Introduction
1. The purpose of this paper is to convey SITPRO Ltd’s concerns regarding the prospect of the United States of America imposing 100% scanning in foreign ports for US bound containers. These concerns are based on our own analysis –and perspective as a trade facilitation organisation-, a number of visits to the Port of Southampton (where the UK trial is taking place), consultation with shipping lines and traders involved in US bound exportation and our discussions with other European ports. From its inception, SITPRO has closely monitored the UK pilot and the impact on the movement of goods to the US should scanning be mandatory at the port of export for all containers. This initiative has the potential to disrupt international trading through the introduction of unnecessary costs and delays without any clear benefit to the security of the supply chain. 100% scanning could in effect become a barrier to trade.
The Southampton Trial
2. SITPRO has been informed that only limited infrastructural changes were needed at the port of Southampton to incorporate the scanning equipment (principally funded by the US) into the port infrastructure. We note that extra burdens were not placed on the trade by the trial and we were impressed by the reliability of the scanning equipment and software. Additional port congestion was avoided through the use of a pre-existing facility -the Vehicle Booking System (VBS)- and unnecessary delays were not, on the whole, found. With regard to the results, it has been confirmed that the trial identified a series of NORMS (Naturally Occurring Radioactive Materials) and one exception that was handled using the standard protocols. SITPRO does not believe that any evaluations made from the Southampton trial are a good barometer for the impact of 100% scanning, should it be rolled out. The site chosen meant that the trial was conducted in a controlled environment where the infrastructure was predisposed to be conducive to this type of initiative.
Costs
3.1 Whereas the trial has been funded by the US government SITPRO has been unable to find any reference made to funding provisions for the installation of equipment or adaptation of infrastructure (including the possibility of purchasing additional land) in other ports, should 100% scanning be imposed. These are not the only costs which have to be met and considered when assessing the effectiveness of 100% scanning. There are on-going operational costs including personnel and the maintenance of the equipment that have to be factored in. Reports have shown that the cost to purchase the scanner and to provide US personnel for 6 months was $18 million. To gain an understanding of the full cost, UK Customs and port personnel as well as upkeep of the scanner must also be added to this figure. SITPRO believe this to be a resource intensive scheme -both financially and operationally- yet resources are finite. A rollout of 100% scanning would, in effect, mean diverting resources from other essential areas of Customs activity.
3.2 Assuming the cost of the scanning equipment will have to be met by the ports, SITPRO foresees the possibility of some ports being potentially prohibited from operating services to the US. This would reduce the free flow of trade and discriminate against those ports without the financial ability to invest in the required machinery . The reduced number of ports able to handle US bound containers will consequentially create delays in getting through the terminal, affecting just-in-time operations and the incurrence of higher inventory and personnel costs. Therefore, all costs incurred will be transferred to the trader and ultimately passed on to the consumer: cumulatively having a deleterious effect on all users of the supply chain in the UK and US.
The Port Environment
4.1 SITPRO asserts that the port of Southampton does not give an accurate illustration of the majority of ports. Southampton is a lower volume port, processing a small proportion of all US bound containers. It principally only receives cargo from road transport (a small percentage enter by rail) and due to the nature of its logistics it had already developed a Vehicle Booking System for the smooth entry into and exit out of the port. VBS is an electronic facility through which all road vehicles delivering or collecting containers from the terminal are registered. Prior to a truck arriving, the booking system records all information regarding the truck trip, including details of the containers and special requirements, and each vehicle is given a time slot to enter the terminal for drop off or pick up. On arrival, entry of a VBS Reference Number will allow the system to send the driver to the most appropriate transfer area for their load and thereby direct US bound cargo to the scanner. Altogether ensuring a smooth turnaround of vehicles and easing of port congestion. One of the shipping lines participating in the trial confirmed to us that the role VBS plays in reducing disruption and congestion could not be understated.
4.2 At Southampton, the time needed for scanning containers was incorporated into the turnaround time for each vehicle before a timeslot was allocated. Therefore, this trial did not show what impact there would be on the processing and movement of containers into and through a port without such a system. Nor does it demonstrate the impact 100% scanning would have on a port receiving containers by rail, barge or other feeder vessel as well as road. Through our consultation with hauliers, SITPRO understands that truck-borne containers are the simplest (and cheapest) to scan and the lack of information pertaining to other modes of transport is of concern to us.
4.3 SITPRO envisages that, for example, where containers arrive on non-road feeder transport there could be a minimum of two extra lifts and additional internal transport needed to put a container through the scanner. Each lift of a container by the port operator could incur a separate charge, as could any additional transport needed to move the container to the various parts of the port. The logistics –and hence the cost and time factors- involved in scanning every US bound container and the impact on the flow of traffic into and around a port cannot, in SITPRO’s view, be underestimated. There are very few ports whose current design and layout will allow for a smooth flow of traffic through the scanners similar to that seen at Southampton. Thus, the time needed for scanning each container will slow down the supply chain and cause delays (and hence additional cost) to the trade.
An Effective Measure for Improving Security of the Supply Chain?
5.1 During SITPRO’s investigations into the effectiveness of 100% scanning we have not been able to identify any clear discernable benefits from this security measure. In the six months of the trial only one potential “threat” was discovered, which was handled using the standard protocols without any difficulty. SITPRO does not believe that this type of result pattern can justify the use of an indiscriminate and non-targeted mechanism and calls into question the cost effectiveness of this measure compared to alternative approaches. There are also other issues with 100% scanning: it only applies to container traffic; it only checks for radiation; it does not detect security risks such as chemical and biological weapons; and it takes resources away from multi-layered risk assessment. All told, either the risk to US national security which 100% scanning is meant to address isn’t there or it is merely moving that risk to other means of entering the United States of America.
5.2 SITPRO is not convinced that the number of containers pulled for further investigation under this trial exceeds the results that would have been delivered by the established approach of using risk based techniques. The latter practices form the modern Customs approach to international trade facilitation. In fact, we consider the trial totally undermines this type of intervention whilst creating unnecessary burdens to the trade. The seemingly projected move away from primarily basing security assessments on risk analysis and towards physical checks and controls could actually have a detrimental effect on security standards. A false sense of security on the part of both government and trade could easily be created. Furthermore, the continuing work being done on the role and use of other security mechanisms, controls and standards related measures (nationally, regionally and internationally) in addition to the mutual recognition between nation states of these measures will be called into question.
Legislation; Sovereignty; Other Security Measures
6.1 SITPRO supports the view that the progression of 100% scanning will deter businesses from becoming authorised economic operators (or similar). The incentive to become a trusted trader will greatly decrease if, irrespective of the security status of a company, all US bound containers will have to be scanned. This has the potential to result in a general lowering of security standards and reduce the levels of certainty and predictability within the supply chain. No longer will traders, who previously were “trusted”, be able to benefit from “green lanes”, reduced checking, or even from having good internal systems, thus challenging the need for any security measures bar 100% scanning. Therefore the impact of 100% scanning on security of the supply chain will not just be US bound, but global.
6.2 100% scanning is an extra territorial and unilateral measure by the United States which will in effect supersede any domestic and/or European legislation. In turn, it has the potential to actually create a barrier to trading with the United States. Whilst goods being exported to other parts of the world will fall under EC Customs’ rules, those being imported to the US will find that the US border has been pushed to the country of export. Legislation and control measures laid down by the United Kingdom and the European Community will be usurped by those of a third country.
6.3 It is our opinion that this type of blanket –as opposed to targeted- operation totally undermines the concept of authorised economic operators benefiting from reduced levels of Customs controls and is a significant move away from risk based analysis –a cornerstone of European Community Customs policy. The Modernised Customs Code states that a proper balance between Customs controls and facilitation of legitimate trade should be maintained. A measure such as 100% scanning contravenes this. There is also no counterbalance due to it being a US initiative.
Conclusion
7. It is our view that 100% scanning will over burden customs and trade and add costs to an industry that has already identified sound security practices and is working vigorously to implement them. This scheme, which currently fails to provide strong evidence in its defence, is simply not economically viable and potential costs are disproportionately high when measured against deemed benefit. Our views are supported by letters from the World Customs Organisation, the Private Sector Consultative Group (PSCG) and Directorate-General TAXUD. Whilst security is always high on the agenda, our view is that the strengthening of the current layering system and use of risk analysis will prove in the long term a more effective solution in relation to f costs, manpower and results.
