Cleared For Takeoff

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Security and customs requirements impose major constraints on airfreight shipments. Two new programs aim to remove some of the obstacles.

When you travel by air, you can choose to pack light—board the plane with a carry-on, then grab it and go when you land. That's fine for passengers, but air cargo doesn't travel so easily. Thanks to security concerns and customs regulations, an air shipment always comes loaded with baggage.

Meeting numerous requirements costs time and money, both for shippers and for the forwarders and airlines that serve them. When something goes wrong—an agent needs to hand-inspect a pallet of cartons, a customs declaration gets lost, a data entry clerk transcribing figures from an air waybill makes a typo—goods sit idle at the airport.

Luckily for all concerned, the airfreight industry is working on programs such as the U.S. Transportation Safety Administration's (TSA) Certified Cargo Screening Program (CCSP) and the International Air Transport Association's (IATA) e-freight initiative to lighten the load for air cargo shippers and their service providers.

100-PERCENT SCREENING

The TSA created the Certified Cargo Screening Program to help the air cargo industry meet new security requirements contained in the 9/11 Commission Act of 2007, which mandated that by Feb. 3, 2009, 50 percent of all cargo carried on passenger aircraft in the United States had to go through a security screening. Since last October, the TSA has required 100-percent screening for all cargo carried on narrow-bodied passenger planes (planes with a single aisle), which account for 95 percent of all U.S. flights.

In August 2010, the 100-percent screening requirement will apply to all flights, including U.S.-bound flights originating in other countries. The federal government is still working out the partnership agreements required to apply that mandate to foreign airlines flying into the United States, says Dwayne Baird, a TSA spokesman.

Making the February deadline wasn't a great deal of trouble. "The first 50 percent was low-hanging fruit," said Brandon Fried, executive director of the Washington, D.C.-based Airforwarders Association, during an audio webinar on the new air cargo security mandates.

But many in the air cargo industry worry that the 100-percent screening mandate in 2010 could slow the flow of goods. The airlines are responsible for cargo screening, but they probably don't have enough capacity to handle the extra volume on their own.

"It would mean interfering with airport operations and potentially adding new facilities that might be necessary to screen cargo," says Christopher Bidwell, vice president, security and facilitation at Airports Council International (ACI)-North America.

Hoping to avoid space shortages and cargo logjams, TSA developed the CCSP, a voluntary program designed to shift at least some of the screening process upstream. Shippers, third-party logistics providers (3PLs), air forwarders, and independent screening services that want to take part in this program can apply to operate Certified Cargo Screening Facilities (CCSFs).

Cargo that is screened in these facilities and transported through a secure chain of custody doesn't need to stop at the airport for inspection, and is more likely to get loaded onto its intended flight and move promptly to its destination.

As of April 2009, TSA had certified about 282 companies as CCSFs, most of them freight forwarders. The additional 1,400 applicants on file at the time demonstrated that the balance of participation was shifting. "Approximately half of CCSF applicants are now shippers," Baird says.

CCSP is especially compelling for shippers and forwarders whose cargo could be harmed or delayed if it's screened at the airport, notably any company that shrink-wraps multiple pieces on a pallet.

The 9/11 Commission Act requires screening air cargo at the piece level. The X-ray and explosives detection systems currently available for use at airports were designed to screen passenger bags, and this equipment is too small to handle loaded pallets. The alternative is not pretty.

"Twenty-four separate boxes might have to be broken down, individually screened, then put back together," Bidwell explains.

CCSP shippers and forwarders can screen boxes before they build loads for shipping, averting the need to tear down pallets.

HARMFUL X-RAYS

Certain industries have more particular concerns. For example, X-rays can damage pharmaceutical products. So can improper handling of packages, which could occur if airline officials not familiar with the products inspect boxes manually, said Brad Elrod, senior manager, global logistics security for Pfizer Pharmaceuticals during the webinar.

"Because of the sensitivity of our products, and the regulations that surround them, we would much rather do the inspection ourselves," he said.

To satisfy the Food and Drug Administration's (FDA) requirements, pharmaceutical manufacturers already follow strict procedures when handling and transporting medications. The industry is working to synchronize FDA and TSA requirements so that one set of processes will satisfy both organizations.

Companies that transport perishables also are embracing the CCSP. Los Angeles-based Commodity Forwarders Inc. (CFI), which transports fruit, vegetables, fish, meat, flowers, and other perishables, has earned certification under the program in seven of its 12 offices, with plans to add four more.

"Perishables that get stuck in screening lines lose their value fast. No one eats a bad piece of fish," said Chris Connell, CFI's president, during the webinar.

While pharmaceutical manufacturers want to avoid exposing their products to X-ray machines and explosives detection technologies, they are the preferred solutions for perishables. These automated systems eliminate handling, which potentially can damage products.

But such technologies don't come cheap. "It can cost $30,000 to $50,000 to purchase an explosive trace detection machine, and up to $500,000 for an advanced technology X-ray machine," Fried says. Third parties that become certified will try to pass those costs along to their customers, although that's not always easy. "We're in a very competitive environment," he notes.

The good news for shippers who want to screen their own products is that they probably won't need those costly systems, unless they're receiving sealed boxes from suppliers. Shippers simply need to prove that from the time a product is manufactured to the time it's loaded on a plane, there is no opportunity to insert a terrorist device into the package.

"Shippers have to provide a sterile area for preparation of the shipment, and ensure that the people who are packing the boxes are security threat-assessed by the TSA," Fried says.

While cost figures heavily in a 3PL's or forwarder's business case for CCSF certification, shippers focus on a different factor: whether or not they want to become regulated.

To maintain the chain of custody, a shipper that operates a CCSF, then gives its freight to a forwarder, won't be able to choose just any partner. It will need to work with one that has qualified itself with the TSA to handle screened cargo.

THE CAR WASH ALTERNATIVE

For shippers and forwarders who want to avoid the airport crunch but don't want to become certified screeners themselves, another option is emerging: the independent cargo screening facility (ICSF). Known as a "car wash," this could be a standalone business, a co-op formed by several smaller businesses, or a division within a larger company.

In one city where it's not a CCSF, for example, CFI is working with a transportation firm that handles hard freight and therefore is not a competitor. "It's helping us screen," Connell explained during the webinar.

Trucking companies that already serve multiple forwarders or shippers are well-positioned to provide this service, especially in smaller markets where no single shipper or forwarder has enough volume to justify doing its own screening.

Although shippers, forwarders, and others are taking on some of the screening burden themselves, the airlines also hope to boost their own capabilities to meet the 100-percent mandate in 2010. One important question is how soon the industry will see new screening technologies designed to handle loaded pallets rather than luggage.

"I worry about the lack of speed with which the technology is being approved to screen large shipments," said Dave Brooks, president of American Airlines Cargo, during the webinar. "Many technology applicants have products ready to test. The process seems to take forever."

Because Congress has mainly funded technologies for passenger baggage, research and development on cargo screening has suffered. "Going forward, there's an opportunity to obtain grants specifically to develop certified screening technologies for large, palletized shipments," Bidwell says.

TONS OF PAPER

If security screening requirements impose a burden on air shipments, so do the piles of paper that usually accompany the freight. A typical air cargo shipment travels with as many as 30 paper documents. Taken together, these documents occupy enough space each year to fill 80 Boeing 747 freighters, according to IATA.

With an eye toward easing that paper burden, and moving cargo more efficiently, IATA has been working since 2004 on an initiative called e-freight. The program's goal is to replace many physical documents with electronic messages agreed upon globally by shippers, forwarders, carriers, and customs authorities. "Airlines around the world are trying to cut costs, and that's why they support this initiative," says Steve Lott, head of communications for IATA North America.

E-freight is part of a larger IATA program called Simplifying the Business, which previously developed standards for electronic passenger tickets. "Eliminating paper for cargo is a more difficult task," Lott says. "Passengers are issued one paper ticket, but cargo moves with 30 different documents."

The e-freight program has targeted 20 of those documents for elimination. Currently, IATA has 13 electronic documents ready, and expects to add three more by the end of 2009. (See box above for complete list.)

"We're not looking to eliminate all the documents at once," Lott says. IATA is focusing mainly on getting participants to use electronic versions of three documents: the master airway bill, the house waybill, and the house manifest.

Nor is IATA targeting all shipments initially. "We've started with general cargo, which is not specialized, doesn't transfer, and is not licensable," Lott says. For example, cargo that flies into New York from overseas but then is trucked in bond for customs clearance in Kansas City currently isn't eligible for e-freight.

Electronic messaging is not a new concept in air transportation. IATA previously developed a version of electronic data interchange (EDI) known as the Cargo Interchange Message Procedures (Cargo-IMP). E-freight builds on that earlier effort. "We're pushing air carriers to use that format," Lott says.

IATA has been modifying some of the Cargo-IMP messages—adding new fields, for example—to accommodate the needs of customs authorities in various countries.

Large service providers such as DHL Global Forwarding have been using electronic formats to transmit certain documents to air carriers since the 1990s. "We were transmitting a master bill level of information, which contained all the house bills beneath it," says Jay Brockington, manager, global XM and e-tools, for DHL Global Forwarding in New York. "That was all sent electronically as well as on paper."

But those transmissions represent just a fraction of what IATA's members are attempting now. The e-freight program seeks to get rid of a much longer paper trail—extending from the shipper through customs and on to the consignee—by replacing invoices, packing lists, customs documents, and numerous certificates with electronic messages. "This is very different because it starts with the shipper," says Holger Bilz, vice president of global airfreight, operations, quality, compliance and technology at DHL in Bonn, Germany. "The crucial point is that customs—on the export side and, especially, on the import side—is willing to clear shipments without hard copy documents."

The big challenge for e-freight has been getting customs authorities to agree on which paper documents they will forego, and to accept electronic messages in the same formats. While many customs authorities originally climbed on board with e-freight in principle, when they got into the details, they didn't agree on standards, Bilz says. Some decided they couldn't give up certain paper documents. Others offered to scrap several documents but wanted to replace them with a single new form.

IATA has resolved those problems to some extent. As of April 2009, e-freight was active at 49 airports in 19 countries. But as each new customs authority joins the program, officials there request special provisions until they realize the benefits of adhering to a single standard. "We will do e-freight in more countries, but it grows increasingly more complicated," says Bilz.

Within the United States, e-freight is active at John F. Kennedy International Airport in New York and Chicago O'Hare International Airport. IATA expects to add seven or eight more U.S. airports this year, including Los Angeles, San Francisco, Seattle, Dallas/Fort Worth, Atlanta, Miami, Boston, and possibly Washington Dulles.

Shippers who want to participate in e-freight by transmitting electronic invoices, packing lists, and certificates of origin need software to create those messages. They might develop the capability in-house or turn to technology vendors.

But until e-freight applies in more countries, and to more kinds of shipments, shippers will have to produce both paper documents and electronic messages. "When you run parallel processes, you don't save money," Bilz notes.

In the long run, though, all supply chain partners benefit, proponents say. IATA estimates that e-freight will save the airfreight industry as a whole between $3.1 and $4.9 billion per year, depending on how many participants adopt the system. Transmitting documents ahead of cargo will cut cycle time by an average of 24 hours. Replacing paper with electronic records also will increase accuracy because data has to be entered only once, and will help the environment by eliminating 7,800 tons of paper per year.

Moreover, "it reduces the need for document storage and the associated costs," says Brockington. Electronic records can be stored on a hard drive or other electronic devices.

Shippers also will benefit by seeing their cargo move faster. "There's less possibility of lost cargo due to missing documentation," says Lott. "And it improves the quality of service shippers will receive."

CCSP and e-freight are in their early stages. But proponents expect that both programs will help relieve air cargo of its excess baggage and keep it moving at optimum speed.

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