Risk Management and Global SupplyRisk Management and Global Supply Chains

T-TIP Stakeholder Presentation – 5th RoundArlington, VAMay 21, 2014

AAEI Works with European Partnersp

What Are the General Trends for Trade?

Compliance Facilitation

Safety SecuritySafety Security

FTAs Increase Complexityp y

Market access by reducing regulatory redundancy for all industry sectors in all T-TIP countries is necessarysectors in all T TIP countries is necessaryTrade facilitation for “trusted traders” who spend on supply chain security and trade complianceClarity for rules of origin• Use KORUS rules for chemicals• Exclude packaging for bulk commoditiesExclude 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 FTAsg

Holistic Risk Managementg

Horizontal Risk Management System• Regulatory regime applicable to all industries to manage imports andRegulatory 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” tradersp 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 companyappropriate 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%

yIf 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 InspectionsIt is the right thing to doBusiness partner pressureExpedited clearanceHaven'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 yBased 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%

yDo 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 Principlesp

Pillar 1: Customs-to-Customs• Customs administrations must work cooperativelyCustoms administrations must work cooperatively

– Harmonize advance electronic cargo information requirements• Ex.: Advance Cargo Manifest Rules

– Adoption of risk management approach to securityp 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” Conceptp

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 pconsolidators, 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 MRAsConcluded MRAsDate Country

June 2007 New Zealand – USA

MRAs Being NegotiatedSignatory CountriesChi EU

May 2008 Japan - New Zealand

June 2008 Canada – USAJordan - USA

June 2009 Japan – USA

July 2009 EU Norway

China – EU

China - Japan

Japan – Malaysia

July 2009 EU – NorwayEU – Switzerland

June 2010 Canada – Japan Canada – Korea Canada - Singapore EU – JapanKorea – SingaporeKorea – USA

China – Korea

Hong Kong, China – Korea

India – KoreaKorea USA

January 2011 Andorra – EU

May 2011 Japan - Korea

June 2011 Korea – New ZealandJapan – Singapore

May 2012 EU – USA

Israel – Korea

New Zealand – Singapore

Norway – SwitzerlandMay 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 - MexicoUSA - Mexico

Source: WCO Compendium of AEO Programmes (2014 Edition)

Getting T-TIP Right Mattersg 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?