Proprietary and Confidential

Supply Chain Security:Supply Chain Security:““The Virtual Border”The Virtual Border”

UNECE Trade Facilitation ConferenceUNECE Trade Facilitation ConferenceHonorable D. Robert QuartelHonorable D. Robert Quartel

CEO and ChairmanCEO and ChairmanFreightDesk TechnologiesFreightDesk Technologies

www.freightdesk.comwww.freightdesk.com

Private and Confidential

Arrival Notice

Letter of InstructionInvoice, PO

Importer’s Bank

Ocean Carrier

Customs House Broker

Line of CreditProforma Invoice

Shipping & funding detail

Cargo Status

Vessel Booking Request

CargoStatus

Shipping & Funding Detail

Exporter’s Bank

Importer Exporter

Vessel Booking Confirmation

Bill of Lading

Rated Bill of Lading

Dock Receipt

Freight Forwarder / NVOCC

Purchase Order

LCConfirmation

AES

Dock receipt

Pick-up & Delivery Order

Vessel Manifest

Dock receipt

Release/Approval

Demurrage guarantee & payment

Inland Carrier

Manifest

Pick-up & Delivery Order

Importer Notice

Converted VesselManifest

Customs (Export)Port

Customs ( Import )

Original B/L, Invoice, PO, Packing List

Inland Carrier

Marine Insurance Company

Fund Transfer

Confirmed Line of Credit

Release/HoldNotice

Purchasing Export Import

ImportTerminalOperator

Proforma Invoice

Export Declaration

Export Declaration

Bill of lading, Documentation

Import Docs

Export Terminal Operator

• Up to 25 Involved Parties

• 200+ data elements

• Manual data exchange processes

• Multiple data platforms

• 30+ documents or messages

Complex Data Flow for International ShipmentsComplex Data Flow for International Shipments

Information Sources and TimingInformation Sources and Timing

First U.S. Destination Port

Foreign Port of Voyage Origin

Overseas Inland Consolidation Warehouse

Voyage Underway

Carrier Reporting

• One or more consolidation layers mask goods’ origins and involved parties (40%)

• U.S. Customs applies physical and commercial border in port zones

• Carriers accept containers from multiple sources, with only partial data on contents and origins

• Ship manifest information must be filed by 4 days prior to arrival (AMS)

• Earliest possible filing of U.S. Customs entry information (ABI)

Flu

id T

ime F

ram

e

Border Today

• Forwarder/consolidator generates documents

•House Bill of Lading

• Carrier generates documents•Master Bill of Lading

• Additional carrier reporting•Shipment Status•Vessel Manifest

• Customs broker and/or shipper reporting

•Customs form 7501 and 3461

• Additional documents may finally be received here

•Surface Bill of Lading

Process Step Source of Data

Buyer • Buyer generates Purchase•Purchase Order

Seller • Seller generates documents•Shippers Letter of Instruction• Commercial Invoice

• Seller and Buyer agree

Today’s border is “fuzzy”: data is reported at fluid times and not analyzed for threatDays to Arrival

40

25

21

5

4

0

Red documents reported to Customs

Virtual Border

ProprietaryProprietary

Private and Confidential

Aggregating Commercial DataAggregating Commercial Data

Data Elements Buyer Seller SupplierExport Forwa rder Carrier

Import Forwarder/Broker Consig nee

Shipper's/Exporters name & address xSuppl ier xAgent of Exporter/Pac ker xInland Carrier (origin) xOc ean Carrier Name x

cus toms brok er xInland Carrier (Destination) xDelivering Carrier (destination) xSeller's Bank name & address xBuyer 's Bank name & addres s xIntermediate Consignee's nam e & address xUltimate Consignee's name & address xCount ry of Orig in xPoint of Origin (City & State) xMethod of Shipment to Forwarder xInland carrier rout e (orig in) xOc ean Carrier Route xVoyage Num ber xVessel Flag xForeign Por t of Export xCount ry W hic h Shipped xLoading P ier xTranshipment Ports xPort of Unloading xUS Port of Arrival xInland Carrier Route (destination) xDelivering Carrier Route (destination) xCount ry of Ul timate Destination x

Ca

rrie

res

/Pa

rtie

s D

ata

C

on

ve

ya

nc

e D

ata

Carrier/Party Data

Prior to shipmentAt time of Purchase Order En route to port of export On water/after arrival US

Leg Data

Route Data

Sample Data Elements and Application Data

Private and Confidential

Dual Purpose InformationDual Purpose Information

• BUSINESS: In-transit VISIBILITY for the purposes of

contract management, planning, process tracking, risk

mitigation, documentation, etc.

• GOVERNMENT: Process and regulatory TRANSPARENCY

for the purposes of anti-corruption, counter-terrorism,

trade processing, health and safety, etc

Private and Confidential

Commercial Data Is Critical to Security:Commercial Data Is Critical to Security:

- Cargo – What is being transported?

- Carriers – Who is handling the cargo?

- Conveyance – What is the route, how is it moving?

- Commerce – Who are the parties to the transaction?

Commercial Data Key to the Security SchemaCommercial Data Key to the Security Schema

Data Fusion & Profiling

GovernmentData-store

LawEnforcement

IntelligenceOcean

CarriersShipper Third Parties

CommercialData-store

Release

Government AgencyResponsible for Cargo Security

Decision

Portfolio of: intercept --inspectionactions

Proprietary

Private and Confidential

Data Mining for Threat and Risk AssessmentData Mining for Threat and Risk Assessment

• Employs a synergistic array of data mining techniques

• Knowledge based, both specific and general

•Based on rules and known facts

• Statistical patterns and profiling

• Mathematical models for risk assessment and threat

identification

• Evolutionary algorithms to detect changes in

patterns and discover new patterns

Private and Confidential

Anomaly Commercial Document

Data element for Anomaly

Cargo Incongruent with Origin

Commercial Invoice, Master Bill of Lading

Routing, Item listing

High value cargo and slow mode

Commercial Invoice, Master Bill of Lading

Item values, routing information

Document discrepancy Any Documents do not conform to each other

New Shipper or Consignee

Commercial Invoice, Bill of Lading, Certificate of Origin

Shipper or Consignee Sections

Violation of established shipping or commercial patterns by parties

Any Any – more in timing/receipt of documents (ex. Once-a-week shipper ships twice in one week)

Suspect source area and transship to small ship

Shippers Letter of Instruction, Bill of Lading

Origin of cargo, route

Point of origin Shippers Letter of Instruction

Pickup location

Illogical commercial transactions

Commercial Invoice Comparison of Consignee and Cargo (ex. Furniture company receiving garments)

Anomalies Generated from Commercial DataAnomalies Generated from Commercial Data

Private and Confidential

A Global IssueA Global Issue

• EC & US Customs, 22 October 2002

• “….major principles for future co-operation were stressed, most

particularly reciprocity….common standards for selection….”

• “…. agreed… to explore…. a declaration of principle to co-operate

on a mutually acceptable container security system covering the

whole EU….”

• WCO and IMO are making it a mandate: IMO Secretary-General,

William O’Neil, has strongly urged all parties concerned “to start

putting in place all the necessary legislative, administrative and

operational provisions needed…”.

Private and Confidential

Principles of a Successful Data EffortPrinciples of a Successful Data Effort

• This IS a transportation and logistics issue, not just a

maritime issue.

• This IS NOT a compliance issue. A legal cargo can

become a lethal cargo.

• Security should be dynamic: The port and customs

processing is a node within the process, not even the

most important focus for security.

• Profiling should and can begin in the Importing Country

at the issuance of the purchase order from the buyer.

• The shipper/importer should be responsible for the

process, not the carriers.

Private and Confidential

Issues for Small Importers and ExportersIssues for Small Importers and Exporters

• Longer lead times for moving cargoes

• Delays in trans-shipped containers

• Negative impact vs. cargo originating in direct service countries

• Many exports to smaller US companies that are not C-TPAT

certified, and not in CSI ports

• Technology infrastructure to comply with big country data

requirements

Another hurdle to competitiveness

Private and Confidential

BenefitsBenefits

• Source-once, APPROPRIATELY to the process

• Flexible, intermodal, sourcing

• Profiling on demand (Dynamic, not Static)

• Business-process centric

• Goes beyond human expertise