1. TSA Air Cargo Update June 2007

2. 2 Air Cargo Landscape U.S. Air Cargo Supply Chain Millions of Shippers ~3,800 Freight Consolidators (IACs) ~ 300 Air Carriers ~ 450 Airports TSA takes a multi-layered approach to air cargo security: Companies shipping and transporting cargo onto passenger planes are vetted to ensure they meet TSA security standards Air carriers and IACs screen cargo using approved screening methods and technologies TSA conducts random and risk-based targeting to identify high-risk cargo that requires secondary screening TSA inspectors continually assess compliance with security regulations Inspected by TSA TSA Air Cargo Focuses on Two Primary Security Threats Improvised explosive device (IED) exploding on a passenger aircraft Stow-away commandeering an all-cargo aircraft

3. 3 TSA Air Cargo Strategy Who does what? What is needed? Entities are vetted to strengthen and standardize security requirements: Purpose: To ensure that all entities that handle cargo to be transported on passenger aircraft are vetted by TSA Known Shipper (KS) Certified Shipper (CS) Indirect Air Carrier (IAC) Air Carrier (AC) Purpose: To ensure that every shipment is screened by an entity in the supply chain. Purpose: To ensure that every shipment is assessed for elevated risk. What is needed? 100% of all cargo on passenger aircrafts will be screened via approved forms of screening. Vetting100% ScreeningTargeting What is needed? 100% of all cargo will be analyzed for risk. All cargo is subject to targeted risk-based and random screening. Who does what? Screens elevated risk cargo (e.g., Cat II- IV airports, counter-2-counter). Inspects to ensure supply chain members screen cargo in line with requirements. Screens cargo during initial packaging and applies tamper evident seal. Screens cargo from known shippers. TSA Industry Screens elevated risk cargo (e.g., Cat II- IV airports, counter-2-counter). Inspects to ensure supply chain members screen cargo in line with requirements. Screens cargo during initial packaging and applies tamper evident seal. Screens cargo from known shippers. TSA Industry Who does what? Randomly screens cargo using canine. Screens cargo with evidence of tampering. Performs risk analysis on cargo using FAS and screens when directed. Inspects to ensure supply chain members comply with risk-based targeting requirements and delivers cargo to TSA for inspection when appropriate. TSA Industry Randomly screens cargo using canine. Screens cargo with evidence of tampering. Performs risk analysis on cargo using FAS and screens when directed. Inspects to ensure supply chain members comply with risk-based targeting requirements and delivers cargo to TSA for inspection when appropriate.  Performs risk analysis on cargo using the Freight Assessment System (FAS) and screens when directed.  Screens cargo display9ing risk-based characteristics. TSA Industry ++ Layered Approach to Cargo Security Vet to ensure companies meet security requirements. Screen with the most efficient and effective Methods. Target to ensure elevated risk cargo is screened a second time. = = Conducts assessments to ensure CS upholds policies and standards. Ensures legitimate & law-abiding entities. Issues certification. Inspects CSs, IACs and ACs to ensure compliance with security programs. Implements policies and standards. TSA Industry Conducts assessments to ensure CS upholds policies and standards. Ensures legitimate & law-abiding entities. Issues certification. Inspects CSs, IACs and ACs to ensure compliance with security programs. Implements policies and standards. TSA Industry

4. 4 Enhancing Air Cargo Security Through Regulations The Notice of Proposed Rule Making was published in November 2004, with the industry comment period closing in January 2005 The Air Cargo Final Rule was published on May 26 th, 2006, and impacts the air cargo supply chain through such mandates as: –Requiring background checks of approximately 50,000 freight forwarder and aircraft operator employees and agents –Extending secure areas of airports to include all-cargo operations –Requiring IACs that tender cargo only to large all-cargo operators to follow a TSA approved security program Details regarding industry compliance with Final Rule requirements were included in the carriers’ revised security programs which were published in January ’07 and effective in March ‘07 Air Cargo Final Rule/Standard Security Programs (SSPs) October 2006 Security Directives/Emergency Amendments (SDs/EAs) Removed previous provisions that allowed for certain types of cargo to be exempted from screening Mandated 100% screening of cargo tendered in passenger terminals Mandated 100% screening in smaller domestic airports (Category II-IV) Required IACs to screen a certain % of cargo shipments

5. 5 Certified Shipper Program Provides a mechanism by which TSA can achieve 100% screening while still allowing for the flow of commerce. Certified Shippers must: –Adhere to increased security standards. –Share responsibility for supply chain security. –Employ tamper evident technologies. –Permit on-site standards validations.

6. 6 Freight Assessment System (FAS) Overview The Freight Assessment System (FAS) is the program mandated by Congress in 2003 that supports both DHS & TSA strategic objectives to improve security around air cargo movement in the U.S. FAS is a technology solution that identifies elevated risk cargo at various points in the supply chain TSA is committed to implement a system that is developed in partnership with industry that increases security and minimizes the impact to the flow of cargo FAS will : –Provide a means to collect standardized data on cargo shipments from air carriers and Freight Forwarders/Indirect Air carriers, –Augment/relate the shipment data with existing TSA data in legacy management systems, –Present a risk indicator to industry with an action directive, –Analyze and feed back data into the continued development of the risk model