Air Cargo Bomb Plot Could Raise Costs, but Who Pays?
Security fears triggered by the air freight bomb plot could increase the costs of global trade and fuel debate over the technology needed to screen packages and who should pay for it, transport officials said on Sunday.
Two air packages containing bombs —both sent from Yemen and addressed to synagogues in Chicago—were intercepted in Britain and Dubai on Friday.
One of the packages was found on a United Parcel Servicecargo plane at East Midlands Airport, north of London. The other was discovered in a computer printer cartridge in a parcel at a FedEx facility in Dubai.
The plot could speed up calls for wider use of sophisticated imaging technology designed to detect explosives, which is not standard, but freight firms are reluctant to bear the full cost.
"The technology used for screening of cargo, typically by X-ray, ... doesn't have explosive detection capacity, but it does enable them to find most things," said Norman Shanks, a former head of security at the British airports operator.
But cleverly concealed devices like this might suggest that there will have to be an ability for an explosive detection capacity such as CT (computed tomography)," said Shanks, who now works as a specialist aviation security consultant.
Tomography is a medical scanning technology designed to display sectional images. Its attraction for security firms was highlighted when France's Safran (SAF.PA: Quote, Profile, Research, Stock Buzz) paid $580 million a year ago for 81 percent of GE Homeland Protection (GE.N: Quote, Profile, Research, Stock Buzz), which supplies the technology.
British Home Secretary (interior minister) Theresa May said security around air cargo arriving in Britain was being reviewed, but stopped short of saying a tighter system was being planned.
Marco Sorgetti, director-general of CLECAT, a European association of freight-forwarding companies, said there were fears of a knee-jerk reaction to the security scare.
"Although this is a clear example where targeted investigation pays, some will say this is why we need 100 percent scanning. What happened doesn't make it (100 percent scanning) one inch better in terms of risk analysis, but emotionally people will say we have to do this."
Freight firms clashed with U.S. and European policymakers last year over calls for 100 percent scanning of sea containers. Plans to introduce full scanning from 2012 were postponed.
Shippers say targeted intelligence work is more effective than faith in a blanket technological approach with no guarantee of success, given the minute quantities needed to pose a threat. They say the intelligence tip-offs linked to Friday's discovery demonstrate that existing systems work.
But some analysts say the cargo industry has for long enough escaped the stringent attention given to passenger security, or freight carried in the cargo holds of passenger airliners.
"Although there has been a lot of talk about the air cargo security regulations, most of these regulations affect the cargo that is placed on commercial passenger aircraft, not all-cargo operators," said Jeff Price, lead author of "Practical Aviation Security: Predicting and Preventing Future Threats."
The World Customs Organization distinguishes between screening -- risk assessment based on the origin and other information; scanning -- which involves X-ray or gamma-ray machines scanning closed packages; and full physical inspection.
Shanks said introducing full scanning globally would be unaffordable -- but authorities may toughen a two-tier approach:
"I think it will have to be affordable for packages of cargo coming out of countries that are known in the past to have caused problems. This will have to be a cost that is either picked up by the state itself or added onto the shipment."
FedEx (FDX.N: Quote, Profile, Research, Stock Buzz) and UPS (UPS.N: Quote, Profile, Research, Stock Buzz), respectively the world's largest and second largest carriers of air freight by volume, are just the tip of a multi-billion-dollar logistics industry responsible for keeping global supply chains running smoothly.
"In the past five or six years we saw logistics costs go up due to the movement of production plants to other areas in the world. A big security focus might put the costs up further," said Nicole Geerkens, top executive at the European Logistics Association.
"Now there is a trend where people are considering whether to in-source," or repatriate production, she added.
Analysts say logistics represent up to 15 percent of the value of goods, depending on the type of business and economy.
"Depending on how you look at it, logistics probably cover about 10 percent of everyone's lifestyle," Sorgetti said.
The plot puts worldwide attention on security just as cargo companies struggle to maintain a recovery in air shipments seen over the past year. Any lasting economic damage may be felt more widely.
"It's our response that achieves the true outcomes of the attack, not the attack itself," said Price.
"Recall the after-effects of 9/11. Economic recession, airline bailouts, the largest governmental bureaucracy created since World War Two. We now spend billions of dollars a year on homeland security, and the attacks have forever changed the way in which we travel."