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>>> 1 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT Workshop on Trade Facilitation Moscow, The Russian Federation November 2004 Mark R. Miller
>>> 2 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. 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 Certificate N° COTECNA INSPECTION
>>> 3 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. EVOLUTION OF SECURITY vs. FACILITATION Trade Facilitation Container Security HIGH LOW HIGH ! GO SLOW
>>> 4 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. THE « SECURITY » REACTION: Container Security Initiative (CSI) US 24-Hour Rule EU « known shipper » EU « approved economic operator » Operation Safe Commerce (OSC) Smart and Secure Tradelanes (SST) Customs-Trade Partnership Against Terrorism (C-TPAT) EU « 24-Hour » Rule (coming soon) « If you are not with me, then… » > Constraints > Delays > Costs > Economic penalites > Substitute products Secure Trade in the APEC Region (STAR)
>>> 5 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. GOVERNMENTS: Balancing Compliance & Security Cost for Business Security compliance level Cost for implementing & operating the security measures Security cost for trade & logistics LowHigh Cost for being non- compliant: penalties and lost incentives Total cost of security compliance Optimum Compliance High Governments aim to shift the optimum compliance point toward full compliance!
>>> 6 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. 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” “0 euro” Cost of security delivery for trade & governments Security efficiency level “0%”“100%” “Infinite” “0 euro” But there are significant benefits to business as well !!
>>> 7 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. THE SUPPLY CHAIN SECURITY BENEFITS FOR BUSINESS ARE … > 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 Manufacturer Exporter Wholesaler Distributor Retailer & Consumer Port of Loading Transit Port Port of Unloading
>>> 8 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. END-TO-END SUPPLY CHAIN SECURITY IN PRACTICE Manufacturer Receive purchase order Consolidation warehouse Loading into containers and sealing Truck transport Local port Customs and terminal authorities checks Terminal Containers are loaded on a feeder vessel Ocean transport Transit port Transfer to the mother vessel Ocean transport Destination port Customs and terminal release Distribution centre Final Customer
>>> 9 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. COTECNA’S EXPERIENCE IN TRADE SECURITY AND TRADE COMPLIANCE PROGRAMS: 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 Trade Security / Supply Chain Security - COTECNA has been involved in 7 of the 18 trade lanes under the US Operation Safe Commerce (OSC): 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 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. WHERE CAN COTECNA HELP? > 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 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 Other COTECNA Services Container Tracking Collateral Management (Warehouses) Social Accountability Monitoring ISO Certification
>>> 11 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. 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 November 22, 2004 Copyright © 2004 COTECNA S.A. All rights reserved. POINT OF CONTACT INFORMATION Mark R. Miller COTECNA Supply Chain Security - COSEC Tel: Fax: Web site:
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