In today’s economy, businesses are subject to a number of external factors that are not

within the direct control of a company, but can still have enormous effects on the company’s
decision-making, planning, and overall success of the business. Among many of these
outside factors is terrorism – defined as the unlawful use of violence and intimidation,
especially against civilians, in the pursuit of political aims. It is the indirect effects of
terrorism that create the most significant potential threat to the activities of businesses and
their supply chains.

The effects of terrorism can cause reduction in demand for goods and services, as a result
of the psychological response of consumers. The acts are designed to reach beyond the
immediate target to intimidate a larger audience, such as specific religious groups, political
parties, or an entire country. Terrorism is aimed at gathering publicity to introduce political
change by influence and power.

EXECUTIVE ORDERS, SUCH AS THE “HOMELAND SECURITY

ACT 2002”, WHICH CREATED THE COLOR-CODED
HOMELAND SECURITY ADVISORY SYSTEM (NTAS), AFFECT
THE SUPPLY CHAIN THROUGH POSSIBLE DELAYS AND
PROACTIVE MEASURES.
NTAS provides detailed information on terrorist threat levels, and recommends security
measures to the public, government agencies, airports, ocean ports, and other hubs.
Changes in government policies, laws and regulations may also take effect as a response
to a terrorism threat or recent act of terrorism. Post-9/11, under President George W. Bush,
the Global War on Terrorism was launched which enacted a series of laws and executive
orders that have affected our everyday lives, as well as businesses.

IMPROVED SECURITY CAN REDUCE THE EFFICIENCY OF A

BUSINESS’S DAILY OPERATIONS, DUE TO GREATER
INSPECTIONS AND SAFEGUARDS THAT SLOW THE FLOW OF
GOODS.
A random customs inspection at an ocean port can take from a few days to a more than a
week. For some containers that are traveling through intermodal rail, there may be random
inspections at the final rail ramps, which are even more costly as most U.S railroads allow
only two business days of free time. Changes in government policy can increase the cost of
business, and prove to be more detrimental to the business than the original terrorist events
that may have created them. Trade is also reduced, as purchasing power decreases from
loss of income when production is disrupted. Within manufacturing, the effects of terrorism
can be found more damaging to high-skilled production than low-skilled production.

A MEASURE IMPLEMENTED POST-9/11 IS THE CUSTOMS-

TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT.)
It is a voluntary supply chain security program, led by U.S. Customs and Border Protection,
focused solely on improving the security of private companies supply chains with respect to
terrorism. C-TPAT was launched in November 2001, with only seven initial members, but as
of December 1, 2014, the program had 10,854 members with 4,315 importers in the
program, accounting for 54% of the value of all goods imported into the U.S. Companies
who achieve C-TPAT certification are required to have a documented process for accessing
and alleviating risk throughout their international supply chain. This designates companies
as low-risk, allowing them to benefit from expedited processing, including fewer customs
inspections.

Suddenly, every plane, ship and container became suspect. Back then, vessels
carrying freight would arrive at U.S. ports uninspected, and containers’ contents were
often unknown to Customs and Border Protection (CBP). Then, the looming threat of
terrorism forced the government to demand more information, placing the burden of
security on supply chains.
Yet, the post-9/11 supply chain has arguably become much more efficient today than
it was before the attack, according to Jon Slangerup, Chairman and CEO at American
Global Logistics. In identifying shippers – collecting and sharing data in the process –
and better understanding the cargo hand-off points, government agencies and industry
stakeholders worked together to improve safety without compromising the speedy
movement of product.
“What we encountered since 9/11 was an understanding of how silo-driven the
management of those supply chains were, and to some extent still are,” Slangerup told
Supply Chain Dive. “The various agencies involved in protecting people and assets
pulled together very quickly.”
In the sixteen years since 9/11, these gained efficiencies have translated into bottom-
line gains, as the cost of shipping as a percentage of a product’s total cost has fallen.
Here are five of the main changes that made this happen:
Data led to supply chain efficiency
Since 9/11, there’s been a lot of attention paid to the points where cargo changes
hands: from origin of manufacturing, to shipper, to marine terminal for loading, to
ocean carrier, to marine terminal for offloading, to rail and trucking, to the warehouse
and distribution centers.
“That’s where the risk and cost lie,” said Slangerup. Once the cargo is on a vessel, the
content is already known and screened. With increased pre-shipping data
requirements due to post-9/11 security concerns, the supply chain was forced to create
efficiencies in the hand-offs, where money and time are often wasted, said Slangerup.
As a result, the cost to move goods is a smaller proportion of the sale price to the end
user than it was 10 years ago, he said.
Information and data leads to visibility and answers as to when a shipper can expect
their goods to show up on the dock or warehouse. Using data, companies can see
where the breakdowns occur in the supply chain, to make corrections.
The ocean shipping industry is taking more time from a visibility perspective than the
air industry, because of the multi-nation integration needed to share information
without giving away a competitive advantage. Like the airline industry has already
done, the ocean side is now forming alliances to help integrate information and cross-
sell.
“This revolution of information started with the small package industry in the early
1980s, with companies like FedEx and UPS,” Slangerup said. By the time of 9/11,
those same companies already had significant information tools available to them to
more easily comply with increased scrutiny. Those that didn’t have those tools in
place had to scramble to get them. The air freight side was in better shape to do that
than the ocean freight side, which is catching up.
Screening at origin
The Container Security Initiative (CSI) was implemented in January 2002. “It forced
upstream the actual inspection or screening of containers at origin,” instead of
inspection and risk mitigation left until arrival at the destination, said Slangerup.
U.S. Customs officers work with foreign counterparts at 58 foreign ports to assess
container security before they’re loaded onto the vessels. When the cargo arrives
onshore in the U.S., it goes through similar examination. These actions dramatically
improved the risk profile for moving ocean freight.
Interestingly, inspections have not delayed importing time to the U.S., said Geoffrey
Powell, president of the National Customs Brokers & Forwarders Association of
America (NCBFAA), which represents operators in international trade.
The reason? More advanced data. CBP has visibility via data on all the shipments
prior to loading. The data package, including automated manifests and Importer
Security Filings (ISF), and the entry package must be submitted earlier than in pre-
9/11 days.
Advanced filings and timeline shifts
Before 9/11, exporters could deliver their cargo two days before vessel sailing, and
get it on board. The documents and data weren’t needed until the ship sailed, or even a
few days later. That’s changed. While an exporter might have a five-day window to
deliver the cargo for loading, the data is required on day three, even if the cargo
arrives on day four or five.
“That shortens the window and pressures companies to get the data out earlier. It’s
the data that’s driving deliveries, as opposed to physical drop-offs and loading,”
Powell said.

In 2002 the U.S. government started requiring advanced or automated manifests. All
carriers have to submit these automated manifests to CBP before loading the cargo, to
allow for electronic or manual screening.
In 2009, the government required ISF. “Importers (or shipping agents) became liable
for the information provided to customs, before the goods arrived at the port,” said
Powell.
Developing ways to reduce container examinations
In November 2001, the government developed a known importers program, which
became Customs-Trade Partnership Against Terrorism (C-TPAT). The idea is for
participating companies to benefit from fewer cargo examinations and expedited
shipping when there’s a port delay.
While there’s not a similar program for exporters, that’s something that various U.S.
agencies are working on, to show that companies are meeting export regulations.
Congress initiated the SAFE Ports Act in 2006, requiring that every container be
examined prior to entry. Initially with this program, though, there was concern that
ship traffic would back up, so the government has had to balance trade facilitation
with security and compliance needs, said Powell.
Increased agency cooperation
“Cooperation is the most amazing thing to come out of this (post-9/11 security
initiatives), and doing that in a way that did not affect the performance or efficiency of
the supply chain,” said Slangerup. That includes multi-agency data integration and
sharing, that goes beyond the U.S. borders. “The cooperation between the CBP and
their counterparts across the various origin points of shipping has been remarkable,”
said Slangerup.
Freight scrutiny by other countries
While these changes focus on freight security coming into the U.S., the industry is
also concerned with what other countries may require of U.S. exports, given the
changes made in their ports.
CBP is a member of the World Customs Organization (WCO) and has been working
with the other 180 members to try to standardize the process for all customs
organizations. They’re working on an Authorized Economic Operator (AEO)
program, which is a combination of the Importer Self-Assessment program and C-
TPAT, for example.
“What would be the impact on us as exporters if they imposed this on us, and this
became global?” said Powell.
When commodity futures trading was temporarily halted, and
international air, and cross-border imports of
perishable commodities from Canada and Mexico were briefly
stopped, the agricultural industry suffered major financial losses.
Not only several firms have been directly hit by the destruction of the Twin Towers, having
their offices inside those buildings, but almost every supply chain was affected by the
closing of US airspace grounding of the planes and by the closure of the borders that
immediately followed. Ford, for example, had to shut down five of its U.S. plants, partly
because it could not get enough parts from suppliers in Canada. The result was a 13
percent drop in production in that quarter (Andel, 2002).
The U.S. Government response not only affected business operations in the aftermath of the
attack, but it is still influencing international shipments through new regulations, thus extending
the impact to global firms. The U.S. Customs is now strongly encouraging importers and freight
carriers to certify their sources and assume responsibility for cargo security (Custom-Trade
Partnership Against Terrorism).

New
“Even before 11 September 2001, operations in the Port of New York and New Jersey
always involved challenges. But after the attacks on the World Trade Centre, the demands
faced by the shipping industry increased drastically throughout the United States. As a
direct result of 9/11, the Department of Homeland Security - along with other local, state
and federal agencies - implemented a raft of stringent regulations that have had a dramatic
impact on the maritime industry.

“Heightened port security means that Captains must file an Electronic Notice of Arrival
(ENOA) in advance. Failure to provide this information to the U.S. Coast Guard 96 hours
before arrival will - without a doubt - increase the likelihood of the ship being held out of
port for up to four days, at great cost. Not only do the ships and crew come under close
scrutiny from the US authorities, so does the cargo. Carriers are required to provide details
of cargo being brought into the USA to US Customs and Border Protection (US CBP) well
in advance of the ships arrival.

“Automated Manifest System (AMS) regulations require any ship carrying cargo into any
US port, either for discharge or in transit, to submit an electronic cargo manifest to US
CBP. Bulk and break bulk vessels must transmit their manifest within 24 hours of arrival
at their first US port; all other vessels must transmit 24 hours prior to loading. However,
CBP has a requirement that for all ships the departure date and time from load port must
be filed within 24 hours of departure from the load port. We recommend our customers
that it is best to submit the AMS with preliminary data on departure and submit an
amendment afterwards, if necessary.

“Even a decade after 9/11, legislation continues to develop and evolve to counter the threat
of terrorism. Since January 26, 2009, container lines and their customers have to submit an
Importer Security Filing (ISF) 24 hours prior to loading. This is commonly known as 10+2
filing as it requires importers to submit 10 data elements about the shipment and the
carrier to submit a further two.

“The International Ship and Port Facility Security (ISPS) Code was created by the
International Maritime Organization (IMO) in the wake of 9/11, defining much stricter
security measures for both terminal operators and seagoing vessels. Further, the
Transportation Workers Identity Credential (TWIC Card) has been implemented by the
Department of Homeland Security to ensure access to ports and terminals is restricted only
to those who have passed the necessary background checks.

“Once, matters like shore leave, deliveries across the dock and easy access to vessels were
simple and routine. But times have changed. A greater burden is now placed on owners,
Masters, crews and agents. Repatriating crew from the US to their homeland now involves
a complex process that, in certain ports, requires off-signers to be on a flight and have left
the country before the ship has set sail.

“Those extra measures have increased everybody’s workload. Masters rely on their ship
agents to know all the regulations and guide them. Daily operations now involve more
notifications, advance information and a whole lot more energy to ensure that everything is
done properly, effectively and according to law.”