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THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT

THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT. Workshop on Trade Facilitation Moscow, The Russian Federation 22-23 November 2004. Mark R. Miller. Certificate N° 200202361. COTECNA INSPECTION. Founded in 1974

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THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT

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  1. THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT Workshop on Trade Facilitation Moscow, The Russian Federation 22-23 November 2004 Mark R. Miller

  2. Certificate N° 200202361 COTECNA INSPECTION • Founded in 1974 • A leading Inspection Company with over 30 years experience • Privately owned and managed; parent company based in Geneva, Switzerland; offices in 120 countries • Core Business - Inspection of Cargo • Member of the International Federation of Inspection Agencies (IFIA) • Operates under multiple Government and private sector contracts throughout the world • A leading innovator in the use of advanced technology in the inspection process, including: X-ray scanning, Risk Management, Valuation systems, and Container Tracking • Cotecna (as a member of the Innovative Trade Network) is a Category A Liaison to Technical Committee No. 8 (TC8) of the International Standards Organization (ISO) • ISO Certified

  3. EVOLUTION OF SECURITY vs. FACILITATION GO SLOW HIGH Container Security ! LOW LOW HIGH Trade Facilitation

  4. THE « SECURITY » REACTION: EU « 24-Hour » Rule (coming soon) « If you are not with me, then… » EU « approved economic operator » EU « known shipper » • Constraints • Delays • Costs • Economic penalites • Substitute products Secure Trade in the APEC Region (STAR) US 24-Hour Rule Container Security Initiative (CSI) Smart and Secure Tradelanes (SST) Customs-Trade Partnership Against Terrorism (C-TPAT) Operation Safe Commerce (OSC)

  5. GOVERNMENTS: Balancing Compliance & Security Cost for Business Optimum Compliance Cost for implementing & operating the security measures High Governments aim to shift the optimum compliance point toward full compliance! Security cost for trade & logistics Total cost of security compliance Cost for being non-compliant: penalties and lost incentives Low Security compliance level High

  6. “Infinite” Cost of Cost of security security delivery delivery for trade & for trade & governments governments “0 euro” “0%” “0%” “100%” “100%” Security efficiency level Security efficiency level THERE IS A « PRICE » FOR SECURITY … • € 1 billion Euros in up-front costs and € 560 million Euros in annual costs will be required to meet International Ship and Port Facility Security (ISPS) Code requirements • In addition to this, US maritime security requirements are expected to push shipping costs up by approximately € 6.2 billion Euros over the next 10 years • Trucking companies in the US have to send complete cargo information to Customs Border Protection (CBP) at an annual cost of $91 million USD SOURCE: Deloitte Research “Infinite” “Infinite” Cost of security delivery for trade & governments “0 euro” “0 euro” “0%” “100%” Security efficiency level But there are significant benefits to business as well !!

  7. Supply chain efficiency resulting from trade security lowers costs (e.g. SST – potential savings of $378 to $462 per container as reported to the US Transportation Security Administration). Retail and wholesale visibility with RFID tags facilitates higher turnover (« full shelf » for the consumer). Proactive security policies and plans enable companies to better manage risk (including additional areas such as pilferage and theft). Crisis response mechanisms provide the opportunity for companies to protect their brands when facing an event. There is a « Good Corporate Citizen » effect resulting from participation in security initiatives. Trade Facilitation for goods undergoing trade security processes. From various sources including: Smart and Secure Tradelanes (SST), Deloitte Research, Hewlett Packard THE SUPPLY CHAIN SECURITY BENEFITS FOR BUSINESS ARE … Port of Loading Transit Port Port of Unloading Manufacturer Exporter Wholesaler Distributor Retailer & Consumer

  8. Manufacturer Consolidation warehouse Truck transport Terminal Receive purchase order Loading into containers and sealing Containers are loaded on a feeder vessel Ocean transport Ocean transport Destination port Customs and terminal release END-TO-END SUPPLY CHAIN SECURITY IN PRACTICE Local port Customs and terminal authorities checks Distribution centre Transit port Final Customer Transfer to the mother vessel

  9. COTECNA’S EXPERIENCE IN TRADE SECURITY AND TRADE COMPLIANCE PROGRAMS: • Trade Security / Supply Chain Security - COTECNA has been involved in 7 of the 18 trade lanes under the US Operation Safe Commerce (OSC): LOAD CENTER / DESTINATIONORIGIN • Oakland <= Germany • Seattle-Tacoma <= Japan • New York – New Jersey <= Brazil • New York – New Jersey <= Turkey • Los Angeles – Long Beach <= China / Hong Kong • Los Angeles – Long Beach <= Singapore • Los Angeles – Long Beach <= South Africa / Singapore • COTECNA (as a member of the Innovative Trade Network) is a Category A Liaison to Technical Committee No. 8 (TC8) of the International Standards Organization (ISO) • Trade Compliance and Trade Facilitation Programs for Governments

  10. WHERE CAN COTECNA HELP? COTECNA Inspection & Control Services End-to-End Supply Chain Security Cargo Physical Verification Risk Management System Destination Inspection Cargo Data Validation Origin Verification X-ray Scanning Counterfeit Detection Standards Conformity Commercial Inspection Credentialing Personnel • Supply Chain and Trade Security for imports into the Russian Federation • Supply Chain and Trade Security for Russian Federation exports into the European Union, the United States and the APEC Region • C-TPAT certification support for companies exporting to the United States Other COTECNA Services Container Tracking Collateral Management (Warehouses) Social Accountability Monitoring ISO Certification

  11. CONCLUSIONS • There is a balance for governments: • Security Cost and Business Compliance • Trade Facilitation and Security • There are cost reduction and revenue benefits to business in trade security implementation • The challenge of compliance for the business and trade communities can be clearly addressed

  12. POINT OF CONTACT INFORMATION Mark R. Miller COTECNA Supply Chain Security - COSEC Tel: + 41 22 849 7821 Fax: + 41 22 849 7807 E-mail: mark.miller@cotecna.ch Web site: www.cotecna.com

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