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International Supply Chain Vulnerabilities
Gary D. GilbertSenior Vice President
Hutchison Port Holdings9 September 2009
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Maritime PerspectiveProtecting Ports, Vessels &
Cargoes
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BAHAMAS• Freeport
HPH Ports Around The World – 49 Ports
• DammamSAUDI ARABIA
• DuisburgGERMANY
• WillebroekBELGIUM
PAKISTAN• Karachi
• Dar es SalaamTANZANIA
• Buenos AiresARGENTINA
NETHERLANDS• Rotterdam• Venlo
• Alexandria• El Dekheila
EGYPT
KOREA• Gwangyang• Busan
• Cristobal• Balboa
PANAMA
MEXICO• Veracruz• Ensenada• Manzanillo• Lazaro Cardenas
HONG KONG• Kwai Tsing• Tuen Mun
• JakartaINDONESIA
MALAYSIA• Port Klang
THAILAND• Laem Chabang
MYANMAR• Thilawa
POLAND• Gdynia
UNITED KINGDOM• Felixstowe• Thamesport• Harwich
• SoharOMAN
CHINA• Shanghai • Shanghai Pudong• Ningbo• Yantian• Xiamen• Shantou• Jiangmen• Nanhai• Jiuzhou• Gaolan• Huizhou
HPH 2008 Volume 69 million Containers
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Quarantine
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Implementation of the IMO – ISPS Code
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The International Maritime Organization (IMO), a United Nations group of 162 signatory countries, adopted, in December 2002, amendments under the 1974 Safety of Life at Sea Convention (SOLAS) the new International Ship and Port Facility Security Code (ISPS Code).
The code contains mandatory security related requirements for governments, port operators and shipping companies. Each government, port operator and ship must have a security designate, security plan, training and risk assessment as per international law commenced 1 July 2004.
International Maritime Organization
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Key elements of CSI• Establish security criteria for
identifying containers that may pose a risk for terrorism, based on advance information.
• Pre-screen containers at the earliest possible point.
• Use technology to quickly pre-screen containers that may pose a risk for terrorism.
• Develop secure and ”smart" containers.
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69 million Trojan Horses
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Layers of Security
• Container Imaging• Radiation Detection• Container Monitoring –Location & Tamper Evidence• Manifest Information• Basic Port/Terminal Security (ISPS Code)
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Radiation Detectors - Felixstowe
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Radiation Scanning and X-Ray Imagingin Hong Kong….Tractor moving at 16 kmp
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Data Integration
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Data Integration Folder for Every Container Onboard
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Secure Freight Initiative
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SAFE Port Act, Oct ‘06Section 208 -
Directs the Secretary to conduct a pilot project at an overseas port similar to the
Integrated Container Inspection System being tested at the port in Hong Kong.
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9/11 Commission Act, Aug ’07Title XVII - Maritime Cargo
Section 1701 - U.S. 100% Container Inspections
• Imaging & Radiation Scanning in Ports prior to arrival in U.S.
• Passed House 371 to 40• Passed Senate 85 to 8• Effective July 1, 2012
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100 % Scanning Challenges• Sustainability of the scanning equipment in extreme weather
conditions • Varying costs of transferring the data back to the United States• Re-configuring port layouts to accommodate the equipment
without affecting port efficiency • Developing local response protocols for adjudicating alarms• Addressing health and safety concerns of host governments
and respective trucking and labor unions• Identifying who will incur the costs for operating and
maintaining the scanning equipment • Acquiring necessary trade data prior to processing containers
and addressing privacy concerns
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100% Scanning Challenges• Concluding agreements with partnering nations and terminal
operators to document roles and responsibilities regarding issues such as: ownership, operation, and maintenance of the equipment; sharing of information; and import duty and tax considerations
• Staffing implications for both the foreign customs service and terminal operator
• Licensing requirements for the scanning technology • Reaching agreement with foreign and industry partners to
continue scanning 100 percent of U.S.-bound containers after the pilot ends; and
• Discussing the potential requirements for reciprocal scanning of U.S. exports.
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Simulating the Impact of Container Inspections on Port Terminal Operations
Nitin Bakshi, The Wharton School, University of Pennsylvania
Noah Gans, The Wharton School, University of Pennsylvania
24
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Month of Data from Hong Kong and Yantian
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Present CSI Protocol
• Containers Tagged for Inspection– US-bound containers only– 24 hours before departure
• Inspection process for tagged containers– 2 handheld spectroscopic devices per
high-energy x-ray radiographic scanner– inspections First-Come-First-Served– 60 minutes to notify local authorities– 40 minutes to pick from stack and
transport to inspection station– 20 minutes to inspect containers
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Results for the CSI Protocol• Percentage of delayed containers
– With 1 inspection station at Hong Kong• a 5% inspection rate is workable• at a 7% inspection rate, 100% utilization
– With 2 inspection stations• a 10% inspection rate is workable• at a 14% inspection rate, 100% utilization
– At terminal Yantian the analogues are
• 1% and 3% for workable rates• 2% and 4% for 100% utilization
27
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1.0%
15.5%
60.0%
99.5%
3.9%
13.3%
28.3%
56.2%
94.8%
0%
20%
40%
60%
80%
100%
0% 5% 10% 15% 20%
% o
f in
spe
cte
d c
on
tain
ers
th
at a
re d
ela
yed
% of US-bound containers tagged for inspection
Terminal A24-Hour Rule, Inspections First-Come-First-Served
With 1 Server With 2 Servers
Base case: as inspection rates climb the % delayed explodes
28
With 1 x-ray, scanner utilization hits 100% at a 7% inspection rate and the backlog explodes
With 2 x-rays, scanner utilization hits 100% at a 14% inspection rate and the backlog explodes
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99.1%
0.0%
8.8%
0%
20%
40%
60%
80%
100%
0% 5% 10% 15% 20%
% o
f ins
pect
ed c
onta
iner
s tha
t are
del
ayed
% of US-bound containers tagged for inspection
Terminal B24-Hour Rule, Inspections First-Come-First-Served
With 1 Server With 2 Servers
Base case: as inspection rates climb the % delayed explodes
29
With 1 x-ray, scanner utilization hits 100% at a 2% inspection rate and the backlog explodes
With 2 x-rays, scanner utilization hits 100% at a 4% inspection rate and the backlog explodes
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0.4 0.8 1.32.9
4.87.0
9.211.3
13.415.6
17.820.0
22.324.6
26.929.2
31.4
0.7 1.1 1.5 2.0
2.53.6
5.67.7
9.811.9
14.116.3
18.4
0
4
8
12
16
20
24
28
32
0% 5% 10% 15% 20%
max
imum
sta
ging
are
a ne
eded
in a
cres
(150
cont
aine
rs p
er a
cre)
% of US-bound containers tagged for inspection
Terminal A24-Hour Rule, Inspections First-Come-First-Served
With 1 Server With 2 Servers
Base case: for utilization ≥ 100% inspection backlog explodes
30
At inspection rates of 7% (for 1 scanner) and 14% (for 2 scanners), the scanners hit 100% utilization and the inspection queue explodes.
These maximums are finite only because they represent the buildup that occurs during the one month we have simulated. With each additional month of (similar) traffic, the inspection queue would grow by the same number of acres…indefinitely.
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0.2 3.512.4
21.430.1
39.047.9
56.865.7
74.683.4
92.3101.2
110.1119.0
127.9136.7
145.6154.5
163.4
15.824.6
33.542.4
51.360.3
69.178.0
86.895.7
104.6113.5
122.3131.2
140.1149.0
0
25
50
75
100
125
150
175
0% 5% 10% 15% 20%
max
imum
sta
ging
are
a ne
eded
in a
cres
(150
cont
aine
rs s
per
acr
e)
% of US-bound containers tagged for inspection
Terminal B24-Hour Rule, Inspections First-Come-First-Served
With 1 Server With 2 Servers
Base case: for utilization ≥ 100% inspection backlog explodes
31
At inspection rates of 2% (for 1 scanner) and 4% (for 2 scanners), the scanners hit 100% utilization and the inspection queue explodes.
These maximums are finite only because they represent the buildup that occurs during the one month we have simulated. With each additional month of (similar) traffic, the inspection queue would grow by the same number of acres…indefinitely.
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Layers of Security
• Container Imaging• Radiation Detection• Container Monitoring –Location & Tamper Evidence• Manifest Information• Basic Port/Terminal Security (ISPS Code)
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9/11 Commission Act, Aug ’07Title XVII - Maritime Cargo
Section 1701 - U.S. 100% Container Inspections
• Imaging & Radiation Scanning in Ports prior to arrival in U.S.
• Passed House 371 to 40• Passed Senate 85 to 8• Effective July 1, 2012
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International Supply Chain Vulnerabilities
Gary D. GilbertSenior Vice President
Hutchison Port Holdings9 September 2009