Companies that purchase and provide transport on all-cargo aircraft will be closely watching whether the Transportation Security Administration on Wednesday offers an alternative security arrangement many believe is designed to help one company — Amazon — avoid screening every outbound shipment for explosives.
How to comply with pending international airfreight security standards is reopening a long-running policy debate over whether supply chains are best protected through a risk-based approach or comprehensive physical checks. Freight forwarders, pilots and some security experts say everyone should adhere to the same screening standards, but major cargo airlines argue the system should be flexible to prevent airport backlogs and contain costs.
Carriers such as Atlas Air (NASDQ: AAWW), FedEx (NYSE: FDX) and UPS (NYSE: UPS) view a trusted trader approach as a way to spread the security burden and benefit of manufacturers, e-commerce retailers and other shippers — not just Amazon (NASDQ: AMZN).
“Anytime you can push the screening responsibility upstream it’s a good thing for the carrier because it’s an on-time business. If you don’t get cargo on the plane when it departs the customer isn’t happy and Atlas isn’t happy because we’re losing revenue,” Gary Wade, Atlas Air’s vice president of global security, said in an interview. “Secure throughput is key for us.”
The International Civil Aviation Organization is requiring member states by June 30 to screen 100% of all export cargo before loading on commercial freighters, creating an equivalency with the passenger environment in which for a decade all cargo, domestic or international, has been screened prior to loading. Until now, the primary focus of security measures for freighters has been preventing the “jack-in-the-box” threat — someone stowing away in a crate and accessing the cockpit from the main deck.
National authorities, however, can also allow regulated companies — airlines and logistics providers — that apply approved security controls throughout the supply chain to have their shipments cleared to fly. A third option would allow manufacturers, retailers or other entities outside the TSA’s normal regulatory reach to prove they have highly secure facilities that provide an equivalent level of security as a substitute for X-ray scanning, explosive trace detection or sniffer dogs.
That appears the direction TSA officials are headed.
The agency has six months to develop and implement a rulemaking that addresses how freighter operators should screen cargo and other options. It likely will expand the Certified Cargo Screening Program (CCSP) that allows logistics providers, ground handlers, shippers or independent security companies that follow TSA-approved criteria to inspect the cargo themselves and tender it to the airlines following strict chain-of-custody requirements.
The CCSP program was established to prevent airlines, many of which have constrained airport warehouses, from getting crushed with inspection responsibilities and being unable to load planes on time. Three years ago, the TSA also created a popular third-party canine screening program that allows airlines and forwarding agents to use certified companies with bomb-sniffing dogs in lieu of physical screening.
And during a virtual meeting with industry representatives Wednesday, TSA officials are scheduled to unveil a proposal for secure packing facilities whereby manufacturers, fulfillment centers and other entities with strict security protocols can have shipments deemed secure that are exempt from 100% screening. Security criteria are expected to cover building access, personnel security, in-transit security, employee training and information technology. The facilities would also be subject to periodic TSA audits and inspections.
Some stakeholders believe the alternative security framework is being pushed by Amazon and that the online retail giant will be the only one to qualify as a secure package facility.
The Airforwarders Association and others say the TSA should expand the CCSP to allow greater participation by manufacturers, suppliers, e-commerce fulfillment centers and others. Going beyond that would create an uneven playing field and possible security gaps, they claim.
But several airlines, in comments submitted last year to the TSA, also expressed strong support for self-policing by shippers as a way to ease their burden as the ultimate party responsible for ensuring security.
They recommended against a one-size-fits-all approach because of the large variety of cargo, airlines and shippers in the system.
“We firmly believe that an alternative framework is necessary in part because … requiring 100% screening of export cargo moving on all-cargo aircraft would not be justified under any cost/benefit review,” Atlas Air wrote. “If the risk is relatively small, the benefits gained from applying a draconian measure like 100% screening of all U.S. outbound air cargo transported on all-cargo carriers will not be great and cannot be justified when compared with the anticipated costs. Given the fact that available data indicate that there have been no attempts by terrorists to introduce explosives into cargo outbound from the United States, the finding that there is relatively low risk mandates the conclusion that TSA should move forward with its program to provide an alternative to a 100% screening regime.”
The Air Line Pilots Association countered that improvised explosive devices in 2010 got onto two planes — one flown by FedEx and one by UPS — in the Middle East and reached the U.S., showing there is a terrorist threat to all-cargo aircraft even if the bombs were discovered and malfunctioned. The union complained that the options for third-party screening and security packing facilities both “allow the commercial entities who benefit from the rapid and efficient movement of cargo, to police their own operations with limited oversight, which has previously proven to be a significant vulnerability.”
Purchase, New York-based Atlas, which operates 117 freighter aircraft — including 44 747 jumbo jets — recommended the alternative approach mirror the Customs-Trade Partnership Against Terrorism, a government program under which ocean shippers with approved supply chain security plans and vetted transportation partners, can avoid port inspections of their containers and other trade facilitation benefits.
Carriers noted that flexibility is the only way to meet the mandate because many types of cargo — pharmaceuticals, hazardous materials, perishable foods, live animals or items shipped in steel drums — are too big to pass through existing X-ray machines or can’t be recognized by them or canines. And packages below a certain size or weight are incapable of containing dangerous explosives.
Atlas is one of Amazon Air’s key flying partners, with about 25 aircraft under lease-operating agreements. Amazon also owns 5% of Atlas and has warrants allowing it to increase its share. Wade said the companies cooperated on developing an alternative screening proposal, but that Amazon has not asked for help pitching the idea.
UPS Airlines also strongly supports an alternative approach, saying companies with adequate security controls should be able to inject cargo into the air transport system without the need for additional screening.
“If the entity applies the required security protocols established by TSA, including chain of custody from the warehouse or fulfillment center to the air carrier, the consignment should be deemed secure,” it said. But most companies will rely on certified cargo screening facilities and airlines to secure their export cargo because of the substantial capital and human resources needed to meet TSA standards for security controls, the express carrier predicted.
One well-connected industry source, who spoke on condition of anonymity so as not to upset professional ties with multiple parties, suggested FedEx and UPS could easily accommodate outbound screening of international shipments, but worry a scan-all mandate will become a slippery slope leading to calls for similar rules on the domestic side, where much greater volumes, aircraft and flights are involved.
Opponents also raise concern that other countries may not allow shipments from the alternative program to enter. While ICAO gives countries the option to use an enhanced trusted shipper approach, the European Union and other states are requiring 100% screening and could expect the same treatment in return.
Wade dismissed that notion, saying, “I don’t know that they’re going to refuse commerce based on someone not dotting the ‘i’ the way they did.”
With so much still unknown about what the regulatory requirements will be, cargo airlines are trying to figure out how much they will have to screen and how much volume will be handled by the freight forwarding community and the alternative program.
Atlas Air plans to use outsourced canine teams, “but we’re just not sure how much we’re going to have to do,” Wade said. “At least it won’t be all on us.”