D&B s Global Business Intelligence Solutions Plug Cargo Security Loopholes Government Solutions: Cargo Security

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1 D&B s Global Business Intelligence Solutions Plug Cargo Security Loopholes Government Solutions: Cargo Security The September 11, 2001 terrorist attacks increased awareness of the significant security threat posed by the approximately 40 million cargo shipments entering the United States annually. Despite the Federal Government s multi-billion dollar investment in aviation and cargo security measures post-9/11, cargo containers remain vulnerable to terrorist activity. Recent research has shown that this weakness in the state of cargo security can be substantially mitigated through the application of commercial business intelligence solutions such as those offered by D&B. With the volume of imports, personnel constraints and the need to preserve the free flow of commerce preventing the Federal Government from physically inspecting all cargo containers, attention has turned to the identification and targeting of high-risk cargo on an exception basis. This paper is intended for public policy makers and industry partners who are focusing on homeland security, targeting and interdiction, intelligence and the Federal Government s interactions with both the public (e.g. state, municipal and local governments) and private sectors in an effort to improve national security. Background The Federal Government has taken aggressive steps to make transportation security a top priority since 9/11. Given the nature of those attacks, it is not surprising that much of the initial focus involved aviation security more specifically, passenger-based, aviation security. In the process, other areas of transportation security such as cargo security have been, comparatively speaking, somewhat overlooked. Nevertheless, many transportation security experts still consider cargo security to be our nation s homeland security Achilles heel, providing a tempting target for those who would exploit this vulnerability and inflict significant damage on our economy. This scenario is further exacerbated by the significant volume of cargo transported by the U.S.-based passenger While 50,000 federal screeners are being hired at the nation s airports to check passengers, only the tiniest percentage of containers, ships, trucks, and trains that enter the United States each day are subject to examination and a weapon of mass destruction could be well be hidden among cargo. America Still Unprepared America Still in Danger : Report of an Independent Task Force, Sponsored by the Council on Foreign Relations

2 There is virtually no security for what is the primary system to transport global trade. The consequence of a terrorist incident using a container would be profound If a terrorist used a sea container to conceal a weapon of mass destruction and detonated it on arrival at a port, the impact on global trade and the global economy could be immediate and devastating all nations would be affected planes and in oceangoing container vessels. According to the GAO, approximately 12.2 billion revenue ton miles of freight were shipped in the U.S. by air during fiscal year 2000, about 22 percent of which was transported on passenger planes ( Vulnerabilities and Potential Improvements for the Air Cargo System, GAO Report No. GAO ). Although the Transportation Security Administration estimates that there is a percent chance that terrorists are planning to plant a bomb in a passenger plane s cargo hold, technological and human resource constraints mean that fewer than five percent of passenger plane cargo is physically screened. In addition to the significant threat posed by air cargo, other Robert Bonner, Commissioner, modes of cargo transportation are equally porous. Only an U.S. Customs Service estimated 15 percent of the seven million sea cargo containers August 26, 2002 arriving in U.S. ports each year undergo examination or physical screening procedures. With 95 percent of the U.S. international cargo carried by ship, sea containers have emerged as another gaping hole in our homeland defense infrastructure. The nature of this threat was underscored during a 2002 simulation of terrorist attack involving cargo containers, which resulted in the closing of every U.S. seaport and $58 billion in lost revenue to the U.S. economy due to spoilage, loss of sales, and manufacturing slowdowns and halts in production ( Preliminary Observations on Efforts to Target Inspections of Cargo Containers, GAO Report No. GAO T). The risk resulting from weaknesses inherent in the present state of cargo security can be mitigated in part by the use of commercially available business intelligence from companies such as D&B to validate the identities of companies involved in the supply chain and identify potentially risky companies and cargo requiring greater scrutiny on an exception basis. D&B s Support of DHS Layered Strategy for Protecting America s Ports* Watching Container # A fictional container of auto parts (Container # ) is being shipped from a Chinese supplier through the Port of Hong Kong on its way to the Port of Los Angeles. The container is being shipped from the Chinese manufacturer to a large auto parts supplier in Riverside, California. Before it leaves: The DHS Bureau of Customs & Border Protection (CBP) analyzes the DHSrequired manifest information transmitted by the shipping company by checking it against the Automated Targeting System (ATS). As part of CBP s risk assessment efforts, company identification information is processed through 2/7

3 D&B s USA Patriot Act Compliance solution, which includes pre-screening against Watch Lists maintained by the U.S. and foreign governments and the verification and authentication of a company s identity through a check of D&B s global business database for outside corroboration of a company s existence. For successful matches, CBP uses value-added D&B intelligence (e.g. corporate linkage, SIC/NAICS codes and sales volume) to pierce the corporate veil by understanding the company s Global Family Tree and identifying anomalies requiring additional due diligence (e.g. the shipment of chemicals to an elementary school and instances in which a cargo s value exceeds an organization s annual sales). In the case of no matches, CBP orders D&B to investigate the affected company through our Global Business Investigation Network. CBP officers stationed in the Port of Hong Kong (under agreement with the Government through the Container Security Initiative) examine the results of the automated analysis, including the Compliance Risk Index and Compliance Risk Class returned by D&B s USA Patriot Act Compliance solution. The former represents a numeric value representing an aggregation of weighted risk flags assigned using a proprietary D&B rules-based algorithm, while the latter categorizes the Index values according to low, medium and high risk. After the analysis and local review, the container is deemed a low risk and the shipping company is given an OK to load message. The voyage Once the vessel is on its way to the Port of Los Angeles, CBP transmits the manifest information to the Coast Guard and TSA. No later than 96 hours before entering the U.S., the vessel operator sends an electronic message to the Coast Guard, identifying the ship and all crew members on board. The Coast Guard supplements this information with Lloyd s Marine Intelligence Unit s vessel tracking information obtained from D&B to better understand the merchant fleet s ownership, including the beneficial, public and registered owners and manager/charterer attached to a vessel. D&B will also provide a record of the vessel s ports of origin and destination, along with its complete movement history for use with cargo manifest information and other information about the crew and vessel to determine whether the ship potentially poses a significant threat. If necessary, a large cutter could intercept the vessel hundreds of miles offshore. 3/7

4 Docked at a U.S. port The CBP Contraband Enforcement Team (CET) checks for any D&B notifications of critical event changes on those companies involved in the shipment of Container # occurring since its departure from the Port of Hong Kong. CET notices that there have been no changes in ownership or risk scores and none of the companies are experiencing severe financial distress. The vessel is met by members of the CET, who, with a copy of the manifest in hand, verify that only those containers expected to be offloaded are all that are unloaded. Container # is released to be picked up for transportation to the importer s premises. Container # arrives at its destination in Riverside, California with its cargo intact. * Adapted by DHS Protecting America s Ports press kit, June 12, Recommendation There are approximately 40 annual million cargo shipments entering the United States. Leveraging D&B s business intelligence solutions will enable CBP to more easily enhance the security of domestic and international supply chains while facilitating the flow of cross-border commerce. We estimate that D&B s approach to evaluating the level of risk associated with companies involved in the supply chain and their cargo would increase the approval rate for cargo shipments from 85 percent to 95 percent. Accomplishing this would enable CBP to gain operational efficiencies while freeing up targeting resources to focus on those companies and containers posing the greatest potential security threats. 4/7

5 D&B Tools As mentioned, D&B offers an array of tools that can be leveraged to help secure our country s homeland and economic security. Our solutions are business-based, and therefore have the most to contribute in commercially-oriented applications, such as cargo screening. The following listing highlights those solutions we believe to be the most relevant. DUNSRight DUNSRight is D&B s patented process for collecting and enhancing data. DUNSRight consists of Quality Assurance, which D&B defines as accurate, timely, complete and consistent cross-border information. DUNSRight includes over 2,000 separate automated and manual edits, standardizations and validations to ensure our business intelligence meets our quality standards. Supported by an annual investment of $250 million, DUNSRight employs five sequential quality drivers to collect and enhance our company data. Global Data Collection: Global Data Collection enables D&B to aggregate and make sense of data obtained from thousands of disparate sources files on the over 115 million company locations in our global business database. Entity Matching: Entity matching is D&B s patented process for matching basic company identification information against the corresponding fields in D&B s global business database. This quality driver generates a single, more accurate view of each company and enables us to validate its identity. D-U-N-S Number: Upon completion of the Entity Matching process, D&B applies the D-U-N-S Number as a means of uniquely identifying and tracking companies globally on a location-specific basis. Assigned and maintained solely by D&B, the D-U-N-S Number remains with the company location to which is was assigned even if it closes or goes out of business. The D-U-N-S Number is the global standard for company identification. Corporate Linkage: D&B s U.S. and global business databases identify and track corporate affiliations on a cross-border basis, linking by ownership 7.6 million records globally, 2.7 million of which are U.S.-based. This linkage can play a crucial role in helping personnel involved in targeting activities pierce the corporate veil by uncovering relationships that might otherwise go undetected. While any information provider can create and maintain linkage on obvious family relationships such as IBM Global Services and IBM Small Business Services, flagging Otis Elevator and Pratt and Whitney as subsidiaries of United Technologies Corporation is a significantly more complex undertaking. 5/7

6 Predictive Indicators: D&B s Predictive Indicators use statistical analysis to rate a company s past performance and indicate the likelihood of a company performing the same way in the future. Solutions such as D&B s Commercial Credit Score, which predicts the potential for delinquency over the next 12 months, and Financial Stress Score, which predicts business failure, can significantly facilitate the ability of targeting officials to mine disparate sources of company data and flag high-risk organizations warranting enhanced due diligence. USA Patriot Act Compliance The USA Patriot Act Compliance solution enables targeting organizations to proactively identify high-risk companies. This transactional solution consists of the following components: 1. Pre-screening against Watch Lists maintained by U.S. and foreign governmental entities, including OFAC, GSA and U.S. Customs. Corresponding details will be provided in the case of all potential matches (either company or individual). 2. Identity verification by processing company identification information through D&B s patented DUNSRight process to match records against D&B s global business database and investigate unmatched records through D&B s Global Business Investigation Network. 3. Authentication, wherein we use various indicators within D&B s global business database (e.g. business license, articles of incorporation, public records and commercial trade experiences) to obtain outside corroboration of a company s existence. As part of the Patriot Act Compliance solution, D&B will deliver both a Compliance Risk Index, a numeric value representing an aggregation of weighted risk flags assigned using a proprietary D&B rules-based algorithm, and a Compliance Risk Class, which categorizes the Index values according to low, medium and high risk. Data Integration Toolkit The Data Integration Toolkit is a set of web-based utilities delivering real-time access to D&B s global business database. Agencies can fully integrate XML-based feeds of D&B s most current business intelligence into automated targeting applications, thereby achieving greater efficiencies. 6/7

7 Customer Information Manager Customer Information Manager (CIM) combines D&B s patented Entity Matching routines with batch and real-time access to D&B s global business database to create a solution toolkit for facilitating the integration of an agency s company data with D&B business intelligence. By creating logical site IDs to identify records ineligible for D-U-N-S Numbers, CIM will achieve 100 percent resolution for all entity records processed. Monitoring Services Monitoring Services leverage the over one million daily updates D&B makes to our global business database to alert targeting agencies of critical event changes involving the companies they are targeting (e.g. change in risk score, bankruptcy, change in ownership). D&B also offers a Severe Risk Service devoted to detecting business conditions outside the normal course of business, including companies that display characteristics of fraud or deception, signs of deteriorating financial condition or Newsworthy events such as the indictment of a company principal on criminal charges. 7/7