New advance-information requirements from international security authorities look set to provide a much-needed boost to e-freight penetration levels. But this ‘help’ comes with additional information responsibilities and liabilities, reports Will Waters
When IATA’s e-freight initiative was launched in 2006 as part of the airline association ’s ‘Simplifying the business’ programme, the passenger side had already been successful with its e-ticket initiative, achieving something like 80% penetration in just three years. IATA wanted to do something similar for cargo, but seven years on, e-freight penetration still languishes at barely 6% of global shipments.
With the good intentions of building a collaborative project, IATA initially gathered together a group of airlines, handlers, and forwarders to discuss what e-freight might look like. Henrik Ambak, Cargolux’s VP for ground services and commercial IT, says this is where “perhaps from the beginning, things went a little bit wrong, in terms of creating something that could be implemented quickly”.
Where e-ticket cleverly deals with just one document, namely the ticket – but not the passport, not the vaccination card, not the immigration papers – for e-freight, it was decided that the lowest barrier that it had to pass was customs clearance.
“But if you want to move cargo across the border and clear customs, you need far more than just the air waybill; you need the commercial invoice, you need a certificate of origin, and a whole swathe of other documents to facilitate that,” Ambak tells the Aviation Information Technology Solutions conference. “So the objectives set up were slightly ambitious from the beginning.”
No benefit for airlines
Ambak believes this is one of the dangers of being “too collaborative”, because it means that all the parties involved need to get some benefit from the initiative. And one of the challenges has been that there is “no real benefit to airlines” from e-freight, says Ambak. “We are interested in one document only and that is the air waybill,” he adds. “All of the other documents that come through for the commercial freight shipment are in the interests of the forwarder and his client, but not really of material relevance to us.”
This has made it very hard to demonstrate to airline boards that there will be any return on the IT investments needed. “We have a further challenge that not many forwarders are actually pushing this forward,” Ambak says. He claims there has been a lot of talk, but not much action. “If our clients, the freight forwarders, do not put us under some kind of pressure to do something, how much will happen? Nothing.”
IATA insists the e-freight programme is making progress now under the cooperative efforts of the Global Air Cargo Advisory Group (GACAG) – an even broader collaboration of airline, forwarder and shipper associations plus the diverse membership of The International Air Cargo Association – although the target of achieving 100% e-AWB penetration has been pushed back by a year, to the end of 2015.
Armed with “an end-to-end aligned industry roadmap”, the programme has been divided into three ‘pillars’ or ‘work-streams’, which can broadly be defined as: regulatory acceptance; e-AWB penetration; and the other documents. “Previously it had all been bundled into one, and it was a lot to tackle at once,” acknowledges Guillaume Drucy, head of cargo e-business at IATA.
Customs to the rescue
Ambak acknowledges that the situation facing the e-freight programme has been improving, although he says this is thanks to help from an unexpected source: customs and other transport security authorities around the world. Since 2001, starting in the US and spreading around the world, most customs authorities have had a new role in preventive security. This interest has intensified following the incidents of the printer-cartridge explosive devices found in cargo shipments from Yemen in October 2010.
“And having the regulatory ability to enforce what they want – not very collaborative, but very effective – they were able to mandate that, prior to entry into US or European airspace, they want an electronic copy of the air waybill and house waybills of the shipments that are being moved, so that they can do a risk assessment, to allow them to make a ‘no-load’ decision, to prevent suspicious cargo even getting on aircraft coming into their airspace,” says Ambak.
Compulsion, not collaboration
The US has begun pilot testing its ACAS (Air Cargo Advance Screening) programme, “and the European Union is waiting to see if this is successful before doing the same thing”, says Ambak. “But if that is what it takes to materialise a good idea, we should still be happy.”
However, it brings other challenges. Ambak says e-freight introduces new possibilities to be fined, although that is more to do with the framework behind it. “With the increased security awareness, there is also an increased regulatory interest that things are correct, and also a willingness to fine,” he says. “US rules state that if the information that we provide is wrong, then not only can they impound the cargo, but they may also block the aircraft – they may even impound the aircraft, and they may even dispose of the aircraft and its load, never mind the fact that the cargo doesn’t even belong to us, and that we only transport it on behalf of a third-party. So the risks involved are substantial.”
Regulatory compliance issues were crucial for Lufthansa Cargo when selecting a supplier under its iCAP programme to optimise the company’s IT systems and processes, says Florian Loos, iCAP product manager. “It is also about getting rules-based engines in place, as currently the IT systems we have usually only accommodate rules for one entity – for that station; for that airline. But the rules that come across nowadays are so much more complicated,” he observes.
“If you look at the TSA and the printer-cartridge incident, for example, you actually have to check whether you have been doing business with that customer for more than 90 days, that you can trace the payment and that it was not paid cash. I would not say it’s impossible but it’s a lot of work for the customer and the employee to ensure their compliance in every element. And you cannot expect sales staff to be doing that, and so you end up selling products that you cannot produce afterwards. So there is also a revenue-associated element.”
Ambak says increasing compliance issues are resulting in transport companies “being made responsible and liable for things that are way outside of our control”. He explains: “If somebody ships something from Houston via Luxembourg to Dubai and then afterwards they put it on a dhow and sail it over to Iran, the transporting company, whether it is Lufthansa or Cargolux, can very quickly find itself liable and being punished by either the European or US authorities, even though we were only parties to the transport from Houston to Dubai. We have nothing to do with the later movement; we were not even aware of it. But through the legislation and embargoes in place, we are liable to know, whether we did know or not.
“So I can only support Florian’s remarks about the need for increased systems capabilities to provide mitigation layers to protect ourselves against these risks, which eventually may also come back to the handling agents, because they are doing this on our behalf and they are, for us, the people who are supposed to see the cargo and screen the cargo and do their job correctly.”
Ambak says technology is not a complete solution in itself. “But what technology does is to facilitate information flows in a timely way, and this gives the possibility to get access to data and have relevant filters in place so you can screen the data earlier and find out if there is something here that is not correct,” he says. “You can then say to the client ‘are you sure you want us is to ship this cargo’? Or you can get questions out there – or even in some cases turn away cargo because we don’t want to run the risk.”
This begs the question of whether carriers are getting enough information in the booking process now to make these kind of decisions?
Ambak says: “This is something that I think all cargo-carrying airlines are emphasising to our frontline staff – a whole series of questions, not only concerning the aerial safety, but a whole different set of ‘problematics’ just for embargoes and safety and security. You train your frontline staff to ask some of these questions, and part of the protection for us is that we can go back and demonstrate to the authorities that we had these checklists in place and we have quality audits; that we do check for these things and that we are making our best efforts.”
The illegal drugs example
For example, most airlines are used for illegal drug transport, even though they don’t want to be, says Ambak. “But in the US, this is part of the C-TPAT programme, and so even if they are found in your cargo, participating carriers will not be prosecuted because they participated in a ‘best efforts basis’ in what the government supports – and then you are supported.”
Loos says Lufthansa Cargo is currently in discussions with IATA about the next generation of ‘TACT’ (The Air Cargo Tariff and Rules), and how they can theoretically be applied from a digital perspective. He compares digital TACT rules and rules engines with computer virus scanners.
“At the point of sale, the system could run through the given set of rules by itself and identify for this shipment specific missing data elements requiring further capture. This feature would also allow staff to ask all the right questions in order to obtain maximum upfront visibility, matching precisely the required information to seamlessly process the shipment when it arrives.”
Roni Harmel, chief technology officer for Hermes Logistics Technologies, says: “What IT can supply here is basically traceability. Your data can follow from the start to the endpoint, and when you have an issue over liability, if you can show visibility to the origin – that actually the customer gave the wrong information – you are much more protected. On the other hand, modern IT systems can perform all kind of checks, embargo checks, any kind of information on commodities, to stop shipments from going to the destination without extra steps needing to be done. So, based on the information that is provided – and there is an issue about the information provided – then the system can stop and block shipments from going on.”
The role for portals
All of this suggests an expanding future role for portals, whether carrier-specific or multi-carrier platforms.
Steve Hill, principal industry consultant for Champ Cargosystems says: “There are two models: portals as a neutral platform, targeting the small and medium independent freight forwarders, who are going to have to comply with increasing demands for security and accountability and the quality of information that they provide.” The other option is for an airline to offer or sponsor a portal for a particular community.
“There is a debate on how to bring the SMEs into the equation; at the moment it is the larger, usual suspects,” says Hill. “Otherwise, what we will have is a dual operational model that will cost more to maintain. Ultimately, paper will become the exception.”
Hill says paper “is very hard act to follow”, although electronic information exchange does offer increased possibilities, particularly in light of the new information demands from regulators. “With the new capabilities of information exchange, there is no limit on the information that can be exchanged between parties nowadays,” he says. “There is more scope for more data for more people to be much more visible.”
Harmel says: “There are two sides to the portal. If a forwarder needs to key in the data twice – once in their own system and once in the portal – that is double the work. On the other hand, if you look at India, for example, there are places where the portal is mandatory. So again, if the local area authority, customs or anyone else, enforces it, then they will have to use it. So either you will do messaging or you will use a portal.”
He says the best approach is probably to use both: “The ones who can will have interfaces and send messages, and the ones who can’t will have to double-key the information so it is available for the rest of the processes.”
Loos believes there are additional benefits to be had from portals. “If you have the right rules engine in place, you can dynamically walk the customer along the decision path and ask the appropriate questions. If you do messaging, that is simply not possible; there is no interaction.”
Hill says that in order to encourage smaller forwarders to get on board, they have to see benefit from their involvement.
But Ambak no longer sees this as a problem. “Nowadays, with the customs regulations in place, we cannot transport the cargo if we don’t have the information in some kind of electronic form, because we need the information in a way that we can transfer it. So, either they are in a messaging programme with us, or they use the portal that we make available to them. So I don’t think we will have an uptake problem with the small forwarders.
“We offer an option of keying the information in ourselves, which very few people take, because nobody wants to pay for that service. So if they don’t have a messaging service, the portal becomes the way to go.”