Tracking and Chain of Custody: The Difference

By MarEx 2011-11-17 09:51:01

Op Ed by Dr. Jim Giermanski, Chairman, Powers Global Holdings, Inc. 

We often hear from the major logistics service providers about how good their tracking services are, and, in fact, they are pretty good.  But what they do not provide is a genuine chain-of-custody system even though some claim to do so.   They cannot provide that beneficial service because of two essential reasons.  First, their shipping containers are not sealed and monitored for access from origin to destination, and second, the signature of the person who verifies the cargo and its quantity and seals the container is not present.   Without the identity of the person and the person's signature attesting to the contents, there cannot be a chain of custody, but only a system of tracking.  The distinction is extremely important with respect to the global supply chain and its use in the distribution of counterfeit products, drugs, and even weapons of mass destruction. 

DEFINITION

One may find multiple definitions of chain of custody, but contained in all are certain elements without which there is no chain of custody.  A chain of custody involves The movement and location of physical evidence from the time it is obtained until the time it is presented in court (1). A proper chain of custody as it relates to the supply chain requires three types of assertions: (1) that the cargo is what it purports to be and in the quantity stated; (2) that the cargo was in the continuous possession or control by the carrier who took charge of the cargo from the time it was loaded in the container at origin until the time it is delivered at final destination; and (3) that there is evidence of the identify of each person or entity who had access to it during its movement and that the cargo remained in the same condition from the moment it was sealed in the container for transfer to the carrier who controlled possession until the moment that carrier released the cargo into the receipted custody of another. 

This chain requires security throughout its carriage from stuffing, verification, and sealing at origin confirmed by an authorized agent who arms a container's security system and seals the container.   All elements of cargo information, container identification in which it was sealed, identify of person verifying cargo and all who had access to it during movement and relating dates and times will be maintained electronically in secure servers of the container security device provider's control system.

THE ROLE OF THE HUMAN ELEMENT

Whatever the chain of custody, the individual is the key component.  The human factor is obvious in Customs and Border Protection's (CBP) Customs Trade Partnership Against Terrorism (C-TPAT) 9 core components, one of which is directly focused on the individual: Personnel Security.  The remaining 8 components confirm the importance of the individual in executing C-TPAT requirements. Therefore, in the global supply chain, custody begins with the identity of the person who verifies the cargo, its quantity, its conveyance, and all else necessary under the contract for carriage.  From the time of loading, transferring, or allowing access, there must be a "signature" or identification of anyone allowed proper access. That signature today can be electronic in nature as allowed by recent changes to the Federal Rules of Civil Procedure preventing the fraudulent manipulation of paper documentation and facilitating the use of "single window" concepts of electronic data interchange which expedites and improves efficiencies in the international movement and control of cargo.

APPLICATION TO CONTAINER OR TRAILER MOVEMENT

The reality of global trade necessitates the use of containers and trailers.  These conveyances today can be secured and monitored throughout their international movement by the use of container security devices (CSDs).  These devices, in turn, can necessitate the use of unique identification codes to identify the particular person who certifies the container's content and its quantity at origin.   Their use impacts both security and efficiencies.  For instance, a person who certifies the container's contents at origin, and seals the container at the time of his/her certification can become an obvious target of investigation if the container arrives with cargo other than that certified and the container had custodial care from origin to destination capable of detecting and reporting any unauthorized access during its global movement.    All elements within this chain of custody are stored and available for law enforcement and company officials in evaluating a potential criminal act or merely the competency of the individual verifying the cargo at origin.

CONSEQUENCES AND POTENTIAL BENEFITS OF THEIR USE

I. Benefits to the Shipper

1. Confirmation and electronic certification of proper cargo and quantity leaving facility

2. Control of access and entry into the container

3. World-wide tracking and location of container for security and asset management

4. Identifying and placing into the supply chain the identity of the company     employee who certifies contents of container at sealing at origin and opening at    destination (end-to-end visibility)

5. Lower insurance costs

6. Knowledge of departure from foreign port to destination port

7. Knowledge of carrier's sail or over-the-road or rail transport time

8. Expedited entry of cargo by CBP and faster through-port time

9. Data-base intelligence identifying weak points/delays/security- risk areas in supply chain

10. Verification of compliance with Incoterms® 2010, and UN Convention of Contracts for   the International Sale of Goods (CISG), specifically Articles mandating accurate cargo and quantities to be shipped under contract

II.  Benefits to Consignee

1. Cargo identification and quantity verification and electronic certification at stuffing

2. Knowledge of departure time

3. Location of container throughout the supply chain

4. Knowledge of opening or surreptitious access into container

5. Third-party verification of all supply chain data elements and reports

6. Knowledge of arrival

7. Lower insurance costs

8. Verifications of Compliance with CISG importer provisions

9. Increased or enhanced knowledge needed for 10+2 Program Importer Security    Filings

10. Enhanced knowledge of shipper and carrier performance

III. Benefits to the Carrier

1. Access control into container and knowledge of container location

2. Protection against claims by shippers that unauthorized contents were the results    of carrier action

3. Certification and Verification of identity of shipper and contents

4. Marketing and sales tool to increase market share in providing secure containers to shippers

5. Automatic transmission to CBP of container data, for instance in the CF-1302 or    data used in electronic filings such as data required by the Automated Commercial Environment (ACE) system.

6. Data-base intelligence identifying weak points/delays/security- risk areas in supply chain

7. Compliance with and protection within the new Rotterdam Rules impacting vessel carriers

IV. Benefits to CBP (2)

1. Knowledge of which containers need no inspection improving man-power    efficiency

2. Identification of suspect container based on real-time or close to real time     electronic reports of authorized access or presence of WMD or other dangerous or    illegal cargo inserted or present in the container signaled by a break in the chain

3. Faster transmission of electronic data into CBP and ACE system

4. Elimination of third-party reporting of trade data (i.e. Motor Carriers and Border    Customs brokers)

5. Enhancement of 10+2 Importer Security Filings

6. Enhanced knowledge of actual container contents from a identified supervisory    employee who certifies shipment contents and quantity at stuffing

7. Evidentiary data for potential legal action

CONCLUSION
The application of a chain-of-custody system is more than compelling.  It would assist law enforcement, solve transshipment problems, impair drug cartel use of commercial  traffic into the United States, reduce counterfeiting, eliminate the in-bond problem of unauthorized container access, control hazmat movement and other dangerous cargo movement, and even provide for automatic hazmat emergency response guideline to first responders in the event of an accident and resultant spill.  Finally, these off-the-shelf systems will actually improve bottom line revenue generation for the firms using them.   The inescapable conclusion then becomes a question: Why aren't they being used??

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Citations

(1) Chain of Custody, Lexis Nexis Applied Discovery, http://legal dictionary.thefreedictionary.com/chain+of+custody

(2) CBP was queried about other potential benefits offered by this analysis with the request that they advise if they see other benefits. After two inquiries to them, they have not responded, perhaps an indicator of government-private sector cooperation. 
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About the Author
A former Regents Professor at Texas A&M International University, Dr. Jim Giermanski is now Professor of International Business and Director of Centre for Global Commerce at Belmont Abbey College.  He has been chosen as the International Educator of the Year by the National Association of Small Business International Trade Educators and has been appointed to the graduate faculty at the University of North Carolina at Charlotte. In conjunction with the Professional Examination Service (PES) and Bradley University, he is a member of the International Practice Analysis Committee of the NASBITE Task Force to develop a national International Trade Specialist Certificate.  He is also a reviewer for the Transportation Research Board, U.S. National Research Council.  He served as Director of Transportation and Logistics Studies, Center for the Study of Western Hemispheric Trade at Texas A&M International University.

Dr. Giermanski consults often on international transportation and transportation security, border logistics, and trade matters involving Mexico.   He has frequently given invited testimony on NAFTA, transportation, and other international business issues before the U.S. Senate and House, the Texas Senate and House, EPA, and the U.S. International Trade Commission.  He served as the co-chairman of the Texas Transportation Committee of the Task Force to prepare for NAFTA, sat for 5 years on the Texas Office of the Attorney General’s Trans-border Trucking International Working Group, and for three years as a member of the Research Advisory Committee on Management and Policy, Technical Advisory Panel, Texas Department of Transportation.   He has been requested to serve as a border expert to assist the Arizona Department of Transportation in developing concepts and practices to improve the border crossing activities on the Arizona Mexico border, and at the request of the White House, Council of Economic Advisors, he provided information on trade issues and barriers on the southern border.
He has authored over 100 articles, books, and monographs and has given over 100 presentations.  He has been published extensively on transportation and trade issues and for five years wrote the International Insight column in Logistics Management.  In addition to his scholarly writing, he has been published in the Journal of Commerce, El Financiero, Traffic World, Strategic Finance, Transport Topics and most recently, Tax Notes International.  He has been interviewed by and quoted in over 50 national and international publications such as the Wall Street Journal, the New York Times, Forbes, the Financial Times, Christian Science Monitor, and has appeared nationally as a special guest on the FOX News Channel’s Special Report with Brit Hume, CNN, NBC, CBS, NPR, BBC, Voice of America and the Canadian Broadcasting Corporation in addition to many local and regional affiliates.

Finally, with his background as a former FBI special agent, OSI special agent and a Colonel in the Office of Special Investigations where he handled counterintelligence matters, Dr. Giermanski is Chairman of the Board of Powers International, Inc. which provides supply-chain security solutions, consulting, and training.  He currently provides transportation security lectures on C-TPAT, and other Customs and Border Protection (CBP) programs.

Dr. Giermanski has a Masters degree from the University of North Carolina in Charlotte, a Masters from Florida International University, and a Doctorate from the University of Miami.  He is a graduate of Air Command and Staff College, and The Air War College while also serving as a visiting scholar at the Center of Aerospace Doctrine, Research, and Education, an Air Force think tank.