Problematic Scanning Mandate Awaits New President

The next president will face the difficult task of meeting a congressional deadline for scanning all U.S.-bound cargo containers for radiation and nuclear...

WASHINGTON — The next president will face the difficult task of meeting a congressional deadline for scanning all U.S.-bound cargo containers for radiation and nuclear weapons.

This story first appeared in the July 8, 2008 issue of WWD.  Subscribe Today.

The mandate from lawmakers comes amid growing resistance from foreign governments and mounting evidence suggesting the intractability of bringing 700 foreign ports online.

Retailers and apparel importers, many of which participate in supply chain security programs with the government, are hoping a new Congress and administration will revisit the 100 percent scanning mandate next year in light of recent reports outlining the significant challenges.

The industry imported $96.5 billion worth of clothing and textiles last year and opposed the 100 percent scanning measure, arguing that the technology was not available and that even the slightest delay in clearing Customs in a foreign or U.S. port could interrupt the entire supply chain and cripple global commerce.

“Our companies take their security responsibility very seriously,” said Allen Thompson, vice president of supply chain security for the Retail Industry Leaders Association, which counts giants Wal-Mart Stores Inc. and Target Corp. as members. “But any security program has to take into account and be integrated into the just-in-time delivery system.”

The presumptive presidential nominees, Sens. Barack Obama (D., Ill.) and John McCain (R., Ariz.), have not yet focused on port security on the campaign trail.

Obama has had a more pronounced position on the issue during the debate in Congress. He joined eight other senators last year in pressuring Wal-Mart president and chief executive officer H. Lee Scott to support the 100 percent scanning proposal. The group of senators, including Hillary Rodham Clinton (D, N.Y.) and Edward Kennedy (D., Mass.), said in a letter to Scott that the largest U.S. importer of foreign goods had an obligation to advance new standards for the scanning of U.S.-bound cargo.

The group also included Frank Lautenberg (D., N.J.), who criticized the administration’s port security record at a hearing on the findings of a pilot project testing 100 percent scanning at three foreign ports, which revealed significant challenges and shortfalls.

“The Bush administration has long believed that a layered approach is adequate for securing our ports,” Lautenberg said. “But in practice, this layered approach has been more like a piecemeal one, leaving our country and our economy more vulnerable.”

Lautenberg cited a General Accounting Office report to Congress that showed “the Bush administration’s cargo security programs are riddled with loopholes.” With administration officials testifying before the Surface Transportation and Merchant Marine Infrastructure, Safety and Security subcommittee, he said the government does not “even have minimum standards for container security.” Lautenberg added that the Department of Homeland Security has still not established a standard lock for metal shipping containers.

“And I am deeply concerned that, more than six years after 9/11, the Bush administration is back once again to report on more problems,” Lautenberg said. “The administration’s approach to securing our ports is unacceptable.”

The White House has stressed that the best way to minimize another terrorist attack is the multiagency, multilayered, high-risk targeted approach. But that strategy has not satisfied congressional Democrats, who have made 100 percent scanning a legislative priority and will influence Obama if he wins the presidency in November.

Conversely, if McCain becomes the next president, many in the industry expect him to hold the same perspective as the Bush administration and his GOP colleagues in Congress.

Regardless of who wins the White House, the new president will have to consider a growing number of impact studies domestically and internationally that expose some of the flaws in the U.S. mandate, as well as the potential negative consequences.

The Bush administration recently told lawmakers that it would not meet a July 2012 deadline set by Congress last year because of significant impediments based on the results of the pilot project at the three foreign ports. U.S. Customs & Border Protection released a 247-page report to Congress last month outlining serious problems, including:

l Extreme weather conditions that negatively effect scanning equipment.

l Exponential costs for U.S. and foreign governments in implementing and maintaining the scanning equipment.

l Addressing health and safety concerns of foreign governments and trucking and labor unions.

l Identifying who will share the costs for operating and maintaining the scanning equipment.

l Staffing implications.

l Nonexistent scanning software.

In addition, the World Customs Organization — an intergovernmental group focused on Customs matters — released a University of Le Havre-commissioned study in June that calls into question the “effectiveness of applying this blanket approach to ensure the security of shipments.”

The WCO is separate from the World Trade Organization, but administers certain technical aspects of the WTO agreements on customs valuation and rules of origin.

“We are all determined to find the best practical solution, one that will provide the U.S. with the added security it seeks to prevent any act of terrorism from being carried out using international shipping channels, which will not burden global trade unnecessarily,” WCO Secretary General Michel Danet said.

The WCO will work in the next few months to “explore various options that will enable the WCO to offer the U.S. administration positive counter proposals, which will meet their needs and result in the 100 percent scanning legislation being repealed,” Danet said.

Retailers said the latest information boosts their case against the U.S. mandate.

“The new reports reinforce what the pilot projects have shown, that 100 percent scanning [at all foreign ports] is not going to work,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. “There are numerous challenges, ranging from training people to who will pay for the monitoring to the fact that the technology does not exist to the need for people to look at images at 700 ports around the world.”

He said the reports also highlighted that foreign governments are wary about taking on the additional burdens required by the U.S. mandate, which could interfere with their own sovereignty.

“The real question you have to ask is: ‘Will our trading partners do this?'” he asked. “They are lining up to say ‘no.'”