Risk Management and Global Supply Risk Management and Global Supply Chains T-TIP Stakeholder Presentation – 5 th Round Arlington, VA May 21, 2014
AAEI Works with European Partners p
What Are the General Trends for Trade? Facilitation Compliance Safety Safety Security Security
FTAs Increase Complexity p y � Market access by reducing regulatory redundancy for all industry sectors in all T-TIP countries is necessary sectors in all T TIP countries is necessary � Trade facilitation for “trusted traders” who spend on supply chain security and trade compliance � Clarity for rules of origin • Use KORUS rules for chemicals • Exclude packaging for bulk commodities Exclude packaging for bulk commodities • Adopt tariff shift or RVC rule for textiles and apparel � Simplicity in applying the rules • Adjust blanket certifications so that the period may begin before certification, but applies to 12 months of shipments � Harmonization among FTAs g
Holistic Risk Management g � Horizontal Risk Management System • Regulatory regime applicable to all industries to manage imports and Regulatory regime applicable to all industries to manage imports and exports based on company internal controls – Example: WCO SAFE Framework • Authorized Economic Operator program for “low risk” traders p p g • E.U. and U.S. have a Mutual Recognition Agreement � Sectorial Risk Management System • Risk mitigation ranges from industry standards to strict liability • Risk mitigation ranges from industry standards to strict liability regulation • Negotiators to determine which risk management regime is appropriate for the risk posed by the industry and the company appropriate for the risk posed by the industry and the company – Regulators should develop pilot projects with the private sector to reduce redundant regulation
What Does Risk Management Look Like? g
Security y If your company participates in a supply chain security program, why did your company decide to join the program? 60% 50% 40% 30% 30% 20% 10% 0% 2009 2010 2011 2012 Fewer Inspections It is the right thing to do Business partner pressure Expedited clearance Haven't joined Source: AAEI Benchmarking Survey – Security Question for Importers/Exporters (June 2009, May 2010, May 2011, and August 2012, respectively)
Security: If you knew then, what you know now . . . y y y Based on your experience with supply chain security programs, would you join today? 70% 70% 60% 50% 50% 40% 30% 30% 20% 10% 10% 0% 2009 2010 2011 2012 Yes No Don't know Source: AAEI Benchmarking Survey – Security Question for Importers/Exporters (June 2009, May 2010, May 2011, and August 2012, respectively)
Security: Costs and Benefits of C-TPAT y Do you think the cost to join/maintain your company’s supply chain security program(s) is worth the benefits? 50% 40% 30% 20% 20% 10% 0% 2009 2010 2011 2012 Yes No Don't know What benefits? Source: AAEI Benchmarking Survey – Security Question for Importers/Exporters (June 2009, May 2010, May 2011, and August 2012, respectively)
WCO SAFE Framework – Two Pillars and Four Core Principles p � Pillar 1: Customs-to-Customs • Customs administrations must work cooperatively Customs administrations must work cooperatively – Harmonize advance electronic cargo information requirements • Ex.: Advance Cargo Manifest Rules – Adoption of risk management approach to security p g pp y • Ex.: Strategic Targeting – Exporting country perform inspection of high-risk cargo • Ex.: Automated Export System � Pillar 2: Customs-to-Business • Customs administration will establish a partnership with the private sector – Provide benefits to businesses that meet supply chain security standards and best practices • Ex.: C-TPAT Tiers 1 - 3
“Trusted Trader” Concept p � Concept predates 9/11, but has gained currency with governments after 9/11 to describe a company which is: • Highly compliant Hi hl li t • Good internal controls • Mitigates risk � “Authorized Economic Operator” Authorized Economic Operator • “a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration as complying with WCO or equivalent supply chain security standards. Authorized Economic Operators include inter alia manufacturers, exporters, brokers, carriers, p p consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses, distributors.” – WCO “SAFE Framework of Standards to Secure and Facilitate Global Trade” adopted in June 2005 in Section 2.3 at p. 8. � AEO programs are: AEO programs are: • Voluntary regimes • Commitment to adopt good importer practices for security and compliance • Trade facilitation benefits
Status of AEO MRAs MRAs Being Negotiated Concluded MRAs Date Country Signatory Countries June 2007 New Zealand – USA China – EU Chi EU May 2008 Japan - New Zealand China - Japan June 2008 Canada – USA Jordan - USA Japan – Malaysia June 2009 Japan – USA July 2009 July 2009 EU EU – Norway Norway China – Korea EU – Switzerland Hong Kong, China – Korea June 2010 Canada – Japan Canada – Korea Canada - Singapore EU – Japan India – Korea Korea – Singapore Korea – USA Korea USA Israel – Korea January 2011 Andorra – EU New Zealand – Singapore May 2011 Japan - Korea June 2011 Korea – New Zealand Japan – Singapore Norway – Switzerland May 2012 May 2012 EU – USA EU USA June 2012 China – Singapore Singapore – USA October 2013 China – Hong Kong, China November 2013 India - Hong Kong, China USA – Israel February 2014 Hong Kong, China – Korea March 2014 Korea - Mexico USA - Mexico Source: WCO Compendium of AEO Programmes (2014 Edition)
Getting T-TIP Right Matters g g Source: AAEI Benchmarking Survey – Security Question for Importers/Exporters (August 2012)
Logistics Performance Index: (1=low to 5=high) Source: World Bank and Turku School of Economics, Logistic Performance Index Surveys
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