Terminal 18 at HarborIsland at the Port of Seattle is one of America’s nerve centers. The fifth-largest container port in the country, it handles 9.9 million metric tons of imports annually. Some 2 million containers crossed the port’s docks last year.

On August 16, even as the world’s attention was riveted on the terror plot to blow up airplanes using liquid explosives that was foiled in Britain, T-18 was going through some anxious moments of its own. The terminal was shut down after two containers from Pakistan were flagged by bomb-sniffing dogs. For three hours, one of the busiest cargo terminals in the nation was evacuated, and a 2,000-foot perimeter was set up around it.

After an extensive search, the incident was deemed a false alarm, but more such scares are likely. Long identified as one of the weakest links in the country’s homeland security infrastructure; ports are becoming the focus of a group of companies that hope to make them more secure.

“There is a belief in cargo security that a nuclear device can be brought into the country through any port or container and detonated,” says Bob Ledoux, CEO of Passport Systems, a company that makes possible non-intrusive container inspection. “Or you could smuggle in materials that could be used to make a nuclear device.”

The United States has more than 360 sea and river ports with more than 3,700 cargo and passenger terminals. All of the oil that flows into the country comes through ports, as well as countless other items, from steel to raw materials to textiles. Waterborne cargo currently contributes more than $742 billion annually to the U.S. GDP, says the U.S. Department of Transportation.

For years, the U.S. government has focused on securing airports, but politicians have recently turned their attention to ports. Congressman Ed Markey (D), a senior member of the House Homeland Security Committee, has called for inspection of container cargo before it sets sail for U.S. ports, with other lawmakers joining in the clamor. And President George W. Bush has asked Congress to approve a $2-billion budget for port security measures as part of the larger $50-billion bill on homeland security. Congress is expected to pass the spending bills by or after September 30, the end of the fiscal year.

Despite this call for tighter security, only about 1 percent of maritime cargo is currently scanned for radiation before it leaves foreign ports. For the rest, the federal government relies on paperwork checks. Once a container reaches American soil, some 5 percent of all shipments are physically inspected.

In the Mix

Companies like Passport Systems, Accela, and Rosum hope to greatly improve those inspection rates.

Passport Systems uses a technique called nuclear resonance fluorescence (NRF) to inspect containers at ports. When an X-ray beam is directed at a material, the nucleus absorbs and then re-emits some of the photons. Capturing the pattern of the re-emitted photons helps build specific 3D images of the material.

Unlike X-ray imaging that does not reveal the composition of a material, NRF can identify the makeup of just about anything. For instance, it can tell the difference between a bottle of shampoo and one that contains explosives, because the material signature for each product is different. Much like the X-ray machines used for screening baggage at airports, Passport Systems scanners will be used to scan containers as they enter a port for loading.

NRF was largely used in academia to study atomic nuclei until William Bertozzi, a professor of physics at the Massachusetts Institute of Technology, stepped in with an idea to use NRF for detection of explosives or radioactive material. In 1992 and 1995, MIT filed patents for the use of the technique. Those patents lay dormant until 9/11, but a year after the WorldTradeCenter towers tumbled down, Passport Systems was founded with Mr. Bertozzi as one of the directors.

“You can have a catalog of threats in the scanners, record the spectrum, translate it into signature, and compare it to what you are currently scanning,” explains Mr. Ledoux.

So far, nine-employee Passport Systems has raised $3.5 million in private funding from investors including Shiprock Capital, Topspin Partners, and Commons Capital. The Acton, Massachusetts-based company has also bagged two grants totaling $2 million from the U.S. Department of Homeland Security. Over the next two years, Passport Systems plans to build a full-scale prototype of its product, after which the company will run pilot programs at select ports.

Not every firm in port security needs a nuclear physicist at its helm. Most ports have been slow to computerize inspection processes, and in the last six months, many U.S. ports have posted requests for proposals for products to automate these processes, says Maury Blackman, senior vice president at Accela, which offers automation software to monitor and track physical port security.

Tracking Containers

For instance, the pier at the Port of San Francisco faces regular construction—new shops or new structures are continually being added. Port inspectors have to certify and track all construction. Accela’s software allows inspectors to go out with handheld devices and file computerized reports instead of filling out paperwork. The San Ramon, California-based company recently won a contract from the Port of San Francisco for its web-based solution, Accela Automation, which records and tracks building permits, plan reviews, code enforcement, and complaints.

Another area for innovation is container tracking. Technologies such as radio frequency identification devices (RFID), as well as cellular and satellite communications, are increasingly being used to log a container’s movements. These technologies can help alert administrators if a container goes missing, is diverted, or opened without authorization, says Jon Metzler, director of business development at Mountain View, California-based Rosum.

Unlike RFID that uses radio signals, Rosum’s tracking system integrates terrestrial television broadcast signals with GPS technology. The dual-signal system offers higher reliability than traditional RFID or GPS technology alone, according to the company. Rosum has designed chipsets, software, and hardware components that enable security officials and shipping companies to track the precise movements of containers.

Rosum says its technology will help make sure that legitimate containers that transport hazardous materials aren’t stolen for terrorist attacks or other nefarious uses. “Consider what happens if a container of razor blades disappears,” says Mr. Metzler. “What happens when the asset leaves the port is important.”

Founded in 2001, Rosum has raised $21 million from investors including In-Q-Tel, Charles River Ventures, and Allegis Capital. Rosum hasn’t yet secured its first port customer, but the company says the customers it has worked with include government departments, especially in defense, and intelligence. Past customers also include fire and police departments in the Silicon Valley. However, Rosum declined to disclose specific names.

Getting ports to deploy technologies like Rosum’s for commercial cargo containers will not occur overnight, wrote ABI Research analyst David Schrier in a report released last year. The overall number of commercial containers utilizing an electronic tracking solution will remain in the single digits until the latter part of this decade, Mr. Schrier predicted. The U.S. government will need to standardize the technology it wants to use, and ports will be slow on the uptake, he said.

For startups, there is a more pressing problem. The port security market is dominated by large firms like Lockheed Martin, which bought RFID tracking technology maker Savi Technology last year, and specialist container security companies like Tradebeam.

“There haven’t been a huge number of startups in this area because there’s hasn’t been a lot of innovation in this area,” says Shiprock Capital Managing Director Nick Harvey. “The technology being used right now is a bit stale.”

Contact the writer: PGanapati@redherring.com