Dec 15, 2003The terrorist attacks on the United States on Sept. 11, 2001, have led to greater regulatory oversight of imports and exports. Gordon Fuller, practice lead of secure logistics at Covansys, a Farmington Hills, Mich.-based systems integrator and outsourcing company, says RFID could help companies ensure that they don’t run afoul of these new rules.
"We are keeping a close eye on the homeland security and other federal requirements regarding the movement of cargo," Fuller says. "These rules affect not only logistics, but also, due to Sarbanes-Oxley and the Patriot Act, they get into every area of reporting, particularly on the financial side."
The Patriot Act was passed by the U.S. Congress in response to the 9/11 acts. Among other things, the act makes it a crime to knowingly falsify a shipping manifest for containers being imported into the United States. The Sarbanes-Oxley Act, passed in 2002 in response to financial scandals, requires the heads of U.S. companies to sign financial statements and assert that the information they contain is accurate.
Fuller says the government isn't looking to stop imports or exports, but companies—and CEO's personally—could be vulnerable legally if they don't put systems in place to provide accurate information on their imports and experts. If a manifest says a company is importing one kind of chemical, and the cargo turns out to be containers of another, the company could face legal action if that other chemical was one that could potentially be used by terrorists to disrupt national security.
If a company were to revise the description of a product to qualify for lower tariffs—something businesses have legitimately done in the past—the company could run afoul of homeland security regulations, and potentially Sarbanes-Oxley. "The U.S. government isn't looking to stop imports and exports, but there are legal vulnerabilities" for companies that don't have good control over their information, Fuller says. Those vulnerabilities—a direct result of the Sarbanes Oxley Act—might result in the company’s CEO being charged with knowingly falsifying financial records.
"This scenario is more remote than the operational failures and the more clearly defined financial penalties there," says Fuller, but it is real possibility nonetheless, and one that RFID could help avert.
Covansys does not advise companies to switch to fully RFID-enabled logistics operations today but suggests that companies should start learning about the technology. Fuller believes that RFID technology could also help a company comply with the regulations by preventing unintentional erroneous information and also by stopping a rogue employee (perhaps someone aligned with a terrorist) from deliberately falsifying information on the manifest.
"We're advising our clients that all of these new regulations are interrelated," Fuller says. "The key to meeting the obligation these regulations impose is top-notch asset tracking. RFID is going to be one of the enablers to get that."
