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The economics of cargo screening

Introduction

For centuries, nations engaged in trade with other countries have needed to inspect incoming cargo, primarily to collect duties and to ensure that undesirable and illegal cargo is excluded from import. The techniques and technology, primarily manual inspection guided by intelligence, evolved little until the use of X-rays in the early 20th Century. X-rays allowed a look inside the container and provided a picture for comparison with declared contents. Exactly how the images are used depends on the country and the screening scenario but commonly, they are used to clear cargo and to refer any cargo with image anomalies for secondary screening.

A country may undertake intensive screening of cargo for many reasons. The type of screening, and techniques used, often depend on the perceived benefit. This paper discusses some of the benefits and estimates the costs of screening cargo with X-rays, and recommends processes that can yield the highest benefit to cost ratio.
 

Benefits

There are three primary reasons to screen cargo: collection of duties and taxes, protection of society from culturally determined illicit materials, and protection of society from external threats. Each of these will be examined individually although X-ray systems are often utilised for some combination of these reasons.

Collection of duties and taxes: The most widespread use of high energy X-ray inspection systems is for the recovery of revenue from duties and taxes on undeclared or under-declared content. This is perhaps the easiest goal to achieve. The X-ray system provides an image of the cargo container’s contents and the operator can compare the image to a record of the declared contents. The benefit is: more effective collection of duties and the protection of local industry from external competition.

Protection from illicit materials: The type of materials sought depends on social norms and laws but often includes narcotics, pornographic material, alcohol, and small weapons. The societal impacts of cargo screening, both in terms of security and cost, are difficult to quantify. Often the benefit to society is a matter of perception and, while important, also difficult to measure. As an example, interdiction of illegal drugs in the United States may increase the street price of these drugs and, to the extent there is economic compliance, can reduce the demand. In addition, there are important indirect social benefits associated with druginterdiction, such as reduced criminal activity and fewer costs to the healthcare system.

Protection from external threats: Each society may perceive external threats differently. Conventional weapons, weapons of mass destruction (WMD), and illegal immigration can all be perceived as significant threats. Traditional weapons can be used in street crime or for insurgency – very costly social problems – and there are significant social costs associated with illegal immigration, as well. The successful deployment of a single weapon of mass destruction, however, could enormously burden a society’s economy, as well as world trade. Therefore there are immediate economic benefits to protection from this threat, with a corresponding psychological benefit to having the inspection system as a deterrent.

The best way to deter potential threats is to find a self-, or nearly self-funding mechanism that also prevents terrorists from moving dangerous materials in order to conduct an attack. The concept is not to develop the perfect system, but rather to raise the obstacles to carrying out a successful attack beyond the will or ability of terrorists to surmount them. If, in addition to identifying threats, the security technology can be leveraged to increase the productivity of other inspection activities, it might be possible to add enough value to fund the screening programme. Of course, the optimum result for a successful screening programme is that an attack is deterred and never attempted.
 

Costs

In order to compute a realistic cost-benefit ratio one must compute the true cost of ownership of an inspection system. The costs that must be considered are the cost of acquisition, installation, operation, and service, as well as fixed costs, including labour, the cost of capital, and utility costs. These costs vary depending on the site location and local cost structures but a reasonable attempt at an estimate is useful in identifying what lessons can be learned. The authors focus on two different types of inspection systems: mobile and fixed. In costing out both types, we will use an interest rate of seven per cent to compute the cost of money.
 

Mobile systems:

As compared to fixed site systems, mobile systems are characterised by lower acquisition and site preparation costs, and relatively higher service costs because of the truck that is required. All numbers quoted in this paper are estimates only. The acquisition cost for a typical mobile system would be about $3M, while the site preparation costs are low to negligible. A mobile system generally requires two operators: a driver and an image analyst. Some sites also require an additional outside coordinator. For this example we will assume three operators.

Usually a number of trucks are lined up and scanned simultaneously. This means that there is some time and effort associated with moving the trucks to the inspection site, lining them up, removing the drivers, scanning, allowing the drivers to return, and moving the containers back to their original locations. The time used per container for all these tasks is estimated at a conservative 20 man-minutes per truck/container. Other costs include the utilities required and the cost of fuel. Fuel is a highly variable cost in today’s environment. A typical mobile system requires an amount of fuel costing approximately $200/week. The problem of false alarms is another little-discussed hidden cost of inspection. This will be considered in this paper as well.

Dr. Paul Bjorkholm, Consultant, & Lester D. Boeh, Jr., Vice President, Varian Medical Systems, Las Vegas, NV, USA
Edition: Edition 31

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