Oops - Pirates pick the wrong ship

A pirate ship mistook a tanker for a commercial vessel. It was a German naval tanker, taking part in Operation EU NAVFOR ATALANTA.

Needless to say, the pirates were captured.

Press release from the EU task force.

Country of Origin Labeling (COOL)

The U.S. implemented new requirements for labeling the origin of food sold in the U.S.

Although the attached brochure says the effective date was Sept 2008, I think it was delayed until March 16, 2009.

It's a good idea, but there are so many loop-holes one must be careful. For example, canned tuna is exempt from these regulations. Huh?

I'll be writing more later with specific details. It's all rather complicated, confusing, and rather boring.

Will Dryships survive?

Dryships auditors have some concerns.

In a note to the Athens based company’s accounts, auditors Deloitte, Hadjipavlou, Sofianos and Cambanis said the company’s breach of financial covenants, negative working capital and other considerations raised “substantial doubt” about its ability to continue as a going concern.

Of course, George Economou says otherwise.

DRYSHIPS boss George Economou has said that the dry bulk and drill ship company’s “proactive approach” to problems has re-engineered it for the long term, in spite of an auditor’s note registering some doubt about the future.

Charter rates in Euros?

The U.S. Dollar has been the dominant currency of international shipping. It is the standard currency for financing, charter parties, bunker oil, and the ocean portion of transport.

However, some have not been too happy with the U.S. Dollar recently, China in particular.

Now some Greek shipowners have floated a new idea.

Mr Antoniou said that although the vast majority of shipping lending was in US dollars, it was currently difficult to fund a loan book in US dollars

“Maybe we’ll start financing in euros, and see ships traded in euros,” he said

Buildings from ocean containers

There have been several houses and even a hotel built from ocean shipping containers.

Most of the houses are not very attractive, but this one is.

It is the Multi-Container House, Redondo Beach, CA.

TSA withdraws request for additional power

The TSA (Transpacific Statilization Agreement) had filed with the FMC (Federal Maritime Commission) for the right for it's members to get together and discuss reducing capacity.

Apparently, after some complaints to the FMC, the TSA decided it best to withdraw their petition.

This happened back in Feb. 09, but somehow I missed it.

TSA, a 14 - member carrier agreement with substantial market share in the Asia/US trades, had contemplated developing a coordinated capacity rationalization program under the proposed Amendment No. 43, in addition to its existing rate discussion authority.

On February 10, 2009, the Federal Maritime Commission ("Commission") received notice that the Transpacific Stabilization Agreement ("TSA") had decided to withdraw a proposed agreement amendment.

Dryships will not negotiate...

... to lower charter rates to their customers, unless, it's a company connected to the chairman of Dryships, George Economou.

The only exception was “if we have to accept it because we have no recourse or if we are wrong”.

An example was the capesize Brisbane, which has been chartered to Classic Maritime, an Economou-backed independent operating company. DryShips conceded a reduced rate — apparently from $57,000 to $25,000 a day — as the charterer threatened to cancel, based on an alleged problem in the vessel’s suitability for a key ore trade, Mr Economou said.

click here for article from Lloyds List

TSA calculates bunker costs

The TSA (Transpacific Stabilization Agreement) web-site now details the basis they will use for calculating bunker surcharges, or bunker adjustment factors (BAF).
(UPDATE - I just realized they are calling this a bunker fuel charge. Next thing you know they will implement a ship cost charge.)

Personally, I think this exercise is mainly for the carriers to understand what they should be charging, more than for the customers.

Steamship lines have been making so much money the last few years, probably no one has been worried about their "cost accounting" guidelines. They have been more worried about finding space for all the cargo coming their way, and of course, with that whole supply/demand thing working, the rates just kept going up.

When the bottom fell out of the market, whoever set the prices just did their best, probably without having the tools to really know their costs.

In my experience, liner carriers aren't very good about cost accounting. Of course, it is very difficult because it depends so much on utilization of each sailing.
It's the same problem for the airlines. Difference is, people can be enticed by really cheap rates. Cargo isn't.

Cargo volume doesn't improve when you drop the rates. Carriers cannot (generally) drop the rates so low as to close the deal between buyer and seller.

The TSA did their whole calculation based on bunker oil around 740.00 per metric ton. Today the price is around 260.00 per metric ton.

They might have shot themselves in the foot.

Contents - BBC "The Box"

The BBC tracking is now updated with movement of The BBC Box, and also gives it's contents as MSG (monosodium glutamate) and car parts.

There are no more details than this, but we do know it's going to Japan from Brazil.

BBC container loaded on vessel in Santos, Brazil

The BBC Container loaded onboard a ship in Santos, Brazil, destined for Yokohama, Japan. From the NYK tracking site. (You can check yourself, input complete prefix and number, no spaces).

Current Date: Mar-22-2009
Container Search Results

Container NYKU8210506 Container Size/Type 40'/DRY

Status As Of Event Location Mode
MAR-22-2009 03:12 Vessel Departure Santos, BRA Aquitania/101

NYK Schedule Santos to Yokohama
This first vessel is Aquitania Voyage 101 to Hong Kong arriving around April 16.

There it will be transhipped onto NYK Estrela Voyage 105, arriving Yokohama around April 21.


For some reason the BBC no longer updates the location of their box. Probably the person in charge of this project got reassigned. So, although I can track the container via NYK web-site, I have no idea what cargo it is carrying.

If anyone in Brazil knows the contents, I would appreciate a comment.

Thanks!

Ocean rates will not go up

Various CEO's of international container companies keep saying there is a need to "restore market discipline", meaning they need to quit cutting rates.

I think the term Market Discipline is an Oxymoron
An oxymoron is a figure of speech that combines two normally contradictory terms.

Janet Porter of Lloyds List wrote a very accurate blog post entitled "We Don't Care About Carriers".

That is what US shippers have to say about container lines as the two sides prepare to embark on their annual round of transpacific contract negotiations

She is referring to the recent meeting of 14 companies getting together to collude.

... the 14 TSA carrier CEOs expressed their intention to avoid any further erosion of existing rate structures that have been undercut by deteriorating demand and bids by carriers to fill gaping capacity.

What these guys don't understand is, you can't restore market discipline by saying "don't do that". You restore market discipline by getting the supply more closely matched with demand.

OPEC doesn't say to it's members "don't sell oil at less than new production cost", they get together and reduce supply.

So shippers, or consignees, you don't need to worry too much about the rates going up for some time. I have seen it happen too often - everyone gets together, agrees they will behave themselves, and it all falls apart as soon as there is no cargo.

Now, having said that, if you want the rock bottom rates, you will probably only get a short term contract. If you want a contract valid for 12 months, the rates will be less than last year, but not crazy cheap like they are now.

If I were negotiating a service contract for the next year, I would be looking more closely at the service part of the contract, making sure the space guarantee is sufficient. If the carriers do get their act together, and by some miracle cargo does pick up, space will be tight.

I doubt that will happen, but better to be safe than sorry.

Industrial Carriers Bankruptcy in question

Industrial Carriers Inc. filed for bankruptcy in October 2008.

This from Bloomberg

Industrial Carriers, based in the Marshall Islands and operating from Odessa in Ukraine, has sought protection from creditors, Michael Ivanov, a senior chartering officer in Odessa.

The shipper's operating office is in Odessa, with a financial office in Athens and representative offices in Shanghai, Moscow and Rio de Janeiro, the Web site showed. The bankruptcy filing was made in Piraeus, Greece, according to TradeWinds.

Since Sept. 26, Industrial Carriers has been sued or is suing other parties in 13 lawsuits in New York and London, according to legal filings data compiled by Bloomberg.

Oh - but not so fast.

Now, 5 months later, the Greek Courts say no,

The Piraeus court threw out the petition on jurisdictional grounds, finding that on the balance of probabilities ICI — which had offices in Ukraine, Greece and elsewhere — had its seat in Odessa rather than Athens, it has emerged.

The appeal filing includes “new evidence”, including greater detail of the Greek residency and background of two of ICI’s three directors, said its lawyer, Andreas Nassikas.

An appeal hearing has been scheduled for May 28 this year.

There's a lot more to this, which you can read in Lloyd's List, but this is my personal favorite.

Staff at the defunct chartering entity have claimed that moves by a handful of owners and charterers to freeze its assets cut short its efforts to settle with more creditors.

Surprise, surprise.

France transport hit by strikes

From the Journal of Commerce

France’s main seaports are at a standstill and rail freight is being severely disrupted as thousands of longshoremen and rail workers join a general strike to protest the government’s economic policies.

The French are upset about their governments' handling of the recession.

This from the BBC

The paper says the protesters are acting out of "indignation at the absurdity of an economic stimulus plan that does not stimulate very much and whose essentials don't benefit workers but businesses".

I think we Americans have more in common with the French than we realize.

The BBC Box loaded in Brazil

The BBC Box, NYKU8210506 was loaded by the shipper in Brazil and returned to the port of Santos on March 16th. There is no update on BBC regarding this movement.

The following is from the NYK tracking site

Current Date: Mar-18-2009
Container Search Results

Container NYKU8210506 Container Size/Type 40'/DRY

Status As Of Event Location Mode
MAR-16-2009 08:00 Arrived at first port of load Santos, BRA Truck

Moves to Date Event Location Mode
MAR-13-2009 15:30 Empty container positioned to shipper Santos, BRA

This container should load on a vessel going to Japan. I haven't checked the schedule to try and figure out which ship.

As cargo must clear Brazilian customs before it can be exported, I guess it should load on a ship by March 22nd or so.

Container Carriers in trouble

The entire international shipping business is in trouble. Dry bulk carriers in particular have been hard hit, but now container carriers are also feeling the pain.

CSAV which speciailizes in north/south trade lanes is in trouble. This from American Shipper.

Chilean liner carrier CSAV has asked shipping bank HSH Nordbank how it can streamline its business as the global slump in demand imperils the line, Reuters reported Monday.
CSAV said Monday it had contacted the bank as shipping rates have sunk to unprofitable levels.
"The main tasks to be developed with the help of HSH Corporate Finance include evaluating the company's different services, their profitability, short- and medium-term prospects and studying the convenience of the sale or disposal of non-essential assets," the company said.
Selling assets might prove next to impossible in an environment where owned and chartered ships are being idled due to excess capacity. And rates aren't likely to recover handsomely for some time. American Shipper and ComPairData analyst Francis Phillips touched on the issue of CSAV's vulnerability in its January issue, noting that the line was being squeezed out of its home market by a decision by its former partners on European-South American services (January American Shipper, page 30 or online at AmericanShipper.com).
Lines like CMA CGM, Mediterranean Shipping Co. and Maersk Line operate large vessels and have more diverse trades from which to draw revenue, issues that make it harder to for CSAV to effectively weather the poor demand storm expected through much of 2009.
In the January report, American Shipper noted that Standard & Poor's downgraded CSAV's creditworthiness, saying it had a negative cash flow. The line lost $36.8 million in 2008, though shareholders injected $200 million in January to "bolster the company's balance sheet," Reuters reported. — Eric Johnson

Flawed Models

When I first read the article regarding Asciano, I thought it was a bulk carrier.

Turns out, it is a port and rail operator in Australia.

However, I think one can draw parallels between the two types of companies which have been created over the last several years.

Asciano was conceived as a high-yield business, paying distributions greater than earnings -- which the global financial crisis has shown is a flawed infrastructure model. So Asciano was loaded with debt of $5 billion, leaving Toll virtually debt-free.

It was obvious after the global credit markets seized up near the end of 2007 that Asciano's debt level was unsustainable and the company's share price, which opened at $10.65 when Asciano joined the lists in mid-2007, began to slide.

By mid-2008 the share price was down to around $3.50....

Asciano's share price rose to $4.83 on news of the approach from TPG-GIP last August but since then has been in steep decline, touching a low of 40c last month after the half-year results failed to reach market consensus.

I wouldn't go so far as saying the bulk carriers paid out dividends greater than earnings. However, because the international shipping business has such highs and lows, the survivors are the ones who stash cash when times are good. These carriers didn't, instead paying out dividends when times were good.

Of course, I don't think it's only shipping companies who can be faulted for this. The companies asking for bail out money from governments, such as the auto industry, are also ones who didn't save cash.

History Oil Price - WTI

Many of the bunker adjustment factors charged by steamship lines have been changed to supposedly be based on a formula adjusted to the price of bunker fuel.

I realize bunker fuel price is not the same as the oil price, just as gasoline does not always go up or down the same as oil. However, let's face it, bunker fuel does come from oil.

I just happened upon an interesting site, giving the history of the spot oil price of
West Texas Intermediate (spot price in Cushing, Oklahoma, USA).

The WTI today is trading around 47.38

I had to go back 4 years to find a price even close to that low.
Here are the prices in February from 2005.

Feb. 2005 47.97
Feb. 2006 61.63
Feb. 2007 59.26
Feb. 2008 95.35
Feb. 2009 39.16

Were carriers charging bunker adjustment surcharges in 2006? I don't think so.

If they were, let me know.

Samsun Logix files Chapter 15

Back on Feb. 9 I blogged about Sansun Logix in financial trouble.


Now they have filed Chapter 15 in New York.

Chapter 15 is a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Generally, a chapter 15 case is ancillary to a primary proceeding brought in another country, typically the debtor's home country. As an alternative, the debtor or a creditor may commence a full chapter 7 or chapter 11 case in the United States if the assets in the United States are sufficiently complex to merit a full-blown domestic bankruptcy case. 11 U.S.C. § 1520(c). In addition, under chapter 15 a U.S. court may authorize a trustee or other entity (including an examiner) to act in a foreign country on behalf of a U.S. bankruptcy estate. 11 U.S.C. § 1505.

Chapter 15 is something new.

It is for foreign companies (outside of the U.S.), so they have some protection when monies are transferred through U.S. This is particularly important because of the rule B attachments which were being filed.

Basis for Bunker Adjustment Factor

One group, the Transpacific Stabilization Agreement (from the U.S. to Pacific Rim) has changed it's formula for charging the bunker adjustment factor

The calculation will be based on the average weekly fuel prices published by independent tracking service Bunkerworld for a smaller number of load ports – Hong Kong and Los Angeles for a West Coast sailing; and Hong Kong and New York for an East Coast sailing, said the TSA.

The formula will assume average vessel size, fuel consumption and steaming time for each routing, taking into account the effective capacity for each type of vessel.

I wonder what they will do if the bunker prices drop more. I doubt anyone will ever see a bunker adjustment credit - only a charge. If the bunker prices drop more, they will probably just reduce the charge to Zero.

At least they have taken the step to adjust this on a quarterly basis instead of monthly.

Collision at Sea

We sometimes forget that international shipping is a dangerous business.

Two ships collided, one sunk, there are still 16 sailors missing.

Sixteen sailors, including seven South Koreans, went missing Tuesday after their cargo ship collided with a larger freighter and sank off the coast of Japan, Yonhap News Agency reported Tuesday, quoting South Korea's Coast Guard.

The sailors who included nine Indonesian crew aboard the 4,255-ton ship went missing after the ship collided with a Panamanian-registered automobile carrier at around 2:15 a.m. approximately seven miles east of Izu Oshima island, according to officials.

The 10,833-ton Panamanian ship was also sinking but all of the 11 sailors on board were rescued by Japanese coast guard authorities, they said.

The South Korean-registered ship, named the "Orchid Pia," was carrying some 5,050 tons of steel coil from Japan to the South Korean southern port of Yeosu.

The car carrier was the Cyngnus Ace, Panamanian Registered. I have not been able to determine who owns this vessel.

Nice Idea

The CEO of Maersk stated

A.P. Moller-Maersk, is determined to defend its market share, which is currently 15 percent worldwide and 17 percent on the Asia-Europe route.
"We would not like to see our market share go down," Kolding said. "When we had huge growth in the market, of 10 percent or more, it was not necessary that we kept our market share each and every year if we had other priorities. But in this environment we will keep our market position."

Then, at the end, he concludes

We are incrementally trying to increase rates when we believe we can get them through," Kolding said. "If it works, we'll of course keep them and consider when we can take the next step. If it doesn't work we'll have to give it up."

Interesting.

Democratic Pirates

The Financial Times published an interesting but lengthy article on piracy in Somalia.

Here's part of the article, which I quite liked.

The Darod may have made the business more democratic, according to Daren Dickson, a senior manager at Drum Cussac, a risk consultancy. They insist on cash delivery, whereas ransoms were previously paid through banks or the informal Hawala money transfer system and controlled by warlords.

“The actual clan members now get the cut, rather than just the warlord taking it,” Mr Dickson says.

The pirates now employ “accountants” to divide up ransoms.

There are carefully worked out formulae determining how much is paid to everyone, from the lowliest guards to gang leaders. The pirates follow a code of conduct which proscribes, for example, the harming of crewmen, with fines for miscreants.

Personal ties and talent together decide how careers progress, according to Mark Genung, captain of the USS Vella Gulf. “If you’re a good pirate, I suppose you get good pirate jobs,” he says. “If you’re a bad pirate, I guess you get bad pirate jobs.”

Rumours are there might be an attack on the land bases of the pirates in March. Honestly, I rather doubt this to be true, but, you never know.

It's not just steamship lines charging fuel surcharge

We forget that railroads in the U.S. are still somewhat regulated.

They have been charging fuel surcharges, but now customers are questioning if these are justified.

Some shippers want to shake things up even more. A collection of mostly small customers is taking on the rail industry’s fuel surcharges in a federal court case seeking class-action status. That case entered its evidence discovery phase as 2008 ended, so 2009 could be a crucial year of judgment on railroads’ fuel fees.

I find it a bit surprising the FMC isn't looking into bunker adjustment factors being charged by ocean carriers. After all, some people think the FMC should be abolished, and one would think they want to demonstrate they have a reason to exist.

Maersk to increase bunker surcharge - what idiots!

This is just unbelievable.

Maersk is increasing bunker surcharges on a couple of trade lanes.

Maersk Line plans to raise bunker surcharges imposed earlier on cargo moving on its services from the West Coast of South America to the Middle East and the Indian Subcontinent.

Effective April 1, the surcharges will be $270 per TEU and $540 per FEU, up from $250 and $500 levied at present, the carrier said in an advisory to the trade.

In a separate notice, the Danish carrier said it plans to implement a similar increase for the trade from Central America and the Caribbean to the Middle East and South Asia, also effective April 1.

The revised surcharges will be $500 per TEU and $1,000 per FEU compared to $470 and $940 imposed earlier.

What in world could cause them to justify this??? I guess it's because they can't get any of their rate increases to stick, so they decided to try this route. Maybe they haven't yet figured out that supply/demand thing.

They won't be increasing the BS in their services to or from Australia, because the authorities there require justification for surcharges.

I guess Maersk thinks their customers are stupid. These bunker surcharges really are BS.

Maersk as a terminal operator

There is an article in Lloyd's List regarding APM, which is the terminal division of Maersk (or A.P. Moller, whatever name they are using these days). The article focuses on the business of running a terminal.

The chief executive of AP Moller-Maersk’s container terminal division, Kim Fejfer, said: “The operator is back in charge. That is healthy for the industry and for the customers because it will come down to who is the best and most efficient operator.”

Mr Fejfer said that the perception had arisen that port development was about “building on an attractive piece of land and then selling it as real estate.”

It's a worthwhile article if you are interested in the business.

I found it slightly amusing, because I recall back when Maersk didn't understand the difference between being a terminal operator and being a steamship line.

I worked for a company which had just gone into a vessel sharing agreement with Maersk. Part of the deal was all of the ships would call at Maersk's terminals.

Problem was, Maersk had never had ships at their terminal which were not their own. They had no idea what an independent terminal operator should do.

The most amusing part was they didn't even have a terminal tariff on file with the Federal Maritime Commission. They kept billing us for demurrage, and I asked them to produce their tariff. They sent me their ocean tariff. I said no, send me your terminal tariff.

After I kept refusing to pay their invoices, I guess maybe their legal department figured it out. We finally came to an understanding that they were the terminal operator and we were the ocean carrier - two separate entities.

Then they allowed us to extend free time on our customers containers if the customer had additional free time in their contract (as did some of their customers).

OK, I admit I took advantage of them and started extending free time on our intermodal containers also, because often they didn't get moved out in time.

Finally Maersk caught on. But, it took them a couple of years.

Piracy Insurance

Finally, insurance companies are taking the Piracy problem serious. A new product being offered is called "Vessel Shield".

When an act of piracy occurs, who is responsible for paying the claim? Is it the vessel's hull or war risk insurer, or the provider of kidnap & ransom cover?" He then noted that the "Vessel Shield package addresses this coverage dilemma by offering an insurance product which clearly provides primary cover for acts of piracy, but also seeks to mitigate the physical security risk as well.

click here for more information

The Problem with Bulk Carriers

Yesterday I made a post concerning Dryships, and at the end mentioned you shouldn't be buying this stock.

It's not just Dryships, it's the entire industry. An article in Lloyds List details the problems besetting bulk shipping. It's rather lengthy, so I will try to put it in a nutshell.

Orders were placed for ships, for which there is no longer a demand. But, the ship yards are not accepting cancellations, nor delays in deliveries.

Here's the official version.

THE world’s bloated bulk carrier order book “spells disaster” for shipping markets and could produce “a wave of destruction for banks to rival the sub-prime crisis”, one of London’s most respected shipbrokers forecast on Wednesday.

Howe Robinson’s annual dry cargo report for 2009 appealed for owners, banks and shipyards to urgently and responsibly work together to “re-order” newbuildings and keep shipping solvent over the next decade.

“The newbuilding profile needs putting back in a tube, from whence it can be squeezed out again over many years to come,” the report said.

“If this does not happen the road to recovery will be littered with many more bankruptcies — and they will not just be shipowners.”

The warning comes as many owners remain embroiled in contentious talks with shipyards in Asia to scale back, cancel or delay orders made at the height of the six-year shipping supercycle.

Shipping is in “the eye of the storm” as the global economy and world trade faces its most serious crisis in 60 years, Howe Robinson said.

At the same time there are more than 3,000 bulk carriers on order at 155 different yards in 15 countries by 479 known owners. All are scheduled for delivery by 2011.

“Yards, owners and banks must realise that it’s not going to rosy in the future unless they do something about this,” said one of the report’s authors.

Dryships is busy

Dryships gave an update today on four items

* Reduces sale price of M/V Paragon to $30.8 mln (half or original price)

* To recognize $2.4 mln gain on sale in Q1 2009

* Settles dispute with the buyers of M/V La Jolla

* Commences arbitration against Samsun Logix

It's rocky times for everyone, not just bulk shipping carriers, but I would bet this news is just the tip of the iceberg.

Also, I just realized, they make no mention of their ship, M/V Saldanha, which was hi-jacked by pirates.

Humm, that makes me wonder if they are trying to "throw us off the scent".

DRYS stock closed at 2.79 today, which is a 5 year low, if not an all time low.

And, to any of you thinking about buying this stock because it's so cheap.

Don't.

What is logistics?

I remember back in the early 90's, the editor of the Journal of Commerce invited me to lunch. I figured he asked me to lunch because I was one of the few female professionals in the business.

I guess that was only part of it. I think the real reason for our lunch, was to ask me the question "what exactly is logistics?". I can assume he wanted to ask me this question, so as not look stupid to one of the guys.

But it is a very confusing area. I googled it, and found one site which gives this as it's primary definition "Logistics means having the right thing, at the right place, at the right time." That's pretty good for putting it in a nutshell.

Here's one that is more typical of an official explanation.

Logistics - ...the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements." Note that this definition includes inbound, outbound, internal, and external movements, and return of materials for environmental purposes. -- (Reference: Council of Logistics Management)

The reason I thought of this was because today, China announced they are investing in logistics. I thought "great, they will build more railroads, roads, etc". But I'm not really sure. This is what they say they will do.

The plan will cover nine areas: Construction of transportation facilities; logistics parks; urban delivery; logistics for bulk commodities and agriculture products; interaction between manufacturers and the logistics sector; promotion of logistics standards; a public information platform about logistics; logistics technology, and emergency logistics.

I'm guessing it just didn't translate well. Or, they are now learning from their American counterparts - how to sound like you are doing something, when you don't know what the heck you will really do with that money. Other than give contracts to your friends.

If anyone needs a logistics consultant, let me know.

A good thing to delay - 100% scanning

Back in January 2009 I said scanning containers will not make us safer.
I stand by that statement.

Although the U.S. has not changed their position on this matter, at least it has become so difficult to implement it probably won't happen.

WASHINGTON -- Homeland Security Secretary Janet Napolitano said Wednesday that Customs and Border Protection is not likely to meet a 2012 deadline for scanning all U.S.-bound containers.

"My initial view is that the 2012 deadline is not going to work. We're going to have to work on what we do beyond that," Napolitano told the House Homeland Security Committee. "To do 100 percent scanning requires agreements with many countries. There are lots of issues with that. There is a difference between screening and scanning in the lexicon of the cargo world, and I believe we are close to 100-percent screening now."