feature article

June 2006

Weighing the costs of security

By Sandra I. Erwin

A smorgasbord of legislation and policy directives aimed at patching up security at U.S. ports in recent years has resulted in expenditures of billions of dollars worth of protective systems and technologies.

But there is lingering confusion among government and industry circles on major issues — such as what level of protection is needed against what threats, and the possible financial implications that the increased security ultimately will have on maritime commerce.

A patchwork of civilian and military agencies — in addition to private firms that manage port terminals — make for a complex web of authorities that oversee port security. Trying to pinpoint exactly who is in charge of port security nationwide is rather puzzling, notes Jonah J. Czerwinski, a homeland security analyst at the Center for the Study of the Presidency. “There’s no one answer,” he says. “In a macro sense, it’s the government and the private sector.” While the Coast Guard has the majority of the security responsibilities, the Customs and Border Protection agency is in charge of the terminal, along with the contractors who operate the port.

Of concern to port managers, particularly, is the lack of standard policies and security requirements, as well as the yet-undermined costs of implementing the added security, says Gary Brown, a retired Marine Corps brigadier general who runs a port security center at the University of Tampa, Fla.

Brown says he met with several private-sector port directors who claim that there is “conflicting information coming from federal agencies.”

Port managers, he says, “want some sort of policy that is consistent, that’s understandable.” Maritime transportation security laws and Department of Homeland Security regulations, for example, require port operators to erect fences around the terminals or to install additional lighting, but don’t specify what type of fence or lights. These broadly stated mandates frustrate port managers, Brown says, because it forces them to rely on the recommendations from contractors who sell this equipment, rather than from unbiased experts.

Port security officials at the Department of Homeland Security could not be reached for comment. According to one DHS spokesman, the science and technology branch of the department plans to set standards for security equipment, but he declined to elaborate. Another spokesman says that technology standards are not the purview of DHS, but of the National Institute of Standards and Technology.

Coast Guard officials and port directors who met with Brown told him they are exposed to a steady stream of vendors who offer security cameras, access portals, detector devices and other pieces of hardware. But port authorities have no easy way to check if these technologies are satisfactory solutions, or how they work with the other systems in the port.

The cost of security is no small matter for port directors who work for profit-making companies. “They are given security requirements that are unfunded,” says Brown. These costs are passed on to the port’s customers — the shipping companies — and port managers worry that these shippers eventually will take their business elsewhere, Brown says.

West Coast ports, such as Seattle and Long Beach, fear losing business to Canada and Mexico once they begin to raise shippers’ fees to pay for the cost of security. These fees could be as high as $20 per container, Brown says. “The cost they have to pass on to customers makes them non-competitive.”

Czerwinski disagrees. He says it is doubtful that raising shippers’ fees will drain business from U.S. ports.

“Everybody passes the cost to the customer,” says Czerwinski. “If the shippers begin to send shipments to foreign ports, it’s up to the U.S. government to say it won’t accept cargo unless it goes through domestic ports that have the added security.”

The port of Hong Kong serves as a test case for what may play out in the United States, says Czerwinski. A pilot program by the world’s largest shipping company, Hutchinson Port Holdings, already has proven that higher shipping fees to cover security costs have an insignificant financial impact, he says. “The study so far shows it would add $6 to $20 per container … It’s pretty negligible for a shipper.”

The cost of security, Czerwinski says, is a red herring. “I think the math is being skewed by contrarians who say it’s an undue burden on the private sector.”

Shippers also may be saddled with additional audit costs if Congress passes legislation — currently still under deliberation — that would require every company that ships containers to the United States to be certified by an independent firm as being compliant with U.S. security regulations.

More than 7,000 companies currently ship containers to the United States, but fewer than 10 percent have had their security procedures validated by the U.S. government. And the validation is strictly voluntary. The proposed legislation would make it mandatory for all 7,000 firms to undergo an independent audit — to be performed by contractors authorized by the U.S. government.

The third-party audit concept started out as a white paper written by R. Carter Pate, managing partner of PricewaterhouseCoopers.

He suggests that the Department of Homeland Security qualify a list of vendors that would be approved to audit foreign shippers. The shippers would pay for the audit costs, which could range from a few hundred dollars to several thousand dollars, depending on the number of containers they ship to the United States.

Pate contends this approach is less expensive than inspecting every container. And it is far less costly than having to shut down port operations if suspicious items are found. The Coast Guard estimated that the closure of a single major port for just one month because of a terrorist attack could cost the United States $60 billion in economic losses, Pate says. “We are the largest market in the world, so if you want to ship here … our nation has a need for security.” He predicts some shippers — small ones most likely — could end up dropping out of the market as a result of the financial burdens of shipping containers to the United States.

Most of the security measures that already are in place, as well as those planned for the future, target the so-called “nukes-in-a-box” scenario, where terrorists smuggle a radioactive device inside a shipping container. The Department of Homeland Security requested $535 million in fiscal year 2007 for domestic nuclear detection — an increase of 70 percent. A portion of those detectors will be installed at seaports. “They perceive it as a serious threat,” Czerwinski says. Even a low-grade radiological dispersion device could wreak havoc by forcing a port to shut down.

Although the dirty-bomb scenario is widely accepted as the most likely threat, it is far from clear whether fears of smuggled nukes are drawn from Clancy-esque fiction or from actual facts, analysts aver. Homeland security efforts “waste scarce resources by focusing on the least likely maritime threats,” write Alane Kochems and James Jay Carafano, research fellows at the Heritage Foundation. “The U.S. simply cannot ‘child proof’ the entire supply chain, eliminating every conceivable vulnerability and opportunity to attack U.S. interests,” they assert in a recent policy brief.

“One such example is the misguided call by some members of Congress to inspect every container bound for the United States because one could possibly be used to smuggle a nuclear weapon or a ‘dirty’ bomb.”

The nuke-in-a-box is an unlikely terrorist tactic, say the analysts. “If an enemy wanted to smuggle a bomb into the United States, an oil or chemical tanker, roll-on/roll-off car carrier, grain or other bulk vessel, or even private watercraft would be a more logical and secure way to transport it, either directly to the target or indirectly by landing it in Mexico, Canada, or the Caribbean, and then moving it across a remote section of the U.S. border.

“Indeed, logic suggests that a port is more likely to be attacked from land than from sea … Terrorists would likely construct smaller items domestically, and then deliver them through FedEx.”

While nuclear smuggling is possible, says Carafano, so are dozens of other scenarios. “Over-investing in countering one tactic when terrorists could easily employ another is dangerously myopic … As a matter of common sense, the United States should not attempt to make every cargo container and port into a miniature Fort Knox.”

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