2011 TRB SUMMIT

2 4 A U G U S T 2 0 1 1

S E T H M . M . S T O D D E R , P a l i n d r o m e S t r a t e g i e s , L L C

Supply Chain Security Since 9/11

Agenda

Introduction

Supply Chain Security Since 9/11

Pre-9/11 View

Post-9/11 Actions

Where To Next – National Strategy and beyond

History – Pre-9/11 View

Supply Chain Security a Smuggling IssueDealt with primarily at the POEsLimited Industry Partnership Programs

Business Alliance for Secure Commerce (BASC) – Private Sector LedCarrier Initiative Program / Land Border CIPAmericas Counter Smuggling Initiative

Limited International Cooperation – WCO, Bilateral

Concern About Pilferage, Internal ConspiraciesInteragency Commission on Crime and Security at U.S. Seaports –Report (2000)

Terrorism – Primarily an Air Cargo IssueLockerbie – Pan Am 103 (bomb in luggage)

History –Post-9/11

Immediate Aftermath – Ramped Up Border SecurityLevel One Alert – Wait Times at the BordersSeeds of C-TPAT / FAST

Concern About Containers and WMD – “Nuke In Box”Not Just Smuggling – “DoA” Concern if Seaport City is Target

Enduring Air Cargo ConcernPassenger PlanesAir Cargo

Key Elements of Post-9/11 Strategy

Staffing Increases – More Security, More Facilitation

Development of Risk Targeting Capabilities and Information Collection

Cooperation with the Private Sector – C-TPAT, FAST, Air Cargo Security

International CollaborationBilateral – North America, CSI, Megaports, TSA Air Cargo Mutual Recognition effortsMultilateral – SAFE, ISPS, ICAO

Technology DeploymentsImaging Equipment (NII)Radiation Detection Equipment

Port Security MeasuresCoast Guard Efforts / Area Maritime Security CommitteesPort Security GrantsMTSA -- TWIC

Congressional Involvement

Trade Act of 2002Authorizes collection of advance information – all modes

Maritime Transportation Security Act of 2002 (MTSA)TWICISPS

SAFE Port Act of 2006Authorizes C-TPAT, CSI, among other things

Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act)100% Scanning – Maritime Containers100% “Screening” – Air Cargo on passenger planes

9/11 Act – Scanning

Maritime ContainersBy 2012, all maritime containers must be “scanned” at foreign port, pre-loading – or else banned from US

Scanning = NII and Radiation Detection

Escape Hatch – DHS can extend deadline for 2 years every 2 years

Air Cargo on Passenger PlanesSection 1602 – 100% “screening” of cargo transported on passenger aircraft

“Screening” = NII, trace detection, physical exam or canine

Administration Response to 9/11 Act

Enormous Objection from Trade and International Community

DHS extended deadline to 2014

DHS not moving to implement – and consistent message has been that 100% scanning requirement not advisable or feasible

TSA moving to implement 100% screening requirement for air cargo on passenger planesDomestic – Already implementedInternational – Work in progress, with intent to implement this year

National Strategy for Global Supply Chain Security

Forthcoming this year

Fundamental Principles of Strategy:Risk Management

Collaboration with Private Sector and International Partners

Security and Prosperity – Equally Important Values

Goal of National Strategy: ‘Secure and efficient global supply chain system that is resilient against catastrophic disruptions’

National Strategy for Global Supply Chain Security

Risk Management – Three Elements:Deter malicious actors from using system – layers of securityProtect systemically critical infrastructureStrengthen resilience of the system

Improving the System – Three Elements:Streamline and reform government security processesDevelop new technologies to improve security and facilitate tradeExpand, develop, and modernize infrastructure – to meet needs of security, efficient commerce, and resilience as trade flows increase

Priority Actions: 1 of 4

Strengthening security and facilitating flow of maritime cargo. Core Strategy – Risk-based, layered approach with six key elements:

1. Threat and risk assessments

2. Risk targeting, information analysis, and sharing

3. Partnerships with industry and governments

4. Promotion of global best practices and standards

5. Inspection/screening personnel and technology deployments – both overseas and in the U.S.

6. Port infrastructure security and worker credentialing

GOAL

APPROACH

PRIORITIES

Priority Actions: 2 of 4

Strengthening security and facilitating flow of air cargo. Key elements:

1. Implement 9/11 Act – by 12/31/11, all air cargo on US-bound passenger planes screened pre-departure

2. Partnerships with industry on improving supply chain security and developing global “trusted shipper” arrangements

3. International partnerships and efforts to strengthen global standards and practices

4. Strengthen risk targeting of in-bound air cargo – including working with industry and international partners to consider promulgation of rule requiring pre-departure information on all in-bound air cargo shipments

GOAL

APPROACH

PRIORITIES

Priority Actions: 3 of 4

Strengthening security and facilitating flow of cargo within North America. Strategy builds from Obama-Harper and Obama-Calderon Declarations:

Canada:1. Develop integrated US-Canada cargo security strategy

2. Harmonize C-TPAT and PIP, expand FAST

3. Modernize border infrastructure, and improve joint border facilities management

4. Strengthen rail security

Mexico:1. Improve bi-national collaboration on cargo security

2. Develop protocols for secure lanes for pre-cleared truck/rail shipments

3. Implement 21st Century Border Declaration, and develop more efficient and secure border management process

GOAL

APPROACH

PRIORITIES

Priority Actions: 4 of 4

Expanding, developing, and modernizing global supply chain and border infrastructure upon which the system depends.Incorporate flexibility and redundancy by building on Administration efforts to combine public and private funding of large-scale infrastructure improvements: ID opportunities to enhance current land border infrastructure

Incorporating best practices for resilience into plans

Assess and remediate systemic risks from loss of operations at key critical nodes

GOAL

APPROACH

PRIORITIES

Implementation of National Strategy

2011New Threat and Risk Assessments for Supply Chain Security

Discussions with Stakeholders – Industry and International Partners

Technology Assessment

Implement Near-Term Priorities

2012National Action Plan developed

Issues Over the Horizon

Extreme Budgetary PressuresCSI Cuts – Complicating effort to develop alternative to 100% scanningEvolution of CSI – New Staffing Models

International Collaboration / Mutual RecognitionAEO programs – Mutual Recognition (New Zealand most recent)China issues and recent agreement

Joint validation efforts and mutual recognition for AEO/C-TPAT

WCO EffortsAir Cargo Security – Post Yemen (both WCO and ICAO)Maritime Cargo – Napolitano trip to WCO meeting in June

DHS partnership with WCO – essentially following key elements of National Strategy for Global Supply Chain Security

Reauthorization of SAFE Port Act This Year?Potential vehicle for amending 9/11 Act “100% scanning” requirement