CBP, told those attending CBP's C-TPAT conference, "Together, we have worked to strengthen the global trading systems and have made our nation's cargo more secure. And the result is that America is safer."
Others, however, have reservations. That became clear from a report released last month by the Lyndon B. Johnson School of Public Affairs at the University of Texas. Conducted for the Congressional Research Service, the study, titled "Port and Supply Chain Initiatives in the United States and Abroad," examined port and supply chain security initiatives around the world. Though the report did not attempt to assess the efficacy of the programs, it did present viewpoints critical of the existing security initiatives. "Our research found an abundance of conflicting views on both ISPS and its domestic counterpart, MTSA," the report said. MTSA, according to critics, does not address real security risks while substantially increasing the workloads of port security officers. ISPS also came in for criticism much of it centered on its implementation, which was termed inconsistent at best.
Targeting the supply chain
The mixed reviews in the LBJ study, though, appear positively optimistic compared to the grim perspective offered by Flynn, who is one of the foremost critics of port security policy. In his testimony this spring, Flynn was blunt in his assessment of the state of port security. "[T]he security measures currently in place do not provide an effective deterrent for a determined terrorist organization intent on exploiting or targeting the maritime transportation system to strike at the United States," he told the committee. (Flynn's testimony is taken from a transcript on the CFR Web site. He could not be reached for comment.)
And the heart of the problem, he contends, is the supply chain. "[T]he threat is not so much tied to seaports as it is to global supply chains that now operate largely on an honor system because the standards are so nominal and the capacity for agencies like the Coast Guard and Customs is negligible," he said. "Based on my experience and research on this issue for nearly 15 years, I believe that the greatest vulnerability that will involve the maritime sector and our seaports is overseas within the transportation system before a container reaches a loading port."
Flynn went on to say that if something like his hypothetical dirty bomb scenario did occur, the consequences would go well beyond the mayhem caused by the explosion. It would also shake the American public's faith in the risk-management system currently in place. "All the current container and port security initiatives would be compromised by the incident," he said. "There will be overwhelming political pressure to move from a 5-percent [container] inspection rate to a 100-percent inspection rate, effectively shutting down the flow of commerce at and within our borders."
But that can all be avoided, he said. With international cooperation, the security problem can be solved. What's required, he said, is a program of mandatory cargo scanning. To that end, Flynn urged U.S. authorities to work closely with overseas terminal operators to create a system that scans every container destined for the United States before it leaves a loading port.
The scan debate
Is something that ambitious possible? Technologically, maybe. For the past two years, the Port of Hong Kong has scanned every single container entering two of its terminals, which are among the world's busiest. The Integrated Container Inspection System, sponsored by the Hong Kong Container Terminal Operators Association, uses three types of imaging to screen trucks and containers. As the vehicles pass through two giant pOréals, they're first scanned for radioactivity. They then undergo gamma ray scanning to generate a radiographic image of the container's contents and optical character scanning to read the container's ID number so it can be checked against cargo manifest data.
Would it work here? Flynn believes it would. He told the committee that four terminal operating companies handle 80 percent of the containers headed for the United States, and that if they imposed a fee of $20 per container, it would pay for installing and operating a scanning system worldwide.
But winning cooperation from widely divergent port operations will be no easy task. For one thing, many overseas players already resent what they see as heavyhanded attempts to secure their cooperation with U.S.-centric port security initiatives. In interviews with port officials around the world, researchers for the LBJ study heard complaints that U.S. security initiatives were being forced on other nations. And for many overseas ports, security simply isn't the top priority. "One of the most striking findings ... is the fundamental incongruity between the maritime security priorities of the U.S. and those of other countries," the report said. Terrorism was not a primary security concern for any of the port officials interviewed, who were much more focused on smuggling, fraud and human trafficking.
Even on the home front, the notion of 100-percent scanning has many opponents, including a number of shippers. In a letter urging Sen. Susan Collins, chair of the Homeland Security and Government Affairs Committee, to oppose any legislation requiring the scanning of all U.S.-bound containers, Sandy Kennedy, president of the Retail Industry Leaders Association, argued that 100-percent scanning would "impose immense costs on our economy and foreign relations without improving the security of our international trading systems." She cited a June 2006 study by RAND Corp. that concluded that 100-percent scanning would delay the movement of cargo containers by 5.5 hours per container.
C-TPAT doubts
Stepped-up container scanning is only one potential solution to the security problem, of course. In his congressional testimony, Flynn also proposed a second measure: tightening C-TPAT. Noting that Customs had only 80 inspectors to monitor compliance of some 5,800 C-TPAT certified companies, he urged Congress to require independent audits of the security plans developed by importers.
Flynn is hardly the only critic of C-TPAT. Some C-TPAT members themselves have reservations about the program. As part of the LBJ school study, researchers conducted a survey of National Industrial Transportation League members on the program (about 80 percent of the respondents were C-TPAT members). That survey revealed at least some disenchantment with the program. "[I]ndustry respondents believe that it is not operating efficiently," the report said. "In fact, most private-sector representatives feel that C-TPAT is an inadequately funded and managed program that requires costly, if not cost-prohibitive, security measures."
Those who responded to the survey acknowledged that they saw promise in the program for balancing security and trade growth. But they also criticized it for being highly bureaucratic. Further, the program was termed "virtually useless without foreign participation."
Despite all the disagreement over how to approach the problem, this, at least, is certain: security efforts will go forward. Leigh Boske, who headed the LBJ school study, was at pains to stress that in an interview. "It is too easy to begin with criticism and end with criticism," said Boske, who is associate dean and a professor of economics at the school. But those critical comments are just a small part of the picture. "That is not reflective of what foreign public officials or the private sector believe," he stated. "They believe in security."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."