Review on The Critical Infrastructure Gap: U.S. Port Facilities and Cyber Vulnerabilities, Policy Paper, July 2013, Center for 21st Century Security and Intelligence (CORE1095)

Summary: In a 50-page policy paper by the Brookings Institute and authored by Commander Joseph Kramek of the U.S.Coast Guard and a Federal Executive Fellow at the institute, the current state of affairs related to vulnerabilities at our national seaports is discussed and options to shore up cyber security are presented. In the executive summary, Commander Kramek writes that today’s U.S. port facilities rely as much upon networked computer and control systems as they do upon stevedores to ensure the flow of maritime commerce that the economy, homeland, and national security depend upon. Yet, unlike other sectors of critical infrastructure, little attention has been paid to the networked systems that undergird port operations. Report is available at: http://www.brookings.edu/~/media/research/files/papers/2013/07/02%20cyber%20port%20security%20kramek/03%20cyber%20port%20security%20kramek.pdf

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Full review: No cybersecurity standards have been promulgated for U.S. ports, nor has the U.S. Coast Guard, the lead federal agency for maritime security, been granted cybersecurity authorities to regulate ports or other areas of maritime critical infrastructure. In the midst of this lacuna of authority is a sobering fact: according to the most recent National Intelligence Estimate (NIE) the next terrorist attack on U.S. Critical Infrastructure and Key Resources (CIKR) is just as likely to be a cyber attack as a kinetic attack.

The potential consequences of even a minimal disruption of the flow of goods in U.S. ports would be high. The zero-inventory, just-in-time delivery system that sustains the flow of U.S. commerce would grind to a halt in a matter of days; shelves at grocery stores and gas tanks at service stations would run empty. In certain ports, a cyber disruption affecting energy supplies would likely send not just a ripple but a shockwave through the U.S. and even global economy.

Given the absence of standards and authorities, this paper explores the current state of cybersecurity awareness and culture in selected U.S. port facilities. The use of the post-9/11 Port Security Grant Program (PSGP), administered by the Federal Emergency Management Agency, is also examined to see whether these monies are being used to fund cybersecurity projects.

Full citation:   The Critical Infrastructure Gap: U.S. Port Facilities and Cyber Vulnerabilities, Policy Paper, July 2013, Center for 21st Century Security and Intelligence.

CORE1095

Keywords: Maritime Security, Cyber-security, Port Security Grant Program (PSGP), Port facility, Coast Guard, Maritime Transportation Security Act (MTSA).

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Supply chain finances and liabilities (CASSANDRA Compendium Chapter 3 – CORE2007b)

Summary

The third chapter of the CASSANDRA compendium clarifies financial and insurance concepts and techniques of international supply chain management. In cross-border trade, exporters and importers often insure themselves against a variety of risks, including loss or damage of goods in transit, currency fluctuations, and a business partner’s default. In particular, exchange of goods for money between sellers (exporters) and buyers (importers) is a great source risk and uncertainty in international logistics transactions. For example, advance payment is unfavorable for importers in terms of cost, cash-flow and risk of default. On the contrary, selling goods on consignment puts exporters at a risk. For risk mitigation, exporters commonly protect themselves against buyers that fail to pay for goods whereas importers protect themselves against exporters that fail to deliver goods. The chapter illustrates how financial transactions and conventions underpin physical flow of goods in international supply chains. The CASSANDRA compendium is available for download here.

Review by Toni Männistö (CBRA).

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Full review

International trading involves many risks. Exporters bear the risk that buyers fail to pay for goods in full or in time. On the other hand, if the exporter requires the importer to pay for goods before shipping them, the importer faces a risk of paying but not receiving the purchased goods in right time, quantity and condition. There are, fortunately, various financial instruments and insurances that both the exporters and importers may purchase to reduce or eliminate such risks. Perhaps the most common instrument is the letter of credit (LC), a guarantee from the buyers’ bank to pay the seller if the seller dispatch goods and meets the terms of delivery. Other common financial services, that allow exporters to hedge against non-payment of foreign buyers, include export credit insurance, export factoring and forfeiting (selling one’s receivable debts for cash). These financial products cost money, but they reduce or eliminate the risks involved in cross-border commerce. Prices and terms of these credit and insurance schemes depend on the creditworthiness of applying companies and riskiness of concerned logistics operations.

The CASSANDRA compendium chapter provides insights into the legal infrastructure – laws, conventions and standard business practices – that set the basis for trust between sellers and buyers in the cross-border commerce. For example, the Rotterdam Rules (“Convention of Contracts for the International Carrying of Goods Wholly or Partly by Sea”) and Hague-Visby determine much of the legal rules for carrying goods by sea. International contract schemes are not always straightforward, but fortunately there are Incoterms, standard trade terms, published by the International Chamber of Commerce (ICC), that determine when ownership of goods change, how costs of shipping are shared, and who is responsible for insuring cargo at different stages in the supply chain. Incoterms are defined in the contract between buyer and seller. The contracts between cargo owners (shipper or consignee) and freight forwarder, an agent organizing the transport, is a separate document, the same way than the agreement between the freight forwarders and carriers.

Supply chain finances is a crucial topic for trading companies, but how do the financial aspect relate to CORE, a supply chain security and optimization project? Related to security, if customs and other border control authorities had visibility over financial transactions, they could use this information for more accurate risk assessment of cross-border shipments. The authorities might be able to identify suspicious financial transactions that do not correspond physical flow of goods (e.g., routing or cargo description). With respect to the logistics optimization, CORE visibility solutions enable companies to monitor location and status of their consignments and help them to react faster to logistics contingencies and disruptions. If increased visibility lowers risk of supply chain glitches, it may also lower insurance premiums and interest rates for credits. Visibility also facilitates investigation of insurance claims, helps resolve liability disputes, and may lower related litigation costs. Track & trace data on cargo en route, for example, helps determine the location and time of unauthorized tampering of a container, with obvious benefit for resolving liability issues. The CORE’s demonstrations will likely benefit from this account of basic trade finances that the third chapter of the CASSANDRA compendium provides. The financial aspects should be considered also in CORE’s education and training material.

Reference

Hintsa, J. and Uronen, K. (Eds.) (2012), “Common assessment and analysis of risk in global supply chains “, Compendium of FP7-project CASSANDRA, Chapter 3

CORE2007b

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Introduction to Supply Chain Management (CASSANDRA Compendium Chapter 2, CORE2007a)

Summary

The second chapter of the CASSANDRA compendium gives a general outlook on the theory and practice of modern supply chain management. Written in lay-man’s language, the text explains a broad range of strategies for managing supply chains, from lean management to agile and responsive logistics. The chapter also defines fundamental supply chain terminology and discusses current trends in the logistics, including synchromodality, use of 4PL logistics service providers, and green logistics. The chapter introduces several supply chain reference frameworks that illustrate a series of interdependent activities and stakeholders involved in the international transport of cargo. The CASSANDRA compendium is available for download here.

Review by Toni Männistö (CBRA)

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Full review

The compendium summarizes the SCOR and UN/CEFACT supply chain models, that may be the two most used logistics reference frameworks in the world. The document also discusses less known academic conceptual models that seek to simplify the complexity of supply chain management by categorizing and explaining management strategies, activities, stakeholders and their roles and responsibilities. The section on the future trends in logistics offers a great outlook on the most likely changes and driving forces in the logistics industry. The outlook suggests that for example synchromodality (increased flexibility in transport mode selection), green logistics (less emissions), use of 4PL logistics service providers (outsourced supply chain management), and continuously increasing ship and port sizes will reshape the cross-border logistics over the years. The document also explains key CASSANDRA concepts and their impacts on international supply chain management. For instance, the Data Pipeline, a pivotal CASSANDRA concept, seeks to enhance sharing of information across supply chain stakeholders, in particularly from business operators to customs and other border control authorities. Most importantly, the Data Pipeline would allow customs officers to access commercial information, that normally is exchanged only between buyers and sellers, early in the upstream supply chain at the consignment completion point (CCP). This accurate, early commercial information would enable the customs and other border control agencies to assess security and other risks of cargo early on.

All in all, the document provides a crash refresher course on basic and advanced logistics terminology that would be beneficial for many the CORE consortium, especially for those partners whose expertise is mainly outside the logistics industry. The CORE demonstrators benefit from descriptions of CASSANDRA innovations that support information exchange and improve visibility across the supply chain. The demos might choose to reuse some of these CASSANDRA innovations or their components. The CASSANDRA compendium also contains a great deal of material that could be reused for education and training purposes in CORE (WP19). Finally, the chapter concludes with recommendations that are relevant also for CORE. The chapter recommends, for example, that because of broad variety of international supply chains, CASSANDRA solutions should be adaptable for different contexts.

Reference

Hintsa, J. and Uronen, K. (Eds.) (2012), “Common assessment and analysis of risk in global supply chains “, Compendium of FP7-project CASSANDRA, Chapter 2

CORE2007

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Trade and money laundering uncontained (the Economist, May 2014, CORE2006)

Summary

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls. Review by Toni Männistö (CBRA)

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Full review

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls.

The new methods for cross-border money laundering and tax evasion concern most CORE demonstrations, especially those involving international cargo movements. The emerging risk of trade-based money laundering calls for new and more effective enforcement of trade transactions. CORE is developing new solutions (e.g., data pipeline and system-based supervision) for capturing and sharing trade information across logistics operators and law enforcement agencies. The new solutions likely improve law enforcement’s capability to detect suspicious trade transactions that may have something to do with the trade-based money laundering. However, building such capability requires IT integration (e.g., interoperability), risk awareness and education and training. CORE consortium addresses these complementary activities in work carried out in risk, IT and educational clusters.

Reference

Trade and money laundering uncontained, the Economist, May 3rd 2014

CORE2006

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Drug trafficking in the Caribbean – the Full circle (the Economist May 2014, CORE2005)

Summary

Anti-drug officials report rising cocaine imports into the US through the Caribbean islands. The officials ascribe the increasing popularity of the Caribbean route to the strengthened enforcement of alternative trafficking routes. The South American cocaine smuggling routes have displaced several times over the years due, and now again the Caribbean route is the same one than traffickers used two decades ago. The new wave of trafficking through is expected to increase violence and undermine anti-corruption efforts in the Caribbean.

The drug traffickers move significant amounts of their cocaine from Colombian coca farms and laboratories to Venezuela by jungle trails, riverboats and small aircraft. From the Venezuelan coast, the contraband is smuggled to Caribbean islands by speedboats, planes, sometimes hidden inside commercial cargo. The cocaine traffickers use then yachts, mules, cruise ships, fast boats and commercial cargo vessels to smuggle the illegal drugs into the US and Europe. The new wave of trafficking through is expected to increase violence and undermine anti-corruption efforts in the Caribbean. Review by Toni Männistö (CBRA)

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Full review

Anti-drug officials report rising cocaine imports into the US through the Caribbean islands. The officials ascribe the increasing popularity of the Caribbean route strengthened law enforcement of alternative trafficking routes. Because traffickers prefer smuggling routes that offer the highest profit-to-risk ratios, the South American cocaine smuggling networks are evolving constantly. Routes have displaced several times over the years, and now the route is again the same than two decades ago.

Today, traffickers move again significant amounts of their cocaine from Colombian coca farms and laboratories to Venezuela by jungle trails, riverboats and small aircraft. From the Venezuelan coast, the contraband is smuggled to Caribbean islands by speedboats, planes and sometimes hidden inside commercial cargo. The cocaine traffickers use then yachts, mules, cruise ships, fast boats and commercial cargo vessels to smuggle the illegal drugs into the US and Europe.  The new wave of trafficking through is expected to increase violence and undermine anti-corruption efforts in the Caribbean. The new wave of trafficking through is expected to increase violence and undermine anti-corruption efforts in the Caribbean.

Trends of international drug trafficking often influence intensity of law enforcement efforts in global supply chains. Thus, changes in South American drug trafficking may affect also the two CORE trade lanes that import goods from the region into Europe, (1) imports of fresh cut flowers from Colombia to the Netherlands (WP11) and (2) imports of coffee and cocoa beans from South America to Europe (WP13). These trade lanes may become subject to more intense anti-drug controls over the following years. Besides the CORE demo cluster, also the CORE risk cluster benefit from the insight this article provides on the recent trends in routes, volumes and methods of the South American drug trafficking. This information may be useful for CORE’s activities that are developing educational and training material.

Reference

Drug trafficking in the Caribbean – the Full circle, the Economist, May 24th 2014

CORE2005

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Punta Cana Resolution, Resolution of the Policy Commission of the World Customs Organization on the Role of Customs in the Security Context, WCO 2015 (CORE2004)

The new Punta Cana Resolution sets guidelines for customs’ security roles in the combat against the new wave of terrorism, as manifested by recent attacks in Tunisia, Turkey, Lebanon, France and Mali. The resolution highlights that the customs authorities are typically the first line of defense against transnational crime, terrorism and extremism: the customs control cross-border movements of people, cargo, money and modes of transport and thus protect communities against terrorists that may exploit international supply chains to move materials, funds or operatives across borders. Building on the previous WCO instruments and agreements, especially on the WCO Security Programme, the Punta Cana resolution is the customs community’s action plan and renewed pledge of solidarity that provides a diplomatic backdrop for further counterterrorism activities. More information at: http://www.wcoomd.org/en/media/newsroom/2015/december/wco-issues-the-punta-cana-resolution.aspx

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Full review

The new Punta Cana Resolution sets guidelines for customs’ security roles in the combat against the new wave of terrorism, as manifested by recent attacks in Tunisia, Turkey, Lebanon, France and Mali. The resolution highlights that the customs authorities are typically the first line of defense against transnational crime, terrorism and extremism: the customs control cross-border movements of people, cargo, money and modes of transport and thus protect communities against terrorists that may exploit international supply chains to move materials, funds or operatives across borders. Building on the previous WCO instruments and agreements, especially on the WCO Security Programme, the Punta Cana resolution is the customs community’s action plan and renewed pledge of solidarity that provides a diplomatic backdrop for further counterterrorism activities.

The Punta Cana resolution encourages customs administrations worldwide to intensify collaboration within the customs community and with other border control agencies, both domestically and internationally. In case of missing or obsolete counter-terrorism strategy, the resolution urges customs to add new security roles in their mandates and activities. The Punta Cana document also recommends customs to pay close regard to the WCO’s previous agreements and instruments, such as the WCO Compliance and Enforcement Package, SAFE Framework of Standards and the WCO Security Programme. At more practical level, the resolution promotes the use of the full range of modern detection and investigation techniques, especially advance risk profiling on the basis of Advance Passenger Information (API) and Passenger Name Record (PNR). The resolution also calls governments from around the world to provide necessary financial and human support so that their national customs administrations can contribute towards the goals of the WCO Security Programme.

The Punta Cana Resolution informs CORE consortium about the changing risk landscape where the threat of transnational terrorism is high again. The Resolution also reminds the CORE’s risk cluster of the three cornerstones of effective border security management: collaboration, technology and human resources. The Punta Cana document also gives an overlook on the customs’ security priorities over the following years. For example, the global customs community will likely invest a great deal of time and money to develop new risk profiling systems that tap into new data sources such as the Advance Passenger Information (API) and Passenger Name Record (PNR). The same trend towards better risk profiling is likely to define also the future cargo security efforts at the borders.

Reference: WCO, 2015. Punta Cana Resolution, Resolution of the Policy Commission of the World Customs Organization on the Role of Customs in the Security Context.

CORE2004

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IT-enabled Resilient, Seamless and Secure Global Supply Chains: Introduction, Overview and Research Topics, Lecture Notes in Computer Science, by Klievink, B., Zomer, G., 2015 (CORE2003)

Summary: How does IT innovation contribute towards development of secure, resilient and integrated international supply chains? This is the question that Bram and Zomer seek to address by examining research agendas of a set of past and present European supply chain projects. In their research paper, these authors identify three main areas of innovation – technology, supply chain risk concepts and collaboration and supervision concepts – that lead the way towards higher uptake of new IT technologies and services in the global supply chains. The authors argue that developers of modern IT-enabled supply chains should pay more regard on non-technical challenges that often hinder adoption of modern IT solutions. The study also introduces and discusses five research papers that will be presented at the fourth Workshop on IT-enabled Resilient, Seamless and Secure Global Supply Chains, WITNESS 2015. The full paper will be available in public domain by fall 2016.

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Full review: The paper provides a comprehensive outlook on innovation agendas that present EU 7th framework supply chain projects follow. The study summarises CORE’s innovation goals and clarifies definitions and purposes of CORE key concepts such as the system-based supervision, supply chain resiliency and advanced data capture and sharing mechanisms. Therefore, the paper strengthens the conceptual basis of the CORE’s IT and risk management clusters. The CORE demonstrations will benefit from the paper indirectly if the IT and risk clusters refine the paper’s ideas and findings into applicable concepts that could be implemented in the demonstrations. The paper highlights three main areas of innovation that will likely improve security, resiliency and efficiency of the global supply in the future:

Technological innovation – The technological innovation focuses largely on IT-enabled capture and sharing of data among operators who are involved in end-to-end supply chains. Timely sharing of relevant and quality data is believed to support secure and efficient supply chain management because such data helps supply chain actors to detect faster logistics contingencies and disruptions and react to them. The higher data availability also supports use of modern sensor, track & trace and cargo screening technologies. For example, better information about cargo flows allow customs administrations to focus their screening activities on high-risk cargo.

Risk concepts – The data availability leads to higher visibility over the supply chain and empowers supply chain actors to regain control over cargo. The increased control helps the supply chain actors to detect faster to operational contingencies and disruptions.

Collaboration and supervision models – Risk-based approach to customs inspections is a departure from the 100% screening philosophy, under which every single shipment faces inspection. The modern risk-based approach disrupts less cross-border trade and commerce than the 100% screening because customs (and other border control agencies) select only a percentage of shipments, those that represent the highest risk, to inspection. Another new concept is system-based supervision, an approach that seeks to assess traders’ internal controls of customs compliance rather than conducting transaction-driven

Reference: Klievink, B., Zomer, G., 2015. IT-enabled Resilient, Seamless and Secure Global Supply Chains: Introduction, Overview and Research Topics, Lecture Notes in Computer Science (pp. 443-453)

CORE2003

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Summary list on: Illicit activities and flows, with estimated monetary values

Summary: This summary list on illicit activities and flows, with estimated monetary values, could have some relevance for CORE Risk-cluster – to understand better the consequences of the illicit acts we try to prevent – and well as for CORE WP19 Education and training. The list has been compiled by CBRA.
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Summary list on: Big numbers in global trade and logistics

Summary: This summary list on the big numbers in global trade and logistics – including estimated international trade value, total number of sea ports and airports, number of commercial ships and airplanes on the move etc. – could have some relevance for CORE Risk-cluster – to understand better the massive context of global trade and logistics we have to deal with – and well as for CORE WP19 Education and training. The list has been compiled by CBRA.
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Review of Building Resilience in Supply Chains (CORE1055)

Summary: Review on Building Resilience in Supply Chains – An Initiative of the Risk Response Network – In collaboration with Accenture – World Economic Forum. The report broadens the view of resilient supply chains away from pure trucking towards taking all available transport modes into account. Additional relevance is given by building partnerships of private companies and creating strategic transport orientation in normal times and to be executed in harsh times. The views given are from large industry and insurers point of view thus serve as hints to SMEs. Demo-WPs concerned with resilience should have the ideas in mind in order to follow the worlds to forum and on the other side identified lacks (of focus on consumers of goods) should be avoided in CORE demonstration layouts.  Coding in CORE e-library is CORE1055. Source file at: http://www3.weforum.org/docs/WEF_RRN_MO_BuildingResilienceSupplyChains_Report_2013.pdf
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