Earlier this month, Simon Kaye, CEO of Jaguar Freight Services, a New York based supply chain solution provider (or “freight architect” as the company somewhat fancifully styles itself), wrote a very incisive piece on the IFW website broadly describing the contours of today’s security environment relative to logistics. Essentially, the gist of his article was that companies which fail to incorporate the most advanced technology and standardized security processes into their supply chain leave themselves needlessly vulnerable to the growing risk of cargo theft (see footnote below).

To combat the problem, Kaye recommended that companies implement a formal methodology such as the comprehensive and widely accepted International Organization for Standardization (ISO) 28000 framework for dealing with supply chain security management combined with deployment of the required technology needed to ensure its practical efficacy. Depending on circumstance, this technology may involve sophisticated electronic tracking and “geofencing” systems utilizing RFID and GPS technology or the implementation of more basic physical security devices such as communication enhanced electronic seals.

Aside from the obvious benefit of curtailing the risk of loss from theft that may be derived from taking such security precautions, Kaye also pointed out the important linkage that has developed in recent years between logistics security and customs compliance as regulatory agencies in North America and around the world increasingly utilize electronic communication between customs and business users to correlate and verify import/export declaration data.

Sophisticated technology is integral to unified customs/security processes for many major importing countries. The U.S. Customs and Border Protection agency (CBP) has created an Importer Security Filing (ISF) on maritime cargo that requires importers to submit advance security-related shipment information electronically, including detailed line item identification.

Similarly CBP’s Customs-Trade Partnership Against Terrorism (C-TPAT) is a cooperative cargo security effort encompassing the full supply-chain to ensure the integrity of security practices, and communicate and verify shipment information electronically. And U.S. government standards mandate 100% security screening of all cargo transported on aircraft, with select forwarders approved by the Transportation Security Administration (TSA) to use electronics to document the integrity of a shipment through stringent chain of custody methods.

With respect to trade compliance, Kaye’s conclusion is most pertinent to us here:

The international economy relies on the secure and efficient movement of goods through an increasingly extended multimodal transport system. The information required by ISO standards and complex customs regulations demands that shippers and logistics companies use sophisticated electronic tools. Government security and customs agencies are generally in synch with logistics organizations that know how to collect freight tracking and compliance data in a way that creates a provable, thorough and secure electronic trail.

That last sentence (highlighted for effect) is not only critically important to appreciating the mindset of regulatory administrations as regards to determining what constitutes a “trusted trader” for the purposes extending preferential customs treatment and expedited release at the border, but is essential for companies to take on board as a best practice when it comes to minimizing their exposure to risk by means of verifiable compliance standards and accountability measures.

Footnote: According to FreightWatch’s 2010 Annual Cargo Theft Report, industry-wide cargo theft rose by 4.1% in 2010. The food and beverage industry was the hardest hit, accounting for nearly 21% of the total theft activity, with an average loss value of $125,000 per incident. Electronics accounted for 19% of all cargo theft with an average loss per incident of $512,000.