Smart containers and the public goods approach to supply chain security

This paper will review the state of technology related to smart containers; discuss their role in the drive to securing global supply chains; and use the economics of public goods to help explain the strategic decisions faced by government, shippers and carriers. The US Bureau of Customs and Border Protection has offered to give 'green lane' treatment to any smart container arriving at a US port of entry. Promised benefits would be no inspection and immediate release at the port. The problem is that there is no smart container currently in use; nor is the nature of a smart container yet agreed to by industry and government. The economics of public goods, as developed in this paper, help to clarify the role of the importer, the carrier, the foreign vendor and the US regulatory agencies. Essentially, the issue is how to manage the trade‐off between efficient trade flows and security across international supply chains. It will be shown that some of these players have incentives to under‐provide expenditures devoted to such security. But this creates a further opportunity for smart containers to mitigate that situation.