Strategy

Security: The secret shipping news

Intelligence services use import manifests to help clients identify consumer trends and keep track of rival products.

Apple is renowned for its secretive corporate culture. Suppliers sign strict non-disclosure agreements, prototypes are wrapped in cloth and employees cannot discuss new products with even their spouses. Yet Import Genius, a trade intelligence firm, pierced Apple’s veil of secrecy in 2008 using nothing more than mundane shipping manifests to predict the launch date for the second-generation of iPhone. Apple had imported 188 containers of what it called “electric computers,” a product description that company had never before used. From that, Import Genius accurately deduced the crates actually contained newfangled iPhones. Import Genius and similar services now do booming business offering companies insights into the trade practices of their suppliers and competitors.

As it prepares to launch its iPad tablet computer, Apple has learned from past security failures, apparently blocking the public release of shipping data filed with U.S. Customs. And in a move reminiscent of a Spy vs. Spy cartoon, a counterintelligence firm called Trade Privacy offers its own services blocking snooping by Import Genius and its ilk. “Importers are in a detrimental position competitively when their information is published, so much so they could go out of business,” says Andrew Park, the CEO of Trade Privacy, based in Reston, Va.

Import Genius, located in Scottsdale, Ariz., and similar services like Panjiva, which has offices in New York and Boston, use shipping records filed with U.S. Customs and other sources to track import and export activities. (Neither company responded to multiple interview requests.) For monthly fees starting at US$99, the intelligence firms offer searchable databases containing the billions of customs documents filed each year. PIERS, a firm based in Newark, N.J., claims to collect 42,000 bills of lading each day. Using this information, a company can track demand for a rival product, spot early consumer trends, or catch suppliers two-timing on them by also shipping to the competition. The information can also be used to catch manufacturers of counterfeit goods or identify larger trends. Panjiva recently noted that San Technology, which makes 3-D glasses, saw its shipment weights increase by 3? times in 2009 compared with 2008, likely thanks to successful 3-D films such as Avatar. The public availability of this information results in increased transparency across the supply chain, according to Peter Quinter, a customs and international trade lawyer with Becker & Poliakoff in Miami. “If one company knows another is bringing in similar merchandise, that would lead the competitor to try and do the same thing at a better price,” he says.

But Trade Privacy’s CEO argues this easy access to customs information has a negative effect on import and export businesses. Park created Trade Privacy in May 2009 after realizing Import Genius was hustling information about his own import business, which includes world flags and other textiles.

“Sometimes you have a product or a fabric that’s not found in abundance, and you want to keep that source secret for as long as you can,” Park says.

A U.S. Customs official says any importer can request confidential treatment for the information contained on ocean vehicle manifests, but Park says blocking public access is complicated and cumbersome. Trade Privacy charges a monthly fee of US$29.99 to negotiate the system on behalf if its clients.

While Apple took steps to conceal its import records, other major manufacturers, such as Microsoft and Sony, have not, according to Park.It should be noted that Apple is not a Trade Privacy client – although Park says he applauds their efforts just the same.