Paying for Protection in the Transportation Market

Ground transportation pays plenty to keep supply chains safe

Anyone who's been following the recent Dubai Ports World brouhaha might believe that America is most vulnerable to terrorist attacks against its seaports. They would be right to be concerned about that possibility. But the need for security hardly stops at the gates of U.S. ports.

Air and ocean security have been getting most of the attention lately. But few seem to notice that there are millions of potentially dangerous targets moving every day in this country's domestic transportation and distribution infrastructure.

For instance, every day a half-million hazardous materials shipments move by truck, and thousands of rail cars filled with chemicals travel around the country. A terrorist with a little imagination and burglar's tools could target a warehouse where chemicals and other potentially deadly materials are stored.

There doesn't seem to be a national strategy for the security of domestic transportation and distribution. Instead, these market segments are subject to a hodgepodge of regulations. But there is a common denominator: money. Railroads, motor carriers, and warehouses are paying plenty to keep their customers' cargo safe, and they seem intent on passing at least some of those costs on to shippers.

The View From the Rails

Nobody in the railroad industry is against better cargo security, but carriers do worry about the cost of increased security inspections and delays at border crossings. Nancy Wilson, vice president of security for the Association of American Railroads, says railroads have no choice but to ask shippers to pay more. "Our rates are based on overall operating costs, and security is part of that overall cost."

State and local regulations also weigh heavily on rail executives' minds. Any operator will tell you that there's no bigger time- or money-waster than having to comply with 50 state regulations when one federal law would do. And now even municipalities are ruling in the name of security which cargoes they will or will not accept.

One example is the recent move to ban hazardous rail shipments in Washington, D.C., where rail cars pass within 300 yards of the U.S. Capitol. If the disputed rule should be upheld by the courts, carriers will be faced with a confusing patchwork of regulations. "We do know there are a number of other jurisdictions poised to issue similar bans based on the outcome of that case," Wilson says.

There's also concern about the frequent turnover among Department of Homeland Security officials in charge of freight security. "I see the government making the same mistakes over and over," Wilson says. "I don't want to say they're not responsive. But I will point out that with the perpetual musical chairs going on with DHS and its field offices, we're constantly reeducating government officials."

No More Free Ride

Truckers also face costly constraints on their operations. Drivers for New England Motor Freight (NEMF), a leading regional LTL carrier, experience daily delays while navigating enhanced security measures in and around New York City, notes Vice Chairman Jon Shevell. Drivers are forced to pull over more often to have their loads inspected, and morale suffers when they must show the same loads to different officers, he says.

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