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.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
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.
A tangled web of cargo security rules
The story of air-cargo security is, in reality, two stories.
The first has largely been written. On Aug. 1, all air cargo scheduled to fly from any U.S. airport in the lower decks, or "bellies," of passenger planes must be screened or inspected before being allowed on board. The law covers all domestic cargo as well as export shipments flown by U.S. or foreign-flag carriers.
The second has yet to play itself out. It involves the screening or inspection of cargoes departing foreign airports bound for the United States. It is a complex, tangled affair involving issues of national sovereignty and paranoia. And it may take several years to write.
The 2007 law requiring the screening or inspection of U.S. belly cargo also set an Aug. 1, 2010, deadline for the examination of all air-freighted goods loaded on passenger planes at foreign airports. However, meeting that deadline would prove to be impossible, due to the difficulty in harmonizing multiple security regimes.
Several months ago, administration officials discussed the possibility of setting a Dec. 31, 2010, deadline to meet the mandate. That, too, was quickly withdrawn. At a congressional hearing on June 30, the Transportation Security Administration (TSA), which oversees the cargo security program, said it would take about three years to achieve 100-percent examination of inbound belly cargo. Currently, about 62 percent of all inbound cargo is being inspected before loading, according to TSA estimates.
For U.S. and foreign governments, the first order of business may be to resolve the "Catch 22" that currently exists in the global security net. Many of the United States' trading partners have supply chain security programs in place. However, they are unwilling to share information about those programs with other countries—including the United States—because of their sensitive nature. The TSA has said that unless it gains access to the details of foreign governments' screening provisions, it cannot determine if they meet U.S. requirements, and thus cannot recognize them.
The back-and-forth between governments means that the international air supply chain may find itself dealing with multiple security programs for some time to come. For example, in the case of cargo flying from Germany to the United States., the goods may be subject to two screening programs, one complying with German requirements, the other meeting the U.S. standards.
TSA and its umbrella agency, the Department of Homeland Security (DHS), said they are working with international regulatory bodies like the International Civil Aviation Organization (ICAO) as well as individual governments to develop harmonized standards for cargo security. Through cross-sharing of information, DHS and TSA hope to identify nations with security programs with requirements that are similar to the United States'.
TSA also said it is exploring with the Bureau of U.S. Customs and Border Protection (CBP) the possibility of using CBP's Automated Targeting System to collect information on inbound cargo before the plane departs the origin airport. TSA said the program will allow it to perform what it called "baseline threshold targeting," enabling it to better identify high-risk cargo that should be subjected to further screening.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.