Risk Management and Global Supply Chains T-TIP Stakeholder Presentation 5 th Round Arlington, VA May 21, 2014
AAEI Works with European Partners
What Are the General Trends for Trade? Compliance Facilitation Safety Security
FTAs Increase Complexity Market access by reducing regulatory redundancy for all industry sectors in all T-TIP 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 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
Holistic Risk Management Horizontal Risk Management System 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 E.U. and U.S. have a Mutual Recognition Agreement Sectorial Risk Management System 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 Regulators should develop pilot projects with the private sector to reduce redundant regulation
What Does Risk Management Look Like?
Security If your company participates in a supply chain security program, why did your company decide to join the program? 60% 50% 40% 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... Based on your experience with supply chain security programs, would you join today? 70% 60% 50% 40% 30% 20% 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 Do you think the cost to join/maintain your company s supply chain security program(s) is worth the benefits? 50% 40% 30% 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 Pillar 1: Customs-to-Customs Customs administrations must work cooperatively Harmonize advance electronic cargo information requirements Ex.: Advance Cargo Manifest Rules Adoption of risk management approach to security 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 Concept predates 9/11, but has gained currency with governments after 9/11 to describe a company which is: Highly compliant Good internal controls Mitigates risk 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, 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: Voluntary regimes Commitment to adopt good importer practices for security and compliance Trade facilitation benefits
Status of AEO MRAs Concluded MRAs Date June 2007 May 2008 June 2008 June 2009 Country New Zealand USA Japan - New Zealand Canada USA Jordan - USA Japan USA July 2009 EU Norway EU Switzerland June 2010 January 2011 May 2011 June 2011 Canada Japan Canada Korea Canada - Singapore EU Japan Korea Singapore Korea USA Andorra EU Japan - Korea Korea New Zealand Japan Singapore May 2012 EU USA MRAs Being Negotiated Signatory Countries China EU China - Japan Japan Malaysia China Korea Hong Kong, China Korea India Korea Israel Korea New Zealand Singapore Norway Switzerland June 2012 October 2013 November 2013 February 2014 March 2014 China Singapore China Hong Kong, China India - Hong Kong, China Hong Kong, China Korea Korea - Mexico Singapore USA USA Israel USA - Mexico Source: WCO Compendium of AEO Programmes (2014 Edition)
Getting T-TIP Right Matters 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?