Coast Guard, DHS Mandate Cybersecurity Reporting, Move to Require Maritime Cybersecurity Programs

HIGHLIGHTS:

• Global cybersecurity attacks have steadily increased in the past few months, effectively shutting down major ocean carriers and impacting marine terminal operations around the globe, most recently hitting transportation and maritime entities such as Maersk and its marine terminal affiliate APMT, the Port of Rotterdam, India's largest container port JNPT and terminals in the United States. Cybersecurity risks impact all aspects of the maritime sector: ports, port operators, major carriers, terminals, logistics services providers, and shippers and their supply chains.
• The Trump Administration has made it clear that cybersecurity is one of its top priorities. The U.S. Coast Guard (USCG) and the U.S. Department of Homeland Security (DHS) recently issued a new Navigation and Vessel Inspection Circular (NVIC) specifically on cybersecurity asking for comments by Sept. 11, 2017. This follows the updates issued in December 2016, which added cybersecurity into the list of "security" items that are covered by Maritime Transportation Security Act (MTSA) traditional security mandates.
• The maritime industry is challenged by a continuing reliance on legacy systems and a relegation of cybersecurity to information technology departments. Vessel automation, cargo and container tracking systems, global navigation and supply chain security put the maritime domain at risk as a result. As the industry begins to look at autonomous ships, cybersecurity risk becomes even more critical to manage.

Cybersecurity risks to the nation's critical infrastructure (CI) – defined as 17 CI sectors, including the transportation and maritime sector – continue to grow exponentially. The U.S. government and Department of Homeland Security (DHS) have made it clear that cybersecurity is a mainstream national, homeland and economic security concern and priority.

On May 11, 2017, the Trump Administration issued Executive Order (EO) 13800, "Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure," which reinforces the concerns over cyberattacks to key sectors, including maritime.

The day after the EO was issued, the first series of global cyberattacks resulting from the WannaCry ransomware hit more than 100 nations throughout the world. Early in July, a second global cybersecurity attack (known as the Petya malware) hit multiple sectors, including the transportation and maritime sectors, with particular impacts on Maersk, the largest containership operators in the world.

On July 11, 2017, as a result of the attacks, Maersk was forced to file a petition before the Federal Maritime Commission (FMC) seeking relief, stating that the attack "severely impaired its information systems" to the extent that they are unable to identify which clients they should contact about their respective rates. Multiple importers in the U.S. and international locations have stated that their operations have been impacted by the supply chain disruption caused by the delay in Maersk shipments.

Request for Comments on NVIC 05-17

On July 12, the U.S. Coast Guard (USCG) announced a request for public comment on Navigation and Vessel Investigation Circular (NVIC) 05-17: Guidelines for Addressing Cyber Risks at Maritime Transportation Security Act (MTSA) Regulated Facilities.

The NVIC consists of two major parts. The first part, "Cybersecurity and MTSA," states that the "existing MTSA requirements are applicable to cybersecurity related threats."¹ The NVIC makes clear that cybersecurity is part of the vulnerabilities assessment and mitigation measures that must be part of existing Facility Security Assessments (FSAs) and Facility Security Plans (FSPs.) As with existing MTSA requirements, regulated entities will need to demonstrate how they are addressing cyber risks. The guidance cites to existing requirements for FSAs under MTSA as a means to provide structure to the review of the NVIC.

The NVIC's second part, "Cyber Governance and Cyber Risk Management Implementation Guidelines," lays out best practices and expectations on all MTSA regulated entities. The guidelines cite to the National Institute of Standards and Technology's Cybersecurity Framework (NIST CSF) to promote effective self-governance. The USCG is seeking comments on or before Sept. 11, 2017, on the feasibility of implementing proposed guidelines regarding robustness, cost and flexibility.

A Wide Range of Threats

Nation-states, non-state actors, "hacktivists" and organized crime syndicates represent the range of attackers against the maritime sector. Ports, port operators, vessel operators, shipping companies and others are faced with constant attacks that range from 21st-century theft to more critical risks to the sector as a whole, including the potential for injury and loss of life as well as physical damage to the maritime, shipping and port infrastructure, and supply chains.

Cybersecurity challenges are a systemic risk to the maritime sector. Vulnerabilities in vessel automation, cargo and container tracking systems, critical shipping documentation, global navigation systems and supply chain security are all at risk for cyberattacks. Large-scale attacks could carry economic impacts potentially in the billions of dollars across all sectors of the maritime industry.

Cyberattacks present a substantial threat to the long-established statutory and legal liability limitation and risk allocation schemes in ocean shipping. Carriers and logistics intermediaries are generally not legally liable for delay damages, including consequential damages for loss of market price, quota availability or harm to perishable commodities. However, if such delay arises from a cybersecurity incident, and the shipper or customer claims the carrier failed to follow good industry practices, the requirements defined by the USCG 2016 guidance or requirements that may be included in the final USCG NVIC in the future, traditional defenses available under statutes and bill of lading terms and conditions may not be adequate. Similarly, carrier and marine terminal compliance with international requirements such as the International Maritime Organization's International Ship and Port Facility Security (ISPS) convention may be compromised.

The DHS and USCG actions represent several years of work raising cybersecurity concerns to the sector:

• In 2013, Cybersecurity EO 13636 was issued, which included the transportation and maritime sector.
• In 2015, the USCG issued a cybersecurity strategy, began working to identify best practices as well as voluntary measures designed to help the sector, focusing on best practices identified in the NIST CSF.
• In 2016, DHS issued a report "Consequences to Seaport Operations from Malicious Cyber Activity," raising concerns about existing cyber vulnerabilities in the sector and stating that cyberattacks posed a "significant risk to port facilities and aboard vessels." It also cited potential negative impacts on other key sectors if there was a major disruption, including manufacturing, food and agriculture, energy, chemical and other transportation systems.
• In May 2017, Congress mandated in Public Law No: 115-31 that DHS and the Director of National Intelligence submit a report on cybersecurity threats to communication networks or other systems employed by entities conducting significant maritime operations to the appropriate congressional committees.

Common Challenges and Strategies to Consider

• The maritime domain is a complex one that has been increasingly automated over time. As a result, cybersecurity risks and subsequent attacks can impact maritime operations and potentially both people and goods.
• Attacks can carry significant regulatory and legal implications to the corporate ecosystem, whether it includes passenger or cargo operations.
• The December 2016 USCG Guidance made clear that cybersecurity attacks need to be reported to the USCG or the DHS National Cybersecurity and Communications Integration Center (NCCIC).² The NVIC sets out different approaches to managing cybersecurity, including the use of the NIST Cybersecurity Framework, but leaves it up to entities to determine the specific approaches they use to manage cyber risk.
• There is a common misconception that cybersecurity risks are solely a technology problem. Cybersecurity risks require an enterprise risk management holistic approach that includes the C-Suite, senior leadership, risk officers, legal, regulatory, security, information technology and other departments in the overall process.
• Cybersecurity attacks on the maritime time sector can have physical impacts on operations, whether it is destruction or degradation of assets. Cyber attackers have varied motives, which include stealing, disrupting and potentially destroying assets.
• A privacy policy is not a cybersecurity policy. Cyber risks have significant operational impacts in the maritime domain, and bring significant legal and regulatory implications on top of potentially severe economic impacts on companies.
• Cargo security, supply chain security and programs such as the Customs-Trade Partnership Against Terrorism (C-TPAT) that looked at physical security after 9/11 can help the industry understand the challenges, as well as identify high-priority assets. The majority of the maritime domain is currently automated, and as a result, these assets also need to be secured against cyberattacks.
• Finally, expect U.S. and global regulators to continue to double down on cybersecurity mandates on the entire maritime ecosystem.

For more information on how these cybersecurity issues could impact your business, contact the authors.

Notes

¹ NVIC 05-17: Cybersecurity and MTSA: 33 CFR Parts 105 and 106: "The specific threats are covered by the existing language in parts 105 and 106 in general, but the Coast Guard interprets this language to specifically include threats to computer systems and attacks in the electronic (cyber) domain."

² The Cybersecurity Information Sharing Act (CISA) set up the parameters for how entities should be sharing information with the NCCIC. If information is shared in the proper manner with DHS or through other entities such as an Information Sharing and Analysis Center (ISAC) or Information Sharing and Analysis Organization (ISAO), there are limited liability protections and protections against the federal Freedom of Information Act (FOIA), as well as state and local sunshine laws, etc.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.