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United States Government Accountability Office: 
GAO: 

Testimony: 

Before the Subcommittee on Border and Maritime Security, Committee on 
Homeland Security, House of Representatives: 

For Release on Delivery: 
Expected at 10:00 a.m. EST: 
Tuesday, February 7, 2012: 

Supply Chain Security: 

Container Security Programs Have Matured, but Uncertainty Persists 
over the Future of 100 Percent Scanning: 

Statement of Stephen L. Caldwell, Director: 
Homeland Security and Justice: 

GAO-12-422T: 

GAO Highlights: 

Highlights of GAO-12-422T, a testimony before the Subcommittee on 
Border and Maritime Security, Committee on Homeland Security, House of 
Representatives. 

Why GAO Did This Study: 

Why GAO Did This Study
Cargo containers that are part of the global supply chain—the flow of 
goods from manufacturers to retailers–are vulnerable to threats from 
terrorists. The Maritime Transportation Security Act (MTSA) of 2002 
and the Security and Accountability For Every (SAFE) Port Act of 2006 
required the Department of Homeland Security (DHS) to take actions to 
improve maritime transportation security. Also, the Implementing 
Recommendations of the 9/11 Commission Act of 2007 (9/11 Act) 
required, among other things, that by July 2012, 100 percent of all 
U.S.-bound cargo containers be scanned. Within DHS, U.S. Customs and 
Border Protection (CBP) is responsible for container security programs 
to address these requirements. This testimony addresses, among other 
things, (1) efforts to gather advance information about container 
shipments to assess risks, (2) technologies used to protect the 
integrity of containers and scan them, and (3) the status of efforts 
to scan 100 percent of U.S.-bound containers. GAO’s statement is based 
on products issued from April 2005 through July 2011, along with 
selected updates conducted from January to February 2012. Updates 
involved collecting information from CBP on the status of efforts to 
address GAO’s prior recommendations on these issues and its plans to 
implement 100 percent scanning. 

What GAO Found: 

As part of its efforts to identify high-risk cargo for inspection, CBP 
uses various sources of information to screen containers in advance of 
their arrival in the United States. For example, in 2009, CBP 
implemented the Importer Security Filing and Additional Carrier 
Requirements to collect additional information for targeting. The 
additional cargo information required, such as country of origin, is 
to be provided to CBP in advance of arrival of the cargo containers at 
U.S. ports. In September 2010, GAO recommended that CBP establish 
milestones and time frames for updating its targeting criteria to 
include the additional information. In response, CBP updated its 
targeting criteria in January 2011. 

DHS has made some progress in developing and implementing container 
security technologies to protect the integrity of containers and to 
scan them. GAO reported in September 2010 that DHS’s Science and 
Technology Directorate initiated four container security technology 
projects to detect and report intrusions into cargo containers. 
However, operational testing had not occurred to ensure the prototypes 
would function as intended. Therefore, GAO recommended that testing 
and evaluation occur in all environments in which DHS planned to 
implement the technologies. DHS concurred and has made progress 
implementing this recommendation. To prevent the smuggling of nuclear 
and radiological materials, CBP, in coordination with the Domestic 
Nuclear Detection Office (DNDO), has deployed over 1,400 radiation 
portal monitors (RPM) at U.S. ports of entry to detect the presence of 
radiation in cargo containers. Since 2006, GAO reported on problems 
with DNDO’s efforts to deploy a more-advanced and significantly more-
expensive type of RPM. Among other things, GAO reported that an 
updated cost-benefit analysis might show that DNDO’s program to 
replace existing equipment with the advanced technology was not 
justified. After spending more than $200 million, DHS ended the 
program in July 2011. 

Uncertainty persists over how DHS and CBP will fulfill the mandate for 
100 percent scanning given that the feasibility remains unproven in 
light of the challenges CBP has faced implementing a pilot program for 
100 percent scanning. In response to the SAFE Port Act requirement to 
implement a pilot program to determine the feasibility of 100 percent 
scanning, CBP, the Department of State, and the Department of Energy 
announced the formation of the Secure Freight Initiative (SFI) pilot 
program in December 2006. However, logistical, technological, and 
other challenges prevented the participating ports from achieving 100 
percent scanning and CBP has since reduced the scope of the SFI 
program from six ports to one. In October 2009, GAO recommended that 
CBP perform an assessment to determine if 100 percent scanning is 
feasible, and if it is, the best way to achieve it, or if it is not 
feasible, present acceptable alternatives. However, to date, CBP has 
not conducted such an assessment or identified alternatives to 100 
percent scanning. Further, as GAO previously reported, DHS 
acknowledged it will not be able to meet the 9/11 Act’s July 2012 
deadline for implementing the 100 percent scanning requirement, and 
therefore, it expects to grant a blanket extension to all foreign 
ports pursuant to the statute, thus extending the target date to July 
2014. To do so, DHS is required to report to Congress by May 2, 2012, 
of any extensions it plans to grant. 

What GAO Recommends: 

GAO has made recommendations in past reports to DHS to strengthen its 
container security efforts. DHS concurred with GAO’s recommendations 
and has either addressed them or is undertaking efforts to address 
them. 

View [hyperlink, http://www.gao.gov/products/GAO-12-422T]. For more 
information, contact Stephen L. Caldwell at (202) 512-9610 or 
caldwells@gao.gov. 

[End of section] 

Chairman Miller, Ranking Member Cuellar, and Members of the 
Subcommittee: 

I am pleased to be here today to discuss the status of federal efforts 
to enhance the security of maritime cargo containers used for shipping 
many imports to the United States. The potential for terrorists to 
smuggle weapons of mass destruction (WMD) inside cargo containers 
bound for the United States has remained a concern since the terrorist 
attacks of September 11, 2001. Cargo containers are an important 
segment of the global supply chain--the flow of goods from 
manufacturers to retailers. In 2011, about 10.7 million oceanborne 
cargo containers arrived at U.S. ports, and according to the U.S. 
Department of Transportation, the majority of U.S. imports arrive by 
ocean vessel.[Footnote 1] The typical supply chain process for 
transporting cargo containers to the United States involves many steps 
and participants. For example, the cargo containers, and the goods in 
them, can be compromised not only by the manufacturers or suppliers of 
the goods being shipped, but also by vessel carriers who are 
responsible for transporting the containers from foreign ports to U.S. 
ports, as well as by personnel who load and unload cargo containers 
onto and off vessels.[Footnote 2] 

Given the complexity of the global supply chain process and the vast 
number of cargo containers that are shipped to the United States each 
year, the global supply chain is vulnerable to threats that terrorists 
and criminals might be able to exploit. As we reported in October 
2009, while the Department of Homeland Security (DHS) has noted that 
the likelihood of terrorists smuggling WMD into the United States in 
cargo containers is low, the nation's vulnerability to this activity 
and the consequences of such an attack--such as billions of losses in 
U.S revenue and halts in manufacturing production--are potentially 
high.[Footnote 3] 

November of 2012 will mark the 10th anniversary of the enactment of 
the Maritime Transportation Security Act (MTSA) of 2002,[Footnote 4] 
which, among other things, called for the establishment of a program 
to evaluate and certify secure systems of international intermodal 
transportation, including standards and procedures for screening and 
evaluating cargo prior to loading and for securing and monitoring 
cargo while in transit.[Footnote 5] In 2006, the Security and 
Accountability For Every (SAFE) Port Act,[Footnote 6] which amended 
MTSA, required DHS to develop, implement, and update as appropriate a 
strategic plan to enhance the security of the international supply 
chain.[Footnote 7] To address concerns regarding international supply 
chain security, U.S. Customs and Border Protection (CBP), a component 
of DHS, developed a layered security strategy for cargo containers. 
Core components of the layered security strategy include analyzing 
information to identify containers that may be at high risk of 
transporting WMD or other contraband, working with governments of 
other nations to examine containers CBP has determined to be high risk 
before such containers are loaded onto U.S.-bound vessels at foreign 
ports, and providing benefits to companies that comply with 
predetermined security measures. 

The SAFE Port Act further requires that pilot projects be established 
at three ports to test the feasibility of scanning 100 percent of 
U.S.-bound containers at foreign ports.[Footnote 8] In August 2007, 
the Implementing Recommendations of the 9/11 Commission Act of 2007 
(9/11 Act) was enacted,[Footnote 9] which requires, among other 
things, that by July 2012, 100 percent of all U.S.-bound cargo 
containers be scanned at foreign ports with both radiation-detection 
and nonintrusive inspection equipment before being placed on U.S.-
bound vessels,[Footnote 10] with possible extensions for ports at 
which certain conditions exist.[Footnote 11] Further, in July 2007, 
DHS issued the strategic plan called for in the SAFE Port Act, 
entitled the Strategy to Enhance International Supply Chain 
Security,[Footnote 12] and on January 23, 2012, the administration 
issued the National Strategy for Global Supply Chain Security, 
[Footnote 13] which describes a strategy for promoting the efficient 
and secure movement of goods and fostering a resilient supply chain. 

DHS and CBP have taken various actions to enhance maritime container 
security. As requested, this statement addresses our work in this area 
and includes the following topics: 

* efforts to gather advance information about container shipments to 
assess the risks of these containers, 

* technologies used to protect the integrity of containers and to scan 
them to detect WMD and other contraband, 

* partnerships with foreign governments and the private sector to 
improve container security efforts, and: 

* the status of efforts to scan 100 percent of U.S.-bound cargo 
containers. 

This statement is based on related GAO reports and testimonies issued 
from April 2005 through July 2011, which addressed various programs 
that constitute CBP's layered security strategy, along with selected 
updates conducted from January 2012 to February 2012.[Footnote 14] For 
our prior reports and testimonies, among other things, we analyzed CBP 
documents; reviewed legal documentation; and interviewed foreign 
government, DHS, CBP, and trade industry officials. We also conducted 
site visits to select ports that participate in CBP's container 
security programs and CBP's National Targeting Center - Cargo. 
[Footnote 15] Additional details on the scope and methodology for 
those reviews are available in our published products. For the 
updates, we collected information from CBP on actions it has taken to 
address recommendations made in prior GAO reports on which this 
statement is based. We also reviewed publicly available documents, 
such as CBP's budget justifications for fiscal years 2011 and 2012 and 
the administration's National Strategy for Global Supply Chain 
Security, for information regarding DHS's and CBP's plans for 
implementing the 100 percent scanning requirement. We conducted this 
work in accordance with generally accepted government auditing 
standards. 

CBP Has Various Tools for Targeting U.S.-Bound Cargo Containers for 
Inspections: 

As part of its efforts to target high-risk cargo containers for 
inspection, CBP uses various sources of information to screen 
containers in advance of their arrival in the United States. 
Specifically, CBP's 24-hour rule requires that vessel carriers submit 
cargo manifest information to CBP 24 hours before U.S.-bound cargo is 
loaded onto a vessel. To further enhance CBP's ability to target high-
risk shipments, in 2006 the SAFE Port Act required CBP to collect 
additional data related to the movement of cargo to identify high-risk 
cargo for inspection,[Footnote 16] and in 2009 CBP implemented the 
Importer Security Filing and Additional Carrier Requirements, 
collectively known as the 10+2 rule.[Footnote 17] The cargo 
information required by the 10+2 rule comprises 10 data elements from 
importers, such as country of origin, and 2 data elements from vessel 
carriers, such as the position of each container transported on a 
vessel, all of which are to be provided to CBP in advance of arrival 
at a U.S. port. Some of the data are required to be submitted prior to 
loading the container onto a U.S.-bound vessel.[Footnote 18] 
Additionally, the United States has worked to expand the program 
beyond domestic implementation by coordinating with the World Customs 
Organization (WCO)[Footnote 19] to incorporate some of the 10+2 data 
elements into the international supply chain security standards, which 
are discussed later in this statement. (Figure 1 illustrates where 
CBP's container security programs intersect with the key points of 
transfer in the global supply chain.) 

Figure 1: Global-Supply Chain Process: 

[Refer to PDF for image: illustration (includes 7 photographs] 

Foreign factory: 
Manufacturers or importers that pack and seal containers           
may be members of the Customs-Trade Partnership Against Terrorism.[A] 
If so, they are considered trusted shippers previously vetted by CBP.  

Packing and sealing container [photograph]: 
Importers and carriers provide advance data to CBP, which uses the 
Automated Targeting System[B] to analyze data and identify high-risk 
containers.  

Entry to foreign port of embarkation [photograph]: 
Before loading, if the container is being loaded at a Container 
Security Initiative[C] port, CBP works with host-country Customs 
officials to identify and scan high-risk containers using nonintrusive 
inspection equipment and radiation portal monitors.  

Loading on vessel [photograph]: 

In transit [photograph]: 
While in transit, importers and carriers provide status and updates on 
containers for CBP to analyze again using the Automated Targeting 
System. 

Arriving at the U.S. port, unloading [photograph]: 
High-risk containers that were not previously scanned at a Container 
Security Initiative port are scanned in the United States using 
nonintrusive inspection equipment. 

Dwelling on terminal [photograph]: 
All containers leaving a U.S. port, regardless of risk level, are 
scanned for radiation by passing through radiation portal monitors 
prior to exit.  

Exiting terminal [photograph]: 

Source: GAO (analysis); GAO and DNS S&T (photos) and Art Explosion 
(clipart). 

[A] The Customs-Trade Partnership Against Terrorism is a voluntary 
program designed to improve the security of the international supply 
chain while maintaining an efficient flow of goods. Under this 
program, CBP officials work in partnership with private companies to 
review their supply chain security plans to improve members' overall 
security. 

[B] The Automated Targeting System is a mathematical model that uses 
weighted rules to assign a risk score to arriving cargo shipments 
based on shipping information. CBP uses the Automated Targeting System 
as a decision support tool in targeting cargo containers for 
inspection. 

[C] The Container Security Initiative places CBP staff at 
participating foreign ports to work with host country customs 
officials to target and examine high-risk container cargo for weapons 
of mass destruction before they are shipped to the United States. CBP 
officials identify the containers that may pose a risk for terrorism 
and request that their foreign counterparts examine the contents of 
the containers. 

[End of figure] 

Data that CBP collects on U.S.-bound cargo containers and their 
contents are fed into the Automated Targeting System (ATS)--a 
computerized model that CBP uses as a decision-support tool in 
targeting cargo containers for inspection.[Footnote 20] Specifically, 
within ATS, CBP uses various data elements to determine an overall 
risk score for a particular threat in a shipment. CBP officers use 
these scores to help them make decisions on the extent to which 
documentary reviews or nonintrusive inspections are to be conducted on 
cargo containers. In our September 2010 report on the implementation 
of the 10+2 rule, we recommended that CBP establish milestones and 
time frames for updating ATS to use the 10+2 data in its 
identification of shipments that could pose a threat to national 
security. In response to this recommendation, CBP took steps in 
January 2011 to improve targeting efforts by updating its targeting 
criteria in to include risk factors present in the 10+2 data.[Footnote 
21] We recently began a review of the effectiveness of ATS as part of 
CBP's targeting efforts and plan to issue a report later this year. 
[Footnote 22] 

DHS Has Made Some Progress in Implementing Technologies to Improve 
Container Security: 

Container Security Technologies Are Intended to Detect Intrusion and 
Track Movement: 

As we reported in September 2010, DHS's Science and Technology 
Directorate (S&T) initiated four container security technology 
projects,[Footnote 23] in part, in response to general MTSA 
requirements,[Footnote 24] as well as CBP's need for technologies to 
detect intrusion and track the movement of containers through the 
supply chain.[Footnote 25] Specifically, a CBP study recognized that 
existing container seals provided inadequate security against physical 
intrusion (e.g., removing a container door to bypass a container seal) 
and therefore CBP should develop a technology to monitor and record 
intrusions on any of the six sides of a container. In September 2010, 
we reported that DHS had conducted research and development for these 
projects, but had not yet developed performance standards for them. 
Specifically, each project had undergone laboratory testing, but S&T 
had not yet conducted testing in an operational environment to ensure 
that the prototypes for those projects that had passed laboratory 
testing would function as intended. Furthermore, S&T's plans for 
conducting operational testing, did not reflect all of the operational 
scenarios being considered for implementation. We recognized that 
successfully testing the performance of these technologies is a 
precursor to developing performance standards for them; therefore, we 
recommended that DHS test and evaluate the technologies within all of 
the operational scenarios DHS identified for potential implementation 
before S&T provides performance standards to the Office of Policy 
Development and CBP--DHS concurred with our recommendation and has 
completed operational testing for two of the four container security 
technology projects in the maritime environment.[Footnote 26] S&T 
officials considered the laboratory and operational testing of both 
technology projects a success because they were proven to function 
under one operational scenario, which resulted in the development of 
performance standards that are necessary to pursue implementation of 
these technologies. To fully address our recommendation, however, DHS 
would need to test and evaluate the technologies within each of the 
remaining operational scenarios it identified for potential 
implementation. DHS has informed us that it plans to conduct further 
operational testing and anticipates completing this testing in May 
2013. 

We also reported on the challenges DHS and CBP could face regarding 
the implementation of the four container security technology projects. 
[Footnote 27] For example, DHS and CBP could face challenges in 
obtaining support from the trade industry and international partners 
as it pursues implementation of the security technologies. 
Specifically, some members of the trade industry we spoke with were 
resistant to purchasing and using the technologies given the number of 
container security programs with which they already have to comply. 
DHS will also need to obtain support from international organizations 
and the WCO to implement new container security technologies. For 
instance, for container security technologies to be admitted to 
foreign countries without being subject to import duties and taxes, as 
well as import prohibitions and restrictions, the technologies first 
have to be recognized as accessories and equipment of the containers 
under the Customs Convention on Containers.[Footnote 28] The 
successful implementation of security technologies also depends on the 
security procedures throughout the supply chain as well as people 
engaged in those procedures, which are typically documented in the 
concept of operations. As a result, DHS and CBP could face challenges 
developing a feasible concept of operations that addresses the 
necessary technology infrastructure needs and protocols. Container 
security technologies require a supporting technology infrastructure, 
including readers to communicate to customs officials whether a 
technology has identified an intrusion. Thus, CBP will be faced with 
determining who will have access to the container security 
technologies through readers, where to place these readers, and 
obtaining permission to install fixed readers at domestic and foreign 
ports. Also, protocols will need to be developed to identify which 
supply chain participants will be involved in arming and disarming the 
technologies, reading the status messages generated by the 
technologies, responding to alarms, and accessing data. 

Radiation Detection and Nonintrusive Imaging Technology Can Help 
Identify Container Contents: 

To prevent the smuggling of nuclear and radiological materials, as of 
September 2010, CBP in coordination with DHS's Domestic Nuclear 
Detection Office (DNDO), has deployed over 1,400 radiation portal 
monitors (RPM) at U.S. ports of entry. Most of the RPMs are installed 
in primary inspection lanes through which nearly all traffic and 
shipping containers must pass before they can exit U.S. ports. These 
monitors alarm when they detect radiation. CBP then conducts further 
inspections of the suspect contents at its secondary inspection 
locations to identify the cause of the alarm and determine what 
further security measures, if any, need to be taken. 

While these RPMs are sensitive and have been effective at detecting 
radiation, they also have limitations. In particular, in May 2009 we 
reported that RPMs are capable of detecting certain nuclear materials 
only when these materials are unshielded or lightly shielded.[Footnote 
29] In contrast, advanced nonintrusive inspection equipment can be 
used to detect dense material that may be consistent with the presence 
of certain nuclear materials. CBP already uses nonintrusive inspection 
equipment to more closely investigate the contents of cargo containers 
that it has selected for secondary inspection at a U.S. port of entry; 
however, according to CBP officials, only a small percentage of 
vehicles or cargo containers are subjected to secondary inspections. 

Since 2006, we have been reporting on long-standing problems with 
DNDO's efforts to deploy advanced spectroscopic portal (ASP) radiation 
detection monitors, a more-advanced and significantly more-expensive 
type of RPM designed to replace the RPMs CBP currently uses. GAO last 
reported on ASP testing in 2009 and found that DHS's cost analysis of 
the ASP program did not provide a sound analytical basis for DHS's 
decision to deploy the portals.[Footnote 30] We also reported that an 
updated cost-benefit analysis might show that DNDO's plan to replace 
existing equipment with ASPs was not justified, particularly given the 
marginal improvement in detection of certain nuclear materials 
required of the ASP and the potential to improve the current-
generation RPM's sensitivity to nuclear materials, most likely at a 
lower cost.[Footnote 31] DNDO officials stated that they planned to 
update the cost-benefit analysis; however, after spending more than 
$200 million on the program, in February 2010, DHS announced that it 
was scaling back its plans for development and use of the ASP, and 
subsequently announced in July 2011 that it was ending the ASP 
program, which means DHS continues to face limitations in radiation 
detection. Since DNDO continued ASP testing through 2011, GAO has 
ongoing work to review, among other things, the results of testing of 
ASP since 2009, lessons learned from the ASP program, and whether DNDO 
plans to conduct additional ASP testing in the future.[Footnote 32] 

Since 2005, DNDO was also engaged in trying to develop a more advanced 
nonintrusive inspection equipment system in order to detect nuclear 
materials that might be heavily shielded. In September 2010, we 
reported that DNDO was simultaneously engaged in the research and 
development phase while planning for the acquisition phase of its 
cargo advanced automated radiography system (CAARS) to detect certain 
nuclear materials in vehicles and cargo containers at ports.[Footnote 
33] DNDO pursued the acquisition and deployment of CAARS machines 
without fully understanding that they would not fit within existing 
primary inspection lanes at CBP ports of entry. We reported that this 
occurred because, during the first year or more of the program, DNDO 
and CBP had few discussions about operating requirements. DHS spent 
$113 million on the program since 2005 and canceled the development 
phase of the program in 2007. 

CBP Works with Foreign Governments, the Private Sector, and 
International Organizations to Implement Supply Chain Security Efforts: 

As part of its risk-management approach, CBP operates two voluntary 
security programs--the Container Security Initiative (CSI) and the 
Customs-Trade Partnership Against Terrorism (C-TPAT).[Footnote 34] 
CSI, through partnerships with CBP's foreign counterparts, is designed 
to target and examine high-risk container cargo as early as possible 
in the global supply chain. CSI places CBP officers at select foreign 
seaports to work with host-country customs officials to identify and 
scan high-risk cargo before it is shipped to the United States. CBP 
launched CSI in January 2002, and in fiscal year 2007 CBP reached its 
goal of operating CSI in 58 foreign seaports, and as of October 2011, 
these ports collectively accounted for over 80 percent of the cargo 
containers shipped to the United States. In 2005 and 2008, we made 
recommendations to CBP to further strengthen the CSI program by, among 
other things, revising its staffing model, developing performance 
measures, and improving processes for gathering information. CBP 
generally agreed and took action to implement these recommendations. 
[Footnote 35] For example, in response to one of our recommendations, 
in January 2009, CBP began transferring CSI staff from overseas ports 
to perform targeting remotely from the National Targeting Center-Cargo 
in the United States. As part of this effort, foreign staffing levels 
for CSI decreased from 170 in January 2009 to 86 in April 2011 while 
32 positions were added to the National Targeting Center - Cargo. As a 
result of the changes in its overseas staffing model, CBP has 
experienced a decrease in operating costs of over $35 million from 
fiscal year 2009 through fiscal year 2011. 

While the CSI program involves partnerships between CBP and foreign 
governments, the C-TPAT program is a government-to-business 
partnership program that provides benefits to supply chain companies 
that comply with predetermined security measures. Under C-TPAT, CBP 
officials work with private companies to review their supply chain 
security plans and improve members' security measures. In return, C-
TPAT members may receive benefits, such as reduced scrutiny or 
expedited processing of their shipments. CBP initiated C-TPAT in 
November 2001, and as of November 2010, CBP had awarded initial C-TPAT 
certification--or acceptance of the company's agreement to voluntarily 
participate in the program[Footnote 36]--to over 10,000 companies. 
[Footnote 37] C-TPAT certified members are then subject to validation 
whereby CBP verifies that the members' security measures meet or 
exceed CBP's minimum security requirements. We previously reported 
that C-TPAT provides CBP with a level of information sharing that 
would otherwise not be available from nonmember companies.[Footnote 
38] In 2008, we made recommendations to CBP to strengthen C-TPAT 
program management, in part, by developing performance measures and 
improving the process for validating security practices of C-TPAT 
members. CBP has since implemented these recommendations.[Footnote 39] 

CBP also partners with international trade and security groups to 
develop supply chain security standards that can be implemented by the 
international community. In 2005, the WCO developed the Framework of 
Standards to Secure and Facilitate Global Trade--commonly referred to 
as the SAFE Framework--for which the core concepts are based on 
components of CBP's CSI and C-TPAT programs. As of the publication of 
the most recent edition of the SAFE Framework in June 2011, 164 of the 
177 WCO member countries have pledged to adopt the framework. As part 
of the SAFE framework, customs administrations may develop Authorized 
Economic Operator programs that offer incentives to supply chain 
companies that comply with predetermined minimum security standards. 
For example, C-TPAT is the designated Authorized Economic Operator 
program for the United States. According to data from the WCO, as of 
May 2011, 59 countries, including the 27 member states of the European 
Union, have implemented or have begun developing Authorized Economic 
Operator programs.[Footnote 40] 

CBP and the WCO anticipate that widespread adoption of these standards 
could eventually lead to a system of mutual recognition whereby the 
security-related practices and programs taken by the customs 
administration of one country are recognized and accepted by the 
administration of another. According to CBP, a system of mutual 
recognition could lead to greater efficiency in providing security by, 
for example, reducing redundant examinations of container cargo and 
avoiding the unnecessary burden of addressing different sets of 
requirements as a shipment moves through the supply chain in different 
countries. As of June 2011, CBP has signed five Mutual Recognition 
Arrangements and is currently working toward two more with other 
customs administrations, according to CBP.[Footnote 41] 

As The Deadline for 100 Percent Scanning Approaches, Uncertainty 
Persists over the Future of 100 Percent Scanning: 

The Scope of the Secure Freight Initiative Has Decreased after Facing 
Numerous Challenges: 

In response to the SAFE Port Act requirement to implement a pilot 
program to determine the feasibility of scanning 100 percent of U.S.-
bound containers with both radiation detection and nonintrusive 
equipment, CBP, the Department of State, and the Department of Energy 
jointly announced the formation of the Secure Freight Initiative (SFI) 
pilot program in December 2006. CBP selected three ports to implement 
the SFI pilot program: Qasim, Pakistan; Puerto Cortes, Honduras; and 
Southampton, United Kingdom. 

In October 2009, we reported that while CBP and the Department of 
Energy had made progress in integrating new technologies as part of 
the SFI program, progress in implementing and expanding the scanning 
of U.S.-bound cargo containers at participating ports was limited. 
Specifically, according to CBP officials, while initiating the SFI 
program at these ports satisfied the SAFE Port Act requirement to 
implement the program at three ports,[Footnote 42] CBP also selected 
the ports of Hong Kong; Busan, South Korea; and Salalah, Oman to more-
fully demonstrate the capability of the integrated scanning system at 
larger, more complex ports with higher percentages of transshipment 
container cargo--cargo containers from one port that are taken off a 
vessel at another port to be placed on another vessel bound for the 
United States. However, these ports faced numerous challenges in 
implementing the 100 percent scanning requirement, as we reported in 
October 2009, and some ports that initially agreed to participate in 
the SFI program did so for a limited time, or on a limited basis. 
[Footnote 43] For example, the SFI program began operating in one of 
the nine terminals at the port of Hong Kong in January 2008 and ended 
in April 2009. The SFI program was not renewed at the port of Hong 
Kong based on a mutual decision by the Hong Kong government and DHS, 
in part, because of concerns that equipment and infrastructure costs, 
as well as costs to port efficiency, would make full implementation of 
the SFI program at all of its terminals unfeasible. CBP has since 
reduced the scope of the SFI program, and currently the only port that 
continues to operate under SFI protocols is Qasim, Pakistan. 

Logistical, technological, and other problems at participating ports 
have prevented any of the participating ports from achieving 100 
percent scanning, as ultimately required by the 9/11 Act, leaving the 
feasibility and efficacy of 100 percent scanning largely unproven. For 
example, we reported in October 2009 that while CBP had been able to 
scan a majority of U.S.-bound cargo containers from three 
comparatively low-volume ports (Qasim, Puerto Cortes, and 
Southampton), at the higher volume ports of Hong Kong and Busan, CBP 
had been able to scan no more than 5 percent of U.S.-bound cargo 
containers, on average. Additionally, scanning operations at the 
initial SFI ports encountered a number of challenges--including safety 
concerns, logistical problems with containers transferred from rail or 
other vessels, scanning equipment breakdowns, and poor-quality scan 
images. Furthermore, since the 9/11 Act did not specify who is to 
conduct the container scans or who is to pay for scanning equipment or 
operations and maintenance, questions persist regarding who will bear 
the costs of scanning. 

In addition to the challenges CBP faced in implementing 100 percent 
scanning at the select SFI pilot ports, CBP also faces a number of 
potential challenges in integrating the 100 percent scanning 
requirement with the existing container security programs that make up 
CBP's layered security strategy. The 100 percent scanning requirement 
is a departure from existing container security programs in that it 
requires that all containers be scanned before CBP determines their 
potential risk level.[Footnote 44] Senior CBP officials and 
international trading partners say this change differs from the risk-
based approach based on international supply chain security standards 
and accepted practices. Specifically, as we reported in October 2009 
and October 2010, foreign government officials have expressed the view 
that 100 percent scanning is not consistent with risk-management 
principles as contained in the SAFE Framework.[Footnote 45] For 
example, European and Asian customs officials we spoke with told us 
that the 100 percent scanning requirement is in contrast to the risk-
based strategy, which serves as the basis for other U.S. programs, 
such as CSI and C-TPAT. Further, the WCO, which represents 177 customs 
agencies around the world, stated that the implementation of 100 
percent scanning would be "tantamount to abandonment of risk 
management." Some foreign governments have stated they may adopt a 
reciprocal requirement that all U.S.-origin containers be scanned, 
which would present additional challenges at domestic U.S. ports. 

We recommended that CBP perform analyses to determine whether 100 
percent scanning is feasible, and if so, the best way to achieve it; 
or, alternatively, if it is not feasible, present acceptable 
alternatives. To date, however, CBP has not conducted such a 
feasibility assessment. CBP has not pursued a feasibility assessment, 
in part, due to the interagency effort to develop the recently issued 
National Strategy for Global Supply Chain Security. CBP officials told 
us in August 2011 that the agency's position was that a risk-based 
approach to global supply chain security was a more feasible and 
responsible approach than 100 percent scanning.[Footnote 46] Further, 
CBP has not provided any details about any alternatives to 100 percent 
scanning that DHS or CBP may be considering. 

DHS Intends to Issue a Blanket Extension Because 100 Percent Scanning 
Cannot be Implemented by the July 2012 Deadline: 

CBP's budget documents and public statements from DHS and CBP 
officials, along with the elimination of SFI operations at all but one 
port, indicate that DHS and CBP are no longer pursuing efforts to 
implement 100 percent scanning at foreign ports by July 2012. While 
CBP had previously implemented the SFI program and protocols for 100 
percent scanning at six ports, it has reverted all but one of these 
ports to CSI operations, for which CBP focuses its efforts on scanning 
those cargo containers it identifies as high risk rather than 
requesting scans of all containers regardless of risk. According to 
CBP's fiscal year 2011 budget justification, the SFI program is a 
"helpful but not essential part" of CBP's layered security strategy. 
In addition, the budget justification noted that DHS will continue to 
use and, when appropriate, strengthen other means to achieve the same 
goals of SFI, such as the 24-hour rule, the 10+2 rule, and C-TPAT. 
Further, there is no mention of the 100 percent scanning mandate or 
efforts to meet the mandate in the recently released National Strategy 
for Global Supply Chain Security. Rather, the strategy notes that the 
federal government intends to focus its efforts on "those enhancements 
that result in the most significant improvement or reduction in risk." 

As the July 2012 deadline in the mandate approaches, uncertainty 
remains regarding DHS's long term course of action to satisfy the 100 
percent scanning mandate. As we previously reported, in the short 
term, DHS acknowledged it will not be able to meet this deadline for 
full-scale implementation of the 9/11 Act's scanning requirement and 
will need to grant extensions to those foreign ports unable to meet 
the scanning deadline in order to maintain the flow of trade and 
comply with the 9/11 Act. The 9/11 Act allows DHS to grant an 
extension to a port or ports by certifying that least two of six 
conditions exist,[Footnote 47] and as we previously reported, DHS 
believes the last two conditions--(1) use of the equipment to scan all 
U.S.-bound containers would significantly impact trade capacity and 
the flow of cargo and (2) scanning equipment does not adequately 
provide automatic notification of an anomaly in a container--could 
apply to all foreign ports that ship containers to the United States. 
Therefore, DHS expects to grant a blanket extension to all foreign 
ports pursuant to the statue, thus extending the target date for 
compliance with this requirement by 2 years, to July 2014. To do so, 
the 9/11 Act requires DHS to report to Congress 60 days before any 
extension takes effect on the container traffic affected by the 
extension, the evidence supporting the extension, and the measures DHS 
is taking to ensure that scanning can be implemented as early as 
possible at the ports covered by the extension.[Footnote 48] As a 
result, DHS will need to notify Congress by May 2, 2012, of any 
extensions it plans to grant.[Footnote 49] 

Given that the feasibility of 100 percent scanning remains unproven 
and DHS and CBP have not yet identified alternatives that could 
achieve the same goals as 100 percent scanning, uncertainty persists 
regarding the scope of DHS's and CBP's container security programs and 
how these programs will collectively affect the movement of goods 
between global trading partners. 

Chairman Miller, Ranking Member Cuellar, and Members of the 
Subcommittee, this completes my prepared statement. I would be happy 
to respond to any questions you or other Members of the Subcommittee 
may have at this time. 

GAO Contact and Staff Acknowledgments: 

For questions about this statement, please contact Stephen L. Caldwell 
at 202-512-9610 or caldwells@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this statement. In addition to the contacts named above, 
Christopher Conrad, Assistant Director, managed this review. Gene 
Aloise, Lisa Canini, Frances Cook, Alana Finley, Rich Hung, Katie 
Mauldin, Jessica Orr, Janay Sam, David Schmitt, Kevin Tarmann, and Ned 
Woodward made key contributions to this statement. 

[End of section] 

Related GAO Products: 

Homeland Security: DHS Could Strengthen Acquisitions and Development 
of New Technologies. [hyperlink, 
http://www.gao.gov/products/GAO-11-829T]. Washington, D.C.: July 15, 
2011. 

Maritime Security: Responses to Questions for the Record. [hyperlink, 
http://www.gao.gov/products/GAO-11-140R]. Washington, D.C.: October 
22, 2010. 

Supply Chain Security: DHS Should Test and Evaluate Container Security 
Technologies Consistent with All Identified Operational Scenarios to 
Ensure the Technologies Will Function as Intended. [hyperlink, 
http://www.gao.gov/products/GAO-10-887]. Washington, D.C.: September 
29, 2010. 

Supply Chain Security: CBP Has Made Progress in Assisting the Trade 
Industry in Implementing the New Importer Security Filing 
Requirements, but Some Challenges Remain. [hyperlink, 
http://www.gao.gov/products/GAO-10-841]. Washington, D.C.: September 
10, 2010. 

Combating Nuclear Smuggling: Inadequate Communication and Oversight 
Hampered DHS Efforts to Develop an Advanced Radiography System to 
Detect Nuclear Materials. [hyperlink, 
http://www.gao.gov/products/GAO-10-1041T]. Washington D.C.: September 
15, 2010. 

Supply Chain Security: Feasibility and Cost-Benefit Analysis Would 
Assist DHS and Congress in Assessing and Implementing the Requirement 
to Scan 100 Percent of U.S.-Bound Containers. [hyperlink, 
http://www.gao.gov/products/GAO-10-12]. Washington, D.C.: October 30, 
2009. 

Combating Nuclear Smuggling: Lessons Learned from DHS Testing of 
Advanced Radiation Detection Portal Monitors. [hyperlink, 
http://www.gao.gov/products/GAO-09-804T]. Washington, D.C.: June 25, 
2009. 

Combating Nuclear Smuggling: DHS Improved Testing of Advanced 
Radiation Detection Portal Monitors, but Preliminary Results Show 
Limits of the New Technology. [hyperlink, 
http://www.gao.gov/products/GAO-09-655]. Washington, D.C.: May 21, 
2009. 

Supply Chain Security: CBP Works with International Entities to 
Promote Global Customs Security Standards and Initiatives, but 
Challenges Remain. [hyperlink, 
http://www.gao.gov/products/GAO-08-538]. Washington, D.C.: August 15, 
2008. 

Supply Chain Security: U.S. Customs and Border Protection Has Enhanced 
Its Partnership with Import Trade Sectors, but Challenges Remain in 
Verifying Security Practices. [hyperlink, 
http://www.gao.gov/products/GAO-08-240]. Washington, D.C.: April 25, 
2008. 

Supply Chain Security: Examinations of High-Risk Cargo at Foreign 
Seaports Have Increased, but Improved Data Collection and Performance 
Measures Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-08-187]. Washington, D.C.: January 25, 
2008. 

Cargo Container Inspections: Preliminary Observations on the Status of 
Efforts to Improve the Automated Targeting System. [hyperlink, 
http://www.gao.gov/products/GAO-06-591T]. Washington, D.C.: March 30, 
2006. 

Container Security: A Flexible Staffing Model and Minimum Equipment 
Requirements Would Improve Overseas Targeting and Inspection Efforts. 
[hyperlink, http://www.gao.gov/products/GAO-05-557]. Washington, D.C.: 
April 26, 2005. 

[End of section] 

Footnotes: 

[1] U. S. Department of Transportation, Research and Innovative 
Technology Administration, Bureau of Transportation Statistics, 
America's Container Ports: Linking Markets at Home and Abroad 
(Washington, D.C.: January 2011). 

[2] Cargo containers serve, in essence, as packing crates and portable 
warehouses for virtually every type of general cargo moving in the 
supply chain. 

[3] In 2002, the consulting firm Booz Allen Hamilton sponsored a 
simulated scenario in which the detonation of weapons smuggled in 
cargo containers shut down all U.S. seaports for 12 days--resulting in 
a loss of $58 billion in revenue to the U.S. economy along with 
significant disruptions to the movement of goods. 

[4] Pub. L. No. 107-295, 116 Stat. 2064. 

[5] See 46 U.S.C. § 70116. 

[6] Pub. L. No. 109-347, 120 Stat. 1884. 

[7] The SAFE Port Act required DHS to report to Congress on this 
strategic plan by July 2007, with an update of the strategic plan to 
be submitted to Congress 3 years later. See 6 U.S.C. § 941(a), (g). 

[8] 6 U.S.C. § 981. A similar requirement was enacted that same year 
by the Department of Homeland Security Appropriations Act, 2007 (Pub. 
L. No. 109-295, 120 Stat. 1355 (2006)) and is codified at 6 U.S.C. § 
981a. Both statutes specify scanning as examination with both 
radiation detection equipment and nonintrusive imaging equipment. 6 
U.S.C. §§ 981(a), 981a(a)(1). 

[9] Pub. L. No. 110-53, § 1701(a), 121 Stat. 266, 489-90 (amending 6 
U.S.C. § 982(b)). 

[10] Radiation-detection equipment identifies radiation being emitted 
from a container, and through nonintrusive inspection CBP can identify 
anomalies in a container's image which could, among other things, 
indicate the presence of shielding material. 

[11] The 9/11 Act scanning provision includes possible extensions for 
a port or ports for which DHS certifies that at least two out of a 
list of specific conditions exist. Among others, these conditions 
include (1) adequate scanning equipment is not available or cannot be 
integrated with existing systems, (2) a port does not have the 
physical characteristics to install the equipment, or (3) use of the 
equipment will significantly impact trade capacity and the flow of 
cargo. See 6 U.S.C. § 982(b)(4). 

[12] DHS, Strategy to Enhance International Supply Chain Security 
(Washington, D.C.: July 2007). 

[13] The White House, National Strategy for Global Supply Chain 
Security (Washington, D.C.: Jan. 23, 2012). 

[14] See the list of GAO's related products included at the end of 
this statement. 

[15] The National Targeting Center - Cargo is responsible for 
targeting high-risk shipments for inspection. 

[16] See 6 U.S.C. § 943(b). 

[17] Importer Security Filing and Additional Carrier Requirements, 73 
Fed. Reg. 71,730 (Nov. 25, 2008) (codified at 19 C.F.R. pts. 4, 12, 
18, 101, 103, 113, 122, 123, 141, 143, 149, 178, & 192). 

[18] 19 C.F.R. §§ 4.7c, 149.3(a)-(b). 

[19] The WCO is an independent international organization whose 
mission is to enhance the efficiency and effectiveness of customs 
administrations. 

[20] For more information on ATS, see GAO, Cargo Container 
Inspections: Preliminary Observations on the Status of Efforts to 
Improve the Automated Targeting System, GAO-06-591T (Washington, D.C.: 
Mar. 30, 2006). 

[21] GAO, Supply Chain Security: CBP Has Made Progress in Assisting 
the Trade Industry in Implementing the New Importer Security Filing 
Requirements, but Some Challenges Remain, [hyperlink, 
http://www.gao.gov/products/GAO-10-841] (Washington, D.C.: Sept. 10, 
2010). 

[22] We are conducting this work for the Subcommittee on Oversight and 
Investigations, Committee on Energy and Commerce, House of 
Representatives. 

[23] Two of the four container security technology projects were to 
detect intrusion on all six sides of a container; one of them was to 
detect intrusion on one side (i.e., the door); and, one of them was to 
track containers and communicate the intrusion to the appropriate 
officials. 

[24] See 46 U.S.C. § 70116. (requiring a program that includes 
establishing standards and procedures for securing and monitoring 
cargo in transit, as well as performance standards to enhance the 
physical security of shipping containers, including standards for 
seals and locks). 

[25] GAO, Supply Chain Security: DHS Should Test and Evaluate 
Container Security Technologies Consistent with All Identified 
Operational Scenarios to Ensure the Technologies Will Function as 
Intended. [hyperlink, http://www.gao.gov/products/GAO-10-887] 
(Washington, D.C.: Sept. 29, 2010). 

[26] Laboratory and operational testing has been completed for the 
project to detect intrusion through the door of the container and the 
project to track containers and communicate intrusions. 

[27] [hyperlink, http://www.gao.gov/products/GAO-10-887]. 

[28] The convention essentially provides for the temporary and 
admission and reexportation of containers and their accessories and 
equipment that meet certain requirements without imposition of duties 
or taxes by any customs authority. 

[29] GAO, Combating Nuclear Smuggling: DHS Improved Testing of 
Advanced Radiation Detection Portal Monitors, but Preliminary Results 
Show Limits of the New Technology, [hyperlink, 
http://www.gao.gov/products/GAO-09-655] (Washington, D.C.: May 21, 
2009). 

[30] GAO, Combating Nuclear Smuggling: Lessons Learned from DHS 
Testing of Advanced Radiation Detection Portal Monitors, [hyperlink, 
http://www.gao.gov/products/GAO-09-804T] (Washington, D.C.: June 25, 
2009). 

[31] GAO, Homeland Security: DHS Could Strengthen Acquisition and 
Development of New Technologies, [hyperlink, 
http://www.gao.gov/products/GAO-11-829T] (Washington, D.C.: July 15, 
2011). 

[32] We are conducting this work for the ranking members of the 
Subcommittee on Investigations and Oversight and Subcommittee on 
Energy and Environment; Committee on Science, Space, and Technology; 
House of Representatives. 

[33] GAO, Combating Nuclear Smuggling: Inadequate Communication and 
Oversight Hampered DHS Efforts to Develop an Advanced Radiography 
System to Detect Nuclear Materials, [hyperlink, 
http://www.gao.gov/products/GAO-10-1041T] (Washington D.C.: Sept. 15, 
2010). 

[34] For more information on CSI and C-TPAT, see GAO, Supply Chain 
Security: CBP Works with International Entities to Promote Global 
Customs Security Standards and Initiatives, but Challenges Remain, 
[hyperlink, http://www.gao.gov/products/GAO-08-538] (Washington, D.C.: 
Aug. 15, 2008). 

[35] GAO, Supply Chain Security: Examinations of High-Risk Cargo at 
Foreign Seaports Have Increased, but Improved Data Collection and 
Performance Measures Are Needed, [hyperlink, 
http://www.gao.gov/products/GAO-08-187] (Washington, D.C.: Jan. 25, 
2008) and GAO, Container Security: A Flexible Staffing Model and 
Minimum Equipment Requirements Would Improve Overseas Targeting and 
Inspection Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-05-557] (Washington, D.C.: Apr. 26, 
2005). 

[36] Acceptance occurs after a review of the company's security 
profile and compliance with customs laws and regulations. 

[37] Aside from maritime container shippers, C-TPAT members include 
many top air carriers and freight forwarders. 

[38] GAO, Supply Chain Security: Feasibility and Cost-Benefit Analysis 
Would Assist DHS and Congress in Assessing and Implementing the 
Requirement to Scan 100 Percent of U.S.-Bound Containers, [hyperlink, 
http://www.gao.gov/products/GAO-10-12] (Washington, D.C.: Oct. 30, 
2009). 

[39] GAO, Supply Chain Security: U.S. Customs and Border Protection 
Has Enhanced Its Partnership with Import Trade Sectors, but Challenges 
Remain in Verifying Security Practices, [hyperlink, 
http://www.gao.gov/products/GAO-08-240] (Washington, D.C.: Apr. 25, 
2008). 

[40] For more information on the WCO Authorized Economic Operator 
Program, see World Customs Organization, Compendium of Authorized 
Economic Operator Programme, 2011 edition. 

[41] CBP has signed the five Mutual Recognition Agreements with 
customs administrations of New Zealand, Canada, Jordan, Japan, and 
South Korea and is working toward more with those of Singapore and EU. 
For more information, see Department of Homeland Security, Customs and 
Border Protection, "Mutual Recognition Information," Customs-Trade 
Partnership Against Terrorism website, (June 2011), accessed January 
24, 2012, www.cbp.gov/xp/cgov/trade/cargo_security/ctpat/mr/. 

[42] The act required CBP to identify three distinct ports through 
which containers pass or are transshipped to the United States with 
unique features and differing levels of trade volume. 6 U.S.C. § 
981(a). 

[43] [hyperlink, http://www.gao.gov/products/GAO-10-12]. 

[44] For more information regarding the application of risk-management 
principles as they relate to 100 percent scanning, see GAO, Maritime 
Security: Responses to Questions for the Record, [hyperlink, 
http://www.gao.gov/products/GAO-11-140R] (Washington, D.C.: Oct. 22, 
2010), 17-20. 

[45] [hyperlink, http://www.gao.gov/products/GAO-10-12] and 
[hyperlink, http://www.gao.gov/products/GAO-11-140R]. 

[46] Additionally, according to CBP, the current SFI budget is focused 
on maintaining operations at the remaining SFI port in Qasim, 
Pakistan, and funds are not presently available to conduct a 
feasibility assessment. The current funding levels may be attributed, 
in part, to CBP's request to reduce funding for the SFI program. In 
CBP's fiscal year 2011 budget justification, CBP requested a reduction 
$16.6 million due to plans to revert three of the SFI ports to CSI 
operations. 

[47] The 9/11 Act scanning requirement authorizes DHS to grant 
extensions for a port or ports if at least two of the following six 
conditions exist: (1) equipment to scan all U.S.-bound containers is 
not available for purchase and installation; (2) equipment to scan all 
U.S.-bound containers does not have a sufficiently low false alarm 
rate; (3) equipment to scan all U.S.-bound containers cannot be 
purchased, deployed, or operated at a port or ports (including where 
this is due to the physical characteristics of the port); (4) 
equipment to scan all U.S.-bound containers cannot be integrated with 
existing systems; (5) use of the equipment to scan all U.S.-bound 
containers would significantly impact trade capacity and the flow of 
cargo; or (6) the scanning equipment does not adequately provide 
automatic notification of an anomaly in a container. 6 U.S.C. § 
982(b)(4). 

[48] 6 U.S.C. § 982(b)(6). 

[49] Additionally, 1 year after an extension takes effect, DHS would 
be required to submit a report on Congress on whether it expects to 
seek to renew the extension. 6 U.S.C. § 982(b)(7). 

[End of section] 

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