TIACA ACF 2014

Workshop 7: E-Trade, Mail and Security
October 9, 2014 10:15am-11:45am

The environment is changing rapidly. Global exchanges are fosteringa shift away from B to B toward B to C and even C to C. Mailparcel volume is increasing with this change, so how will that impacttraditional cargo models and the need for data requirements? Howcan regulators, postal operators and industry manage this change?

Subject Matter Experts:

  • Moderator: Christophe Eggers, Supply Chain Facilitation Manager, Le Groupe La Poste
  • Greg Crabb, Inspector in Charge, Revenue, Product and Global Security, US Postal Inspection Service
  • Brendan Sullivan, Manager, Dangerous Goods and Training Standards, IATA
  • Bryce Dalziel, USA Regional Manager, Hanjin Global Logistics
  • Carl Schelfhaut, Vice President, Global Regional Mail Office, DHL
  • Axel Klein, Manager Handling Competence Customs, Authoritys and Committees, Lufthansa Cargo AG
  • Robert Woods, Program Manager/Import Specialist, Department of Homeland Security, Customs and Border ProtectionGene Maddox, Manager Cargo Security Compliance – Corporate Security, American Airlines
  • Kester Meijer, Director, Operational Integrity, Air France / KLM Cargo
  • Derek Duiser, Cargo Security Manager, Delta

OVERVIEW

Workshop 7moderator Christophe Eggers noted that e-commerce sales are expected to grow 45% by 2016, with cross-border sales increasing 10% per year.This presents an attractive business opportunity for all air cargo supply chain stakeholders, including postal operators. Posts have seen traditional letter mail volumes drop roughly 5% annually, so the growth in e-trade offers them a chance to make up for some of their declines on the letter side.

One feature of e-commerce sales is the growth in direct shipments to consumers (both B to C and C to C). This is changing the business dynamic for all stakeholders, with implications for the air cargo supply chain.

In addition to the changes driven by the growth in e-trade, the introduction of advance data regimes for aviation risk assessment is also changing the business dynamic for postal operators. (The broad subject of advance data was the focus of Workshops 3 and 5; Workshop 7 covered its implications for postal shipments.)

Workshop 7 participants discussed how postal operators and their partners in the air cargo supply chain can best address all these changes.

SUBJECT MATTER EXPERT COMMENTS AND GROUP DISCUSSION

The Subject Matter Experts and workshop participants engaged in wide ranging discussions about the changes that are affecting postal shipments by air, and what this means for the traditional distinctions between postal and cargo traffic.

Advance Data

The U.S. Air Cargo Advance Screening (ACAS) pilot provides a good platform for testing advance data in a live environment. ACAS is a joint initiative by U.S. Customs and Border Protection (CBP) and the Transportation Security Administration (TSA), which jointly conduct risk assessment on the advance data. CBP and TSA are working with the U.S. Postal Service (USPS) to receive advance data for postal shipments. Currently, USPS is engaged in a proof of concept with La Poste from data derived from the posts’ CN-23 customs form. Messages go from La Poste to USPS, then from USPS to CBP. CBP shares the data with TSA. Once risk assessment is complete, return messaging goes from CBP to USPS. The pilot may be expanded to other posts in the coming months.

The pilot only covers express mail shipments and, at this point, there is no anticipation that posts will provide data for every postal shipment. However, the Universal Postal Union (UPU) has developed a system that allows collection and electronic transmission of information for every postal item with a CN-22 or 23 (the two postal customs declaration forms). The system has been piloted with about a dozen countries. The key implementation challenge is the cost to the posts of providing the information electronically. (Some posts are providing incentives for customers to provide data over the Internet, to avoid the cost of a postal clerk entering data.) It is also a challenge for posts to collect the necessary information (e.g., a customs classification code) from many of their customers, who tend to be average citizens without specialized customs knowledge.

Airline operators are generally satisfied that data is being transmitted post-to-post, as they do not want to be “data middlemen” for postal shipments. However, airlines do need to receive a “traffic light” message informing them that data has been transmitted and risk assessment completed, so they know how to proceed with mail shipments. The messaging need not be complicated: it simply needs to communicate an “okay to load” (green light) in addition to existing EDI message received from posts, noting that postal operators will retain any parcel that received a "do not load. Another challenge relates to what data customs will require to be able to link the filing from the post (at goods level) to the one from the carrier (at conveyance level).

Workshop participants agreed that, with the growth of postal data interchange, there is a need to define the roles and responsibilities for posts and carriers.

Postal Clearance vs. Cargo Clearance

Significant differences exist between the postal and commercial clearance processes for international shipments. In general, commercial clearance is slower, with every shipment checked by customs authorities, whereas postal shipments are only spot-checked and, thus, clearance is quicker. (There are some variations by country and port that creates exceptions to this general rule – for example, Shanghai has a gigantic backlog of postal shipments because of the popularity of e-commerce orders direct toChina and because of Chinese Customs’ practices.)

The expedited postal clearance process raises the question of whether postal and cargo shipments compete on a level playing field. Participants felt that, while this is not the case today, the field may level in the future, particularly with the growth of e-trade and advance data regimes, and with regulators’ and operators’ growing interest in applying comparable risk assessment on both streams of traffic. A significant number of countries have already transitioned to commercial clearance, and there is some anticipation that this trend will continue, as is the case in most countries in the European Union.

Safety and Dangerous Goods

The rapid growth in e-commerce shipments through the posts is significantly changing the risk profile for postal traffic. While major companies such as Amazon know how to properly handle and ship dangerous goods, one-off and smaller shippers may not – creating major challenges for safety. This has serious implications for airline operators, as they need to ensure the safety of shipments in their cargo holds.

Air cargo operators report increasing safety occurrences with mailbags, and feel the safety risk is becoming comparable to non-postal shipments. There is an urgent need to update industry/postal requirements and procedures in this regard, to ensure that postal operators are performing necessary safety checks and are properly handling shipments. There is a particularly large volume of lithium batteries sent via the mail, and this needs to be addressed.

In 2013, ICAO agreed to new international standards for postal operators’ preventing the introduction of dangerous goods in airmail, and handling and transportation of the very few dangerous goods categories posts can accept. The new standards restrict the types of lithium batteries that posts may ship, and establish training requirements for posts, under the supervision of national CAA. Posts are depoying considerable efforts to implement these standards. Some participants felt more time is needed to allow the posts to comply with the new standards, but others felt much more needs to be done. Specifically, they believe more awareness needs to be pushed through the supply chain, and that industry should consider some integration of image analysis, similar to what Dutch customs is doing with its new center for analyzing x-ray images. They also agreed that posts need to do more outreach to their customer base, and that the overall approach to postal shipment safety needs to be reexamined.

Updating the risk profile for postal shipments and making necessary adjustments to handling and other safety procedures will likely be a major issue for future industry-postal-regulator discussions. IATA is working on a new risk mitigation strategy that introduces multiple barriers and safety checks. Airlines cannot be the only safety step, as the volumes are simply too high. There is a need to extend the risk mitigation barriers out through the postal supply chain, and collaboration is essential if this effort is to succeed.

CONCLUSIONS

The changes in the postal business - led by the downturn in letter volumes, upturn in parcels, and the onset of advance data regimes – are minimizing many of the traditional distinctions between mail and cargo. Increasingly, the issue is becoming not whether a shipment is made via post or airfreight, but rather what is in the parcel. It is just as essential to ensure the security and safety of postal shipments sent via air as it is for air cargo shipments.

Workshop participants agreed:

  1. The general advance data transmission model that postal operators are considering is sound, and better postal integration with customs and civil aviation security authorities is a good development. The data should be exchanged between posts, and then with customs authorities – but carriers must receive a red or green light, to know how to handle the shipments, and the roles and responsibilities of postal and airline operators should be carefully defined, as well as those of customs.
  2. International guidelines resulting from joint work of ICAO and WCO is key.
  3. The safety system for postal shipments is in urgent need of updating. Considerable work is already under way, and should be sustained throughout the postal networks. Such discussions should include the full supply chain. In addition to new requirements that push the risk barriers out from the airlines to the various layers of the supply chain, there is a need for improved education of postal operators, and of postal customers.