Interest driven approach to enforce the supply chain ...m.sat.gob.mx/omamexico/Paginas/semblanzas/docs/TE... · Shipper , Forwarder, Terminal & Airline All parties involved in international

Interest driven approach to enforce

the supply chain through the AEO

WCO 3rd Global AEO Conference

Jimmy Pang (Vice President of SCSA)

May 2016

Supply Chain Security Associationwww.scsasecurity.org

Interest driven

approach to enforce the

supply chain through the AEO

http://www.scsasecurity.org/

Trade Facilitation Through Supply Chain Security

HKCAD RAR Review Group – Member

Trainer for AEO Auditor Team of HK C&E Dept.(2010)

Lecturer & course advisor of the in IT Risk Management and logistics

Security Management of SCOPE of City University of HK

IATA DGR Instructor & HKCAD RAR Qualified Trainer

PISA (Professional Information Security Association) former program

committee member

Speaker in APEC meeting 2015 (Philippine and Taiwan)

(APEC's Emergency Preparedness Working Group)

Active participate in world wide supply chain conferences

since 2006 (APEC, WCO, ICAO, IATA )

Over 20 years in consulting industry & MBA holder

Jimmy Pang 彭偉樂

• Founder & Vice President of Supply Chain Security Management Association

• TAPA Asia Hong Kong Representative & Shadow auditor


the supply chain through the AEOAbout Supply Chain Security Association

Supply Chain Security Association (SCSA) is founded by a group of professionals, namely

- Supply Chain Management

- Security management

- Information Technology Management in April 2002

SCSA aims to address the awareness and give

solutions to the increasing security threats that

is unavoidable in the current running and

operations of the supply chain’s existing

business.


the supply chain through the AEOAbout Supply Chain Security AssociationOur Mission• We believe in the joint effort of supply chain and appointed security professionals, we

are able to enable safety measures be implemented in the most effective way.

• It is our ideal to help optimize Supply Chain operations & management with the most

effective risk management scheme.

Our Credentials• With over 1,000 members in Hong Kong and over 100 seminars and training programs related to

supply chain security have already been taken place in Hong Kong, China and Singapore, with the

cooperation of relative Universities such as (Chinese University of HK, City University of HK) and other

professional bodies.

• Participated in the APEC STAR meeting (Supply Chain Security Conference) since 2006, WCO supply

chain security conferences since 2007, WCO AEO conference at Korea 2012 & Madrid 2014.

• Organized the liaison between the SCSA YMC group and various Universities in the promotion of

the concept and the significance of Supply Chain Security concerns.

• Exclusive seminars for AEO took place since 2008.

• Supporting organization for Interpol World 2015.


the supply chain through the AEOSCSA in AEOSince 2006

• Researched on WCO Safe framework

• APEC STAR meeting (Supply Chain Security Conference), 2006-2008

• 1st AEO / WCO safe framework seminar 2008, 2010

• WCO conferences since 2008-present

• Conducted Training Course for Chinese University of Hong Kong

• Conducted the AEO auditor training for Hong Kong Customs AEO team

• Initiated 1st HK AEO pilot project in 2011

• WCO AEO conference since 2012

• Researched on AEO education & integration with other SCS standards (ACC3,

TAPA FSR, RAR)



Today’s agenda

1.About the SCSA AEO Pilot Run Project

- Focus & Strategic project selection

2.Findings

- Various supply chain security standards benchmark

- The changeling that the industry facing

3.Transforming their concerns to be best practice for promoting AEO

- Enhancing the AEO security controls to address other concerns

(i.e. hidden DG, counterfeit component and commercial risk)

4.Conclusion


the supply chain through the AEOWhy Forwarding Industry?

Supply chain Security Association initiated an AEO Pilot Run project for Hong Kong supply chainindustry in 2011, Hong Kong as one of the higher number of forwarders’ port, the 1st stage is focusedon forwarding industry.

Source www.vtc.edu.hk/uploads/files/publications/transport_logistics_training_board/en/2014%20MPS

%20Rpt/2014%20TLTB%20MPS%20Report%2020150618(1).pdf

AEO Pilot Run Project Number of freight forwarders in Hong Kong

About The Pilot Run Project



The Project Mission AEO Pilot Run Project

To Enhance The Hong Kong International

Supply Chain Competitive Advantage



Supply Chain Security Related Standards

Hong Kong China Singapore Japan USA EUInitiative

Industrial RA program 1437No RA

program268 162 No data No data

National

EU 2014 ACC3

Screening &

ValidationGreen Green Green Green Green N/A

C-TPAT 100+ No data No data No data 9600+ No data

Customs AEO 28 3453 121 542 10832 13885

Commercial TAPA (FSR) 64 129 31 14 142 423

Last update : Jan 2016

An overview the global popular SCS standard or program, Hong Kong has a very good foundation for supply

chain security, which able to continue to keep Hong Kong as one of the important port in the global supply

chain, Also enhance the competitive advantage.




The Project Mission AEO Pilot Run Project

To Enhance The Hong Kong International

Supply Chain Competitive Advantage

Approach

Integrate their in-house best practices and

existing complied with supply chain security standards

or regimes;

To learn their concern & challenging to identify the best

way to promote and achieving the AEO


Because of that reason, we selected the firm who already have foundation of supply chain security,

for example, firm who already certified TAPA, RAR, C-TPAT or ISO28001,……

\Through the Integration their in-house best practices and existing certified program to learn their

concern & challenging for identifying the best way to promote and achieving the AEO


SCSA HK AEO Pilot project

Invitation

Screening

Confirmation

Preparation•Scoping

•Risk Assessment

•Risk Management & policy setting

Implementation

•Integration

•Procedure & training

•Pre-assessment

•Validation & refinement

Certification

Pilot Project Implementation

After we screened applicants, tailoring a comprehensive road map for each selected project applicants; from

risk assessment …to certification stage, review all present activities and in-house practice for identify the

scope, and next is risk assessment



Related

Standards & Doc.

INTERNATIONAL

STANARD

Iiso/iec

17799

IiNTERNATIONAL TECHNOLOGY – CODE OF

PRACTICES FOR INFORMATION SECURTITY

IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY

INTERNATIONAL

STANARD

Iiso/iec

17799

IiNTERNATIONAL TECHNOLOGY – CODE OF

PRACTICES FOR INFORMATION SECURTITY

IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY

BDVHJDBDVHJD

TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY

Corporate

Policies & SOP

Regulations

Establish

Processes

Risk

Assessment

Development

Implementation

Monitoring &

Refinement

Continues

improvement

SCS Security

Standards(AEO, TAPA, RAR,ISO,..)

Majo

r fi

nd

ing

s

During the risk assessment, we find there are a lot of control practicesare present, those may not be 100% perfect fit into the AEOrequirement, because…

Comparison of Supply

Chain Security Standards

1. The scope of controls is not comprehensive enough

2. Focus of threats are not exactly same as AEO

3. Those daily controls may not be documented in a systematic manner, either procedure or recording

Project Implementation (Various Standards)

AEO Pilot Run Project (1st stage findings)


the supply chain through the AEOAEO Pilot Run Project (1st stage findings)

Ma

jor

fin

din

gs

As mentioned before, the principle of security controls are very similar, common aspects are in AEO and other

standards.

Review on Major 3 StandardsTrade Facilitation Through Supply Chain Security

Same Security Principle : No disruption to the supply chain

Common Controls (Easier to Achieve AEO?)



1. The scope of controls may different

RAR AEO TAPA

Target

Group

Shipper , Forwarder,

Terminal & Airline

All parties involved in

international supply chain

Forwarder, trucking and

shippers & Terminal

Threats Aviation security (Bomb

threats)

Trade & Terrorism Criminal threats

Scope Air export only All international trade in

all mode

Selected freight

operations for high

value cargo (mainly air operations)

Ma

jor

fin

din

gs

The scope of AEO is including all Air, Sea and Land international trade issues, but

for the RAR, it’s concerning the bomb threats to aviation security only; for

TAPA, both import and export operations dealing with high-value cargo with

threats from theft, so both scope of standards are less comprehensive than

AEO.

Common Controls (Easier to Achieve AEO?)



Ma

jor

fin

din

gs

RAR AEO TAPA

Requirement Control procedure +

handling practice +

training + recording

Comprehensive

management system

(Control procedure +

handling practice +

training + recording)

Specific high value

shipment handling

framework

(Control procedure +

handling practice +

training + recording)

Time for

Achieve

Within one

month (Audit time

takes 0.5 day)

Months till year

(Audit time takes 6-10

months)

3-5 months(Audit time takes 1- 3

days)

RAR AEO TAPA

Target

Group

Shipper , Forwarder,

Terminal & Airline

All parties involved in

international supply chain

Forwarder, trucking

and shippers & Terminal

Concern

Threats

Aviation security

(Bomb threats)

Trade & Terrorism Criminal threats

Scope Air export only All international trade in

all mode

Selected freight

operations for high

value cargo (mainly air operations)

Common Controls (Easier to Achieve AEO)



AEO Pilot Run Project (1st stage findings)1. Extend the controls

2. Refine their best practices and;

3. Document their best practice

Ma

jor

fin

din

gs

Therefore, those controls already give a very important SCS foundation to the firm,

achieving AEO is much easier when compare to others without any best practice. they only need 3 approaches to build their AEO.

Common Controls (Easier to Achieve AEO)

Same Security Principle : No disruption to the supply chain



Terrorism

SmugglingHowever, during starting we find that Not many firm eagers to have AEO, as they don’t find

significant benefit in Hong Kong, as a Free Trade Port.

We also try to identify the driver for the forwarding industry, however terrorism, trade crime and

smuggling is not the 1st priority of concerns;

Trade crime

About The Pilot Run Project - Other Findings

What is the effective driver to promote the AEO?



The industry is facing costing competition and performance challenging from neighbor ports.

Costing

Performance





Deception

Claims

Especially their highest concerns from commercial threats like deception, bad debt, claims or

hidden Dangerous goods, they eager to spend their extra-investment because the impact and

liability are direct and extremely high compare to others threats.

Bad debt

Hidden Dangerous Goods




Concern issuesHidden Dangerous Goods (Lithium Battery )

Industry Concerns (Challenging)

Ho

ng

Ko

ng


e.g, under a cross border export trade environment, hidden dangerous goods problem is one of the

biggest concerns to Hong Kong air cargo forwarder, as nowadays Lithium Battery is commonly find in

equipment, toy, gadgets…etc., which are being produce in southern China,


Concern issuesHidden Dangerous Goods (Lithium Battery )


Ho

ng

Ko

ng

Total value :

282.4 Billion USD (2014)


high portion of world supplied via Hong Kong air export, so their products quality and quantities

are directly affecting the Hong Kong export logistics performance, in terms of safety and revenue;


IncidentsDate: 1 Dec 2015

Location: Louisiana, United States

Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and

he had only used it for one day before she spotted flames coming from the device while it was plugged

in to charge the battery.

Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/

She said the hoverboard was

ordered on Amazon.com from a

company called Fit Turbo.

The incident is under investigation

by the Louisiana State Fire

Marshall's Office.

Hidden DG cause fire (Lithium battery)



Because of Lithium battery or it’s products are classified as Dangerous Goods in air logistics,

therefore, the cost and safety requirement are much higher than normal general cargo.

Higher power battery products are required higher cost for proper packing and limited quantity

to ship, responsible brand owner and forwarder understand the importance of safety,








She said the hoverboard was

ordered on Amazon.com from a

company called Fit Turbo.

The incident is under investigation

by the Louisiana State Fire

Marshall's Office.

Value Added Best Practices (example)




however, because of cost reason and air logistics safety requirement is not well known by some

trader and manufacturer; therefore most of the problem is come from the high risk shipper who are

ignorance to safety, which may start from product design, component selection, assembly process

control and event safety testing, not too difficult to understand why their risk is higher than usual

shipment a lot;


additionally, to the multi-levels consolidation and limitation of jurisdiction, which enhancing the conflict

of interest business environment between commercial interest and compliance duty.

Concern issues

Multi-levels consolidation

Limitation of Jurisdiction

Carrier /

Forwarder

Consolidation

Industry Concerns (situation)




as long as the trend of demand for higher power battery products & developing web shopping

business model, multi-levels cross border consolidation is more complicated, which start from the

buyer who sit in front of the computer till to the carrier, the multiple effect of those minor problems can

lead to disaster.

Concern issues - MisDeclared / UnDeclaredHidden Dangerous Goods (Lithium Battery )




Source: Aviation Safety Network

Nature of goods

LHR Leather case, plastic cover, screen protectorAMS Clothes, Plastic Case, RingLHR Phone case, keyboardDXB Mobile Accessory (LCD, Screen guard, leather

case, charger, without battery)

SDQ Power supplySDQ Power supplyLIM Cell phone security display holder set, set incl

power adapter, charge line, connector, sticker,

cable. Remote control

AMS Clothes, Plastic Case, RingLHR Phone case / LED light (without battery)LHR Phone case / LED light (without battery)DXB Leather case, charger, screen guard, no battery,

no magnet.


Nature of goods







no magnet.

“The focus of dangerous goods is not

only a safety issue but also one of

security…”

Source: International Civil Aviation Organization (ICAO),

Dangerous Goods Panel (DGP), DGP-WG/07-WP/75

such kind of problem, may possible to cause aviation disaster, International Civil Aviation Organization

already name the hidden dangerous goods problem as one of the highest safety & security issue.


http://aviation-safety.net/photos/displayphoto.php?id=20060208-0&vnr=3&kind=C





Most of the Hong Kong forwarder understand this situation, especially the extremely high liability that

they may face from due diligence environment.

Therefore, liability and commercial risk are effective drivers for promoting AEO.

Concern issues - MisDeclared / UnDeclaredHidden Dangerous Goods (Lithium Battery )


Liability & Commercial Risk

Due Diligence








Value-added best practice


Nature of goods







no magnet.


Nature of goods







no magnet.

“The focus of dangerous goods is not

only a safety issue but also one of

security…”

Source: International Civil Aviation Organization (ICAO),

Dangerous Goods Panel (DGP), DGP-WG/07-WP/75

So, how to detect it?



Following is an example is one of the best practice that we learn from the pilot project and which now

helping us to promote the AEO. So, the forwarder, how to detect the shipment may have

misdeclarated hidden Lithium battery? Even possible to know they are using counterfeit battery?,

even some goods have fake test report?









During the firm encounter a new client, the well trained salesman conducts a client evaluation, and

try to visit the client facility, beside complete the client profile, also further explore the business

potential and risk,

Terrorist Safety

Smuggler Bad Debt

Profile



Value-added in security control best practice

Terrorist Safety

Smuggler Bad Debt

ProfileProfile

Enhancing Controls - Hand search - Zero credit terms…etc.

Enhancing the client loyalty - Free handling charge,- Priority of delivery- Longer free storage period… etc.

Business partner evaluation

After all, the output is like hotel / airline loyalty program, each client profile being rated with risk

of commercial, criminal, smuggling and hidden DG of Li-battery, it is not only allied with A.E.O.

requirement ‘business partner evaluation’, which basically allied with R.A.R. and TAPA, as

commercial risk is the priority of concern, especially on bad debt and smuggling from cross

boarder cargo, firms are eager to input and update the profile for minimize their risk






e.g. when they walk through the production of the gadgets, they will observe the operation

environment, especially the packing box of battery at production, they already know they factory

using counterfeit battery in the product, whereas qualified battery would not pack in that way, it will

give the firm have an alert to the shipment from this new client.





So how to detect it?Commercial

- Bad debt

- Claims

Criminal

- Deception

- Robbery

- Smuggling

Management

- Error

- Poor Client

info.

Business Concerns (Risk)

From Commercial Perspective

Value Added Best Practices drives Compliance


of course there is no silver bullet, but under the deal diligent and limited jurisdiction

cross border trade environment, their liability being minimize, and some problematic

client may walk away already.This is only one of the example that when the firm implementing the AEO , and they can managing

multi-risk by refining one action, actually, from the pilot run project, also other commercial risk and

criminal threats are being improved in different controls activities.



Compliance

Profitable

BusinessAs long as more controls practice being enhanced, we find more business risk being tackle, which is

value added to the AEO applicant, in result which is able to achieve both compliance and creating

more profitable business model.




A new industry initiative ‘ Li-CAT program’ suggested by

our members

Li-CAT is a non-profit program bringing new, safe insight to the industry.

Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential

threats, at the same time maintaining the economic potential of the industry.


After all best practices exchanged, some members further suggested to systematic to those best

practices from shipper evaluation, people training, questionable cargo handling procedure…etc.


A new industry initiative ‘ Li-CAT program’ suggested by

our members

Li-CAT is a non-profit program bringing new, safe insight to the industry.

Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential

threats, at the same time maintaining the economic potential of the industry.


to set up a ‘White-list’ program to give priority to their ‘secure & safe cargo’, which a further

enhancement from our A.E.O. pilot program, which is well received by the cargo forwarder.



In conclusion

Nowadays the global trade environment is more complex,

problem is dynamic,

Solution is also need to be dynamic, Government policy

and industry best practice integration is the way to go,

AEO giving the global supply chain a security framework,

continue share and learn from the industry and globally is

the way for trade facilitation.

[email protected]



Let’s share your

best practice to drive

a safe & secure

supply chain!

[email protected]

Thanks you

Documents

Interest driven approach to enforce the supply chain ...m.sat.gob.mx/omamexico/Paginas/semblanzas/docs/TE... · Shipper , Forwarder, Terminal & Airline All parties involved in international