COAC is a security risk for the U.S.

Dr. Jim Giermanski explains why he thinks the Advisory Committee on Commercial Operations (COAC) needs changes in order to effectively secure U.S. ports and borders

Many have questioned more than once the value of COAC, especially about its memberships self-interests. But now there is serious question about its role in the security of this nation's borders and ports. COAC's obvious weaknesses are two: first, its latest charter; and second, the self-interest of COAC's non-government membership that places protecting and promoting company and industry values over the greater security of U.S. trade infrastructure essential to our nation's economic base. It has value to the Department of Homeland Security that needs to claim it understands both trade and security for the political agenda of the Administration.

[ See also: Supply chain security: 5 game-changing forces ]

COAC's charter or purpose

In 2004, the COAC Charter was changed to reflect the added need to be concerned about homeland security within the new Department of Homeland Security's structure and mission. Specifically, the Charter stated:

The Committee shall advise the Secretaries of the Department of the Treasury and the Department of Homeland Security on the commercial operations of Customs and Border Protection (CBP) and related DHS and Treasury functions. It is expected that, during its eleventh two-year term, the Committee will consider such issues as: enhanced border and cargo supply chain security...and the CBP mission, and import safety.

Note: The Committee shall advise...on commercial operations. It is expected that...the Committee will consider... enhanced border and cargo supply chain security. In fact, the word security can only be found 7 times, 6 of which are its use in the title Department of Homeland Security. Words such as container, explosives, WMD, Chemical, Narcotic, Drug, Counterfeit, or Air are not found.

However, the word trade appears 3 times; twice in titles: Deputy Assistant Secretary for Tax, Trade and Tariff Policy and Office of Trade Relations; and as it directly relates to the qualifications of the membership.

Members are selected from representatives of the trade or transportation community served by CBP or others who are directly affected by CBP commercial operations and related functions. The members shall represent the interests of either importers (and their agents) or those associated with the carriage of international freight .... Members shall represent the interest of either importers (and their agents) or those associated with carriage of international freight and are not Special Government Employees as defined in section 202 (a) of Title 18, United States Code.

The Charter allows for subcommittees to be established, presumably to ensure that DHS and CBP obtain information from supply chain security experts. There is a subcommittee called Global Supply Chain Security Subcommittee (Committee).

COAC may establish subcommittees for any purpose consistent with this charter subject to the approval of the Co-chairs. Such subcommittees may not work independently of the chartered committee and must report their recommendations and advice to the COAC for full deliberation and discussion...other entity.

Subcommittee expertise in security and focus

In 2010, the membership of Committee consisted of 19 members. The membership represented typical areas of industry involving trade: import/export facilitators, manufacturers, trade specialists and facilitators, legal firms involved in trade compliance, insurance-related firms, customs brokers and forwarders, transportation firms, air transport association, and one lone seaport expert. A review of numerous minutes from this subcommittee designed to address supply chain security reveals the Committee's lack of experienced supply chain security experts, security technology experts, and transportation security experts. Most obvious is the absence of supply chain security technology experts. The Committee is not totally without expertise in security. Testimony on port security by one member disclosed a breadth and depth of knowledge regarding containers, seaport security and the vital role they play in sustaining our economy.

However, as expected, the membership's first objective seems to be to prevent the government from mandating unnecessary requirements that increase costs to the trade community. Besides weak qualifications in security, the Committee focus is also a detriment to our security. It appears that this membership is virtually consumed with the concept of "cost," and not the concept of supply chain security which when used, decreases costs and increases revenue and profit. It's clear that these industry representatives do not understand how certain costs result in profit and position the firm to improve its business posture and competitive advantage.

The challenge for the Committee, however, is to comprehend the value of national security connected to the supply chain efficiency and securityand to set expectations accordingly. More importantly, the Committee's paramount and overriding duty is to secure our ports and border, not to lobby for fewer CBP controls and mandates.

Solutions

First, the mandate of the subcommittee must be changed from "is expected that it will consider" to "it shall advise on supply chain security." Second, it is important that the mix of membership and backgrounds include the following type of executives or specialists: port security experts, border security experts, trade and intellectual property right experts, security corporate executives, and most of all supply chain security experts similar to those who belong to a newly formed national Cargo Intelligence and Security Association (CISA) which represents a cross section of security technology experts devoted to securing and improving the value and efficiency of supply chain as it links to our economy and who place security first.

Third, the role of the membership should include the advice and consul needed for DHS and CBP to do more be more engaging and cooperating with other nations in international efforts to secure the supply chain. To a certain degree in its Bottom Up Review Report, DHS has acknowledged this.

* Enhance Partner Capability and Capacity... important aspects of core homeland security mission activities.

* Deepen International Engagement.... We must work with key international partners to improve the critical partnerships and activities that affect the homeland security mission....

* Strengthen and expand DHS-related security assistance internationally (e.g. border integrity and customs enforcement security assistance) consistent with U.S. government security and foreign assistance objectives in consultation and coordination....

Fourth, it should learn more about the bottom-line benefits of supply chain security and security technology. A study on the value of smart container usage from Stanford University pointed to quantifiable benefits such as a 50 percent increase in access to supply chain data, a 38 percent drop in theft and similar losses, a 14 percent cut in excess inventory, and 29 percent reductions in overall transit times. The consulting firm BearingPoint has calculated returns of up to $700 per container per move. An A.T. Kearney report showed a savings of $1150 per container, per move, while the U.S. Congressional Budget Office stated savings of 0.8 percent of the value of a smart containers contents.

Finally, it is time for Committee members to take positions for and not against the value of technology's role in the securing of the supply chain: a position about which they appear to be uniformed. Not knowing about the value of supply chain security technology is no excuse for dismissing it as some recent statement of the Committee suggests. As quoted in feature on supply chain security in World Trade 100, "Earl Agron, of the wholly owned subsidiary of Singapore-based Neptune Orient Lines, a global transportation and logistics company engaged in shipping and related businesses, said there is little justification from either a business or security perspective for real-time visibility at die container level."

Today, ocean carriers, within hours of a container status change, record location data in their proprietary systems and make that data available to their customers," Agron said. "The supply chain security benefit of realtime container visibility is negligible. COAC Global Supply wholly owned subsidiary of Singapore-based Neptune Orient Lines, a global transportation and logistics company engaged in shipping and related businesses, said there is little justification from either a business or security perspective for real-time visibility at die container level.

"Today, ocean carriers, within hours of a container status change, record location data in their proprietary systems and make that data available to their customers," Agron said. "The supply chain security benefit of realtime container visibility is negligible.

The bottom line question is: Whose interests are represented on COAC's Global Supply Chain Security Subcommittee? For instance, in its meeting on October 7, 2010 Co-chair Earl Agron, in his opening remarks informed the Committee that there will be only ...twenty minutes allocated to Global Supply Chain Security at the November 9th COAC meeting. Again whose interests matter? The Global Supply Chain Security Subcommittee is just that: a security committee. Now it only needs to act like one. It's time to fix it, before it's too late to fix it, and fixing it must start with a change in its leadership.

Dr. Jim Giermanski is the Chairman of Powers Global Holdings, Inc., and President of Powers International, LLC, an international transportation security company.

This story, "COAC is a security risk for the U.S." was originally published by CSO.

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