Cargo containers are an important segment of maritime commerce. Approximately 90 percent of the world’s cargo moves by container. In 2002, approximately 7 million containers arrived at U.S seaports, carrying more than 95 percent of the nation’s non-North American trade by weight and 75 percent by value. Many experts on terrorism—including those at the Federal Bureau of Investigation and at academic, think tank and business organizations—have concluded that oceangoing cargo containers are vulnerable to some form of terrorist action. A terrorist incident at a seaport, in addition to killing people and causing physical damage, could have serious economic consequences. In a 2002 simulation of a terrorist attack involving cargo containers, every seaport in the United States was shut down, resulting in a simulated loss of $58 billion in revenue to the U.S. economy, including spoilage, loss of sales, and manufacturing slowdowns and halts in production. CBP is responsible for preventing terrorists and weapons of mass destruction from entering the United States. As part of its responsibility, it has the mission to address the potential threat posed by the movement of oceangoing containers. To perform this mission, CBP has inspectors at the ports of entry into the United States. Inspectors assigned to seaports help determine which containers entering the country will undergo inspections, and then perform physical inspections of such containers. These determinations are not just based on concerns about terrorism, but also concerns about illegal narcotics and/or other contraband. The CBP Commissioner said that the large volume of imports and CBP’s limited resources make it impossible to physically inspect all oceangoing containers without disrupting the flow of commerce. The Commissioner also said it is unrealistic to expect that all containers warrant such inspection because each container poses a different level of risk based on a number of factors including the exporter, the transportation providers, and the importer. These concerns led to CBP implementing a layered approach that attempts to focus resources on potentially risky cargo containers while allowing other cargo containers to proceed without disrupting commerce. As part of its layered approach, CBP employs its Automated Targeting System (ATS) computer model to review documentation on all arriving containers and help select or target containers for additional scrutiny. The ATS was originally designed to help identify illegal narcotics in cargo containers, but was modified to help identify all types of illegal contraband used by smugglers or terrorists. In addition, CBP has a program, called the Supply Chain Stratified Examination, which supplements ATS by randomly selecting additional containers to be physically examined. The results of the random inspection program are to be compared with the results of ATS inspections to improve targeting. If CBP officials decide to inspect a particular container, they might first conduct a nonintrusive inspection with equipment such as the Vehicle and Cargo Inspection System (VACIS), which takes a gamma-ray image of the container so inspectors can detect any visual anomalies. With or without VACIS, inspectors can open a container and physically examine its contents. Other components of the layered approach include the Container Security Initiative (CSI) and the Customs-Trade Partnership Against Terrorism (C- TPAT). CSI is an initiative whereby CBP places staff at designated foreign seaports to work with foreign counterparts to identify and inspect high- risk containers for weapons of mass destruction before they are shipped to the United States. C-TPAT is a cooperative program between CBP and members of the international trade community in which private companies agree to improve the security of their supply chains in return for a reduced likelihood that their containers will be inspected. A supply chain consists of all stages involved in fulfilling a customer request, including stages conducted by manufacturers, suppliers, transporters, retailers, and customers. Risk management is a systematic process to analyze the threats, vulnerabilities, and criticality (or relative importance) of assets in a program to better support key decisions linking resources and program results. Risk management is used by many organizations in both government and the private sector. In recent years, we have consistently advocated the use of a risk management approach to help implement and assess responses to various national security and terrorism issues. We have concluded that without a risk management approach that provides insights about the present threat and vulnerabilities as well as the organizational and technical requirements necessary to achieve a program’s goals, there is little assurance that programs to combat terrorism are prioritized and properly focused. Risk management helps to more effectively and efficiently prepare defenses against acts of terrorism and other threats. Key elements of a risk management approach are listed below. Threat assessment: A threat assessment identifies adverse events that can affect an entity, and may be present at the global, national, or local level. Criticality assessment: A criticality assessment identifies and evaluates an entity’s assets or operations based on a variety of factors, including importance of an asset or function. Vulnerability assessment: A vulnerability assessment identifies weaknesses in physical structures, personnel protection systems, processes, or other areas that may be exploited by terrorists. Risk assessment: A risk assessment qualitatively and/or quantitatively determines the likelihood of an adverse event occurring and the severity, or impact, of its consequences. Risk characterization: Risk characterization involves designating risk on a scale, for example, low, medium, or high. Risk characterization forms the basis for deciding which actions are best suited to mitigate risk. Mitigation evaluation: Mitigation evaluation is the identification of mitigating alternatives to assess the effectiveness of the alternatives. The alternatives should be evaluated for their likely effect on the risk and their cost. Mitigation selection: Mitigation selection involves a management decision on which mitigation alternatives should be implemented. Selection among alternatives should be based on preconsidered criteria. Systems approach: An integrated systems approach to risk management encompasses taking action in all organizational areas, including personnel, processes, technology, infrastructure, and governance. Monitoring and evaluation: Monitoring and evaluation is a continuous repetitive assessment process to keep risk management current and relevant. It includes external peer review, testing, and validation. Modeling can be an important part of a risk management approach. To assess modeling practices related to ATS, we interviewed terrorism experts and representatives of the international trade community who were familiar with modeling related to terrorism and/or ATS and reviewed relevant literature. There are at least four recognized modeling practices that are applicable to ATS as a decision support tool. Conducting external peer review: External peer review is a process that includes an assessment of the model by independent and qualified external peers. While external peer reviews cannot ensure the success of a model, they can increase the probability of success by improving the technical quality of projects and the credibility of the decision- making process. Incorporating additional types of information: To identify documentary inconsistencies, targeting models need to incorporate various types of information to perform complex “linkage” analyses. Using only one type of information will not be sufficient to yield reliable targeting results. Testing and validating through simulated terrorist events: A model needs to be tested by staging simulated events to validate it as a targeting tool. Simulated events could include “red teams” that devise and deploy tactics in an attempt to define a system’s weaknesses, and “blue teams” that devise ways to mitigate the resulting vulnerabilities identified by the red team. Using random inspections to supplement targeting: A random selection process can help identify and mitigate residual risk (i.e., the risk remaining after the model-generated inspections have been done), but also help evaluate the performance of the model relative to other approaches. CBP has recognized the potential vulnerability of oceangoing cargo containers and has reviewed and updated some aspects of its layered targeting strategy. According to CBP officials, several of the steps that CBP has taken to improve its targeting strategy have resulted in more focused targeting of cargo containers that may hold weapons of mass destruction. CBP officials told us that, given the urgency to take steps to protect against terrorism after the September 11, 2001, terrorist attacks, they had to take an “implement and amend” approach. That is, they had to immediately implement targeting activities with the knowledge they would have to amend them later. Steps taken by CBP include the following: In November 2001, the U.S. Customs Service established the National Targeting Center to support its targeting initiatives. Among other things, the National Targeting Center interacts with the intelligence community and manages a national targeting training program for CBP targeters. In August 2002, CBP modified the ATS as an antiterrorism tool by developing terrorism-related targeting rules and implementing them nationally. CBP is now in the process of enhancing the ATS terrorism- related rules. In 2002, CBP also developed a 2-week national training course to train staff in targeting techniques. The course is intended to help ensure that seaport targeters have the necessary knowledge and ability to conduct effective targeting. The course is voluntary and is conducted periodically during the year at the Los Angeles, Long Beach, and Miami ports, and in the future it will also be conducted at the National Targeting Center. In February 2003, CBP began enforcing new regulations about cargo manifests—called the “24 hour rule”—which requires the submission of complete and accurate manifest information 24 hours before a container is loaded on a ship at a foreign port. Penalties for non- compliance can include a CBP order not to load a container on a ship at the port of origin or monetary fines. The rule is intended to improve the quality and the timeliness of manifest information submitted to CBP, which is important because CBP relies extensively on manifest information for targeting. According to CBP officials we contacted, although no formal evaluations have been done, the 24-hour rule is beginning to improve both the quality and timeliness of manifest information. CBP officials acknowledged, however, that although improved, manifest information still is not always accurate or reliable data for targeting purposes.