How can technology assist customs authorities streamline cross-border freight?

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Monday, 27th May 2013

How can technology asist customs authorities and trade corridors to streamline cross-border freight?


By Prof Alwyn Hoffman

North West Uinversity


South Africa


The modernization programmes of customs authorities around the world have the objective of improving the effectiveness of all systems operated by customs to fulfil its role in the collection of revenues.  A common theme of such programmes is the movement away from paper based systems towards electronic systems; in the case of Customs functions this should eventually support long term objectives like One Stop Border Posts and Green Lanes.  In the shorter term the management of transit goods represents a specific problem area to be targeted for improvement.

Transit is a very important customs procedure for Customs Administrations in countries that provide port services for land-locked countries.  These administrations are required to provide a transit solution for neighbouring countries, and in practice the administration of these procedures create problems that are shared by customs organisations all over the world.  The difficulties arise from:

  • Assessing whether the actual goods that have been released for customs transit have in effect reached their proper destination, i.e. did the goods leak out of customs supervision prior to reaching their destination (in another country or into a customs warehouse);
  • Administering large numbers of transactions (largely paper based) in an audit context.


Customs transit is a very important procedure for all customs authorities, both domestically and regionally.  The regional context is especially relevant in the African context, as most sea ports serve as ports of entry and exit for landlocked countries.

The implementation of an effective system for the management of transit goods will not only address an area where significant revenue losses are suspected to occur – it can also serve as benchmark for future systems to be applied to control the movement of all goods, facilitating the process for the implementation of One Stop Border Posts and Green Customs Lanes.

Problem Statement

Efficient administration of goods being transited through a country between a port of entry and a port of exit is essential to prevent revenue loss as a result of goods disappearing while in transit. While control procedures supported by existing paper based systems are officially in place, there is a significant lack of visibility of the status of goods-in-transit at any point in time, and a limited ability to automatically verify what level of compliance is actually achieved in the acquittal of such goods.  The suspicion exists that a significant proportion of goods-in-transit leaks back into the local economy without these goods either being acquitted or the relevant customs and duties being paid, hence representing a loss to the revenue base.

Within the broader scope of the goods-in-transit problem there are specific areas that stand out as issues to be addressed with a high level of priority.  With the increase in taxes on so-called ‘sin goods’ (liquor and tobacco products) there is a suspected increase in the level of illegal importation of such goods, either by not declaring the true contents of containers or by using the in-transit process to avoid paying duties.  As a single container load of such products represents a potential tax liability of millions of dollars, it would be justified to give consideration to a system that can improve the level of control over the tax status of such goods. Likewise, contraband and counterfeit goods may enter the country masked as Trojan trans-shipments.

Transit systems also often struggle to monitor the acquittal status of any particular consignment in transit on a continuous basis, given the huge amount of paper documents reflecting the status of all transit consignments at any specific time.  The fact that a fair amount of manually controlled processes are applied by most Customs administrations makes it challenging to achieve a marked improvement without the utilisation of new technology that can automate not only the reliable capturing of goods-in-transit information but that will also automatically monitor data that has already been collected, in order to flag non-compliance events as they occur.

Recent developments in tracking, electronic sealing and tagging technology mean that it can be contemplated to track the movement of goods-in-transit and to automatically detect such goods upon leaving through a border post, in the process identifying deviations from designated routes and tampering of the relevant seals. This concept can be applied not only to goods in containerised format but also for different modes of transportation (e.g. the tagging of individual vehicles or high value items).  These tools can be incorporated into fully electronic transit solutions that will enable efficient and accurate administration both for Customs and the clients involved.

The problem to be addressed in this case is therefore threefold:

  • Collecting high integrity information that will measure the effectiveness of existing customs systems for enforcing the acquittal of goods-in-transit, in the process reflecting the current status regarding compliance enforcement;
  • Implementing and proving in practice the effectiveness of an improved transit system supported by technology that can maintain the required level of compliance;
  • Utilising the same concepts and technologies to also address the need for One Stop Border Posts and Green Customs Lanes, in the process streamlining the flow of freight through border posts.

Technology options

A variety of technologies are currently available to help address the problems as outlined above.  Careful consideration should however be applied before a decision is taken regarding the optimal choice of technologies to be deployed.  The best option to be deployed will depend not only on technical functionality, but more importantly on suitability for the specific need as well as total cost of deployment and operation.  In this section an overview is provided of the most prominent candidate technologies that should be considered as part of an overall solution.

Satellite based vehicle tracking combined with Active RFID electronic seals

Typical system operation

The use of satellite tracking systems, both for theft prevention (i.e. vehicle recovery) as well as for logistics management, is already commonplace around the globe.  For the application of this technology to freight tracking, the solution will consist of a satellite tracking unit fixed to each item to be tracked (e.g. trucks and containers), using existing satellites both for location fixing (the GPS portion of the solution) as well as for communication with a base station.  It is also possible to use a unit that can support both satellite and GSM/GPRS communication, as this is normally a cheaper alternative in terms of communication costs, to be used in areas with GSM/GPRS coverage.  In addition such units can support additional sensing devices, e.g. intrusion or temperature sensing.  At the base station a software application will provide tracking information on a 24/7 basis, showing the location of each tagged item on a GIS (geographical information systems) map, and highlighting items that have deviated from planned routes. 

The active RFID portion of the solution will consist of an active transponder attached to each item to be tracked (typically trucks and containers) with active readers either installed inside the trucks and linked to the GPS/GPRS devices, and/or permanently installed at locations where the presence of the tagged items must be detected.  It will offer tracking over distances of around 100m between transponder and reader, although this can vary substantially depending on the physical surroundings.  It therefore offers 24/7 tracking plus spotting of tagged items when the item passes close enough to a fixed reader.  The number of readers per site will depend on the size of the area to be covered as well as on the nature of obstructions that are present (e.g. buildings).  Active RFID tags are battery powered and can also accommodate additional sensing devices (e.g. intrusion detection). 

Cost issues

The capital outlay for satellite tracking systems can vary between approximately US$ 300 up to more than US$ 1,500 per tracked item.  In addition a monthly fee of around US$ 30 or more per tracking unit will form part of operational cost to cover the required communication and control room expenses.  The cost of active RFID transponders can vary between approximately US$ 75 up to US$ 500 depending on functionality.  Reader cost varies between US$ 750 and US$ 1,500.  A cost comparison between GPS/satellite/GPRS/active RFID and a passive RFID system will depend on the ratio between the number of items to be tagged and tracked, and the number of locations to be covered.  As an example: if there are 1,000 items to be tagged and 10 locations, the capital outlay in hardware will be approximately US$ 1,500,000 – 3,000,000 for GPS/satellite/GPRS/ active RFID (providing continuous tracking) and US$ 75,000 – 150,000 for passive RFID (providing spotting information only).

Cost pressures in the freight industry may require GPS/GPRS and active RFID readers and e-seal devices to be recovered from containers or trucks before the tagged items leave the geographical area controlled by the customs authority.  Installation of the devices will also require some level of technical training, as e.g. the devices must be armed before being dispatched, to prevent false alarms. A reverse supply chain of recovered devices will be required as in the case of satellite tracking devices.

Pros and cons

  • In most successful deployments of the GPS/GPRS/active RFID concept, the vehicles to be tracked and secured are either the property of one specific legal entity, or alternatively are effectively controlled by one entity.  Ownership of, and the resulting long term financial interest in such mobile assets normally provides justification for the deployment of relatively high cost technology that becomes a permanent feature of the relevant vehicles.
  • The primary benefit of satellite tracking combined with mobile active RFID monitoring, using GPS technology in combination with either satellite or cellular communications and active RFID, is the fact that 24/7 coverage of the tracked items and their security status is available (unless tracked items move into areas that are screened off from GPS satellites or communication satellites/beacons).  In addition the functionality of such tracking units can include the incorporation of sensing devices (e.g. intrusion detection or temperature).  This can support a concept of real time surveillance of not only the location but also the status of vehicles and the goods being transported.
  • Within the context of customs transit control systems, the challenges to effectively implement the above scenario in accordance with the requirements of a customs authority, and the limitations that such a system may have when operated in isolation, must be well understood.  In a typical case the customs authority may want to deploy its own satellite tracking and active RFID systems onto vehicles used in transport, or onto shipping containers.  The significant capital outlay in terms of tracking devices necessitates the attachment of tracking devices to trucks and/or containers upon entering the country, and the recovery of tracking devices from trucks/containers at some appropriate point to prevent the permanent loss of these items.  Recovery of tracking units at border posts will necessitate the deployment of trained staff that are technically skilled in the operation of such devices, to prevent the equipment to be either damaged in the process or not being set up correctly. 
  • A decision must be made regarding the installation the tracking devices either in a position that is hidden from the truck driver, or that is clearly visible to the driver.  The former choice may cause an additional time delay, should it be required of the driver to leave the truck for an undetermined period to allow the customs official with sufficient time for the installation.  There is furthermore the problem that not all trucks are of the same design, making it impossible to enforce a standard procedure for such covert installation.  It must furthermore be taken into consideration that, should it be too difficult for the customs official at the other end to find the covertly installed tracking devices, more time will be lost, creating resistance from shipping companies.  Installation of the tracking devices outside of the cabin will furthermore require the use of a weather-proof enclosure that will add to the cost of the solution. If the device is clearly visible to the driver it must be taken into consideration that, in the case of tampering with goods-in-transit, this most often takes place in collusion with the driver.  An overt tracking device increases the possibility of tampering with the device to de-activate it while the tampering with cargo is taking place.
  • An important aspect to take into account is the fact that not all ports and border posts, where the removal and installation of tracking devices should occur, will have a balanced flow of freight in both directions.  For this reason a reverse supply chain for tracking devices will have to be operated, to return excess recovered devices to the locations where they are needed.
  • In terms of maintaining the level of security until such time that the cargo has indeed left the country, it will have to be decided exactly at what stage the e-seal device, plus the other tracking equipment installed on the truck, will be disarmed and removed.  Should it occur within the area controlled by the customs authority, it must be taken into consideration that when goods are illegally removed from customs custody by crime syndicates it most often occurs in collusion with the relevant customs official.  A security loop-hole may be created whereby a syndicate is allowed by the customs official to remove or add some goods after the security devices have been removed and before the truck actually leaves the customs area on the one side of a border post.  Should the security devices only be removed after the truck has left the customs controlled area, the customs authority will have to deploy staff within the customs area of the neighbouring country for this purpose, which may add specific costs and potential operational complexities.
  • Another factor to keep in mind is the issue of communication costs.  While a satellite tracking system can generate GPS location information on a regular basis (once every few seconds), it will not be realistic to send all such information to a central repository, as the resulting communication costs will be too high.  The tracking units will have to be programmed to only dispatch historic tracking information to the central system as often as is really needed for management purposes (e.g. once an hour or even less often, depending the current location and status of the container (e.g. in a stationary position in a depot for several days of even weeks). Higher frequency of communication will not only increase costs but also reduce battery life, resulting in batteries being exhausted before the shipping cycle has been completed.
  • One of the benefits of long distance tracking devices that continuously monitor the current status of the item being tracked (e.g. the intrusion status of a container en route to a border post) is the fact that a security incident can be immediately reported and acted upon.  While this is a potentially attractive feature of a security system, there are a few practical realities to keep in mind.  Should a particular truck or container report a security incident while not being close to either a port or border post, it will require an organised operation to act upon the reporting of such an incident: if immediate action forms part of system operation, it may require the 24/7 availability of a (potentially armed) task force that can be dispatched to the relevant site.  It should also be taken into account that travelling to the location of the incident may take hours or even days if it occurred in a remote area.  Should the objective of the security incident have been to steal the relevant cargo, the goods will in all likelihood be lost by the time that the task force reaches the scene of the crime. A more realistic approach, from the customs perspective, may be to wait until the relevant consignment arrives at a border post and is reported for customs acquittal. An inspection will then reveal if unlawful tampering with cargo actually occurred. 
  • In the case of cargo being taken across the borders of the country illegally at a position other than through a formal border post, the use of satellite tracking technology may hold specific benefits over other tracking options.  In order to detect and prevent such actions, the customs authority will have to monitor on 24/7 basis if cargo is venturing off the authorised trade route and possibly crosses the border illegally.  Should the entity in charge of the cargo (cargo owner, haulier or a syndicate that illegally took control of the cargo) intend to take the cargo across the border illegally, it will be possible to sabotage the tracking equipment, either through mechanical misuse, or by generating a jamming signal at the frequency of communication, making it impossible to detect the device remotely.  A breach in communication will therefore also have to be viewed as potentially a deliberate effort to take cargo across the border illegally.  Breaches of long distance communication may however occur from time to time even for fully functional tracking devices.  It must therefore be taken into consideration that, in effect, many false alarms are likely to be generated, should every temporary breach of communication be viewed as an actual security incident to be acted upon. The customs authority will have to decide upon an appropriate line of action in such circumstances, to balance the risk of loosing consignments in customs bond, versus spending too much effort on following up on false alarms.
  • The security and tracking needs of a customs authority includes the need to identify an individual container as it moves through a customs lane, verifying if the seal is still intact, comparing some other data fields (e.g. the association between seal number and consignment reference number), before either acquitting the consignment or diverting it for a physical inspection.  Should this activity be automated, which is the long term objective for the automation of customs processes, it will require the verification of the identity and status of an electronic seal with a location accuracy that is sufficient to guarantee that the correct seal is indeed inspected.  In the case of multi-lane customs gates, the distance between containers possibly being inspected at the same time can be as little as 3-4 m.  In this scenario the triangulation capabilities of active RFID will have to be used.  At each site it will have to be verified if this accuracy can indeed be guaranteed, given the possibility of multi-path reflections that may lead to spurious location detections.  For this purpose active RFID based e-seals are normally equipped with a short range passive RFID transponder as well, to allow high integrity short range identification.
  • If a tampered e-seal is detected by a reader, the relevant container will still have to be identified amongst the collection of containers within read range from the reader (which in some cases may be more than 1 km).  Should a significant level of congestion be experienced (which is specifically the type of scenario for which such an automated security system is primarily required), it may be impossible to identify the compromised container until such time that it actually drives up to the customs gate to be inspected.  In such a case a lower cost shorter range device could have been used to achieve the same result.
  • While active RFID based e-seals or container security devices (CSDs) can store onboard information about the security status of the container over the period of time since it was sealed and armed, the question remains of what value such information will be to a customs authority once a security breach is detected at a customs gate. One possible benefit is the ability for the CSD to store in memory any incident that involved the opening of the container doors.  If e.g. the doors were removed by tampering with the hinges without damaging the e-seal, it should be possible to detect a movement of the doors away from the body of the container based on magnetic induction sensors.  It will however be possible for criminals to temporarily disable the CSD by removing its battery while tampering with the container, replacing the battery once cargo has been removed or replaced, obscuring the fact that any security breach has occurred.

Against this background the practical value of the combination of GPS/GPRS/active RFID must be carefully assessed before operational deployment of such a system. 

Passive RFID

Typical system operation

The next logical technology option to consider is passive RFID.  As for active RFID, it provides spotting rather than continuous tracking information, with the read range between transponder and reader limited to a distance of about 3 – 10 m, depending on the type of reader and its orientation with respect to the transponder.  As in the case of active RFID, all tagged items will be equipped with a transponder, while readers will be installed at position where items must be detected, typically at a customs gate.  Passive transponders carry no battery, and only become alive when passing close enough to a reader – it is therefore not possible to continuously store data from additional sensors, e.g. when an intrusion event occurred.  This information will only become known when the transponder is read for the first time subsequent to such an event.  Transponders can be read manually using handheld readers or automatically using lane readers – it is therefore possible to accommodate either manually controlled or fully automated detection of the status of consignments.

Cost issues

The important benefit of passive RFID (compared to the previous two options) is the fact that an RFID transponder can be sufficiently cheap to use it as a disposable item in the freight supply chain.  A container bolt custom designed to container a passive RFID tag can be provided in volumes in excess of 10,000 at costs below US$7, with this price coming down to US$ 3-4 for volumes exceeding 1 million.  It will therefore not be necessary to recover the devices before the tagged item leaves the geographical region controlled by the customs authority – the passive transponder only has to be read upon leaving the area to record this event.  This removes an important cost element and a big logistical and operational obstacle from the operation of the tracking system.

Pros and cons

  • While a passive RFID tag does not offer the same technical functionalities as satellite or active RFID tracking devices, they offer the advantage of being small enough to be integrated into standard container bolts.  Combined with the fact that these bolts can be used as disposables, it offers the important benefit that the current operational procedures used in the freight industry for sealing containers and dispatching trucks will not have to be significantly changed: the operator will still apply the bolt in exactly the same way, the only difference being that the seal ID can now be read electronically, using either a handheld or fixed installed reader, in stead of relying on a manual read.  In contrast significant modifications to operational procedures will be required when using satellite or active RFID devices. It is furthermore possible to combine the passive RFID transponder with a barcode as well as a human readable code, to provide for monitoring points where no RFID technology is available.
  • The use of passive RFID in the freight supply chain is based on the philosophy that continuous tracking is not essential for the vast majority of consignments, and that in fact the availability of 24/7 tracking information on all active consignments will overburden a customs authority, who typically does not have the resources to act upon illegal or suspicious consignments in areas other than at custom gates or border posts.  The focus of passive RFID is therefore on the recording of high integrity information during all important events that a consignment is subjected to, starting with the initial sealing event, and terminating when the consignment is opened at its final destination.  A high integrity factory programmed code, which in combination with the necessary encrypted information on the passive RFID based e-seal, is used as security token during each of these events.  Any handover event that changes the current ownership of or control over the consignment, is recorded through a transaction with the inclusion of the unique e-seal code, in order to effectively also transfer culpability from one party to the next.  Tamper evidence can be built into the passive RFID e-seal, to ensure that a receiving party can verify the integrity of the consignment before accepting culpability.  By focussing on the handover and control points (in stead of providing continuous tracking) passive RFID allows the freight community to use a much lower cost technology that provides the level of security that a typical customs authority can support based on its existing infrastructure and resources (e.g. it will not need reaction task force teams to act upon the information provided by the tracking system – it can use existing personnel already employed at customs gates and border posts).
  • In summary: passive RFID offer the combined benefits of high integrity (un-cloneable codes that are read at short enough range to eliminate confusing different consignments), low cost (to allow all types of consignments to be accommodated, not only high value or high risk consignments), a simple operational procedure that easily fits into existing operational procedures used by customs authorities, and the ability to enable fully automated acquittal processes and Green Lanes procedures.

Summary and Conclusions

The management of transit goods under suspense regarding the payment of customs and duties has been identified by many customs authorities as a problem area that requires the support of improved systems.  This article describes currently available technology in the form of GPS/GPRS tracking and RFID and electronic seals to be applied to transit goods moving from ports into neighbouring countries, with the aim of improving control over the acquittal status of such goods. 

It is my belief that a transit system enabled by e-seals can be a cost effective and suitable solution for use within the cross-border operational environment.  The outcomes that can be achieved from the implementation of such a system include real time verification of the current acquittal status of transit goods, 100% accuracy in the eventual acquittal of such goods, and the generation of evidence to assist prosecution in the case of transgressions.

While GPS/GPRS assisted by active RFID offer the benefit of real-time tracking, solutions based on passive RFID is differentiated by the use of low-cost electronic seals and electronic tags to secure and identify transit goods.  Additionally, a passive RFID system is easy to implement, simple to run, and offers a cost effective approach relative to the technology alternatives, both in terms of capital expenditure required to be installed at key ports of entry, and subsequently exceptionally low variable costs of application (per seal or tag). 

Apart from customs authorities it is believed that a wider spectrum of stakeholders will benefit from the visibility and security features of the system as discussed; such stakeholders include the roads authorities, police services as well as cargo owners, freight forwarders and shipping lines.  One possibility to facilitate future expansions of a customs transit system to incorporate the needs of other stake-holders would be the creation of Public-Private Partnerships that can offer a comprehensive service to both public and private players in this sector, covering complete trade corridors end to end – this concept will be the topic of a future article in this series.

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