Freight Transportation Vulnerability, Security, and Productivity

Preface

Some readers have a version of this report dated June 30, 2002

The principal differences between the versions arise from additional material provided by Encrypta Electronics on July 12. The following information is provided to aid readers who may have marked up the earlier version:

The Encrypta changes affect pages 12-14, the Summary Matrices on pages M-1 and M-2, and the product sheet on page M-15. Page M-16 of this report is new. Additional changes are on pages 6-8 and M-13 - M-14.

This overview of the electronic cargo seal market was prepared by Michael Wolfe of The North River Consulting Group, a member of a Battelle team providing research and analysis support to the Federal Highway Administration, including the Intelligent Transportation Systems Joint Program Office. The paper was prepared under contract DTFH61-97-C-00010, BAT-99-020.

Kate Hartman of the ITS Joint Program Office is the project manager. She may be reached at 202-366-2742, email Kate.Hartman@fhwa.dot.gov.

Mr. Wolfe may be reached at 781-834-4169, email noriver@att.net.

This paper is the third in a series. The first two, prepared by Mr. Wolfe for the FHWA Office of Freight Management and Operations, are:

· "Freight Transportation Security and Productivity," April 2002. Bruce Lambert is the project manager. He may be reached at 202-366-4241, email Bruce.Lambert@fhwa.dot.gov.

· "Technology to Enhance Freight Transportation Security and Productivity," April 2002, which is a stand-alone appendix to the preceding paper. Michael Onder is the project manager. He may be reached at 202-366-2639, email Michael.Onder@fhwa.dot.gov.

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Table of Contents

n The Rationale for Electronic Seals 1

Manual Seals and Locks 1

Potential Improvements from Electronic Cargo Seals 3

Improving Information 3

Improving Physical Protection 3

Customer Perspectives 4

n The Characteristics of Electronic Seals 5

RFID Seals 5

Standards and Frequencies 8

Infrared Seals 10

Contact Seals 10

Remote Reporting Seals 11

n The Electronic Seals Marketplace 12

Types of Market Participants 12

Market Status 13

Pricing 15

Looking Ahead 15

n E-Seal Product Matrix 16

Electronic Cargo Seals:

Context, Technologies, and Marketplace

n The Rationale for Electronic Seals

This paper provides a concise overview of today's marketplace for electronic cargo seals. It describes the background of traditional cargo seals, then explains the rationale for electronic seals, the expectations of users, and the characteristics of such seals. Product matrices describe twenty electronic seals and locks offered by twenty-four firms. The products represent four technologies--Radio Frequency Identification (RFID), infrared, remote communications, and very short range or contact technologies. Market status ranges from active development through established use.

Manual Seals and Locks

Cargo seals are more common in international trade than for domestic shipments. This reflects the historical and continuing importance of Customs duties and cross-border smuggling. In general, locks are more common domestically, but some domestic shippers use seals.

Manual cargo seals have long been part of good security practice. Their principal purpose is to assure carriers, beneficial owners of cargo, and government officials that the integrity of a shipment is intact by acting as a 'tell-tale' for tampering. There are two major categories, indicative and barrier seals, both of which detect tampering or entry.[1]

Indicative seals are usually made of plastic, wire, or strips of sheet metal marked with a unique serial number or identifier. These seals may be looped through a hasp or around locking bars and handles so that the container or trailer door cannot be opened without removing the seal. Indicative seals offer no physical protection, they simply reflect whether or not the sealed entrance has been compromised. They may be used together with locks or alone.

Barrier seals add physical protection to tamper detection and are more difficult to defeat. It usually takes bolt cutters or special tools to remove a barrier seal, not simple wire cutters or a sharp knife. Barrier seals take many forms, with the simplest using steel cable rather than wire. Bolt seals are generally more protective, using heavy-duty bolts with specialized single-use locking nuts and unique identifiers.

Barrier seals vary widely in the degree of protection they offer. Many factors affect protection, including the design, materials, and construction of the locking device, and the design and materials in the hasp, bolt, or cable. A brawny appearance does not guarantee great protection. The trade abounds with tales of popular barrier seal designs that have been copied with cheap materials.

There are no international standards for manual seals, only partial surrogates for such standards. For example, Customs agencies may approve individual products as acceptable for uses such as in-bond transits.[2] The US DoD has a robust Lock and Seal program that sets standards for different types of defense shipments. The American Society of Testing and Materials (ASTM) has standards and guidelines that address lock and seal characteristics such as resistance to picking and pull strength. ASTM ratings cover a range of protection levels that, as expected, affect cost. For "ordinary" international commerce--such as shipments not affected by in-bond rules--shippers, their carriers, and perhaps their insurers define practice. For example, major container carriers largely require shippers to seal containers with "high security" bolt seals from reputable sources. These seals are often called bullet seals in the trade because of their shape.

Business practices are critical to seal programs. It has been said that 'a bad seal in a good process' is better than 'a good seal in a bad process.' Good practice begins with careful loading, counting, and documentation of cargo before a seal is applied. Seals themselves should be controlled and accounted for. Seals should have unique identification numbers that are noted on the cargo documentation. The seal should be inspected and its number verified against the documentation at every hand-off in the chain of custody; initialing a bill of lading indicates taking responsibility for the condition of the cargo. Any discrepancy in the seal or seal number indicates possible tampering. It must be noted on the documentation and should cause the load to be set aside for detailed inspection and verification.

Good seal practices improve the odds but cannot guarantee shipment integrity. Clever miscreants can defeat seals in numerous ways, such as cutting holes in the side or top of a container and then repairing it. However, the effectiveness of seal programs seems more affected by poor practices than by unusually skillful criminals.

Good practice for seals is ignored to a significant degree, often for lack of discipline in the system as well as simple human error. One common issue is failure to read or note seal numbers at handoffs in the chain of custody. For example, a former container terminal manager told the author that, when he ran a terminal controlled by a container carrier, he got rid of seal checkers as an economy measure. ("Any loss was still our company's regardless of the seal.")

Good practice with manual seals can establish what entity had responsibility when a seal was compromised--it had to happen between the last time the seal was inspected and noted as intact and the time it was noted as broken, missing, or changed. However, manual seals offer no precise information as to where, when, under what circumstances, or by whom the seal was broken.

Potential Improvements from Electronic Cargo Seals

Electronics can improve the seal process in two main ways, by improving the completeness, richness, and value of information; and by improving the quality of physical protection.

Improving Information

The core payoff of an effective electronic seal program is increasing the probability and completeness of seal verification throughout the chain of custody. The appeal rests largely on the ability to reduce or alter the role of people in the cargo security process. In some cases, the intent is to take people out of the loop entirely, in other cases to increase the likelihood that people will do what they are supposed to do, and that they do it accurately. There are partisans for both points of view.

The basic function for electronic seals is to assure a complete and accurate audit trail for seal status through a shipment's chain of custody: to both determine the integrity of seal and record the time and place of the transaction. This may be done in close proximity to the seal or at some distance from it; regardless of the read distance, this basic function is an analog of the manual seal process.

One possible enhancement is to detect a breach or tamper attempt as it happens and record the time of occurrence for later reporting. The data set can be richer by adding the location of the tamper event with latitude and longitude from GPS or another source. The electronic seal may also be a platform to report other sensor data, such as light, barometric change, and radiation.

Another possible enhancement is to enable the immediate reporting of a breach or tamper event so that authorities may interrupt improper activity or act to foil criminal intent. Some technologies can accomplish this within a limited area, such as a terminal. Other technologies employ satellite or cellular communications for much wider reach.

Improving Physical Protection

Electronic seals can simply mirror traditional seals in terms of protection. Some approaches use electronics as intrusion sensors or indicative seals. It is also common to find electronic devices married to traditional barrier seal components such as steel bolts and cables.

More sophisticated--and expensive--approaches use electronics to control the operation of locks and seals. One approach programs a lat/long location or key code into the seal, which will not open until an internal or external device confirms the correct location or code. Another approach enables remote control of the locking mechanism via satellite or radio frequency (RF) messages.

Customer Perspectives

Users seem to have three concerns related to electronic seals: effectiveness, operating impacts, and cost--and not necessarily in that order.

Effectiveness addresses several components, starting with whether the electronic seal performs as advertised, which is necessary but not sufficient. Effectiveness requires that the electronic seal capabilities complement good operating practices. Smart potential users know the best electronic seals may provide nothing more than an illusion of security unless they are part of a thorough security regime. There is also a political facet of effectiveness for users: confidence that the electronic seals will satisfy the requirements of government agencies and security regulations so that shippers and carriers can continue to do business.

Using electronic seals means changing operating practices to accommodate and take advantage of the new tools. Many users think of potential negative impacts, such as increased maintenance and susceptibility to vandalism. The largest concern seems to be that expensive seals would require recycling, especially when cargo flows are unbalanced. Recycling would entail removing, collecting, and accounting for the devices, and shipping them to the next loading point.

Some users and seal vendors also see the potential for positive operational impacts. First, electronic seals may simplify seal checking and speed handling. Second, e-seals, acting as transponders, may simplify and automate general processes such as gate processing and equipment inventory.

Cost is a major concern to shippers, carrier, and economists. Freight industries run on thin margins. Seal manufacturers tell of carriers arguing over pennies in seal costs. All of the electronic seals cost more than traditional seals, most of them much more. Important trade-offs seem to be reflected in whether one chooses to emphasize purchase cost or amortized per shipment costs; Exhibit 1 summarizes those trade-offs.[3]

There are also major concerns about the allocation of costs--whether they will be absorbed by the carriers, passed on to the shippers, or underwritten by governments--and whether carriers and shippers can offset them with operating efficiencies or insurance benefits. Many carriers emphasize the importance of applying increased costs uniformly to prevent some firms some getting economic advantage.

Exhibit 1: Trade-offs and Points of View Associated with Approach to E-Seal Costs
Focus on Purchase Cost		Focus on Per Shipment Cost
	· Favors low cost, disposable devices · Favors minimal capability devices · Seems to imply less impact on operations · Services both open and closed loop applications · Emphasized by users opposed to recycling seals and vendors of disposable seals		· Favors reusable devices · Favors higher capability devices · Seems to imply more impact on operations · Tilts toward closed loop applications · Emphasized by people desiring higher levels of security and by vendors of high capability devices

n The Characteristics of Electronic Seals

There are four clusters of electronic seals, representing four methods of communicating between the seal and its "reader:" radio frequency identification (RFID), infrared, direct contact, and very long range cellular or satellite. All but the simplest solutions are capable of reporting sensor information and data that goes beyond seal status and ID.

RFID Seals

RFID technologies are most common among electronic seals. Fundamentally, they marry RFID transponders or their components with manual seal components. There are two main types of RFID tags and seals, passive and active.

Passive seals do not initiate transmissions--they respond when activated by the energy in the signal from a reader. Interrogated by a reader, a passive seal can identify itself by reporting its "license plate" number, analogous to a standard bar code. The tag can also perform processes, such as testing the integrity of a seal. The beauty of a battery-free passive seal is that it can be a simple, inexpensive, and disposable device. Although not a formal term, it is useful to think of such devices as "pure passive"--a term that describes what most practitioners have in mind when they discuss passive RFID electronic seals.

Passive RFID seals can carry batteries for either or both of two purposes. The first is to aid communication by boosting the strength of the reflective signal back to the reader. This capability need not add much cost. The second purpose is to provide power so functions can be performed out of the range of readers. One example of the latter is to power a clock, continuously test the integrity of the seal, and record the time of tampering. Adding substantial capability could raise the cost of a passive seal sufficiently that it would be practical only as a reusable product.

Practitioners use three different terms to describe passive tags with batteries. They are semi-active, semi-passive, and battery-assisted passive. Since the terms seem to be interchangeable, this is a source of confusion in RFID tag discussions. Alien Technologies began using the term semi-passive and is now transitioning to the term battery-assisted passive since they find it reduces customer confusion. Since Alien is the only firm uncovered in this project that is developing a passive electronic seal with a battery, their choice of terms seems best: battery-assisted passive.

Other than Alien, all known passive electronic seals are "pure passive," with no battery whatsoever. Pure passive functionality is limited to testing the integrity of the seal when interrogated by a reader and reporting that status, its ID, and other on-board information to the reader.[4] One manual seal manufacturer opposes batteries on passive tags, telling the author that "if I'm forced to use a battery on a seal, then it will be an active seal."

Passive seals tend to be short range and directional to maximize antenna exposure to reader signal strength. Maximum read range for electronic seals without battery-assisted communications tends to be two-three meters, with some debate in the industry about efficacy beyond two meters. Adding a battery can boost the range--Alien's design target is >30 meters--but concerns about safety, regulations, and the operating environment impose practical limits on power and range.

Active seals can initiate transmissions as well as respond to interrogation. All active tags and seals require on-board power, which generally means a battery.

A major attraction of active tags and seals is the potential for longer-range and omnidirectional communications--up to 100 meters. Expressed user needs for greater range and the ability of signals to wrap around obstructions in terminal operating environments prompted the international standards group working on electronic seal and read/write container RFID standards to add active RFID protocol(s).

At the lowest functionality, active seals must cost more than pure passive seals because of the battery and the ability to initiate communications, but the difference would be relatively small. Actual price differences between passive and active RFID seals in the marketplace tend to be much larger, reflecting design choices to host greater functionality on active tags--taking advantage of the battery, the potential to initiate communications, and the greater, more flexible range.

All active RFID electronic seals on or approaching the market monitor seal integrity on a near-continuous basis, and most capture the time of tampering and write it to an on-board log. Some can accept GPS and sensor inputs, and some can provide live “mayday” tampering reports as the events happen, mostly within specially equipped terminals.

Passive vs. active RFID seals. One may look at the trade-offs between these technologies from theoretical and practical perspectives.

Theoretically, the only difference between passive and active tags and seals is the ability to initiate communications from the tag--a distinction that means passive RFID tags could not initiate mayday calls. However, a designer could add on-board power to a passive tag, match other functionality and, setting aside regulatory, safety, and cost issues, increase read range and directional flexibility by increasing power and adding antennas. This perspective seems most appropriate to laboratory R&D discussions.

Practically, there is an unmistakable clustering in the market: Exhibit 2 summarizes choices made by firms in pursuit of customers and profit. All but one of the five passive RFID-based seal designs is battery-free. If the exhibit were more complex, including degrees of functionality, the clustering would be reinforced: the four "pure passive" solutions are simple, relatively short range, and low cost. All six of the active RFID-based designs have significantly more read range, greater functionality, and five of them are able to log and report the time of a tampering event. There is one crossover point, where Alien's battery-assisted passive RFID design seems close to the capability --and price points--of several active RFID designs.

Seal Can Initiate

Communications

No Yes

Passive Active

Exhibit 2

Technology Distribution of

RFID Electronic Seals Found in This Market Survey