Business andGovernmentWorking Togetherfor Nation’s Safety:An Overview of Effort to Mandate 100 Percent Passenger Jet Cargo Screening of Shipping to Canada

The purpose of this review was to uncover all weak links in the system that may have failed to prevent the attacks, and to eliminate opportunities for additional attacks. Under the direction of the Congressionally mandated “National Commission on Terrorist Attacks Upon the United States” (commonly referred to as the “9-11 Commission”), the government set out to identify areas of vulnerability in the nation’s domestic security processes, and to recommend changes that would correct those weaknesses.

It wasn’t long before the 9-11 Commission turned a spotlight on the nation’s air cargo screening procedures. At the time of the 9/11 attacks, cargo screening was a low priority for airlines as well as government regulators, and was not performed with any regularity or through any uniform process. Cargo screening was certainly not on the minds of most Americans prior to 2001. John Raidt, a staff member of the 9-11 Commission, noted that a Fox news opinion poll conducted during the late 1990s found that 78 percent of Americans cited poor maintenance as a greater threat to airline safety than terrorism.

Public opinion changed dramatically in the aftermath of 9/11, and all facets of airline safety, including cargo screening, have remained front burner issues ever since. The 9-11 Commission report, which was released in July 2004, specifically addressed the need to implement cargo-screening procedures for all goods loaded onto aircraft traveling within the United States, or arriving in the U.S. from a foreign country.

Congress accepted the 9-11 Commission’s findings and, in August 2007 legislation was enacted “to provide for the implementation” of the Commission’s recommendations. With regard to air cargo screening, the legislation instructed the secretary of homeland security to establish a system to ensure that, within three years, 100 percent of cargo transported on passenger aircraft was screened. The Transportation Security Administration (TSA), an arm of the Department of Homeland Security charged with overseeing the security of the nation’s transportation system, finalized the process by announcing specific implementation deadlines:

• 50 percent of all cargo traveling on passenger jets must be screened by February 2009;

• 100 percent of all air cargo must be screened by August 2010.

As airlines, transportation logistics providers, distribution center operators and manufacturers prepare to meet these new mandates, much discussion has ensued. While there is widespread agreement that changes need to be made in current air cargo screening processes, there is a broad range of opinion with regard to what those changes should look like, and how much time is needed for proper implementation.

This report is intended to offer a discussion about the air cargo screening process along with information about current regulatory mandates and compliance deadlines.

Following the 9/11 terrorist attacks, the United States government initiated an exhaustive review of thenation’s domestic security programs and processes.

2COST REDUCTIONS

The TSA estimates that roughly 12 million pounds of cargo is transported daily on passenger aircraft. This amounts to about 22 percent of all domestic air cargo. Air transport of cargo is critical to the timely and efficient distribution of goods to and from our country, and also generates a significant source of revenue for our nation’s economy. The Air Transport Association, a passenger airline trade association, reports that air cargo generates roughly $4.7 billion in annual revenue for U.S. passenger airlines, and accounts directly for more than 100,000 American jobs.

Manufacturers and businesses rely on airlines to transport a wide array of time-sensitive products that cannot easily be transported via other modes such as ground, rail or water. Fruits and vegetables, computer hardware, medical supplies, automotive parts, U.S. mail, consumer purchases — and even domestic pets and human organs — are among the items that routinely travel in passenger jet cargo holds.

The scope of the air cargo industry and its importance to American business mean that any changes to current processes will have enormous

implications throughout the supply chain and potentially for the nation’s economy. While there has been general consensus among affected parties that increased air cargo screening is necessary, there has been disagreement on how that be should be accomplished. With key congressional leaders arguing for 100 percent screening of all cargo, and airline groups supporting a risk-based approach, and business groups concerned with the implications of any change to their bottom lines, the result has been a fierce debate that lingers today, despite looming mandates for 100 percent screening by 2010.

Situation Overview

3SITUATION OVERVIEW

4LEGISLATIVE HISTORY

What to screen, how to screen, where to screen it, who to do the screening and how to pay for it were among the key questions that government and industry representatives needed to address in attempting to work out a process for improving air cargo screening standards.

As with all major policy debates, strongly held positions on either side of the issue needed to be melded into what could hopefully become a workable and effective compromise. In the months following the September 2001 terrorist attacks, the “Aviation Security Advisory Committee” (ASAC) consisting of representatives from the air cargo industry, airlines, airport management, law enforcement, terrorism survivor groups and government agencies, worked together to develop almost 40 recommendations for enhancing air cargo security. Those recommendations were given to the TSA and several were adopted, including provisions to improve processes for “vetting” shippers against government watch lists. ASAC also called for a “layered approach to cargo profiling,” that included profiling, inspection and detection. Purolator USA participated in the ASAC working group through its affiliation with the Express Delivery and Logistics Association.

This partnership of sorts continued until July 2004, when the 9-11 Commission issued its recommendation that definitive steps be taken to ensure that 100 percent screening was implemented within three years. The Commission did not specify how 100 percent screening was to be accomplished, nor did it address any other practical implications. The immediate result was a great deal of confusion: Was the recommendation a mandate? Was industry charged with developing a plan for implementation? Did the recommendation apply only to air cargo traveling within the U.S., or was cargo arriving from international points of origin also to be screened? Who was going to develop the necessary technology? And, of course, who was going to pay for the new program?

Following the release of the Commission report, the TSA announced several steps toward achieving the 100 percent screening goal. The agency announced that beginning in 2005 all “high risk” cargo would be screened, and said that new baggage scanning technology

would be installed in airports. The agency also announced that several hundred security

personnel would be hired to help manage the new screening process. A report released later that year by the General Accounting Office however, found that more than half of all cargo traveling aboard passenger jets was still going unscreened.

Congress asserted its desire to see the full scope of 9-11 Commission recommendations implemented when it enacted the “Implementing Recommendations of the 9-11 Commission Act of 2007.” Oversight responsibility for the law’s provisions regarding cargo screening fell to the House Committee on Homeland Security, chaired by Rep. Bennie Thompson (D-MS). The law effectively took the 9-11 Commission’s “recommendations,” and put the teeth of law behind them.

Legislative History

Since then, Congress has taken an active role in overseeing the TSA’s work to meet its February 2009 and August 2010 deadlines. Congress has been sharply critical of the TSA’s progress, and has openly expressed doubt about the agency’s ability to meet its deadlines. At a July 2008 hearing of the Subcommittee on Transportation Security and Infrastructure Protection, John Sammon, TSA Assistant Administrator stated the TSA’s belief that the mandate does not extend to air cargo transported on passenger jets traveling from overseas to the U.S. That comment led to a strong rebuke by Congress, along with a suggestion that additional legislation might be necessary to further direct the TSA in its efforts.

The initial February 2009 deadline ensures the TSA will continue to face scrutiny from Congress, as well as by the private sector about its interpretation of the law, and about the feasibility and effectiveness of its processes and directives.

5LEGISLATIVE HISTORY

In July 2008, TSA Assistant Administrator John Sammons appeared before the Subcommittee on Transportation Security and Infrastructure Protection and reviewed the TSA’s immediate goals:

Certified Cargo Screening Program (CCSP)This is the cornerstone of the TSA’s plan, and the key to its ability to meet its mandates. According to TSA’s Sammon, the CCSP is “a voluntary program under which TSA will certify cargo screening facilities to screen cargo before it is tendered to aircraft operators for carriage on passenger aircraft.” The TSA expects to launch the CCSP in FY 2009 as a way to establish “full supply chain security of air cargo.” The program is an attempt to address the inevitable bottleneck that will result, as previously unscreened cargo is channeled into the new air cargo screening process. By moving the screening process “up the supply chain,” and allowing cargo to arrive at the airport pre-screened, the TSA is hoping to reduce delays and minimize disruptions.

Increased Use of Canine Detection Program As of July 1, 2008, the TSA reported having 450 canine teams trained and deployed by local law enforcement agencies at airports. Each canine team is required to spend at least 25 percent of their time in the air cargo environment. Canines have proven to be very effective at detecting explosives, and TSA plans to increase the number of canine teams in coming years.

Increased Number of Air Cargo Inspectors The TSA expects to have 450 trained cargo inspectors in place by the end fiscal year 2008, up from 300 inspectors on hand at the beginning of FY’08.

Research and DevelopmentThe TSA is working in conjunction with the Department of Homeland Security’s Science and Technology Directorate (S&T) to identify technology gaps and to prioritize research and development (R&D) needs. This is a tremendous task. Cargo arriving at airports is typically loaded on pallets, or secured in bundles. TSA must develop technology that will allow for

the efficient screening of this cargo, with minimal disruption to the supply chain. In addition, new technology must also be developed that can provide proper screening for explosives, stowaways and other new categories.

TSA Plan to Achieve 50 Percent Screening by February 2009, 100 Percent by August 2010

6TSA PLAN

One of the obvious concerns about mandating 100 percent cargo screening, is the probable detrimental effect on the flow of goods through the supply chain. Just as increased passenger security measures have caused bottlenecks for passengers trying to navigate security checkpoints, administrators and industry officials envision a severe and costly backup of cargo sitting in various airport-holding areas waiting to be screened. To address that concern, TSA devised the CCSP program. Through CCSP, the onerous effects of the screening requirements can be minimized. CCSP creates a category of facilities known as “Certified Cargo Screening Facilities, (CCSF)” to screen cargo before it is transferred to airport operators and placed aboard commercial aircraft. By allowing this screening to take place further up the supply chain, the TSA is hoping to address expected airport delays.

Companies eligible to become CCSFs include logistics providers, airlines, manufacturing facilities, warehouses and distribution centers. Companies granted CCSF status must adhere to stringent security requirements set by the TSA, and must meet other requirements including:

• Screen cargo at the piece level

• Permit onsite validations and periodic inspections

• Initiate and maintain the integrity of cargo through chain of custody measures

• Adhere to stringent security requirements set by a TSA program

• Pay all associated administrative costs. Because CCSP is a voluntary program, all costs will be charged back to participants.

• Purchase and install TSA-approved screening equipment

• Hire and train necessary personnel

Benefits of CCSF Status The obvious benefit for businesses that attain CCSF status is that they are able to avoid the lengthy screening delays that are certain to develop at airport screening facilities. Companies choosing not to become CCSFs will likely face extensive delays at the nation’s airports, where all non-CCSP screening will be performed. Other benefits include:

• Ability to continue to ship certain cargo types without potential invasive screening later in the supply chain

• Ability to shrink wrap cargo and assemble cargo in bulk formation

• Avoidance of possible cargo screening fees later in the supply chain

Certified Cargo Screening Program (CCSP)

7CCSP

CCSP Status The TSA is using a phased-in approach to introducing the CCSP program, and is currently conducting two pilot programs: (1) A CCSP pilot program involving shippers and other entities such as manufacturers, distributors and third party logistics companies; and (2) the Indirect Air Carriers (IAC) technology pilot. This program is being conducted with shippers located in the following major gateway airports: San Francisco, Chicago, Philadelphia, Seattle, Los Angeles, Dallas-Fort Worth, Miami, Atlanta, and New York/Newark, as well as in Boston, Dulles, Honolulu, Intercontinental Houston, Detroit, Denver, San Juan and Orlando.

The TSA is expected to use the findings from these pilot programs in issuing a “final rule” to implement the CCSP. That rule is expected to be announced in late 2008, with implementation to follow during 2009.

8CCSP

“Essentially, this legislation mandates the reinvention of air cargo security,” TSA Assistant Administrator John Sammon told the U.S. House Subcommittee on Transportation Security and Infrastructure Protection. All parties involved in fulfilling this legislative mandate recognize the enormity of the project, and all parties bring a unique perspective and preference for how the new air cargo screening system should look and function.

While the TSA did reach out to industry representatives during the policy drafting process, many issues remain open to debate, and await further clarification by the TSA: Scope of Mandate. The 9-11 Commission report clearly calls for 100 percent screening of all air cargo. But many are questioning whether the scope of that mandate goes too far, and if the legislation shouldn’t be revised to direct the TSA to develop a system of prioritized screening. After all, this logic says, doesn’t it seem logical that a shipment of flowers arriving at the airport would pose less of a risk than a shipment of chemicals? Or that a shipment originating in Chicago would be less of a threat than cargo arriving from Saudi Arabia? This type of risk-based prioritization is currently in use in Great Britain and, supporters argue, should

be a model for a similar program in the U.S.

The converse of this argument is that any easing of screening standards at any point in the network would be an invitation for ill-intentioned individuals to manipulate the system.

International versus Domestic Cargo Only. The TSA has interpreted the 9-11 Commission recommendation, and the legislation that authorized it, to mean that only cargo traveling on airplanes that originated in the U.S. must be screened. Others, including members of the Congressional committee charged with oversight of the cargo screening process, interpret the law to also include cargo arriving in the U.S. on international carriers.

Committee members have said that they will consider additional legislation to specify that foreign carriers be subject to the cargo screening mandates, should TSA adhere to its “domestic-only” approach.

This is significant because, according to the General Accounting Office (GAO), an estimated 200 U.S. and foreign air carriers currently transport cargo into the United States from

foreign countries, bringing in approximately 4 billion pounds of cargo annually. And, the GAO notes, the TSA’s progress in developing a screening process for inbound air cargo has lagged. This would augment considerably the amount of cargo that would need to be funneled into the screening system, and would also mean more funds would be necessary for additional manpower and equipment. Congress has directed the TSA to provide a detailed analysis on the issue, which could jeopardize the agency’s ability to meet the February 2009 and August 2010 compliance deadlines.

Issues to be Resolved

9ISSUES TO BE RESOLVED

Technology All eyes are on the TSA as it works to develop technology necessary to achieve the expected level of screening, particularly in an environment in which much of the cargo arrives at the screening point in a consolidated phase. The agency is also under pressure to approve “stowaway detection” equipment that could detect a human heartbeat buried inside a container. Failure to develop effective technologies to meet these realities would require significant and costly reengineering of existing packaging and shipping processes. Some fear that a failure to develop appropriate technology could result in unacceptable and even unimaginable delays.

As the TSA has stated, the new law in essence has mandated the creation of a wholly new screening system. Previous processes, whereby screening was handled by employees of individual air carriers, is not sufficient to handle the infusion of previously unscreened cargo into the mix. In August 2008, the TSA announced a 5-year program to test different categories of detection equipment. The effort, which TSA has dubbed its Multi-Technology Assessment

Program will examine the equipment’s ability to detect explosives hidden within eight different types of cargo: fresh flowers, machine parts, electronics, printed materials, miscellaneous durable goods, clothing, fresh produce and fresh or frozen seafood or meats. However, as of late August 2008, one industry observer noted that none of the technologies under consideration by the TSA appeared suitable for screening pallets or unit load devices or containers.

Elimination of Exemptions Current TSA practices allow for a series of exemptions from physical screening and alternate means of screening for certain types of cargo, such as shrink-wrapped, strapped and palletized shipments. The new law directs the TSA to review all exemptions, and make a recommendation with regard to which, if any, should continue to be allowed. TSA Assistant Administrator Sammons told Congress in July 2008 that the TSA is “in the process of reevaluating and eliminating many of the alternative screening methods previously used for ensuring the security of certain categories of cargo.” It is not clear at this point how the TSA plans to screen these “special”

types of cargo. For example, will technology be available to disassemble pallets and rebuild them after screening? Will screening equipment be available that recognizes the different categories of products filing through — paper for example, would warrant a different screening process than auto parts or fresh fruit. Or, will all screening be done by hand, with TSA employees opening each box, and then theoretically repackaging and reassembling the pallet configurations?

10ISSUES TO BE RESOLVED

Staffing Since the beginning of FY2008, the TSA has added 150 cargo screeners to its existing staff of 300 screeners. In addition to conducting air cargo screens, these individuals also investigate for instances of potential non-compliance, they conduct random “strikes” on cargo screening facilities, and they conduct outreach to all regulated entities to ensure understanding and compliance with the law. These inspectors are expected to have a huge increase in their already significant workload, and if it is determined that international cargo must also be screened, existing personnel will be stretcher even thinner.

There is significant concern within the industry, and by some in Congress, that TSA does not have proper staffing resources to implement the new screening procedures.

Cost The Congressional Research Service has estimated that the cost of the new screening program will be between $3 and $4 billion over the next ten years. And who will bear the costs? Private industry. The bulk of costs will be paid by manufacturers (who will no doubt pass along costs to consumers), freight forwarders and other logistics providers.

The bulk of these costs will be incurred through the purchase of TSA-approved screening equipment. Estimates of those costs range from several hundred thousand dollars to over one million dollars. Businesses unable to afford to buy the new technology will be at a severe disadvantage to other businesses that can afford it. Businesses without their own screening technology will have to transport cargo to the airport for screening, where their shipments will be put in the queue and forced to wait to be screened.

11ISSUES TO BE RESOLVED

The TSA has informed Congress, as recently as July 2008, that it is on track to meet the February 2009 deadline for 50 percent screening. That optimism is not shared by everyone familiar with the program. Significant progress needs to be made by the TSA in the areas of technology, staffing levels and capability, allowable exemptions, and final determination with regard to screening of cargo arriving on international flights.

Whether or not the TSA will be successful in meeting its deadlines remains to be seen.

What is certain is that 100 percent air cargo screening will soon be a way of life in the logistics industry. And whether the TSA meets its deadline or not, businesses would be wise to prepare for the inevitability of new screening standards and processes.

Understand the law It’s important for businesses to understand that there is a new sheriff in town! The old process of minimal-to-zero screening standards for air cargo is gone. The TSA, under the watchful eye of Congress has been charged with developing and implementing an entirely new system for cargo screening. This has been a front burner

issue in the logistics industry for the past several years. Hopefully businesses that rely on cargo transport have been following the debate and are aware of the pending changes. One hundred percent screening is the new normal, with very few exceptions.

Talk to your Logistics ProviderA good logistics provider will be aware of the new mandates, and will be following closely the TSA’s progress in finalizing requirements for the 100 percent screening program. Purolator USA, a leading provider of transportation logistics for shipments traveling to-and-from Canada, as well as within the U.S. offers customers upto- date information, along with recommendations about how best to comply with the new regulations.

Purolator USA offers customized regulatory compliance plans through its Purolator Trade Solutions service. Purolator Trade Solutions offers a team of regulatory experts who can evaluate legislative and regulatory mandates as they apply to each customer’s unique situation. Purolator’s trade specialists can then recommend a logistics plan that ensures full compliance, but in a timely and cost efficient manner.

Beware of Technology! The TSA has yet to determine the exact technologies that will be required at each screening facility. Until the TSA makes that determination, NO ONE knows with any certainty what that technology will look like. Businesses that are seeking to become a CCSF should hold off on purchasing any technology until the TSA has issued its final statement on that topic. Similarly, no logistics provider should be portraying itself as having access to “TSA compliant” screening equipment. The TSA is hoping to conclude its technology review by the end of 2008. Until then, businesses should continue to monitor developments, but keep their wallets closed!

Implementation

12IMPLEMENTATION

The shared goal of all parties involved in improving the nation’s air cargo screening process it to prevent terrorists from bringing dangerous materials or weapons into the United States. While all can agree on the objective, there is broad disagreement with regard to how to achieve that goal.

Business interests are primarily concerned that regulations not be excessive, and not unnecessarily impede the flow of goods through the supply chain. Regulation for the sake of regulation can have adverse consequences, and accomplish very little. Businesses have expressed support for a “risk-based” approach to screening, rather than a system whereby every package on every pallet is individually opened and screened.

Others however, including several members of Congress with oversight authority for the air cargo screening program, have made it clear that they will accept nothing less than absolute and thorough screening of every package. Technology, however, remains a great uncertainty, as the TSA has yet to approve equipment capable of meeting the volume and unique nature of cargo shipments.

The TSA faces a congressionally mandated deadline of February 2009 by which time 50 percent of air cargo aboard passenger jets must be screened, and a second deadline of August 2010 for 100 percent screening. Significant questions remain unanswered as the initial deadline approaches:

• Is there adequate staffing to handle the surge in volume?

• Are there certain types of shipments that may be exempted from physical screening?

• Should the 100 percent mandate be interpreted to mean only goods traveling on airplanes originating in the U.S., or should international cargo be screened as well?

• Should there be a risk-based approach to the screening process, whereby cargo is prioritized based on its point of origin and its contents?

• Is it fair for Congress to ask business to incur these costs, which could run into the millions of dollars?

Regardless of the debate, the reality is that 100 percent cargo screening is the law of the land. While TSA and Congress may choose to modify some of its mandates down the road, for right now businesses need to prepare for the reality of 100 percent screening.

Purolator USA is committed to ensuring that customers understand the new mandates, and are positioned for proper compliance once they take effect. Air cargo screening is an important tool in our nation’s war against terror. Working together, businesses, regulators and Congress can develop a system that protects our country, while simultaneously protecting our economy by ensuring the unimpeded flow of cargo.

Summary

13SUMMARY

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14SUMMARY

15REFERENCES

References

Air Transport Association, “Air Cargo Security – the Airlines View,” www.airlines.org/government/issuebriefs/Air+Cargo+Security+-+The+Airlines+view.htm, January 2007.

Berrick, Cathleen, Director of Homeland Security and Justice Issues, Government Accounting Office, Review of the Transportation Security Administration’s air Cargo Screening Exemptions Report, August 15, 2008.

Goodwin, Jacob, “TSA Plans Pilot Program to Evaluate Cargo Screening Technologies,” GSN: Government Security News, www.gsnmagazine.com/cms/features/news-analysis/456.html, January 28, 2008.

Goodwin, Jacob, “TSA to Assess Different Air Cargo Screening Technologies,” GSN: Government Security News, www.gsnmagazine.com/cms/features/news-analysis/960.html, August 18, 2008.

Lipton, Eric, “New Scrutiny for Air Cargo Screening,” International Herald Tribune, www.iht.com/articles/2007/02/08/news/security.php, February 8, 2007.

McNeill, Jena Baker, “100 Percent Air Cargo Screening Continues to Infect Homeland Security,” The Heritage Foundation, www.heritage.org/research/HomelandSecurity/ wm2025.cfm, August 15, 2008.

Marino, Jonathan, “TSA Announces Strengthening of Air Cargo Screening Rules,” GovernmentExecutive.com, www.govexec.com/dailyfed/0506/051906j1.htm, May 19, 2006.

Moorman, Robert, “TSA Gets Tough on Cargo,” Air Cargo World Online, www.aircargoworld.com/break_news/03312008b.htm, March 12, 2008.

Oldham, Jennifer, “Cargo Screening Finally Taking Off,” The Los Angeles Times, April 30, 2007.

Ott, James, “Deadline Looms for Cargo Screening on Passenger Airplanes,” Aviation Week and Space Technology, September 5, 2008.

Sammon, John, Assistant Administrator of the Transportation Security Administration, Statement before the Subcommittee on Transportation Security and Infrastructure Protection Committee on Homeland Security of the United States Congress, July 15, 2008.

Seemuth, Mike, “With the Air Cargo Industry Race to Meet New Security Deadlines, the Race is on to Screen New Technology,” Air Cargo World Online, www.aircargoworld.com/features/0908_3.htm, September 2008.

Strohm, Chris, “House Democrats, TSA at Odds Over Cargo Screening Mandate,” GovernmentExecutive.com, www.govexec.com/dailyfed/0708/071608cdam1.htm, July 16, 2008.

Thompson, Honorable Bennie G, Chairman, U.S. Congress House Subcommittee on Transportation Security and Infrastruture Protection, “Homeland Security Democrats to TSA: The 100% Screening Air Cargo Law Means All Cargo Must Be Screened,” July 31, 2008.

15REFERENCES

Transportation Security Administration, http://www.tsa.gov/what_we_do/layers/aircargo/index.shtm.

Transportation Security Administration, “TSA Certified Cargo Screening Program: Information Bulletin,” http://www.airforwarders.org/documents/ LAX,%20DFW,%20JFK,%20EWR%20Outreach.pdf.

Transportation Security Administration, “Certified Shipper Program Briefing,” August 17, 2007.

Transportation Security Administration, “TSA’s Progress in Air Cargo Screening,”www.tsa.gove/press/happenings/air_cargo_screening.shtm, July 15, 2008.