Freight keeps flying but under tighter rules
Established shippers keep their air freight moving despite tightened FAA regulations. But all parties can expect closer scrutiny of their operations.
Staff -- Logistics Management, 11/1/2001
In the first few days after passenger airlines began flying again following the Sept. 11 terrorist attacks on New York and Washington, air cargo was prohibited from the airplanes' bellies.
A few days later, the Federal Aviation Administration (FAA) lifted that ban but subsequently issued strict new rules on how cargo had to be handled. Further restrictions could be in store.
For shippers who have well-established business relationships with their forwarders, air freight continues to move with little disruption for the time being. Yet in the months ahead, all shippers can expect more complex paperwork, greater scrutiny of their documents, and possible site visits from their forwarders, who have to assure the FAA that shipments are secure from the start of the shipping process.
The new rules might also make it more difficult to change forwarders. Shifting to a new provider could move even a long-time aircargo user into the category of "unknown shipper" under the rules imposed by the agency. And some carriers are adding new fees to cover the cost of enhanced security, fees that will show up in airfreight rates.
The FAA, carriers, and forwarders consider details of the new rules to be highly sensitive information and will say little about them. Paul Takemoto, a representative for the agency, will only say, "We have significantly heightened cargo restrictions," adding that the rules apply to both passenger and cargo airlines.
What's clear is that the rules strengthen the "known shipper" requirement that was put in place in 1996 following the crash of TWA flight 800, which was originally thought to be the result of a terrorist act. (Subsequent investigation proved otherwise.) Under the strengthened requirements, a "known shipper" is one that has conducted business with a carrier or forwarder since at least Sept. 1, 1999.
This has added a major hurdle for many potential airfreight shippers. "It has reduced the ability to get your freight out of town if you're unknown," says Ken Hughes, corporate manager of export compliance for Danzas AEI Intercontinental. "There's very limited lift potential. The FAA [has] added a second layer that amounts to what I call the 'golden oldie' rule—it's based on how long you've done business and the amount of business you do."
Adds David Wirsing, executive director of the Airforwarders Association, a trade group of forwarders, "For the most part, the directives and amendments in place are workable under the circumstances. But [the FAA] has tightened things up. Things will never be the same again."
One factor that makes compliance with the rules difficult is that the requirements themselves keep shifting. "There are more rules and continual changes to the rules," says Doug Foster, vice president of marketing for Emery Worldwide, which serves as both an international forwarder and an integrated carrier, flying its own aircraft domestically. "Every day, the FAA continues to assess what changes it wants to make."
The result has been a few delays, where some freight has been held for further inspection. Foster expects the FAA to continue to review security issues, particularly as U.S. military action continues overseas.
Beyond shifting rules, another problem facing shippers can be inconsistent policies from carrier to carrier. "The difficulty comes when you ... have slightly different requirements by different forwarders or different airlines," says Peter Gatti, a policy director for the National Industrial Transportation League (NITL), the nation's largest shipper organization. "That was the case when the rules first came out." However, in the days following implementation of stronger rules, he says, NITL had not heard any reports of compliance difficulties from its members.
Fear of the unknown
What is likely to cause shippers difficulty, however, is the need to change carriers or forwarders or find a new provider altogether. "Shippers will probably have less flexibility," says Gatti. "You don't want to start to do business with a new forwarder and become an unknown shipper." Shippers considered "unknown" or who have not worked with a carrier for two years or more face a long list of requirements they must fulfill before they can place shipments on commercial air carriers.
Frank Perri, senior vice president of sales and marketing for Pilot Air Freight, a major U.S. forwarder, outlines some of these requirements. A shipper's first three shipments with a new carrier must be on non-consecutive days and move by surface carrier or on a cargo-only airline, he says. "We're still required to get specific documentation to qualify them as a known shipper," he reports, adding that there are additional requirements, most of which are confidential.
"The broader definition requires more work by us, but I would not say it is overly cumbersome or burdensome," Perri continues. "It is prudent in these times to take on these procedures. It's a little more difficult to engage new customers, but not overly so. We intend to comply with the rules and cultivate new customers. We just have to be a little more diligent."
Hughes of Danzas AEI concurs. "You can build a relationship, but it will take more time and effort to accomplish," he says. The days of 'I'll give you a try'—they're gone."
In the meantime, what can shippers do to keep their airfreight moving? Wirsing suggests beginning with a thorough operational review. "They [shippers] have to make sure there are no holes in their systems," he says, "and make sure they have good people working for them."
Hughes advises shippers to pay particular care to their documentation. "Your documents do the talking for you," he says. "Right now, we're obligated to check everything out." He adds, "I have no beef with what the FAA is doing. They're doing their best to make things more secure. They've achieved something good. But before we do business with you, the possibility that you're a subversive [must be] substantially reduced. I have got to check you out before I take your box."
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