GAO REVIEWS CANCELLATION OF SFI TRIAL IN SINGAPORE

UNCLAS SECTION 01 OF 02 SINGAPORE 000028

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KSLG ETRD ECON SN
SUBJECT: GAO REVIEWS CANCELLATION OF SFI TRIAL IN SINGAPORE

REF: 08 SINGAPORE 1201


1. (SBU) SUMMARY: A three-person team from the Government
Accountability Office (GAO) visited Singapore December 12 to 19 to
meet with GOS officials, private sector representatives, and Embassy
personnel regarding cancellation of the Secure Freight Initiative
(SFI) trial. At a multi-agency briefing, the Ministry of Transport
(MOT) reviewed its version of the steps that led to the cancellation
of the trial, and all agencies and companies involved in the
implementation of SFI conveyed their concerns about the high costs
and cargo delays that would likely result from 100-percent scanning.
The GOS is concerned that the USG appears to be layering on
security programs without a clear strategy. Singapore supports a
total supply chain approach to cargo security (reftel) and does not
wish to see 100-percent scanning implemented. End Summary.


2. (SBU) A three-person team from the Government Accountability
Office (GAO) visited Singapore December 12 to 19 to review the
Secure Freight Initiative (SFI) trial that was cancelled earlier in

2008. The GAO team, joined by the Ambassador, participated in a
multi-agency briefing on December 15 chaired by Ministry of
Transport (MOT) Deputy Secretary LIM Boon Wee that also included
representatives from the Ministry of Foreign Affairs (MFA),
Singapore Customs, Maritime and Port Authority, Immigration and
Checkpoints Authority (ICA),port terminal operator PSA, and
shipping company American President Lines (APL). The team
separately took a tour of the port and met with representatives from
the Singapore Shipping Association and the Singapore Logistics
Association. In addition to external meetings, the GAO team
discussed the SFI trial with Embassy personnel, including the
attaches for Immigration and Customs Enforcement (ICE) and Customs
and Border Protection (CBP). The team visited SFI ports in Busan,
South Korea and Hong Kong before traveling to Singapore.

Events Leading to Cancellation
--------------


3. (SBU) During the multi-agency briefing for GAO, GOS officials
reviewed their perspective on the steps that led to the agreement to
implement the SFI trial in Singapore and the events that led to its
cancellation. MOT stated that CBP was the first to initiate
discussions in 2006 about including Singapore in SFI, because as a
transshipment hub it offered a testing environment different from
other SFI ports. (Note: Post's understanding from Washington at
the time was that it was the Singapore Embassy in Washington that
initially approached DHS to talk about SFI. End Note.) The GOS
agreed in late 2007 to go ahead with the SFI trial so long as the
scanning equipment was not installed permanently, and any extension
of the trial beyond six months would be renegotiated. If SFI was
found to have a negative effect on port operations the trial could
be suspended, MOT and PSA representatives stated to GAO. The MOT
Permanent Secretary and the U.S. Ambassador to Singapore signed the
Declaration of Principles for the SFI trial in December 2007.


4. (SBU) From January to April 2008 the GOS developed a trial
protocol for SFI, DepSec Lim said to GAO. MOT claimed that in that
period CBP became less responsive to GOS queries about the trial and
the timeline for implementation. The GOS then learned of testimony
by CBP Deputy Commissioner Jayson Ahern who indicated CBP would
shift the focus of 100-percent scanning to "high risk trade
corridors." The GOS was informed by CBP Commissioner W. Ralph
Basham in June 2008 that the Singapore SFI trial would not proceed.
Until that point, the GOS was prepared to go forward with the trial
in order to collect data demonstrating the challenges to 100-percent
scanning. DepSec Lim said the GOS was surprised to learn that the
trial had been cancelled by CBP. In August 2008, MOT and CBP issued
a joint press release stating they mutually agreed to cancel the SFI
trial because CBP decided to focus on "high-risk trade corridors."
(Note: CBP has since changed the term "high-risk trade corridors"
to "strategic trade corridors." End Note.)

Potential Costs of SFI and 100-Percent Scanning
-------------- --


5. (SBU) The SFI trial was not implemented in Singapore, so it was
difficult for the GOS and PSA to assess the costs that would be
associated with 100-percent scanning. However, MOT and PSA told GAO
they estimated that SFI and 100-percent scanning would increase
container handling time by 50 percent and reduce the overall rate of
containers handled at the port by about 32 percent. 100-percent
scanning would also increase berth times and fees by an estimated 50
percent. MOT projected that the total cost of the six-month SFI
trial would be US$2.4 million. Half of that amount would be
reimbursed by the USG to cover technology and management costs,
while PSA and the GOS would absorb the rest to cover manpower and
operational expenses.


6. (SBU) During the December 15 briefing PSA stated to GAO that
scanning of U.S.-bound containers would require rerouting cargo

SINGAPORE 00000028 002 OF 002


moving among berths to a scanning station, potentially adding
several kilometers to any container movement within the port. The
longer distance would increase fuel and driver costs. Current dwell
times at the port are about 24 hours for ships and two to four hours
for individual containers, but that could change under SFI. The
scanning station would become a chokepoint that could significantly
affect port efficiency and the competiveness of Singapore's port,
PSA added. (Note: In 2007 approximately 28 million TEUs
(twenty-foot equivalent units) moved through the port of Singapore,
and 80 percent of the cargo was transshipped. Approximately 680,000
of the TEUs passed through Singapore en route to the United States.
End Note.) PSA also wrestled with how to handle liabilities and
claims filed by shippers or shipping lines if cargo was delayed by
the scanning process and missed its transfer to an outbound ship, or
damages that might occur if a container triggered an alarm and had
to be opened at the port.

GOS: No Substantial Benefit to 100-Percent Scanning
-------------- --------------


7. (SBU) Cargo scanning is a useful tool that has a role in a
risk-based approach to supply chain security, but implementation of
100-percent scanning is not worth the incremental benefits it
provides, DepSec Lim told GAO. CBP promised benefits to SFI such as
fewer inspections of cargo once it reaches the United States.
However, as of now, MOT estimated that only a very small percentage
of cargo from Singapore is re-inspected on arrival at a U.S. port,
and that is little incentive. Singapore also has yet to see
benefits promised from other container-security programs such as the
Container Security Initiative (CSI). Ambassador Mary Seet-Cheng,
MFA Senior Specialist Advisor, claimed that CBP has yet to fulfill
promised "green lanes" at U.S. ports for cargo screened through CSI.



8. (SBU) Singapore remains supportive of supply-chain security but
views 100-percent scanning as a departure from the USG's previously
stated risk-based approach to security, Seet-Cheng said.
100-percent scanning does not equal 100-percent security, she added.
The USG began with risk-based programs such as CSI and the
Customs-Trade Partnership Against Terrorism (C-TPAT),and the world
adopted those programs. Now the USG appears to be layering on even
more programs, including the Megaports radiation detection program
and SFI, and consistency has been lost. Seet-Cheng asserted that
the United States must show it can address security issues in a
"rational" and "logical" way because "its reputation is on the
line."

SFI Versus Other Trade Security Programs
--------------


9. (SBU) GAO and the GOS discussed SFI and 100-percent scanning in
relation to other U.S. or international trade-security programs,
such as CSI or the EU Authorized Economic Operator (AEO) program.
The GOS favors a total supply chain approach to cargo security and
initiatives such as the Asia Pacific Economic Community (APEC) Trade
Recovery Program. MOT and Customs did not think companies would
reject participating in CSI or the AEO program if they also had to
comply with 100-percent scanning, but Customs indicated companies
are concerned about meeting many obligations under disparate cargo
security programs. There could be less incentive to participate in
C-TPAT and CSI if all containers are scanned at the port. MOT
indicated that the GOS might be more supportive of USG cargo
security programs if they were more based on mutual recognition and
reciprocity, so implementation led to lower risk scoring and
facilitation of shipments bound for the United States. However, the
GOS does not intend to ask for reciprocity for SFI because it does
not support 100-percent scanning and does not want to see it
implemented, DepSec Lim told GAO.


10. (U) GAO cleared this message.
HERBOLD