Late last year, the outgoing Congress adopted—and the president signed—a bill aimed at improving security at the nation's ports. Called the Security and Accountability For Every Port Act (SAFE Port Act) of 2006, the bill calls for the installation of radiation detection equipment at major ports and establishes several other pro grams designed to tighten control over container freight destined for the United States.
But the bill did not go far enough for some members. And the newly empowered Democrats, flexing their muscle when the new Congress con vened in January, pushed a bill through the House that included even tougher freight security lan guage in the first 100 hours of the session.
Some of the provisions of that measure, HR 1—Implementing the 9/11 Commission Recommendations Act of 2007, have shipper and carrier groups plenty worried. In particular, they are concerned that a provision mandating inspection of 100 percent of containers bound for the United States within five years could seriously disrupt trade while adding little in the way of real security. It would also require the use of "smart" seals on container doors that would provide some sort of notification in the event of unauthorized entry—a technology some say does not yet exist. The bill also mandates inspection of aircargo shipments. (See the accompanying story.)
The concern over the container inspection requirement centers on cost and technological feasibility. Some 12 million containers arrive at U.S. ports every year from around the world; inspecting every single one of them before they left the port of origin would be a formidable task.
"There are huge technological and logistical problems that the House bill ignores," argues Eric Autor, vice president and international trade counsel for the National Retail Federation. "If it is not done properly, it could seriously disrupt global trade, particularly in the poorest countries. The technology is not cheap. How can the poorest countries afford the technology, and if they cannot, what impact will that have?"
At press time, it appeared that a similar bill would soon get attention in the Senate. Doug Sibila, chairman of the International Warehouse Logistics Association (IWLA) and president and CEO of Ohio-based transportation and storage specialist People's Services, said that the group feared that Democrats might push a bill with provisions like those in HR 1.
Autor said he doesn't expect the Senate bill to include the provision for 100 percent inspection, but added that he does worry that some senators may try to attach amendments inserting the requirement. In anticipation of Senate action, Peter Gatti, vice president of the National Industrial Transportation League (NITL), wrote to all U.S. senators in January outlining the league's concerns.
In that letter, he argued that a major provision of the bill regarding container cargo and air cargo "would divert valuable resources from existing security programs that have proven to be effective and would significantly disrupt commerce, without reasonably improving security."
Gatti contended that even if it were possible to implement the requirements, they did not offer the benefits proponents suggest and could come at a high cost to the economy.
"Our concern is that even if the employment of such technology is feasible, reliance on such an approach would provide a 'false sense' of security and would result in legitimately safe cargo being delayed," he wrote. Gatti added that the security seals that the law would mandate were not yet available. Further, requiring the seals could decrease security if containers were delayed until port workers could assure that compliant seals were in place and working. He contended that the delays the requirements would impose would "have serious adverse impacts on companies' 'just-in-time' supply chains and, in turn, the U.S. economy."
At present, about 5 percent of inbound containers are inspected. Autor reported that on average, the release time for containers held for inspection is about two weeks, an indicator of how serious delays could become should 100 percent of the containers be required to undergo inspection.
Not ready for prime time?
The shippers and trade organizations are essentially unanimous in agreeing that port security must improve. Most support the existing multi-layered approach, which includes shipper registration programs, strict documentation rules, pre-screening of containers before loading in foreign ports, and other steps aimed at weeding out high-risk freight.
Gatti wrote that the existing approach was designed to ensure that any high-risk cargo would be inspected, and was a better approach than the proposed inspections. He pointed out that the SAFE Port Act adopted in October requires 22 major U.S. ports to install radiation detection equipment this year and calls for the development of technology for "non-intrusive" cargo inspection. The law requires 100 percent screening, as opposed to inspection, of all cargo containers bound for the United States, with inspection of all containers considered high risk.
Matt Schor, director of homeland security solutions for WhereNet Corp., a supplier of logistics visibility and control systems that was recently acquired by Zebra, says that any technology installed on containers would have to be robust enough to withstand 20 or more scans a year for the decade-long life of an ocean container. "No one has focused on whether a technology can withstand being repeatedly scanned like that," he says.
Schor reports that while WhereNet and other technology developers are working on solutions that capture supply chain and logistics data, demands for tools that can detect nuclear material, for example, make product development difficult. "What it comes down to is that the rules of the game are changing," says Schor. "You almost have to go back to the drawing board. It's going to slow things down."
Scanning technology is already available. Schor points out that all trucks loaded on trains for transport through the tunnel connecting England and France are scanned. In addition, several terminals in Hong Kong scan all incoming cargo containers. But the technology is not cheap.
Autor says using the Hong Kong experiment as justification for expanding screening is problematic. "First, Hong Kong is wealthy and has the resources to do this," he says. "Secondly, no one is looking at these scans." The United States faces a different set of challenges, he says. "We have 12 million containers coming into the United States each year.
We need a system in place—not only human, but technological—to be able to examine these scans and take appropriate action. Our experience with the computer systems at Customs does not fill us with too much confidence. ACE is still not fully implemented and it was authorized 13 years ago." (ACE—the Automated Commercial Environment—is an initiative to automate Customs' systems and processes.)
Autor argues, too, that widespread use of "smart" seals won't be feasible until some technological hurdles can be cleared. "We need a system that is effective—one that can operate in the bowels of a vessel. We cannot have a system that results in a lot of false positives. It has to be … able to detect any breach, not just opening the doors. And it has got to be cheap. We are talking tens of millions of containers. The seals cannot cost $10 each. There are not any seals out there that meet those requirements. It is a real technological problem."
"The question is how to minimize risk," says Sibila, adding that many Democrats do not understand the impact the proposed law would have on businesses. "There's a misunderstanding between 100 percent inspection and 100 percent screening."
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."