Risk Management and Global Supply Risk Management and Global Supply - - PowerPoint PPT Presentation

Risk Management and Global Supply Risk Management and Global Supply Chains

T-TIP Stakeholder Presentation – 5th Round Arlington, VA May 21, 2014

AAEI Works with European Partners p

What Are the General Trends for Trade?

Compliance Facilitation Safety Security Safety 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

60%

y

If your company participates in a supply chain security program, why did your company decide to join the program?

30% 40% 50% 10% 20% 30% 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 . . .

70%

y y y

Based on your experience with supply chain security programs, would you join today?

50% 60% 70% 30% 40% 50% 10% 20% 30% 0% 10% 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

50%

y

Do you think the cost to join/maintain your company’s supply chain security program(s) is worth the benefits?

40% 20% 30% 10% 20% 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:

Hi hl li t

• Highly compliant
• 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

• perators, 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

Concluded MRAs

Date Country

June 2007 New Zealand – USA

MRAs Being Negotiated

Signatory Countries

Chi EU

May 2008 Japan - New Zealand June 2008 Canada – USA Jordan - USA June 2009 Japan – USA July 2009 EU Norway

China – EU China - Japan Japan – Malaysia

July 2009 EU – Norway EU – Switzerland June 2010 Canada – Japan Canada – Korea Canada - Singapore EU – Japan Korea – Singapore Korea – USA

China – Korea Hong Kong, China – Korea India – Korea

Korea USA January 2011 Andorra – EU May 2011 Japan - Korea June 2011 Korea – New Zealand Japan – Singapore May 2012 EU – USA

Israel – Korea New Zealand – Singapore Norway – Switzerland

May 2012 EU USA June 2012 China – Singapore October 2013 China – Hong Kong, China November 2013 India - Hong Kong, China February 2014 Hong Kong, China – Korea

Singapore – USA USA – Israel

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

Questions?