Pfizer’s Medicines, Gallery’s Art Sidestep Air-Screening Delays
A truck-size x-ray machine, made by Rapiscan, is capable of seeing through shrink-wrapped pallets at the Federal Forwarding Company air cargo facility near Dulles Airport, Virginia on April 30, 2010. Photographer: Angela Greiling Keane/Bloomberg
Pallets of cargo await screening at the Federal Forwarding Company air cargo facility near Dulles Airport, Virginia on April 30, 2010. Photographer: Angela Greiling Keane/Bloomberg
Pfizer Inc., the world’s largest drugmaker, didn’t want to take any chances when rules requiring screening of all U.S. air cargo take effect next week. Neither did Racine Berkow Associates, a shipper of fine art.
Both are among 873 companies that as of last week had joined a federal program qualifying them to screen their own goods for air shipping instead of relying on airlines or freight-handling companies.
The rule taking effect Aug. 1 requires checking for explosives all 4.2 billion pounds of freight shipped on passenger planes annually within the U.S., plus goods loaded onto flights headed for international destinations. The Transportation Security Administration estimates the anti- terrorist screening may cost $2.8 billion over 10 years. Carriers such as Delta Air Lines Inc. are charging extra to customers who leave screening to them.
“Delays alone could hurt our product,” Brad Elrod, Pfizer’s director of global conveyance security, said in an interview. “It could be sitting in non-temperature-controlled environments. If you open it up to inspect it, you ruin the product.”
It “became a very simple choice” for New York-based Pfizer to seek certification to do its own pre-flight inspections under the TSA’s program, Elrod said.
The inspection requirement, championed by Representative Ed Markey, a Massachusetts Democrat, was part of a 2007 law in response to the Sept. 11 attacks. All freight going into the belly of a plane should be checked for explosives just as all passengers must clear security checkpoints, Markey said.
Delays, Confusion
Companies expect delays and confusion as airlines and customers struggle to meet the 100 percent inspection standard, up from a requirement of 75 percent that took effect in May, said Brandon Fried, executive director of the Airforwarders Association.
“There will be some spotted areas of hardship which might take a few days to resolve,” Fried said. Members of his Washington-based organization include Swiss freight forwarders Kuehne + Nagel International AG and Panalpina Welttransport Holding AG.
Los Angeles International Airport, Chicago’s O’Hare International Airport and New York’s John F. Kennedy International Airport are among the 18 largest gateways where cargo may back up after the deadline, Doug Brittin, the TSA’s general manager for air cargo security, said in an interview.
AMR Corp.’s American Airlines, which spent $10 million to comply, is screening about half the cargo it ships, with the remainder arriving at the airport already screened, said Dave Brooks, president of the airline’s cargo unit. The Fort Worth, Texas-based company’s cargo division generated 11 percent of its revenue in the second quarter.
Rapiscan, Smiths
American bought seven machines, from London-based Smiths Group Plc and OSI Systems Inc.’s Rapiscan unit in Hawthorne, California, that are capable of screening shrink-wrapped pallets. Each machine costs about $300,000, Brooks said.
Rapiscan and Smiths, the world’s biggest manufacturers of airport scanners, make the only two machines certified by the U.S. to inspect cargo shipped on pallets. TSA-approved air cargo inspection is Rapiscan’s “largest-growing business and has been for the last year,” said Peter Kant, the company’s executive vice president, without disclosing sales.
Racine Berkow, whose Long Island City, New York, company ships fine art, antiques and museum exhibitions, said she is worried her fragile and valuable goods may be damaged even though she met the TSA standards for self-certification.
Risk of Damage
“This whole thing has been a nightmare,” Berkow said in an interview. “For my cargo, it’s going to increase the risk of handling and possibly increase the risk of damage.”
Companies such as Berkow’s didn’t have to buy screening machines. They won TSA certification by training employees in security procedures and verifying that goods are secure from packing to airport delivery. The companies attach special package seals that speed cargo past airport screening.
Cargo backups next month will be more likely when airlines are doing the screening at the airport, Brooks of American Airlines said.
“We will see, probably at a major airport, some cargo get left behind just because of a miscommunication or a spike in activity that we weren’t anticipating,” Brooks said in an interview. “We’re not going to see the supply chain come to a screeching halt.”
Program’s Costs
The TSA estimates it will pick up a fourth of the costs of the screening program, with companies bearing the rest. Agency officials have said they will miss an Aug. 1 deadline for screening cargo arriving on passenger planes from overseas for transfer onto domestic flights.
Delta carried the most cargo among U.S. passenger airlines last year with 2.29 billion ton miles, an industry measurement of one ton of cargo carried one mile. About 4 percent consisted of U.S. mail. Cargo volume fell 20 percent last year from 2008 after the world’s largest carrier idled the last of its Boeing Co. 777 freighters because they were becoming too costly to operate. It now moves freight only on passenger planes.
The airline bought screening machines for major hubs and gateway cities such as Atlanta, Los Angeles and Seattle, and expanded its cargo staff to offer screening under the rule, said Anthony Black, a spokesman for Atlanta-based Delta.
Fee Doubled
Delta more than doubled a cargo-screening fee, to 12 cents per kilogram from 5 cents, to cover costs for new equipment, the carrier said in a May letter to freight customers. Customers that deliver cargo already screened don’t pay the fees.
Even with extra costs, it is usually cheaper to ship air cargo on passenger planes than on air freighters, which may cost three to four times as much, according to Fried of the Airforwarders Association.
FedEx Corp. and United Parcel Service Inc., the largest U.S. air-freight carriers, are exempt from the inspection requirements because they fly planes without passengers.
To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
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