New and proposed rules established by Congress on July 1 will increase pressure on transportation providers to meet stricter security requirements in both the air and maritime cargo industries, likely increasing costs to the already margin-struggling transportation industry.

The most controversial provision in the new rules is an amendment to the funding bill for the Transportation Security Administration (TSA) passed June 30 that requires the TSA to develop a plan to screen all cargo on passenger planes or risk losing $50 million in Federal funding. The amendment, authored by Reps. Edward Markey (D-Mass.), and Christopher Shays (R-Conn.), requires the TSA develop a plan to implement cargo screening, but does not set a deadline for the screening to begin. If no plan is in place by the start of the fiscal year, Oct. 1, when the new budget takes effect, the TSA would not be allowed to use $50 million in funding for cargo programs.

According to the General Accounting Office, about 22% of all cargo is carried on passenger planes. But the TSA currently has no plan to screen the packages, before they are loaded into aircraft cargo holds.

Opponents argue the new security measures will cost too much time and money in a market hit by slumping volumes and increased costs.

"It is not humanly possible to inspect every piece of cargo that goes onto the aircraft," said Rep. Harold Rogers (R-Ky.) "TSA does not have the staff or technologies in place to do that." Screening all cargo, Rogers said, would cost $500 million in the first year to buy equipment and add personnel. If airlines are prohibited from transporting cargo that isn't screened, "the money-strapped airlines would be sorely tried trying to do this, and it would greatly impact their bottom lines," he said.

New interim rules passed July 1 under the Federal Maritime Security Act of 2002, look to put a big dent in the maritime industry's bank account. Some 10,000 ships and 5,000 coastal facilities will be required to assess their vulnerabilities, hire and train security officers and purchase security equipment. The nation's 361 seaports will be required to establish security committees, draft security plans and hold training drills and exercises. The owners of 4,121 domestic ships will be required to buy and install transponders so their identities and movements can be continuously tracked.

The interim rules, which will become final late this year after one more public review, will be administered by the Coast Guard. Individual ports must submit their plans by Jan. 1, 2004, to the Coast Guard for review. Once the Coast Guard approves the plans, the ports need to set in motion improved security initiatives by July 2004, according to information provided by the American Association of Port Authorities. The rules apply security protocols typically associated with international seafaring to many domestic vessels, public ports and other piers, terminals and loading docks. The Coast Guard estimates the cost to ports, ships, coastal facilities and offshore oil drilling units will exceed $7.3 billion over the next 10 years.

"These rules are an essential element in the Department of Homeland Security's national strategy," said Vice Admiral Thad Allen, the Coast Guard's chief of staff, at a news conference. "They provide templates to strengthen security measures for our ports and for those who do business in our ports."

The Homeland Security Department has distributed $337 million in grants to ports and facilities and later this year will release an additional $105 million. Still, Asa Hutchinson, undersecretary for border and transportation security, acknowledged the maritime industry will have to assume much of the cost of making itself more secure.

The Coast Guard accepted public comments until July 31 and the final version of the rules, with any revisions, will be released in October and take effect 30 days later.