1. 1st National Conference on Safe Trade and AEO 13 May 2008 © 2008 IBM Corporation A Global & Business Overview on the SAFE Framework of Standards and the AEO Concept Andrew Jackson Chairman – Customs Working Group US-ASEAN Business Council

2. © 2008 IBM Corporation 1st National Conference on Safe Trade and AEO 13 May 2008 2 Global Import Compliance and Supply Chain Security Mission:  Enable a globally integrated world class import process –Attributes of a world class importer: –Compliant –Secure –Efficient  Responsibilities –Identify and interpret regulations –Establish policies –Assess internal compliance –Educate import network –Develop government relationships  IBM is a globally integrated enterprise –60% of revenue and 65% of our employees are outside the US and growing  Daily Scope –2500 Customs Declarations –$68M in value –5.5M pounds shipped

3. © 2008 IBM Corporation 1st National Conference on Safe Trade and AEO 13 May 2008 3 Supply Chain Security Goals  Implement a more secure supply chain that yields greater trade efficiencies  Create Industry/Government Partnerships in the development of security and trade initiatives  Achieve Global Commonality of Supply Chain Security Criteria, Customs Declarations Data and Processes  Promote voluntary industry participation that provides collateral benefits

4. © 2008 IBM Corporation 4 Why participate in Authorized Economic Operator programs?  Reduce threats to ‘our’ global supply chain from: –Unauthorized materials –Weapons of Mass Destruction (MWD) –Weapons of Mass Effect (MWE) –Unauthorized personnel  Enhance supply chain operations  Assure the safety of employees  Maintain or improve brand image

5. © 2008 IBM Corporation 5 Security has to be applied across the entire value chain, across borders, and integrate an ongoing awareness in every single point of interaction with the goods. Distribution Center Port Authority “A” Customs Port Authority “B” Customs Carrier Manufacturer Distributor Freight Forwarder A Chain is Only as Strong as its Weakest Link Stakeholder Security Linked with its Predecessor and Successor

6. © 2008 IBM Corporation 6 Mobilize to Execute  Executive sponsorship  Establish end-to-end team –IBM –International Service Providers –International Product Suppliers  Monitor for continual improvement

7. © 2008 IBM Corporation 7 Identify Key Stakeholders  Import Compliance Office  Security  Integrated Supply Chain –Procurement –Manufacturing –Global Logistics  Human Resources  Legal  Internal Audit / Business Controls  Customs / Government  Service Providers / Product Suppliers

8. © 2008 IBM Corporation 8 Project Milestones  Gather data –Identify gaps –Propose resolutions –Prioritize –Approve and implement  Draft response  Engage and close with stakeholders  Executive sign-off  Customs Validation Meeting –IBM –Service Provider Locations  Validation Report

9. © 2008 IBM Corporation 9 Government Initiatives  Customs Relationship Management –Establish relationships with 20 Customs organizations that are considered most critical to IBM’s asset based supply chain –Discuss support needed for common standards –Create partnerships –Expedite implementation of programs  World Customs Organization (WCO) –Member of the Private Sector Consultative Group (PSCG) –Provide input regarding SAFE Framework or Standards to Secure and Facilitate Global Trade and Authorized Economic Operator (AEO) program –Benefits for industry participation –Mutual Recognition –Participation by Small and Medium Enterprises –Adoption of harmonized partnership programs will prevent conflicting requirements and unnecessary inefficiencies in a global supply chain CountryMeeting Date United StatesOn-going Mexico4/24/2004 EC HQ3/07/2005 Germany3/08/2005 UK3/10/2005 Ireland3/11/2005 Australia3/17/2005 Canada3/29/2005 Japan5/24/2005 Taiwan5/27/2005 Singapore6/15/2005 Malaysia6/16/2005 Thailand6/17/2005 China10/20/2005 Brazil3/07/2006 France3/28/2006 Hungary9/06/2006 Korea11/09/2006 India2007 Russia2007 Common global standards will drive supply chain efficiencies

10. © 2008 IBM Corporation 10 Internal actions to improve supply chain security Early Adoption of Government Anti-Terrorism Trade Programs Partners in Protection (PIP) Canada Business Alliance for Secure Commerce (BASC) Mexico Free and Secure Trade (FAST) Program US/Canada US/Mexico Global supply chain readiness assessment Electronic door sensors on trailers transporting product between U.S. and Canada High level security seals on ‘stuffed’ trailers / containers / conveyances Empty trailer / container / conveyance inspection Risk Assessment database for security monitoring and analysis of IBM facilities Updated Asset Protection corporate standards Supply Chain Security education and training for import compliance and security personnel Internal Security Actions Participation in recent AEO Programs Secure Trade Partnership Singapore Australian Authorised Economic Operator Program

11. © 2008 IBM Corporation 11 Participation in Australia AEO Pilot - Lessons Learned  Completing partnership application and security profile requires: –internal collaboration of multiple internal stakeholders –engaging our supply chain partners  Validation process with government is a two-way learning experience, promotes sharing of industry best-practices  Voluntary partnership: –promotes stronger relationships and open communication –enables flexibility to adapt program quickly  Continual improvement process is key to success –new threats require a review of existing security processes Security Brands ICO Govt Pgms Legal ISC Suppliers Customs Govt Agencies End-to-End Focus Sense of Urgency Continual Improvement

12. © 2008 IBM Corporation 12 Participation in AEO Programs – Benefits Expectations  Increased Efficiency –Adoption of Common Requirements by other countries will prevent conflicting requirements and unnecessary inefficiencies in a global supply chain –Mutual Recognition will reduce administration burdens for industry and governments –Less Intervention and Fewer Examinations will reduce cycle time –Measurable Benefits will facilitate ongoing executive support  Enhanced Business Continuity –Business Resumption consideration following a security incident or during increased threat levels will provide a competitive advantage  Increased Productivity –Recognition/prequalification for future Trade Facilitation programs (e.g., Accredited Client Program) will acknowledge company internal controls while focusing customs’ resources on less known importers Measurable Benefits and Mutual Recognition are key

13. © 2008 IBM Corporation 13 Recommended Next Steps  Pursue common standards and processes globally –Streamline processes to keep cost down  Track and promote benefits of investing in supply chain security –Return on Investment (ROI)/Collateral benefits –Efficiency and productivity  Be industry leaders –Be outspoken –Be a part of the process –Be an influencer Industry – this is your supply chain … Governments – this is an opportunity for valuable partnerships …  Accelerate implementation of common APEC/WCO SAFE Framework  Establish Government – Industry consultation groups to drive Authorized Economic Operator (AEO) aspects of framework  Begin pilot programs with trusted industry partners and major trading countries

14. © 2008 IBM Corporation 14 ajackson@au1.ibm.com Questions?