US-EU Trade Facilitation by Vision 2030

US - EU CONFERENCE

FACILITATING SECURE TRANSATLANTIC TRADE WASHINGTON D.C.

SECURITY & COMPETITIVENESS

Ma g az i n e s p o n s o re d b y

F O R WA R D

With the support of the Representative of German Industry and Trade (RGIT)

Facilitating Secure Transatlantic Trade A one-day conference October 31, 2007 Dear Participant, Welcome!

To the Facilitating Secure Transatlantic Trade Conference.

In April 2007, President Bush, EU Commission President Barroso and German Chancellor Merkel, then serving as EU Council President, signed a framework for advancing transatlantic economic integration between the European Union and the United States. Under this initiative, five topics were given priority, or ‘Lighthouse’ status, one of which is Secure Trade. Under this item, governments agreed to “Develop common and accepted standards to maximize security, safety and facilitation of international trade supply chain that could lead to mutual recognition of programs for economic operators.”

This one day conference will harness the momentum created by the Framework, focusing on the experiences and concerns of transatlantic companies. Participants from the U.S. Government, EU Commission, and European and American firms will explore ways to cut red tape through mutual recognition of customs security initiatives, to facilitate trade, and maintain safe and secure supply chains. The conference will conclude with a set of concrete recommendations from business.

We sincerely hope that you have a productive and interesting day. Best wishes,

Kathryn Hauser U.S. Executive Director TABD

Heiko Willems Section Director, Trade Policy BDI

About the

Transatlantic Business Dialogue The TransAtlantic Business Dialogue (TABD) is a group of some 40 chairmen and chief executives from American and European companies operating in the United States, Europe, and globally. Originally convened by the U.S. Department of Commerce and the European Commission in 1995, the TABD is a unique forum to promote enhanced cooperation between the transatlantic business community and the governments of the European Union and the United States. “Dialogue” is at the heart of the TABD. The TABD meets face to face with U.S. and the EU political-level officials to discuss transatlantic business issues, share recommendations for action, and engaged in a dialogue on the future of the transatlantic economic relationship. The TABD’s primary goal is to establish a Barrier-Free Transatlantic Market with the freest possible exchange of goods, services, people, and capital. The TABD warmly welcomed the action taken towards this end by President Bush, Chancellor Merkel and President Barroso at the U.S.- EU Summit on April 30, 2007. The Summit Leaders agreed on a Framework for Advancing Transatlantic Economic Integration, including a work program and political accountability which TABD believes constitute necessary incentives to achieve progress towards a Barrier-Free Transatlantic Market. We particularly welcome the establishment of the Transatlantic Economic Council (TEC) to oversee implementation of the Framework. The TABD has long maintained that significant steps to reduce barriers to transatlantic economic integration can be made through more effective, systemic and transparent regulatory cooperation. In addition, the TABD is focusing its work in 2007 on maintaining an open investment climate, establishing a transatlantic financial market, strengthening security to enhance transatlantic trade, and protecting intellectual property rights. The TABD Executive Board meets twice a year – during the annual U.S. – EU Summit and during the World Economic Forum’s annual meeting in Davos, Switzerland – to set the agenda and put forth recommendations to the political leadership of the European Union and the United States. Each chief executive or chairman designates senior staff that constitutes the Joint Policy Committee, which carries out the work of the TABD during the course of the year. The activities of the TABD are directed by a Secretariat, with offices in both Brussels and Washington. For more information, please visit us at

www.tabd.com

CONTENTS TABD

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STRENGTHENING SECURITY TO ENHANCE TRANSATLANTIC TRADE By Kathryn Hauser, TABD US Executive Director and Jeffries Briginshaw, TABD EU Executive Director

The Transatlantic Business Dialogue (TABD) is a group of more than 40 Chairmen and Chief Executives of major EU and U.S. multinational companies. The main goal of the TABD is the establishment of a Barrier-Free Transatlantic Market. Since 2004, when we first set out our vision for a Barrier-Free Transatlantic Market, we have called on our political leaders to resist protectionist pressures and have put forward detailed recommendations on priority issues to be addressed in transatlantic trade and investment.

The transatlantic market is the world’s largest, deepest and most integrated economic space. Not only are the EU and the US are each other’s main trading partners, this relationship also serves as the anchor of the global economy. Transatlantic trade accounts for around two fifths of world trade – that’s €1.7 billion a day in trade flows.

Despite the high extent of economic integration of the EU and U.S. economies, the full potential has yet to be realized. A recent OECD study has shown that further reduction of barriers to trade between the EU and US would lead to a significant increase in welfare for European and American citizens: reducing barriers to trade and investment could increase GDP per capita in the medium term in the EU by 3% to 3.5%, and in the US by 1% to 3%.

As more countries become active players in the global economy, it is even more important for the U.S. and Europe to reduce trade barriers and do everything possible to strengthen the transatlantic economy and the globalised economy. What does it mean to strengthen these ties? The main

message of the TABD to U.S. and EU leaders, is the need to use multilateral and bilateral institutional settings for dialogue followed by concrete actions. Bold steps are required to establish a truly Barrier-Free Transatlantic Market. In this respect 2007 has been a busy year – in particular the WTO Doha Round of global trade talks, though painstaking, have offered the largest potential rewards for transatlantic trade. It is essential that these talks reach a conclusion and another set of trade ties are signed into international law. With the Doha multilateral agreement in place, all businesses, including TABD companies operating globally can rely on predictable and transparent international trade rules to manage increasingly complex global supply chains and business operations. This will then enable further transatlantic economic integration.Beyond multilateral trade agreements, there have been encouraging signs at the transatlantic level, with the U.S. and EU governments working towards the goal of reducing regulatory barriers on the basis of a very detailed work program spanning many areas.

T h e L i gh t h ouse Projects: O p p o r t u n i t i es for Action

In April 2007, President Bush, EU Commission President Barroso and German Chancellor Merkel, then serving as EU Council President, signed an agreement guaranteeing their commitment to cooperate on a wide range of mutually beneficial areas.

The TABD welcomed this Framework for Advancing Transatlantic Economic Integration, which is a significant step towards the establishment of the Barrier Free Transatlantic Market. In particular, we welcome the establishment of a Transatlantic Economic Council, which is to define a work program and oversee progress made to reach the goals and objectives of the Framework.

An important task for the TEC will be to guarantee that not only objectives are reached to enhance economic integration, but also that the EU and U.S. steer away from retrograde steps. The free flow of goods and persons is essential to a healthy transatlantic trade relationship. The TABD is concerned that protectionist voices continue to use security concerns as a pretext to restrict trade, immigration and investment. It remains essential that the EU and U.S. continue the work to balance transatlantic trade concerns with legitimate security measures.

The TABD appreciates the processes put in place and steps taken by the U.S. and EU to respond to security incidents. However, current initiatives only provide solutions for the short term. The TABD believes that the U.S. and EU have an opportunity to develop a sustainable long term solution by utilizing existing technologies to establish cost-efficient capabilities to secure travel and trade. This would ultimately benefit the citizens and industry on both sides of the Atlantic.

Transatlantic business currently still suffers from the complexity and costs of having to comply with different security rules and regimes, which essentially share the same objective. The TABD urges the U.S. and EU to work constructively towards a situation of mutually agreed rules and standards to ensure the free flow of goods and persons across the Atlantic. The TEC has a key role to play to realize this goal.

The great selling point of the Transatlantic Framework is that it prioritizes five key areas, or ‘Lighthouse

Projects’ for immediate action. Secure Trade is one of the five, and the goals outlined call for pilot projects that will explore the similarities between U.S. and EU standards and programs, with the ultimate goal of achieving mutual recognition between customs initiatives. The ultimate goal here is to accommodate a mutual recognition between U.S. and EU customs-business partnerships. In the EU this initiative is called the Authorized Economic Operator, and envisages a community-wide standard for trade facilitation and security. In the U.S., the innovator of public-private initiatives of this type, the Customs and Trade Partnership Against Terrorism C-TPAT, is also a voluntary program to improve supply chain security. Mutual recognition will bring numerous benefits to transatlantic business, by cutting red tape, increasing efficiency and bringing competitiveness gains along the supply chain. By simplifying procedures on both sides of the Atlantic, we will gain a strengthened and transparent security environment, thus meeting with government requirements for secure trade.

The TABD is fully supportive of the Transatlantic Framework, and is doing its part to ensure that its potential benefits are fully realised. The “Facilitating Secure Transatlantic Trade” conference is a key part of this strategy. The conference will create a dynamic space for discussion where our business members are able to respond to the Framework recommendations on Secure Trade. At the TABD we believe that public, private dialogue and partnerships are crucial in the work ahead to reduce trade barriers.

We hope for a productive conference that will produce substantive recommendations from business to help push this important initiative forward. The TABD is committed to reporting these recommendations at the next EU-U.S. summit, and will continue to put these important issue front and center of government agendas on both sides of the Atlantic.

TRANSATLANTIC CUSTOMS SECURITY AND FACILITATION PROGRAMS FROM A BUSINESS PERSPECTIVE

By Klaus Bräunig, Spokesman for the Executive Board and Delegate for SMEs, BDI – Federation of German Industries

Since 2001, the US and the EU have adopted several customs security measures to minimize the risk of terrorist attacks on the supply chain and to prevent the import (and in the EU also the export) of dangerous goods for terrorist purposes. The two core elements of these security initiatives are: pre-arrival (and in the EU also pre-departure) declarations before shipments arrive at the borders and

customs-business partnership programs providing certain benefits for participating companies.

Industry is willing to cooperate in the fight against terrorism. Business itself has an interest in preventing terrorist activities – companies want to protect their facilities, their supply chains, their products and their customers. However, we also have to face the fact that the efficiency of customs-related security measures to prevent terrorism is limited. For instance, none of the terrorist attacks or plots of the last years (9/11, Bali, Casablanca, Madrid, London etc.) had a connection to trade and could have been avoided by trade-focused security initiatives. Of course, we have to do our best to prevent terrorist attacks on the supply chain and we cannot rule out the possibility of an assault on international trade, but we also have to analyze carefully the effectiveness and proportionality of countermeasures.

In this debate, the BDI has appealed to governments and will continue to do so – to strike the right balance between security and the necessities of global trade. Pre-arrival (and the European pre-departure)

Klaus Bräunig, Spokesman for the Executive Board and Delegate for SMEs

declarations have considerable consequences for the organization of the logistics and supply chain. Inevitably, companies are facing additional costs, more bureaucracy and greater administrative burden, because they have to provide more detailed information, submit additional declarations prior to shipments and are subject to increased controls. With the existing and upcoming security measures, customs procedures will become more difficult, especially for small and medium-sized enterprises.

Therefore, facilitation programs are a decisive aspect of customs security measures. They have to provide the necessary simplification for legitimate trade.For

European and American industry, a business-friendly environment in customs legislation and customs procedures is of utmost importance. In a globalized economy, we cannot afford to live with a customs regime which would put our companies at a permanent disadvantage vis-à-vis their competitors in other parts of the world.

To reduce the burden for “reliable” companies, the EU and the US have introduced customs-business partnership programs containing facilitations for the participating companies. The “Customs-Trade Partnership Against Terrorism – C-TPAT” in the US and the "Authorized Economic Operator – AEO” program in the EU are a response to business needs for trade facilitation in a more regulated environment. Companies certified under these programs comply with existing legislation and agree to implement additional voluntary security measures. To become a member of C-TPAT and AEO, companies have to provide exhaustive information on their security measures (e.g. premises, information and personnel security) and their internal organization.

In the EU, the criteria are even more stringent and cover customs compliance and solvency. Although the services of a lawyer or consultant are not required to prepare and submit the respective applications, the C-TPAT and AEO procedures do require substantial time and effort. Especially for many small and medium-sized companies this is a considerable burden. Therefore, we believe that certified companies deserve meaningful simplifications. The C-TPAT and the AEO programs already contain important benefits. Participating companies have a lower risk profile at customs administrations, they are subject to fewer and priority checks at the border and may (in the EU) submit a reduced data set for their pre-arrival or pre-departure declarations. But we are certainly not at the end of the road. Customs legislation is constantly in motion. The current debate in the EU on the “Modernised Customs Code” gives the opportunity to review the balance between AEO criteria and simplifications. The BDI has made specific proposals to increase the AEO benefits. In the US, the vision for C-TPAT is a “green lane” for validated companies.

A decisive issue for transatlantic – and global – business is to work on a harmonized system on customs and

supply chain security, because only an internationally coordinated approach can deliver the expected results. The World Customs Organization (WCO) has elaborated the “Framework to Secure and Facilitate Global Trade” which can serve as a common standard for customs security initiatives worldwide and which provides for a mutual recognition of security partnership programs.. The EU and the US are committed to the work of the WCO and also have been working bilaterally on customs security issues in the last few years.The EU-U.S. summit on April 30, 2007 identified closer cooperation in trade-related security measures as a priority "lighthouse project" for deepening further transatlantic economic integration. A key objective of the project is mutual recognition of customs business partnership programs. The BDI strongly supports these negotiations between the EU and the US. From our point of view, there should be no concerns with accepting both AEOs and C-TPAT validated companies as reliable partners of customs.

Both schemes are stringent and guarantee a high level of security within the participating companies and their supply chains. Moreover, due to the fact that all companies – even C-TPAT and AEO participants – still have to submit detailed pre-arrival (and in the EU predeparture) information to the customs authorities, there is definitely no lack of control. Customs has all the

necessary information for performing a timely risk assessment and can still stop every high-risk shipment from any company before entering (or – in the EU – leaving) the territory. From an industry perspective, a successful conclusion of the lighthouse project on “Secure Trade” is of utmost importance. If the EU and US governments fail to succeed, business would be confronted with double certification and double standards. Moreover there is a risk of multiplied standards throughout the world. This would not be acceptable for a globalized economy. “Secure Trade” is therefore not just a technical customs issue, it has a very significant political dimension. It is important that the political leaders of the two major trading blocks in the world have identified this field as a priority for closer cooperation.

With our conference “Facilitating Secure Transatlantic Trade”, the BDI aims to express transatlantic business needs and to propose concrete next steps for a successful conclusion of government negotiations. A meaningful outcome of this project could also serve as an important signal for a closer regulatory cooperation in other areas. A failure would send the opposite signal. In both directions, the EU and US will be setting an example for their future bilateral cooperation and – related to customs security – also for the rest of the world. Thus, political leadership for a successful conclusion of the lighthouse project is imperative.

THE EU’S AMBASSADOR TO THE US WRITES ABOUT SECURE TRADE by Ambassador John Bruton

The good news, from a financial perspective, is that the European Union and the United States trade for more than three billion dollars every day. The bad news, from a security perspective, is that we trade for more than three billion dollars every day. As the biggest trading partners in the world, we are faced with an enormous challenge: How do we enhance trade security without impeding the massive flow of goods and services across the Atlantic? As both Europeans and Americans have experienced terrorist attacks in recent years, we fully recognize the need to secure the international supply chain and have made great efforts to do so. However, as we create new practices and systems we must strike the right balance between trade facilitation and increased security.

Customs authorities on both sides of the Atlantic have long opted to perform their security tasks by using a risk-based approach. This means weighting and prioritizing risks and allocating resources in accordance with priorities. The European Union is currently implementing the security amendment to the EU Customs Code whereby customs authorities in all 27 EU countries operate under a uniform set of risk-selection criteria. From July 2009, all cargo going to or leaving from the European Union will be subject to electronic-based prior declaration. To speed the flow of legitimate trade, data gathered in the pre-arrival or pre-departure declaration will identify higher-risk cargo. Already from January 2008, the EU's Authorised Economic Operator (AEO) program will allow reliable traders, in other words low-risk traders, to benefit from facilitation measures on the condition that they effectively secure their part of the international supply-chain.

Ambassador John Bruton

This initiative is at the heart of the Secure Trade project, which was launched at the EU -US Summit and will be reported to the first ministerial meeting of the Transatlantic Economic Council in Washington on November 9. Its launch has put the spotlight on the ongoing dialogue between the European Commission and the U.S. Customs and Border Protection towards the mutual recognition of the AEO program and its U.S. equivalent, the Customs-Trade Partnership Against Terrorism (C-TPAT).

Mutual recognition, quite sensibly, is what we are working towards in the TEC. Unfortunately, we are not on the same wavelength as the US Congress which has enacted legislation requiring that, within five years, all US-bound containers be scanned before they are loaded at the foreign port.

Many experts and industry leaders have long expressed skepticism about this legislation and it's not hard to see why. This measure – not to be applied, by the way, at US ports on outbound shipments to Europe or elsewhere - requires foreign ports to make massive new investment in new scanning equipment, personnel and procedures just for exports to the US market. In physical terms, large, even staging areas will be required to scan and evaluate every container. This will translate into huge congestion at many European ports, some of which were built in medieval or even Roman times. Some ports could find themselves at a considerable competitive disadvantage, and many may have to opt out of US trade altogether leading to major internal traffic diversions by road and rail within EU countries. All this will eventually be translated into higher prices for US consumers.

Not surprisingly, the European Commission fears that implementing the scanning rule would prove to be very costly and disruptive to international trade, without providing significant security benefits. It pre-empts the Secure Trade project, which, over the same five year period, could well demonstrate that

security and trade facilitation desired by both the EU and the US could much more effectively be achieved using a risk-based approach.

Both the EU and the U.S. trade partnership programs illustrate the virtues of involving the private sector in a public policy effort. While measures like 100% scanning are politically appealing at a time of heightened concern about terrorism, I cannot imagine, based on my own experiences and port visits, that customs officials and port users in the US would be jumping for joy if the EU were to enact similar legislation with extra territorial application requiring the US to do 100% scanning of all its exports to Europe. We believe a risk-based approach is more pragmatic, and empirical evidence would suggest, as effective. Overall success of the Secure Trade project would illustrate the renewed strength of the transatlantic bond. It would further show that our cooperation in the most sensitive field of security can provide benefits for all. For these reasons, I trust that the October 31st Secure Trade Conference will provide for an open and fruitful exchange between all participants, and contribute to our objective of building a safe and efficient transatlantic marketplace.

ENHANCING TRANSATLANTIC INTEGRATION THROUGH SECURE TRADE

International trade is an essential driver of the world’s economy. Nowhere is this more apparent than in the United States, where, from 2005 to 2006, our exports of goods and services grew by 13 percent to $1.4 trillion. A critical component of this success has been the ability of maritime transport to move securely and freely. In fact, 99 percent of the volume of overseas trade enters or leaves the United States by ship.

As our share of international trade continues to rise, we have an increasing responsibility to secure the infrastructure that supports the global marketplace from those that seek to turn our openness against us, including terrorists.

Since 2001, the United States has taken significant steps to protect its cargo supply chain and has done so in a way that further promotes confidence in the free movement of trade. The most notable example is the Container Security Initiative (CSI). Through CSI, U.S. Customs and Border Protection (CBP) officials work in the host country with the host government to identify and target for pre-screening containers that may pose a risk for terrorism before they are loaded on U.S. bound vessels. CSI is now operational in 58 overseas ports. CBP has also implemented a Customs-Trade Partnership Against Terrorism (C-TPAT). This program allows importers to voluntarily take prescribed measures to enhance the security of their supply chains and receive expedited customs processing and other benefits in return.

The success of these programs is due in large measure to the support and cooperation we have received from like-minded partners, including the European Union. Of the 58 CSI ports, 23 exist in EU Member States, accounting for roughly 80 percent of U.S. bound

Paul B. Dyck, Deputy Assistant Secretary for Europe International Trade Administration, US Department of Commerce

containers from the EU. Further, the EU is home to one of the pioneering ports in the Secure Freight Initiative.

The EU has also developed its own program to combine increased security with expedited customs clearance called the Authorized Economic Operator (AEO). We are working with the EU, under the auspices of the newly formed Transatlantic Economic Council, to coordinate the further development of these two programs.

Our cooperation in this field is based on the common premise that protecting our homeland and enhancing our economic prosperity must be mutually reinforcing objectives. We also recognize the increasing role that the private sector must play in balancing this equation through the development of new, innovative techno logies. The Department of Commerce commends the Transatlantic Business Dialogue (TABD) and the Federatioof German Industries (BDI) for hosting this timely conference and for its overall leadership in this important area. We look forward to a productive discussion and welcome recommendations from the transatlantic business community.

CUSTOMS AND SECURITY: THE EUROPEAN PERSPECTIVE

by Robert Verrue, Director General, DG TAXUD, EU Commission

The rapidly increasing exchanges of goods and services demand effective customs services that guarantee revenue for the states, the security of our countries against devices of terrorism and the safety, health and life of our citizens against counterfeit. In the European Union we are modernizing our customs legislation, working on the simplification and modernisation of the Community Customs Code and on the full scale introduction of a European electronic customs that will make interoperable the current national systems. These Robert Verrue, Director General, DG TAXUD, EU Commission actions are intended to achieve our two main objectives in the customs area: facilitating trade and strengthening of In April 2005, in response to the new security challenges, the so-called security amendments to the safety and security. Fas ter and m o r e s e c u r e t r a de : great chall e n g e f o r C u s t o m s

The new methods of trading raise expectations for faster delivery and customs clearance. The trusted and reliable traders want us to reduce customs intervention, whereas at the same time we are bound to protect the security, health and safety of European citizens and the financial interests of the European Union.The European Union is strongly committed, and actively contributing, to the fight against terrorism. Customs has an increasingly important role to play in this fight, particularly by ensuring effective control at EU's external borders, as well as by enhancing security in the international movements of goods through stronger international customs cooperation.

Community Customs Code were adopted. With these amendments the European Union introduced a number of measures to tighten security around goods crossing international borders.

The adopted measures aim at ensu r i n g faster and better-targeted checks. They introduce three major changes to the customs code: A Common Risk Management Approach, which introduced on 26 December 2006 a mechanism for setting uniform Community risk-selection criteria for controls, supported by computerised systems.

From 1 January 2008, reliable traders (Authorised Economic Operators) respecting high standard security criteria will benefit from trade facilitation measures. From 1 July 2009 traders will be required to provide customs authorities with electronic inform ation on goods prior to import to or export from the European Union. (Pre-arrival/pre-departure inform ation) The implementation of these measures will allow the increase of the electronic input of data by economic operators directly into our systems.Therefore the transfer of information between national administrations will be possible. The concept of authorised economic operator will enable us to identify reliable traders, for whom the customs intervention will be reduced.

Our activities in this field will be accompanied by an increasingly sophisticated risk management framework, pre- and post-clearance control, audits and authorisations. These measures will increase security and reduce the risk of irregularity.

An early warning for all consignments sent by traders via computerised systems will enable the authorities to target high risk consignments, on the basis of computerised risk management systems, while the non-risk consignments can be released at a very early stage. Resources will thus be more efficiently used to control suspicious goods with improved security, but also to achieve the instant release of all compliant goods flows upon their arrival at the customs offices with the consequent benefits for the compliant traders.

In addition, we are also working on two major actions: the Simplification and Modernisation of the Community Customs Code and on the implementation of a European electronic Customs.

These measures lay down the foundation for modern customs legislation and processes in order to better serve the objectives of trade facilitation and to address security threats.

The European electronic customs will provide for an efficient communication between customs administrations, between customs and other law enforcement authorities, and between customs and business. Electronic declarations will become compulsory, with paper-based declarations becoming the exception. We are focusing on IT-systems that have to be interoperable among all 27 Member States and are supporting efforts to secure the supply chain by means like e-seals and smart containers.

In ternation a l c o o p e r a t i on

It is obvious that customs legislation and practical activities in the field of supply chain security have to be seen in the international context: traders request harmonised rules and common technology standards in order to avoid that different rules from country to country have to be respected, that legitimate international trade is unnecessarily blocked or delayed and to avoid unnecessary expenses. These actions have to be properly coordinated at international level. Failing that, we run the risk of inconsistent, incompatible, expensive and inefficient technological solutions.

The best approach is to rely on common standards and requirements. We therefore fully back and contribute to international initiatives undertaken in that respect and we grant our full support to any project of public-private partnership that can help to develop the most efficient and the least costly devices.

In this context, we support the SAFE Framework of Standards to Secure and Facilitate Global Trade, which was adopted in 2005 by the World Customs Organisation. This lays down the principles for worldwide supply chain security. It is being further developed and will be the common basis for the actions of our Member States to secure the supply chain worldwide while facilitating legitimate trade. A fundamental pillar of SAFE is the promotion of mutual recognition of security measures, control results and authorised trade partnership programmes.

Against this backdrop, the European Community has decided to vigorously pursue negotiations with its main trading partners in this direction. We have already begun to work jointly with our US counterparts on "secure trade" towards mutual recognition of the US Customs-Trade Partnership Against Terrorism (C-TPAT) programme and the EU Authorised Economic Operator (AEO).

The aim is to ensure that recognised reliable traders of one side of the Atlantic will benefit from trade facilitation measures at the other side Atlantic without superfluous formalities. We are developing a roadmap, which would include short and medium term political, administrative and legal measures to achieve an agreement on the modalities of mutual recognition, hopefully by the end of 2008. The upcoming meeting of the EU-US Transatlantic Economic Council (9 November 2007) will hopefully produce clear-cut commitments and possible deliverables on this important issue.

Conclusion

The challenges that we are facing require adequate and coordinated responses. The European Union continues to adapt its customs policy, and promote mutually beneficial cooperation with its trading partners and the economic operators to find effective answers to these challenges. We strongly believe that mutual recognition and a multi-layered risk-based approach is the most effective response to cargo security and this is our offer to make unilateral and disproportionate measures, such as mandatory container scanning, irrelevant and unnecessary.

We are ready to work together with the United States, our most important trading partner and Ally in the fight against terrorism, to guarantee the security of our citizens, a safe environment and the competitiveness of our economies.

TRADE FACILITATION AND SECURITY PARTNERSHIP PROGRAMS-THE PRIORITIES By Roger Urbanski, Managing Director, Pinkerton Consulting & Investigations, Inc.

Paperless trade and “single windows” for the submission of data will raise all the boats in the turbulent sea of trans-national commerce if only government and business can see beyond their self interests toward their mutual, significant rewards. The achievement of mutual recognition of comparable customs simplification, facilitation and supply-chain security measures, paperless traders and fewer (or even single) windows to and through which trade data must be supplied is now a realistic goal that cannot be denied.

At a summit meeting in Washington, DC in April of 2007, the Presidents of the European Council and the European Commission and the President of the United States agreed on a“Framework for Advancing Trans Atlantic Economic Integration between the European Union and the United States”.

This effort is designed to significantly enhance transatlantic economic integration by defining the many areas in which the trade facilitation and security measures of the World’s largest trading blocks (the US and EU) are largely similar. The fact that the negotiators are all but agreed on the priority that must be assigned to these efforts is all but lost among the details, but represents a milestone along the route to future trade simplification possibilities impossible to achieve without the catalytic affect of demands for greater trade and supply-chain security post 9/11 and other terrorist acts in the EU and around the globe.

The limited, tangible benefit that the private sector has seen to-date from their commitments to and involvement in the US/Customs-Trade Partnership Against Terrorism (C-TPAT) will be pocket change

when viewed against the promised larger dimensions of the EU’s/Authorized Economic Operator (AEO) program and others that promote compliance and demand transparency and predictability everywhere. Implementation of the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade (the Framework, or SAFE) and the Revised Kyoto Convention (RKC) on the simplification and harmonization of Customs procedures also call for significant, private-sector involvement and broad based training and implem entation to facilitate and secure global trade.The concurrent World Trade Organization (WTO) negotiation of trade facilitation measures, which will likely include many RKC standards, has strong, multi-lateral support. All are consistent with the efforts of the United Nations Centre for Trade Facilitation and Business (UN CEFACT) to establish simple, efficient andeffective processes for global business. The rewards for these efforts will soon accrue to developed and developing countries, international traders, ports and cargo transporters, small and medium sized enterprises (SMEs) and others who will prosper inevitably and inextricably from the economic stability and growth that are realized through the simplification, harmonization and security of trade.

The people and economies of the World benefit further from improvements in the integrity and security of the global supply-chain and cargoes that could contain contraband between all countries.

On July 1, 2008, the EU will demand the electronic submission of pre-arrival and pre-export shipments. The US already insists on receiving information 24 hours prior to the lading of ocean vessels bound for that country and a Trade Data Exchange is well within our technical capabilities and required for the exponential growth in trade that is to continue throughout the century.

The WCO Framework includes as fundamental, the concept of AEOs and it is likely to become the global standard of compliance, safety and security. The Framework defines core international standards to be followed by all parties, and establish the baseline for national programs (while allowing for the inclusion of supplemental national criteria).

The WTO may only conclude an agreement as part of the current DOHA round of negotiations on expediting the movement, release and clearance of goods, including goods in transit. There is also agreement at enhancing technical assistance and support for capacity building in this area, and at developin “provisions for effective cooperation between customs or any other appropriate authorities on trade facilitation and customs compliance issues” . T he broad aim of the RKC is to provide international commerce with the predictability and efficiency that modern trade requires. The RKC promotes trade facilitation and effective controls through legal provisions that detail the

application of simple yet efficient procedures. The RKC also contains new and obligatory rules for its application which all Contracting Parties must accep t.

The RKC requires model customs procedures and standards within a single vision for: - Predictability (standard principles for customs processing of goods, conveyances and persons moving across borders - clearance procedures) - Transparency (providing all information relating to customs and opening customs procedures to scrutiny) - Legal process (that prevent arbitrary or unfair actions by customs – establish necessary appeals procedures and regulate the handling of offences) - Use of Information Technology - Modern techniques (risk management, pre-arrival information, post-clearance audit etc.)

• Just In Time goods are being manufactured and shipped with shorter lead times, allowing less time for advance notifications and inspections; delays have an immediate and costly impact on dependent production/consumers.

UN/CEFACT, a United Nations body, encourages close collaboration between governments and private business to secure the interoperability for the exchange of information between the public and private sector. In effect, UNCEFACT is concerned with standardized communication between businesses, whereas a WCO data model provides business to customs communication guidelines. The key tool for business to business communication is UNeDOCs, which is the foundation for the EU's Single Administrative Document (SAD).

International trading and supply c h a i n s a r e now at greater risk due to a n u m b e r o f f actors:

• Globalization –supply chains are longer and more complex, with increased reliance on goods sourced from lower cost economies.

• An increase in complexity has run parallel to increased reliance on longer and potentially more fragile supply chains, even for essential (to assembly, production and consumer demand) commodities. • Increased Volumes – increased imports/exports make it impossible to inspect all goods movements without some risk analysis.

• Conversely, more facilitative, transparent and predictable procedures should produce more rapid transport, shorter customs clearance times and less paperwork intensive import and export regulatory procedures and a more stable global economy In the US, supply-chain security was first addressed by means of the “24 hour” rule which established standards for the submission of more thorough and timely data for containerized cargoes destined for the US from international ports (and in order to subject that data to risk analysis in advance of the lading of cargoes destined for US Ports). More thorough and timely trade data remain the critical elements in all subsequent trade facilitation, compliance and security efforts.In contrast to the EU’s AEO program, however, the US Customs-Trade Partnership Against Terrorism (C-TPAT) is wholly focused on voluntary industry participation in an effort to better secure commercial supply chains.

The AEO program mandates trade compliance as a prerequisite for participation in trade security and facilitation benefits. This EU stance underlines the added importance of swift private sector participation, and the creation of comprehensive and affordable solutions that are scalable.

Significant demand and current, momentum exists for continual improvements in the efficiency and security of global trade. The confluence of efforts at the WTO, the WCO, UN/CEFACT and the recent ratification of the RKC, are not coincidence. Further progress can best be achieved by means of an intensified partnership between governments and the private sector that establishes the comparability between and among like programs for the benefit of all.

IMPACT OF PAPERLESS TRADE ON MARINE INSURANCE INDUSTRY

By Donald Harrell, Director of Operations Starr Marine Agency, Inc

The opportunity cost to all parties involved in the facilitation of a trade transaction is significant. When considering just the process of issuing a Cargo Insurance certificate, the average cost associated to issue one certificate by a SME would be US$75. Paperless trade could reduce the cost to below US$10 for the validation of insurance and eliminate the requirement for the importer or exporter to obtain a paper certificate.

While the Marine Insurance industry is clearly behind other service providers, like banks and freight forwarders, many insurance companies are striving to automate the process of issuing the insurance certificate into the trade supply chain. Due to the cost associated in upgrading legacy and disparate systems, Donald Harrell, Director of Operations the insurance industry will continue to struggle to pro Starr Marine Agency, Inc vide integrated solutions unless it becomes a necessity to be competitive in a paperless trade environment. Cargo Insurance systems are long overdue for a technological overhaul. Current internal systems are incapable of delivering the process improvements so desperately needed to control soaring operational costs. Process adjustments intended to ease administrative pressures have, more often than not, placed cargo insurance companies in a more precarious position than they were before. Besides the assured, transactions may involve freight forwarders, banks, overseas agents, consignees, a surveyor, a claims settling agent and several other parties. It is staggering, therefore, that the majority of the industry still operates on internal system incapable of executing platform-to-platform communications, much less branch to branch or external communications.

As a result, insurance companies absorb heavy communications costs, tedious administrative burdens and long processing delays. The negative effect is three pronged. First, the inefficient process stifles real cash flow at the insurance company. Second, the lack of accessible and accurate historical data limits the insurer's ability to rate shipments based on underlying risk and provide real time analysis of accumulation of risks of multiple insurers. Finally, tedious administrative delays and the inaccessibility of critical information serve to alienate clients who crave a simpler, more transparent experience.

As the EU and US move towards establishing standards and protocols for paperless trade, all service providers will need to embrace these new regulations and standards. Furthermore, the insurance industry will need to immediately adopt these standards and work with other trade related service providers, customs organizations, freight forwarders, banks, trade associations, etc. in order to provide a seamless integration in the transactional trade process. The consolidation of shipping data through the logistic supply chain would allow the Marine Insurance industry to measure and monitor real-time risk by client as well as risk of accumulation for entire portfolio of clients. Standardization of data and electronic facilitation of data would improve the accuracy and timeliness of the data.

Ultimately, Insurance Companies, financial institutions, customs and governments would be able to more accurately analyze and predict what the impact of natural disaster or terrorist attack would be to ensure that there are appropriate reserves, reinsurance protection, and government funding, etc. to respond to a tragic event.

The opportunities for the Marine Insurance industry are directly related to those companies willing to invest in technology and participate in improving global data standards. The Marine Insurance industry would greatly benefit from secured paperless trade by improving client satisfaction, real-time measurement of risk and overall reduction of operational costs.

Ireland

Protecting & Increasing Economic Competitiveness

I R E L AN D ’ S B E S T P R A C T I C E M O D E L SLOW LANE

FAST LANE

Failure to comply with US, EU, WCO Legislation & Standards

Comply with legislation and provide secure UN/CEFACT electronic trade capability and increase competitiveness

• Not trusted

• Cut Red Tape • Attract FDI • Grow Exports • Protect SMEs

• Not Competitive

UN/CEFACT STANDARDS B2B

B2G STANDARDS UN/CEFACT

Capacity Building

Education & Awareness

Buy

Public

Public Sec tor

Suply

Government Departments Central & Local Government Agencies

Ship

Private

Chain

Pay

P r ivat e S ec t or -Tr ad e & Tr ansp o r t

7,000 Large Companies 226,000 SMEs 3,000 Exporters 12,000 Importers 4,000 Freight Companies

UMBRELLA ORGANISATION Trade Facilitation Ireland

Conor O’Riordan, founder of tradefacilitate, will be addressing the

Washington Conference on Secure Trade on October 31st. CEO Financial talked to him about the solution tradefacilitate has designed that meets

the twin challenges of trade facilitation and supply chain security for SMEs. Conor O’Riordan has spent most of his life as an SME involved in international trade. He knows better than most about the challenges, obstacles, but more importantly, the opportunities provided by the changing trading environment brought on by increased security measures and regulatory requirements internationally. “Originally we had devised software application designed to improve the information flow between importers and retailers. But following the events of 9/11 the United States government launched a range of initiatives, including onerous regulatory and security requirements, designed to secure its borders. With the US taking the lead, the EU and the rest of the world followed suit rapidly”. The results of these requirements, according to Conor , is that companies are strangled by red tape, bureaucracy and regulations relating to every aspect of the supply chain from customs to insurance.

“There are mountains of paperwork involved if you want to import and export and for companies engaged in international trade, that cost time and money” says Mr. O’Riordan. “multinationals have the resources to deal with the paperwork, but for small and medium enterprises upwards the challenges are more onerous”.

O’Riordan’s observations in this regard are supported by Eurochambres and US Chamber of Commerce research on SMEs trading transatlantic.

Conor O’Riordan,, Founder of TradeFacilitate

The joint report of Eurochambres and US Chambers of Commerce (Obstacles to Transatlantic Trade and Investment) highlighted the difficulty SMEs face in finding: 1) The right information on Customs procedures.

2) Information about standards and technical procedures 3) Local partners

4) Overall trading information

He cites Forbes.com on this subject.

Forbes forecasted in 2005 that the major losers globally in the changes in international trade will be the small and medium-sized enterprises and developing countries that cannot meet the cost of these new legislative requirements.

Conor O’Riordan doesn’t like to dwell too long on the obstacles to trade, concentrating rather on the opportunities that have emerged: “Put simply, our company, TradeFacilitate, spotted an opportunity to address the paper problem once and for all. We went back to the drawing board and designed a software product, an online web-based package that eliminates a lot of the paperwork and makes trade more efficient for SMEs. The benefits for business are considerable, in terms of reduced costs, increased competitiveness, significantly less red tape and logically, as he points out, increased profits. It’s a “no-brainer” according to O’Riordan, and you can’t help but be excited by both his enthusiasm and the simplicity of the product from a user’s perspective.”

There are also other added-value systems which drive down the cost of business, such as online-quotations for Transport, Insurance and Letters of Credit.

“Without a low cost solution like that offered by tradefacilitate the reality is that only the biggest players in trade as Forbes forecasted would be able to survive the expense of the changes”.

tradefacilitate’s online platform is a secure web service based on SAAS that embodies the new security requirements while cutting red tape and increasing competitiveness for SMEs upwards.

At the heart of tradefacilitate’s software is an e-invoice that tracks all the trade actors along the supply chain, so that accurate information can be made available to all parties at all times. Additionally, the e-invoice can track, trace and match documents to source, thus enabling business to comply with mandatory security legislation. The focus of tradefacilitate is on ensuring that SMEs, which provide the economic backbone to the EU and North American Economies, can engage, compete and comply with new international trade requirements and to UN/CEFACT standards. The Application manages collaboration electronically between Trading Partners, Freight Forwarders, Carriers, Customs and other organisations such as Chambers of Commerce. It facilitates trade transactions by providing a workflow-based system where the transaction is initiated by the Commercial Invoice from the Exporter's Accounts System. Each subsequent document including Trade, Transport, and Customs uses UN/CEFACT core documents avoiding duplication and providing accurate and traceable information.

tradefacilitate

IC Realtime is a client of TradeFacilitate which ships its products across the Atlantic from its base in Florida.

ICRealtime designs security systems that not only help organisations to enhance the effectiveness of their security operations, but also imporove their overall business performance.

Detecting and identifying security threats in realtime is one of the most critical challenges facing organisations today. ICRealtime has created video and biometrics solutions that identify threats as they occur and automatically alert management of potential breaches.

Eme Trad trad soft netw key

Acc “The opp Hub this Euro

Based in Ireland, Sphere One is an SME client which is set to use the TradeFacilitate platform for its international shipping arrangements. Founder Lucy Downes is an accomplished entrepreneur in the world of fashion and has lead Sphere One to great success through its prodcution of high-end fashion products.

Sphere One’s international success and particular interests in New York City make it an ideal candidate to utilise the TradeFacilitateTransatlantic platform.

erald Freight Express is a partner in deFacilitate’s mission to facilitate transatlatic de. Providing consultative advice regarding tware development and liasing with its global work of international partners, Emerald plays a role in the initiative.

cording to Managing Director Owen O’Brien, e TradeFacilitate platform is a unique portunity to develop Ireland as an International b for e-commerce for the entire EU region and s will make Ireland “best in class” within the opean Union.”

TradeFacil i t at e – The Interna t i o n al D i m e n s i o n

So how did Conor O’Riordan take it from a solutionbased concept and bring it to the international table?

Conor O’Riordan started the process in his home country, Ireland - one of the world’s most open economies with a large SME business community and significant FDI particularly from the USA. Recognising as he did, that where trade is facilitated you continue to attract FDI, grow exports, cut red tape and as a local economy introduce efficiencies of up to 1% of total trade volume (one billion euro per annum in Ireland’s case), he and others formed Trade Facilitation Ireland.

This group was drawn from both the public and private sector and includes all the major stakeholders on the island, including Customs. Its aim was to generate the necessary torque needed so that Ireland can avail of the opportunities and avoid the risks that are posed by the ongoing changes in international trade.

In order to facilitate trade and to deal with emerging international regulatory requirements such as C-TPAT and AEO in accordance with the needs of Ireland’s private sector, he identified the importance of and was instrumental in bringing together key stakeholders from trade, government and business in Ireland to form an association whose key goals embraced the adoption of a best-practice model to include: •

• • • •

The adoption of UN/CEFACT standards

The promotion of best international trad ing practices

The development and promotion of in terna tional standards for trade docu mentation

Working towards the removal of interna tional trade barriers

Facilitation of the establishment of a “Single Window”, whereby trade-related information need only be submitted once to fulfil all import, export and transit-related documentation

“Significantly, we saw measures such as the US secure trade programme, C-TPAT and the EU equivalent, AEO as striking the balance between the need for security measures and trade facilitation. Marry these measures to a paper-free process and a clear mandate from Brussels that the private sector has to lead and suddenly there was a huge synergy of opportunities to enable business, and SMEs in Ireland and this lies at the root of tradefacilitate”

From an Irish best-practice model the platform was then introduced with EU ETEN funding to dem onstrate to SMEs in 5 other European countries how to trade more efficiently, faster, quicker and cheaper. This project will validate the Europe-wide availability of an electronic paperless trade service for SMEs in Europe connecting to global systems throughout the world. “The EU ETEN programme has evaluated our online solution as meeting with their policies and as being a viable low cost solution”says O’Riordan. In fact the EU summary of the pilot advises that "The proposed service is an excellent idea and will provide a low cost solution for SMEs and clearly addresses a contribution to EC policies and embraces UN/CEFACT standards as defined by the commission"

The Tran satlantic Initiative

At the April 30, 2007 US-EU Summit meeting, President Bush, German Chancellor Merkel and EU President Barroso signed a framework for advancing transatlantic economic integration between the European Union and the United States. In order to encourage concrete actions and a specific work program under the framework, the Leaders identified a list of five “Lighthouse Priority Projects”, one of which is Secure Trade. tradefacilitate had established a US base in Washington DC and had engaged US participants engaged in export to embrace participating in an extended EU project of Irish origin to embrace USA exporters. Called tradefacilitate.com – it was agreed it should demonstrate developed common and accepted standards to maximise transatlantic trade for SMEs and remove the acknowledged barriers to trade. tradefacilitate.com will work to the spirit of the lighthouse project and is set to be used by over a

thousand SME users that will dem onstrate security, safety and facilitation of international trade supply chains. Conor continues: “Following this EU North American transatlantic initiative we have invited Australia and South American country participants into the tradefacilitate.com initiative, and we are confident they will join.”

The Challenges for the Future

TradeFacilitate holds strong views on where the process needs to go now. “Security measures adopted in response to the threat of terrorism by both the US Government could have served as serious impediments to trade. Ironically, and in large part due to the response of the private sector, responding as we have to the request to lead by the EU, these measures offer a unique and complementary opportunity to business on both sides of the Atlantic and beyond. I am certain that underlying the security measures is the requirement for a simple and paperless environment for customs and trade”

O’Riordan concludes with some objectives for the Washington Conference on Secure Trade: “It is said that big business thinks in quarters; government in terms of years and the United Nations in terms of decades but that SMEs think in hours. For business especially SMEs, the challenges arising from security measures are immediate and seemingly burdensome. These concerns ought to be fully and comprehensively addressed before the very obvious benefits of such measures can be played out. In particular, small and medium enterprises cannot afford to be isolated by the perception of overwhelming bureaucratic requirements.”

“Awareness and education of the requirements and their upsides are crucial for SMEs. Globally we see the same problem for SMEs and it is inextricably tied into political will. Where there is no political will there is no mom entum and no urgency.”

“Ireland however, has shown a best practice model which has been successful in securing political will and that process creates responses to the requirements of secure trade and the urgent imperative of trade facilitation, like our service. A shared goal of Trade Facilitation Ireland is to provides business with a unique opportunity to cut costs, cut red tape, increase competitiveness and increase profits and ensuring to continue to attract FDI.”.

For Conor O’Riordan, CEO of tradefacilitate the task facing private sector and governments on Secure Competitive TransAtlantic Trade, in terms of small businesses upwards is simple. The private sector has to lead with low cost access solutions and governments must lead with resources for awareness and capacity building for SME competitiveness. These combined factors will provide the backbone of transatlantic trade with the ability to be both compe titive and secure.

IRELAND’S

BEST PRACTICE MODEL IN INTERNATIONAL TRADE FACILITATION

“World-class infrastructure, skills T he C o n t e x t and connectivity mean Ireland can go Like all EU states, and like all international open beyond mere implementation of new economies, Ireland is affected by the regulatory trade facilitation systems and changes that have taken place in international trade. technology; Ireland can become their The US Security Programme C-TPAT, which champion on the international stage” fast-tracks shipments from certified traders through - Cathal Fitzgerald, Senior Policy Analyst, FORFÁS -

(Ireland’s´s National Policy and Advisory Board for Enterprise, Trade, Science, Technology and Innovation)

Ireland Eco n o m y

Ireland’s economy is one of the most competitive in the world. •

4th most competitive economy in the EU

•

11th most competitive economy in the World

•

Total exports approximately equal to both Brazil and Australia

•

• • •

Exports over 7 times that of the USA per capita

Irish export growth is twice that of the EU average

Export growth accounts for half of Ireland's economic growth

Top 5 OECD country regarding export growth

In order to maintain this competitiveness in international trade while complying with new security regulations, Ireland’s public and private sectors are committed to trade facilitation and UNCEFACT.

customs, led to the World Customs Organisation’s Authorised Economic Operator – AEO. The EU has adopted AEO as a means to facilitate secure trade. The EU’s new Modernised Customs Code, which necessitates a transition from paper to paperless trade, is underpinned by the AEO programme and also includes deadlines for Pre-Arrival, Pre-Departure and Single Window.

I r e l a n d ’s R e s p o n s e

According to Chambers Ireland, Ireland’s economy can save up to €1 Billion in previously sunken administration costs.

Responding to this, an initiative developed between the Public and Private Sectors to increase Ireland’s competitiveness through Trade Facilitation built on

UN/CEFACT international standards.

Commenting on the opportunities presented to Ireland arising out of the new regulations, Minister for Enterprise, Trade & Employment, Micheál Martin TD, outlined how they: “…..move(s) us closer to the day when firms will be able to conduct ‘paperless trade’ within the Union. As a government we are determined to reduce the burden of red tape for Irish firms at both national and EU level”

His colleague, Minister of State for the Information Society, Tom Kitt TD, stated at the UNCEFACT Conference in Dublin this year that: “Trade Facilitation reduces the red tape and barriers for many companies, particularly SMEs, trading internationally. Ireland strongly supports these initiatives…………the work of UNCEFACT is of vital importance towards facilitating international trade.” Following the EU’s instruction that the private sector should lead with solutions, Trade Facilitation Ireland was formed, representing a number of partners including the Irish Exporter’s Association, Chambers of Commerce, Local Government and Business.

Irelan d and t h e EU

An Irish Company is currently leading an EU project which is focused on validating the Europe-wide viability of an electronic supply chain – The project is named “ClearView” and is part of the EU’s eTEN programme.

“The ClearView project will validate the Europe-wide viability of an electronic supply chain management system (a “single window”) for SMEs. Single Window is primarily the preserve of large corporations and state bodies, due to high set-up costs. ClearView makes Single Window opportunities available to SMEs using the Application Service Provider (ASP) model.” EU Commission

Ireland and the USA

Ireland and the United States are running a transatlantic initiative - tradefacilitate.com, which will demonstrate developed common and accepted standards to maximise security, safety and facilitation of international trade supply chains. This is in accordance with Lighthouse Priority Project 2B from the recently agreed: “Framework for Advancing Transatlantic Economic Integration between the EU and the USA” - signed by Bush, Merkel and Barossa tradefacilitate.com is an 18 month transatlantic project built on an agreed United Nations technology framework which connects traders in the EU and the US.

Ireland’s Minister for Trade, John McGuinness TD, comments in this edition of CEO Financial that: We in the Department of Enterprise, Trade & Employment support the creation of a paperless environment and see that this can deliver huge benefits to the SME sector in terms of cutting red tape and reducing bureaucracy. As a Minister with a business background, I can also appreciate the cost savings that can be delivered to SMEs with the reduced administration costs that the paperless environment will bring.”

The Minister has identified the way ahead for Irish Business in the context of trading within a new security context:

Fu rther De v e l o p m e n t s

Forfás, Ireland´s National Policy and Advisory Board for Enterprise, Trade, Science, Technology and Innovation, in an article appearing in this edition of CEO Financial, are clear that fundamental to the security measures is the “desire for a simple and paperless environment for customs and trade, which promotes, among other things, integrated electronic record-keeping systems and electronic access to the documentation across States”. Forfás sees that necessary security measures and the “Single Window process overlap to a great extent”. Forfás points out in this edition of CEO Financial, that while security concerns may have been an initial impetus for the AEO programme, the potentially onerous adoption for SMEs can be considered in the context of potential trade gains. These include : v v v v v v v

Fewer physical and document-based controls Priority treatment of consignments Diversion to point of shortest delay or less costs

Easier admittance to customs simplifications Reduced data set for summary declarations Prior notification of physical controls Many indirect benefits including improved planning, improved customer loyalty, and re duced theft and losses.

“We need to engage and inform the SME sector in Ireland about the issues they currently face in international trade and provide them with assistance in dealing with these issues and maintaining competitiveness internationally. For this, we have a network of 35 County Enterprise Boards which work very well with business, as well as the Department’s flagship institutions, Forfas, Enterprise Ireland and the IDA. I am now going to take a leadership role in bringing these issues to the forefront within the department as they are crucial. We have here an opportunity to show the US, the EU and all other trading nations, that Ireland is up to this game. We as a nation have embraced IT and assumed a leadership role in this field.”

He also further identifies some of the next steps that are necessary to carry the benefits forward: “Addressing these issues will not be without its pain. SMEs will have to be made aware of benefits that will accrue to them by changing their current business processes. We will have to provide a level of comfort and confidence among them and build on that. I am currently examining how (my) Department can do that. The Department of Enterprise, Trade & Employment will take a lead role in this by providing guidance.”

MINISTER JOHN MCGUINNESS MINISTER OF STATE FOR TRADE & COMMERCE IN THE

DEPARTMENT OF ENTERPRISE, TRADE & EMPLOYMENT.

Irelamd’s Minister for Trade, John McGuinness TD comes from a business background and as such, has a unique grasp of the importance of AEO and paper-free trade and the benefits that the adoption of same can deliver to small business. CEO Financial spoke to him about how Ireland should best balance the pertinent issues of security compliance and the need to increase competitiveness. “My mindset is the mindset of business. I have a specific understanding of what AEO means because I used to be a doc clerk, bringing the paperwork down to the Dublin Docks for inspection. Things have moved on a lot since then, but from that experience, I can certainly appreciate the necessity for the move towards paper-free trade .

We in the Department of Enterprise, Trade & Employment support the creation of a paperless environment and see that this can deliver huge benefits to the SME sector in terms of cutting red tape and reducing bureaucracy. As a Minister with a business background, I can also appreciate the cost savings that can be delivered to SMEs with the reduced administration costs that the paperless environment will bring.”

Minister John McGuinness

“Addressing these issues will not be without its pain. SMEs will have to be made aware of benefits that will accrue to them by changing their current business processes. We will have to provide a level of comfort and confidence among them and build on that. I am currently examining how the Department can do that. The Department of Enterprise, Trade & Employment will take a lead role in this by providing guidance.”

“As a country, competitiveness is now a major issue. We have to look at our costs. We can take advantage of AEO and the shift to paper-free trade and use this as an opportunity to cut our costs. Given the success of the County Enterprise Boards’ scheme “Tech Check”, we know that this is within our reach. We know that small business is aware of the gains that technology can bring and is readily adaptable to change in this regard. I think you will see a very positive response to AEO in

Ireland. They’ll need convincing, but once the SME sector can see that there is support for it in the Government and that there are concrete benefits to be derived from it – I think that the uptake will be high.” “It is time now for the SMEs to stand back and think about what they are doing at this juncture. I know myself from working in a small business, sometimes it is hard to tell the wood from the trees – but in this instance, it will be worth it.”

“Forfas’ proposition that in the long term, Ireland could be a hub for e-clearing houses is a valid one. We should explore this initiative and engage Forfas to assess how this could be achieved. First of all however, we need to build confidence so that the SME sector embraces these changes and moves forward as quickly as possible in order to take ownership of the whole process, so that Ireland can be at the forefront of the development of the new E-economy, and create new jobs as a result”.

TOWARDS IRELAND'S SINGLE WINDOW - BECOMING AN INTERNATIONAL TRADE FACILITATION HUB World-class infrastructure, skills and connectivity mean Ireland can go beyond mere implementation of new trade facilitation systems and technology; Ireland can become their champion on the international stage. In the last edition of CEO Financial we saw the potential benefits of developing a Single Window for Ireland. With further work, innovation and co-operation this process can be built upon to make Ireland a globally recognised trade facilitation centre. While Ireland’s public and private sector continue to work on adopting Cathal FitzGerald Senior Policy Analyst Forfás the Authorised Economic Operator (AEO) programme and an optimum For Ireland, this means the priorities need to be, in the short-term, full adoption of the AEO Single Window model, Ireland is programme, in the medium-term employing a well-placed to be at the forefront of Single Window, and in the longer-term global trade facilitation. becoming an international centre for trade The benefits for both government and business of reducing administrative burden on trading firms - SMEs in particular – have been well articulated. Unsurprisingly the Irish economy, given its openness to international trade and investment, stands to benefit substantially if competitive pressures can be met with lower administrative burden, trade costs and risks. The latest1 research demonstrates that lower trade friction and, somewhat surprisingly, greater import penetration can have a positive effect on domestic productivity growth. We are conscious of continuous international pressure on our competitiveness, so any and all steps taken to facilitate trade and boost productivity will help Ireland’s wider economic development.

While security concerns may have been an initial impetus for the AEO programme, the potentially onerous adoption for SMEs can be considered in the context of potential trade gains. These include : v v v v v v

Fewer physical and document-based controls 2 Priority treatment of consignments Diversion to point of shortest delay or less costs

Easier admittance to customs simplifications Reduced data set for summary declarations Prior notification of physical controls

Import penetration, intermediate inputs and productivity: evidence from Italian firms: Altomonte, Barattieri and Rungi, September 2007; Productivity and Firm Selection: Intra- vs. International Trade: Colcos, Del Gatto, Mion and Ottaviano, June 2007. 2 Authorised Economic Operators: Guidelines, DG- TAXUD, European Commission, June 2007. 1

facilitation.

Many indirect benefits including improved planning, improved customer loyalty, and re duced theft and losses.

Fundamental to the AEO process is the desire for a simple and paperless environment for customs and trade, which promotes, among other things, integrated electronic record-keeping systems and electronic access to the documentation across States. In this regard, the AEO programme and the Single Window process overlap to a great extent.

Trade Facilitation Ireland’s vision for the Irish Single Window is that companies will only have to submit export or import information once electronically, and that this information can then be used by a range of public and private sector bodies. Indeed, the significant savings expected from the Single Window are linked to use of electronic over paper-based systems together with greater potential for security and control of goods movements between and through States.

The dialogue with Irish Customs currently underway on the development of the Irish Single Window reflects the fact that in every country where the concept has been successfully adopted, the relevant customs authorities have been central actors. As this dialogue leads to action, longer-term opportunities must remain in focus: there are natural synergies and opportunities to be explored and exploited simultaneous to the development of the AEO and Single Windows in Ireland that can help position us to the fore of world trade facilitation activity.

The work of United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) on electronic data exchange - which is so related to AEO and Single Window activity – identifies these synergies. A Single Window system and wider cross-border document exchange capability can be built upon process and document simplification, and data harmonisation. As far back as twenty years ago, countries recognised that technology could allow coordination of trade processing and replace manual processing of trade documentation. As it makes progress on electronic over paper-based trade tracking and processing systems, and the Single Window, Ireland’s

European and international expertise in data hosting and processing services should not be far from our minds.

The UN has recognised that the design of Single Window systems must be aligned with the real information and communication technology (ICT) capacities of the country or region in which it will operate . Ireland is fortunate in this regard. Ireland boasts excellent information hosting infrastructure and is expanding and maintaining high quality broadband infrastructure on a national basis via Metropolitan Area Networks established in 2003. In addition to having the ICT capability to support facilitation for domestic traders, Ireland has the capacity and expertise to support international trade facilitation. Ireland’s resilient, diverse and competitive international broadband connectivity is well recognised and is being utilised by major international players across leading edge business sectors, among them Hewlett Packard, Cable & Wireless, Hertz and Citigroup. Significant e-business leaders such as Amazon, Google and eBay have major operations in Ireland. According to UN/CEFACT, the implementation of a Single Window entails the harmonisation and alignment of the relevant trade documents and data sets. Whenever electronic data interchange is involved, the harmonisation, simplification and standardisation of all data used in international trade are an essential requirement for smooth automatic operation of the Single Window. Exploiting data harmonisation, simplification and standardisation activity is nothing new to Ireland.

The synergies and opportunities for Ireland to establish itself as an international centre for trade facilitation emerge from our success in establishing ourselves as one of the principal international centres for electronic data interchange and becoming a world-leader in shared service provision. This has allowed global players to centralise processing functions and manage supply chains from the one location – Ireland - enabling them to reduce costs, increase efficiency and synergise operations. Reducing costs, increasing efficiency and synergising operations is what trade facilitation is all about, and Ireland is bringing its rich experience to bear on this exciting challenge.

Recommendation and Guidelines on establishing a Single Window, United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), 2005 3

IRISH CUSTOMS THE AEO PROGRAMME THE IRISH PERSPECTIVE In the aftermath of the events of 9/11 in the US and other incidents elsewhere, there are heightened concerns that the global trading system in goods could be vulnerable to terrorist exploitation. Governments worldwide have recognised that customs administrations are in a unique position at national borders to provide increased security to the global supply chain.

Josephine Feehily, Revenue Commissioner & Director General of Irish Customs

Ireland is very well placed to address the challenges posed by this new environment following the successful launch of our enhanced electronic Clearance and Risk Analysis System 1st June 2007. Our next significant project is the implementation of the Authorised Economic Operator (AEO) Programme.

This is a single, but important, part of a worldwide movement that aims to increase security of the global supply chain without creating a barrier to trade and the free movement of goods. The Irish customs administration sees this and the related projects that form the EU electronic customs initiative as an opportunity to demonstrate our long-standing commitment to being to the forefront of change.

As readers will be aware, the status of AEO is open to all operators involved in activities covered by customs legislation, and who meet the required standards in relation to their general compliance record, control system, financial solvency and security and safety systems.Holders of an AEO certificate will be recognised as secure and safe business partners and will be accorded various trade facilitation benefits as a result.

Ireland has an open economy that is dependent on international trade to a much greater extent than many other countries. Working in partnership with the trade,

we must ensure that the free movement of goods is not compromised and that there is minimum intervention consistent with the necessary customs controls. The concept of AEO dovetails well with this approach and with Revenue’s overall strategy of offering a Cooperative Compliance model to large businesses. In Irish Customs, we are already adopting a partnership approach with the trade. The AEO Programme is a new initiative and, from experience, we are aware of the need for traders to receive comprehensive information and guidance as part of its roll out. In addition, we are particularly conscious of the importance of the SME sector of our economy and the need to ensure that AEO requirements for this group are not unduly burdensome yet still ensure that sufficient controls exist to provide the necessary supply chain security.

One of our main objectives will be to emphasise the need for advance preparation. We have already designed a selfassessment questionnaire and this document, together with the accompanying explanatory notes, will help to ensure that traders can be confident that their business will meet the relevant qualifying conditions and criteria in advance of any formal application. Our advice to applicants will be “Do not submit an application for AEO status until you have

completed the questionnaire in full and are confident that your business can meet the required standards”.

Following that process, we expect that businesses will be making choices, taking account, for example, of their own business model, customer base etc., as to whether the AEO programme is important for them at this time. As a first step, we have put in place a comprehensive in-house training programme to ensure that the necessary trained staff are in place throughout all regions of the country. This will allow for AEO evaluations to commence immediately following receipt of the first applications. The current training schedule is already nearing completion and we expect be inviting applications from October 2007. It is also our intention to maximise use of our Website at www.revenue.ie, and we will publish all relevant material for traders in advance of the launch of the AEO Programme in Ireland.

In Irish Customs, we appreciate the role of the Trade. We have long experience, through formal consultation mechanisms such as our Customs Consultative Committee, of working with Irish traders and this has served us well in the past. As we move forward, in a more security conscious environment, we expect that the same level of two-way co-operation will continue to our mutual benefit.

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CHAMBERS IRELAND ON AEO By Mary Mooney, Chambers Ireland

The recent success of Ireland’s economy has been founded on an open trading system which has been widely recognised as the most globalised in the world. However, threats to security in the recent past have heightened the need for tight security measures as well as enhanced traceability on import and export documentation. In response to this new environment, new EU rules will take effect from next January and these are aimed at forcing companies involved in importing and exporting to obtain additional clearance from the Revenue Commissioners. These rules will apply to all companies included in international trade. They will require them to provide evidence that they have taken steps to ensure compliance with EU customs laws, as well as ensuring safe and secure supply of products to their clients. It is therefore crucial that Irish businesses involved in international trade apply for Authorised Economic Operator (AEO) status to avoid complications in carrying out their international trade operations from next year, as failure to do so will prove heavily burdensome and will also directly impinge on a company’s competitiveness.

The new rules, which were drawn up as part of the European Commission’s measures to enhance safety and security in the supply chain, are just months away from implementation. Businesses will therefore need to make themselves aware of their obligations under the new regime in a relatively short period of time. To facilitate this, Chambers Ireland has applied for Skillnets funding aimed at preparing businesses in Ireland for AEO issues and sensitise them to the finer details of applying for AEO status and the benefits arising from it.

Mary Mooney, Chambers Ireland

The benefits of familiarising yourself with AEO and its implications are clear – those companies which obtain AEO status will benefit from simpler dealings with customs authorities across the EU, as they would be deemed to be of lower risk and would be likely to get faster customs clearance. This will decrease the delay in getting your goods to market, decrease the cost and amount of litigation involved and simultaneously, ensure that businesses are as competitive as possible when operating internationally.

Failure to apply for and avail of AEO status could see companies battling increasing levels of red tape arising from impending changes in the importing and exporting of goods.

As members of a small, open economy that, by necessity, must export if it is to continue to grow, Irish business must deal with different bureaucratic regimes and paper-based systems as it deals with each new international market and, by extension, new customs authorities.

Chambers Ireland is fully supportive of EU plans to have a single electronic European trading window by 2012, however we fear that if these processes are not optimised by this date, then there is every prospect of a two-tier trading system building up in which some companies’ papers are speedily processed while others languish.

It is clear that a paperless, transparent system could mean significant savings for Irish importers and exporters and Chambers Ireland also maintains that if an optimised trade facilitation regime was introduced into Ireland, we could actually be looking at a saving up to a billion euro in previously sunken administration and processing costs. Becoming an AEO is clearly beneficial, but there are certain procedures that need to be implemented before a business is granted AEO status.

As part of being an AEO-approved business, companies will be expected to show an appropriate record of complying with customs requirements, a satisfactory system for managing commercial records and, in some cases, prove their financial solvency and provide evidence that they comply with the relevant security and safety standards.

While there will be no immediate legal requirements to obtain AEO status, businesses that obtain the relevant clearance will be given priority treatment at customs checks and find it easier to ship goods across third country international borders. They will also need to provide less detailed information for entry and exit purposes in individual countries.

Ireland is leading the charge by highlighting the importance of AEO status for Irish-based businesses in an increasingly global marketplace. While the benefits are clear and the training facilities available, it is crucial that businesses acknowledge the importance of AEO status and apply before the window of opportunity slams shut.

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EMERALD FREIGHT EXPRESS PARTNERS IN TRADE FACILITATE Owen O’Brien is CEO of Emerald Freight Express, the indigenous Irish Freight Forwarder, which will play a crucial role in the Transatlantic trade initiative, TradeFacilitate. O’Brien is enthusiastic about the pivotal role that Emerald Freight Express has adopted on this project, by working closely with TradeFacilitate.com and through that, with partners worldwide, in order to push this vast undertaking across the line. Emerald will bring the platform to their 1,000 clients in Transatlantic trade. “It’s inevitable that in this Post 9/11 Era the thrust of world trade should grasp this opportunity to secure Trade Facilitation with the development of an IT based Trade Facilitation Platform. Of course, it’s a huge learning curve for everyone involved, but we’re committed entirely to this mission and we consider it a privilege to be so heavily engaged”.

Having consistently grown his business since 1981, O’Brien describes the natural progression of Emerald Freight Express with their investment in technology and customised software applications.

“When we first started, there was virtually no computerisation in the Freight Forwarding / Customs Brokerage Sector. It was an antiquated process whereby shippers, Freight Forwarders, Stevedores and Customs were inundated in a mish-mash of manual paperwork. Consequently, we could always see the need and the benefits to adopt IT driven solutions to streamline and automate the process of running our business”.

Owen O’Brien, Managing Director

“In the late 80s, our business became electronic”, continues O’Brien, “we bought stock in a company trading as Cargo Community Systems, which enhanced our technological capabilities. Of course in 1989,Irish Customs introduced its AEP (Automated Entry Processing) system and this development was the catalyst which triggered an IT Revolution in the Global Freight Forwarding Industry”.

“Currently our business is 100% electronic, as we operate with our own tailor made Freight Administration System. Now, as inbound shipments depart at origins destined for Ireland we receive electronic Pre-Alerts from our overseas Agents and this advanced data enables us to transmit the Import Customs Entry to Customs, as soon as the Aircraft or Ocean Vessel arrives in Dublin. This process ensures immediate release from Irish Customs and meets to service expectations of our customer. The same process and technology is used on the Export side of our business to ensure immediate delivery at the overseas destination”, outlines O’Brien

I enquire as to the varying degrees of response Emerald Freight Express receives from Customs when Import / Export Entries are transmitted:

“Well, there are three categories of response;

Green - signals immediate electronic release paperless.

Orange – signals Customs call for inspection of the paperwork, prior to Release . Red – signals Customs call for inspection of the paperwork and the shipment”.

However, O’Brien emphasis’s that the Customs AEP System is intelligent and can be programmed to conduct surveillance on any sector in the Supply Chain to ensure that Customs retain full control at their discretion 24 hours a day, 7 days a week, 365 days a year.

It is clear that Emerald Freight Express has a wealth of experience and an intimate knowledge of the Freight Forwarding and Customs Brokerage business. As such they will make a considerable contribution to the stakeholders involved in the development and the refinement of the Trade Facilitate application, ensuring that their consultative advice is incorporated at all levels.

Their reputation, service track record and credibility makes Emerald Freight Express a trustworthy and invaluable partner. With their extensive global network of service partners and their forward thinking philosophy they are now embracing the development of the Trade Facilitate Platform to guarantee their own future success.

O’Brien reiterates his enthusiasm for and commitment to this massive venture.

“The development of Trade Facilitate.com’s application is dynamic, coupled with the forthcoming introduction of the Authorised Economic Operator (AEO) will create a secure environment

• • • •

for International Trade in the future, using technology the aim and objectives are as follows”: Electronic Data Paperless Trading & Data Entry Efficiencies.

Global Integration of Security Systems Seamless Transparency.

Authorised Economic Trader Fast Lane Customs Release.

Benefits to SME Sector Level Playing Field & Improved Competitiveness.

Owen O’Brien’s made his final comments by expressing his view that “ The Trade Facilitate Platform is a unique opportunity to develop Ireland as an International Hub for e-Commerce for the entire EU Region and this will make Ireland “best in class” within the European Union”.

Vendor Receives PO

Shipment Ready for Pick Up

Vendor Generates Export Sales Invoice

Export Customs Declaration

SECURE SUPPLY CHAIN MANAGEMENT

Shipment Delivered to Consignee

Shipment Released by Customs

Import Duties & Tax Paid

Shipment Entered to Customs

Emerald Freight Express, Santryhall Industrial Estate, Santry, E-mail: sales@emerald-freight.com www.emerald-freight.com

Vendor Issues Security Declaration

Shipment Picked Up by Forwarder

Forwarder Processes Shipment for Export

Shipment Departs by Air, Road or Ocean

GLOBAL TRADE FACILITATION

Products Tariff Classified for Customs Entry

Shipment Arrives at Destination

D u b l i n 9 , I r e l a n d . Te l : + 3 5 3 1 8 1 6 5 1 9 8 F a x : + 3 5 3 1 8 4 2 7 1 0 2 Skype: emeraldfreightexpress

The ClearView project will validate the Europe-wide viability of an electronic supply chain management system (a “single window”) for SMEs. Single Window is primarily the preserve of large corporations and state bodies, due to high set-up costs. ClearView makes Single Window opportunities available to SMEs using the Application Service Provider (ASP) model.” -EU Commission

“The eTen project will establish pilot sites in six countries and engage in localization, business and legislative validation, market analysis and business/deployment planning.” -EU Commission

“The proposed service is an excellent idea – and has significant potential for SMEs. Conventional approaches tend to be costly and often prohibitive for SMEs” -EU Commission

“This solution however, proposes a simple cost-effective approach which is most appropriate.” -EU Commission

“The project clearly addresses its contribution to EC policies” “There is a wide Trans-European dimension to this project”

“The planning of the project is methodologically sound, clear and well-presented”

ClearView is a project funded by the European Commission under the eTen programme, to roll out a pilot single window service for SMEs across Europe. Single window is a technology which offers significant business benefits to companies trading across national boundaries. Single Window services allow companies to create, manage and maintain electronic documentation dedicated to import, export, transport and logistics. The use of Single Window facilitates legal/regulatory compliance and drives major time and cost savings in cross-border trade.

-EU Commission -EU Commission -EU Commission

The single window system enables a company involved in import/export to submit documentation just once, and have it delivered automatically to the relevant government and customs agencies, both in his own country and (ideally) in the country with which he is trading. By providing a 'single window' to a significant number of agencies, the system reduces the time and effort spent on bureaucracy by the company. It also reduces the human error introduced by serial re-keying of product data, over and over again.

The core component of ClearView is a Web based User Interface that uses Service Orientated Architecture (SOA) to manage collaboration electronically between trading actors. The user can file all trade standards compliant documents (e.g. Declarations, Freight Forwarder Instructions, Bill of Lading and Manifests) through the internet. The transaction is initiated by a Commercial Invoice from the Exporter’s Accounts system. Each subsequent

The underlying software is implemented and in beta testing; it will be rolled out in the Member States and adjusted/enhanced and customised in response to feedback from the projects. The core focus of the project is on

1. finalisation and customisation of the product to meet SME requirements across multiple Member States 2. development of a compelling business plan, for bankers and venture capitalists 3. dissemination and marketing, in order to prepare the ground for deployment in the pilot Member States.

The project began in June 2007. CP3 is a leading practitioner in the single window and trade facilitation areas, and is a founding member of the national organisation, Trade Facilitation Ireland.

CP3's senior developer Edmund Gray explains the value of the project,

Single window and e-customs services are important enablers for AEO status and enhanced management and security of transport.

“According to UN/CEFACT Recommendation 33 a Single Window “refers to a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements. If information is electronic, then individual data elements should only be submitted once”.

The project involves the developer of the Single Window software, two other technology and services companies and four organisations which represent and serve SMEs across Europe (two Chambers of Commerce, a state development agency, and two SME associations).

“So essentially it’s a single point of entry (one stop shop) to all Government depts. involved in Cross-Border Trade for the lodgement of documents related to Exports/Imports. We provide Single Window facilities to our users by using the SAD submission to Custom’s. Traders or their representatives are facing in and Government is facing out. It involves public and private partnerships because Government systems have to make sure they can handle the documents coming in but conversely Trader systems have to handle the documents coming out.”

document including Trade, Transport, and Customs uses core documents avoiding duplication and providing accurate and traceable information.

Single window services are typically available only to large companies, or to companies which use specific major ports. The ClearView project offers single window services to SMEs, thus increasing their competitiveness.

“In the past multiple documents had to be provided for each shipment. Now wherever there is a Single Window only one document is required – unless the Goods have to be checked, then other supporting documents have to be provided particularly the Invoice, Licenses, Certs etc. Over 97% of goods get through without presenting supporting documents.” “The EU Commission has declared that there will be one Single Window for all of Europe by 2012. Some of this works has started already i.e. AEP 2 in Ireland. That means whether you are Exporting/Importing in Greece, Latvia, Slovenia or Ireland, you will be effectively submitting them to one Single Window. Therefore our system, which is compliant with these standards, can be used anywhere in Europe with only the need for language localisation.

Many other countries outside Europe are also working on Single Window projects. These include the USA, much of Asia (inc. China and Japan), some of Africa.”

“In most of these Countries, existing software systems providers have simply changed their products to send documents through this new interface, rather than re-engineer to take advantage of the new opportunities. Therefore their systems are not suitable for Trade transactions based on the new Commercial Invoice that was decided upon at the 10th UN/CEFACT forum in Dublin. This means they cannot easily change to suit the needs of this sector and the new security requirements. Most of their systems are a box filling exercise and rely on an expert to complete the documents. Of course Companies like SAP have systems for Customs Clearance as part of their offering but this is beyond the reach of most SMEs. On the other hand our strategy is to focus on the SMEs, provide built-in intelligence to help fill out the forms and using Open Standards, ensure that we can more easily interoperate with other systems that provide added value to our users. It is obvious to us and our friends in

UN/CEFACT that we have the correct strategy and so far we seem to be fairly unique.”

CP3 is joined by i2i, a UK leader in electronic documents, transport and logistics. I2i will contribute its unique electronic certificate of origin capability to the project, and will integrate it with the CP3 software.

Management, business planning and dissemination expertise is contributed by Pintail, a services and software company based in Dublin, with particular experience in bringing research to market, and in EU project management. The four organisations, each responsible for dissemination and piloting in its home country, are • HIBA, the Hellenic Irish Business Association • IEA, the Irish Exporters Association • Arctur, a high-technology group of SMEs in Slovenia • LCCI, the Latvian Chamber of Commerce and Industry.

The project plan is made up of six consecutive steps. 1. To establish ClearView project sites in each of the pilot countries • Slovenia • Latvia • Greece • Ireland

B UY

S HI P

These project sites will include three SMEs, plus the pilot partners, all of whom will utilise the ClearView system. The core objective is to gather feedback, suggestions and specifications for change to the system, which will inform the adjustment and localisation work.

2. To work with the pilots to localise the system, both in terms of user interface and in terms of specific documentation and legislative support, to make the product attractive to their home markets. This is an essential step towards making ClearView ready for the commercial market across the EU. 3. To get real-world feedback from the pilots about how the system meets their needs, how it needs to be adjusted or enhanced before a full commercial roll-out and whether or not it is a viable business proposition in their Member States. The ideal way to get real-world feedback which reflects the needs of genuine customers is to engage these customers in pilot operations. The pilot organisations include SMEs and SME representative organisations from four countries. 4. To publicise and disseminate the project and its outputs across the pilot countries. The dissemination will serve two main purposes

PAY

• to raise awareness of single window and the legislative drivers behind it, thus creating demand for a service such as ClearView • to gather comments, suggestions and feedback from a wide and representative audience of SMEs and SME organisations, in addition to the pilots, on what the market wants and how to meet that demand. 5. To research the market in terms of demand, competition, alternative technologies, growth potential and risks. This is ‘standard’ market research, which must be carried out by any new service. In addition, the project will engage with umbrella groups, consultative forums and government agencies and authorities – their endorsement and support can be a major force for success. The dissemination activities will be a key enabler to reaching, and gathering requirements from, a large population of potential customers. 6. To develop a business plan that will enable the partners to assess whether or not to continue the ClearView efforts towards a full commercial deployment. The plan will be ready for delivery to venture capitalists, to banks and to other potential investors and will help to convince them of the service’s potential for commercial success.

IN AUSTRALIA

The opportunity of adding an Australian dimension to the transatlantic participants was a natural fit according to Ian Watt, the Australian project manager. He added “A global standards based trading solution will benefit Australian SMEs engaged in export to EU and North America by primarily providing a secure paper-free environment that meets the EU & USA market needs whilst improving Australian SME export competitiveness and efficiency. The Austra l ia n b a c k g r o u n d

Following the announcement of the EU/US TradeFacilitate Transatlantic pilot at the UN/CEFACT 10th Forum, held in Dublin March 2007,Tradefacilitate Ltd., was invited by Australian Customs to outline the details of the pilot at the APEC Sub-committee on Customs Procedures (SCCP) Single Window Working Group (SWWG) workshop in Sydney in April 2007.

Subsequent discussions with the Australian Customs executive confirmed that agency’s willingness to consider joining the Tradefacilitate Transatlantic pilot provided there was broad based Australian industry and

Ian Watt, Trade Facilitate Australia Project Manager

government support and provided the Tradefacilitate Transatlantic pilot complemented and aligned with existing Australian Customs Authorised Economic Operator (AEO) related projects and timeframes.

Based on the positive outcome of these initial discussions (Q2/07) with Australian Customs and the Customs Brokers & Forwarders Council of Australia Inc., TradeFacilitate Ltd., appointed an Australian based independent project Management Company (Q3/07) to position for the launch of the Australian pilot Q1/2008. The MD of the Project Management Company is currently Australia’s Head of Delegation to UN/CEFACT, the UN standards setting body of the

global messaging standards for eCommerce, and chairs the UN/CEFACT working group developing the International Supply Chain Reference Model.

A national event in early July 2007 hosted by TradeFacilitate Ltd., which included disc ussions with Commonwealth Government agencies involved with international trade and a forum of invited contributors to the national capability for eCommerce adoption, concluded that Australian industry should proceed to join the Tradefacilitate Ltd., pilot program.

Immediately following the launch on 31st October 2007 of the Tradefaciliate.com Transatlantic pilot, Tradefacilitate Ltd., will form the Australian funded consortium that will position for the launch of the Australian TradeFaciliate.com project Q1/2008. This work is to occur in Australia, in this first week of November 2007 will confirm the national industry segments that are to participate in the project.

Under Ian Watt’s stewardship the Australian project is proceeding professionally and efficiently and is on target to join transatlantic participants by April 2008 with initial partner recruitment being bolstered now with a trade finance dimension from Westpac Bank.

According to Ian Watt, local public sector support and government commitment are compatible with the goals of the TradeFacilitate Transatlantic initiative.

The Australian Government has committed Aus$254.1 million over the next ten years to the Global Opportunities (GO) programme announced as part of the Government’s Industry Statement:

Global Integration – Changing Markets, New Opportunities. The GO Programme aims to increase the participation of Australian small and medium enterprises in global opportunities such as global supply chains or major international projects.

Ian Watt has defined that the core of the programme is designed to foster collaboration and co-operation between Australian firms and between groups of firms and the Government through the formation of Industry Capability Teams (ICTs). The spirit of the Tradefacilitate model sits comfortably with this programme which is focused to work with Australian firms and ensure readiness and ability to enter the global market with long term strategies for securing access to global opportunities.

Ian Watt takes significant pride in Australia’s historic ability to regionally lead in technology. He sees this innate ability continuing as Australia prepares to embrace global secure trade requirements ensuring competitiveness and efficiencies are delivered to its private sector. In a final summary with CEO Financial, Ian Watt says that “the pragmatic attitude of Australian SMEs characterized by their ‘can do attitude’ holds well for success in joining global initiatives such as TradeFacilitate.”

AUTOMATED COMMODITY CLASSIFICATION: ENABLING SECURE, COMPLIANT AND FACILITATED TRADE. During the 5th century BC, Chinese philosopher Lao-Tzu famously declared, “The journey of a thousand miles begins with a single step.” For today’s global trader, the first step always involves determining a product’s Harmonized System code. The Harmonized Commodity Description and Coding System (HS) is the lingua franca of international trade. HS codes form the basis upon which all products are described for Customs’ purposes, and ensure that commodity information can be shared and understood by a multitude of supply chain participants and government agencies.

Governments use HS codes to perform risk assessment and targeting, establish and impose duties, collect trade statistics, and enforce domestic laws. Companies use HS codes to comply with national regulations, determine the true landed cost of their finished products and components, streamline their global supply chains, and identify selling and sourcing opportunities worldwide. Despite its ubiquity however, the process of determining HS codes remains an extremely error-prone and labour-intensive activity. According to the Auditor General of Canada, HS coding errors occur on 30-50% of all Customs entries, and at 90% of all companies. The U.S. Department of Customs and Border Protection claims that classification discrepancies account for 75% of all compliance violations.

Incorrect and inefficient HS classification costs importers and governments billions of dollars annually in mispaid duties, non-compliance penalties, higher administrative costs, and shipping delays. Additionally, incomplete and/or inaccurate commodity reporting is having a profoundly negative effect on border security and trade facilitation programs.

In a 2003 examination of mandatory HS reporting, the Canada Border Services Agency admitted to having “no assurance that shipments containing goods that Customs is attempting to target will actually be identified at the border” due to concerns over the accuracy of HS reporting by importers and brokers.Such concerns have prompted the creation of stricter and more burdensome advance commercial reporting requirements under such programs as the U.S. Secure Freight Initiative (which includes “10+2”), and the EU’s Customs Security Program (which includes the AEO model).

Errors Explain ed

HS Classification errors can be explained by several factors. First, the HS is a profoundly complex document. HS product descriptions are arranged hierarchically into 21 sections, 96 chapters and over 5,000 headings, and are bound by complicated rules and legal notes.

Second, the HS describes commodities in extremely unfamiliar, sometimes even impenetrable language. For example, an “Electric Toothbrush” is described in the HS as “Electro-mechanical domestic appliance, with self-contained electric motor, other than vacuum cleaners of heading 85.08. Other appliances.”

Finally, errors are caused by the use of ever-present keyword-based classification assistance tools. Keyword tools are poor classifiers because they are only able to find exact HS term matches. This means that keyword tools simply cannot locate the HS codes for such common products as “computers” (“automatic data processing machinery”), “Kleenex” (“facial tissue”), and “toothpaste” (“dentifrice”). Additionally, keyword-based tools retrieve results indiscriminately. Try to ask a keyword tool for the HS code for “raincoat”, and you will have to sift through hundreds of mostly irrelevant and erroneous product descriptions - such as “Fish sticks coated with batter”, “Uncoated kraft paper and paperboard” and “Ice hockey gloves not coated with plastic or rubber” - in order to find a potential match.

E n a b l i n g A ccurate, E ff ic i e n t HS Classification

Montreal-based, Logical Properties Inc. is dedicated to solving the chronic problems of high error rates in commodity classification and substandard product data reporting. The company’s flagship solution, called 3CE (the Commodity Code Classification Engine) uses artificial intelligence, natural language processing and information retrieval technology to automatically deliver instant, accurate HS codes from shippers’ narrative commodity information.

“The difficulties associated with HS Classification relate to a fundamental disparity between HS terminology and the language of trade,“ asserts company President, Randy Rotchin. “HS Classification always starts with a product description. We designed 3CE with the belief that it is unrealistic, impractical, and undesirable to require industry to use HS terminology when describing their products.”

3CE has demonstrated a prodigious ability to read and interpret readily available commercial product information…no matter how it is expressed. 3CE’s Query Analyzer identifies products and their relevant attributes from an unstructured “bag of words”.

It expands analogous and synonymous terms, processes complex numerical formulae, and handles negation. 3CE’s Intelligent Information Retrieval Engine searches hierarchically according to stringent HS rules, and applies HS Legal & Explanatory Notes. 3CE is the only HS classification technology capable of intelligently matching narrative product information to residual headings (i.e.- commodities described in the HS simply as “Other”). Finally, 3CE identifies instances of critical ambiguity and underspecification, and responds by prompting importers for additional product information through intuitive multiple-choice questions.

3CE’s brain is an ontological database, which represents a rich encyclopedia of products, product attributes, measurements and their relationships.

The 3CE database, which involved the contribution of experts from a multitude of domains (from Agronomy to Organic Chemistry to Mechanical Engineering), represents one of the largest populated ontologies ever created.

3CE’s abilities were recently put to the test in an HS classification competition organized by the World Customs Organization. 3CE - the only machine in a field of 196 - finished in 5th place. Its score of 93% was 21% higher than the average score of 96 government participants, and 37% higher than the average score of 99 competitors from the private sector. Moreover, 3CE’s placement confirmed the tool’s ability to perform expertly across many industry domains.

3CE eliminates HS complexity, and extends expert HS classification capabilities to everyday traders. Effectively, 3CE bridges the gap between how products are described by industry and how they are expressed in Customs tariff schedules worldwide. What’s more, 3CE delivers streamlined global trade management and enhanced trade compliance by ensuring that product data is both complete and accurate before it takes that “thousand-mile” journey.

PAPERLESS TRADE FOR SMALL AND MEDIUM-SIZED ENTERPRISES By Ian R.J. Gourley, President Hellenic Irish Business Association

Trade facilitation is a key element for international competitiveness and investment, however the question that has to be asked is where do small and medium-sized enterprises (SMEs) figure in this rapidly changing picture.

P o s it i o n o f S m a ll & M e d iu m S i z e d E n t er p r i s e s

SME activities represent a significant part of the global industrial landscape, accounting for •

90% of the companies in Ireland

•

2/3 of employed in Europe

•

Ian R.J. Gourley

In the globalized world of the 21st century “size does not matter” is the new mantra and opportunities are open to all in increasing cross-border trade and business networking.

As a consequence of these developments, companies are expanding their markets, distribution channels and realizing their economies of scale in both products and processes and thus the significance of trade facilitation becomes apparent. The main focus of trade facilitation is customs reform, with the introduction of simple requirements and new techniques in order to reduce the time it takes for imports and exports to be released. However, the issue goes beyond customs, and implies simplification and coordination of procedures involved in the management of imports and exports, as well as other procedures linked to the trade and transport of goods such as transit rules, or banking and insurance facilities.

•

99% of the companies in Greece

60% of the value added growth in business activity in Europe

Small businesses are thus a major driver of economic activity and are regarded as important innovators in both economic growth and competitive success. As the US and EU seek for ways to increase their competitiveness in factors other than cost it is clear that SMEs should be put at the forefront of initiatives on sustaining competitiveness and play a role in trade facilitation.

However, it has to be emphasized that there is still limited awareness and use of trade facilitation by SMEs. Recently one of our companies which has a flourishing export market in Europe lost out on a contract in North America simply due to the fact that they have had no experience or exposure to Single Window technology.

Furthermore, there is inadequate policy coordination for negotiation in trade facilitation. In spite of their important economic position in most economies – they are but a voice in the wilderness when it comes to issues of facilitating trade in a global market. While SMEs play an important role in economic activity research has shown that they have little or no experience of international trade. Thus the stream lining solutions offered by trade facilitation would open up this world to SMES and allow them to enjoy its benefits.

When it comes to transatlantic trade, which accounts for nearly a third of global trade, again the role of SMEs cannot be underestimated. Given the present climate and challenges that come with it, we are at a stage now where focus has to be given in how to facilitate trade against a background of increasing global competition and the need to balance both the interests of commerce and security.

The Changi n g L a n ds c a p e

As the momentum increases on both sides of the Atlantic towards paperless trade, from the work being done at a global level through UN/CEFACT, the effect of C-TPAT, to the new Custom Code and concept of Authorised Economic Operatorin the EU, it is clear that the existing landscape is rapidly changing. At the same time, around the globe, mandates for Single Window and associated techno logies are being launched and the future is already clear – doing business without such tools will make cross-border business impractical.

Thus the issue of compliancy is of vital importance to the sustainability of SME activity and one that requires a cheap and flexible solution. SMEs are already at a distinct advantage and there is a real danger that they will be left behind or excluded from the race.

Ch allenges

The question to be posed is thus: How can SMEs be helped to get involved in paperless trade? Here the focus is on what is perhaps the key to SME activity and growth – their potential for entrepreneurship.

Governments and state agencies have to lead the way in enabling SMEs to realize the benefits of global restructuring by facilitating a conducive business environment. However this is against a background where the EU is expecting much of the initiative in this area to be championed by the private sector. For paperless trade to be a viable and feasible option for SMEs a number of factors should be taken into consideration 1.SMEs have to have sufficient information to start with paperless trade. Some are already aware of Single Window and the developments due to be implemented in the incoming years. The challenge for SMEs is to make changes happen and move from general awareness to business decision. It is at this stage that Business Associations and Chambers of Commerce have a key role to play in informing as well as supporting SMEs in their transition to a paperless environment. 2.Creation of a service/system primarily aimed at the needs of the small and medium-sized enterprise, which not only facilitates their compliance with the new AEO (Approved Economic Operator) requirements mandated by customs authorities (most notably in the US, but also in the EU), but also facilitate their cross-border commercial activities.

3.Any such system must be built on ease of access, for example using web-based access as this avoids issues of installation and support. In addition, a centralised service is cheaper to set up and to run, particularly for the SMEs, which have no up-front costs and need no technology more advanced than a browser. Thus the playing field is levelled for the SMEs, by making Single Window services available to them, thus equipping them with the same business tools as the larger, richer corporations who have in-house Single Window systems. As Erkki Liikanen, Member of the European Commission responsible for Enterprise and the Information Society noted - only when SMEs are fully integrated into e-marketplaces will e-business become the norm.

AID, TRADE AND SMES: HOW SMALL BUSINESSES CAN FLOURISH IN A LESS THAN FLAT WORLD by Emily Brearley, International Trade Consultant

It is often argued that trade is not aid. Since the end of World War II, international trade has transformed the face of the advanced economies, fueling the postwar boom in the United States, Western Europe and Japan. But it was only after the fall of the Berlin Wall in 1989 and the rapid rise of China and India in the 1990s, that the potential benefits of closer economic integration started to reach the rest of the developing world. Traditional trade patterns have given way to truly global supply chains, creating vast production networks which have already lifted many millions of people out of poverty. Just one example is the Asian Tigers: small export-oriented economies that harnessed the power of the market to help their countries graduate from developing to developed economies within one single generation. “Trade” here is in many ways seen as preferable to Aid. Not only does it allow firms in developing countries to be in charge of their own destiny, it also exposes them to the rigors of international competition, forcing them to continuously improve their efficiency. In my own development experience, I have come to believe in a slightly more nuanced version of this view: although trade is clearly vital for future economic growth in the developing world, it can also be greatly enhanced by “smart aid choices.”

Emily Brearley, International Trade Consultant

The aim of development aid should always be to create dynamic, rather than static relationships. The popular idea of the ‘worthy donor’ is really an illusion – the health and prosperity of the developed world is inextricably linked with that of the developing economies, especially as the global economy continues to interlink.

So, the right kind of aid, for the right kind of projects is crucial. What do I mean by that? When I first started working at the multilateral development banks five years ago, I would often get quite disheartened with some of the more traditional aid projects: their core objectives seemed unrealistically optimistic compared with the results on the ground; and aid money arguably created an unhealthy co-dependence between donor and borrower. Donors would usually treat communities as if they were helpless, neglecting to see the wealth of untapped potential and entrepreneurial drive.

But I soon discovered a new kind of development assistance, and became involved with these inspiring entities called SMEs – Small and Medium Sized Businesses, or “PYMES” in Spanish. With relatively little seed money, I watched how a group of SMEs from across Central America were able to grow their businesses and substantially improve the lives of everyone in their communities. The aid money merely enhanced what was already there, and the expert training and technical assistance helped these clients tap into otherwise unavailable market knowledge. The relationship between the donor and the recipient was healthy and proactive. As donors, we were not coming in promising a panacea for everything. Rather, we offered targeted technical assistance and funds for specific investments, and left the rest up to the hard work and sweat of the local entrepreneurs. The success of these SME projects was dependent on each side bringing their best and most useful tools to the challenge, and recognizing that in the end, most problems facing SMEs were universal. Indeed, SMEs from Guatemala to Germany face rather similar challenges and opportunities, to differing degrees. Anyone who claims that the world is somehow flat should try getting coffee beans to market on time along the bumpy, flood-prone roads of Haiti; or try to find a way to invest in a new security fence in England if you are a small enterprise on a shoe-string budget that competes on the smallest of margins.

In many countries, SMEs remain cut off from the many opportunities global trade has to offer, and what we really observe is a parallel economy: one for price-setting multinational corporations with high profit margins, and another for price-taking small firms with minimal profits which is marginalized from this world, and often stagnant or declining. All SMEs struggle to stay informed of continuing change, and find it hard to make the most of technological advances. When staff is limited, it is hard to keep abreast of all the latest government requirements and legislation; when your supply of electricity is unre liable, how can you ever hope to stay plugged into the global economy?

There are no simple solutions to this, but I am starting to believe that an important part of the answer for SMEs across the globe will require a mixture of targeted investment, technical assistance and tailored legislation. SMEs are the backbone of our economies – creating the most jobs and value-added, so they should not be seen as victims, but as key protagonists that deserve attention and investment if our economies are to continue to grow.

It is in this context that technology – bringer of ‘destructive’ innovation, and leveler of the playing field – can really help. One of the cornerstones of modern growth economics is the idea of “catch-up” – the notion that latecomers will be able to benefit from the early birds, and snap up the technological spillovers from richer countries by piggy-backing over early advances. The internet is a classic example of this: if information is power, then this huge data base of free information is an invaluable tool for SMEs. While advising Tradefacilitate.com, I have seen first-hand how the internet is re-shaping complicated business processes; using electronic data entry and management systems to simplify time-consuming and duplicative processes that used to require paper, fax and telephones. Nowaday,s we would not think of buying our flight tickets from a travel agent – it is so much simpler, quicker and cheaper on line.

Of course, technology for technology’s sake is no panacea either – I have seen some applications that require months to install, and teams of expensive consultants to maintain, again creating a needy relationship between the provider and the client who has a huge sunk cost. However, the combination of technology, aid and training can be amazingly successful, and is a vital mix for all SMEs if they want to take their businesses forward and stay ahead. Just as long as the underlying mantra is always the same: Simpler, Quicker, Cheaper. Emily Brearley is an International Trade Consultant who has worked at the World Bank, and the Inter-American development Bank. Currently she is advising tradefacilitate.com

DIGITAL B2B, DIGITAL INTEGRTION OF THE SUPPLY CHAIN IN LATIN AMERICA In the case of foreign trade, Digital B2B has been working closely with the Mexican government international trade partners among other international entities, with the aim to facilitate foreign trade using digital and electronic documents, models and standards. With this background it is no surprise the United Nations has chosen Digital B2B and Mexico to organize and host the 13th UN CEFACT forum and the world e-business conference to be held in Mexico City on April 7 to 11, 2008.

In his interview with “ CEO Financial “ Gabriel Rosales, Gabriel Rosales, Digital B2B CEO of Digital B2B Servicio advised “We are committed to provide our clients not only functionalities to automate their operations, but also interfaces to Gabriel Rosales advised “ CEO- Financial” services to facilitate secure and competitive trade, it is a natural extension for Digital B2B to allowing our users to access new clients, suppliers and provide a paper free capability for exporters markets”. With his current business role allied to his to assist them be more competitive and meet former role as a diplomat and trade commissioner of oversea electronic declaration requirements. México Gabriel is extremely aware of the importance of deploying global standards to ensure regional The negative costs normally associated with competitiveness. requirements of Latin American countries to meet the raft of overseas legislation since September 11 2001 can be Digital B2B a company with headquarters in Mexico turned to be a positive Digital B”B believe. Based on City, and operations in major countries through Latin UNcefact figures the cost of goods traded can be reduced America is committed to provide a comprehensive pro- by up to 15% where the supply chain moves from a paper gram including software, services to ensure their client to a paper free capability. From its Mexico base Digital base can communicate more efficiently with their B2B are committed to be the first Latin American suppliers and also meet their international supply chain country to demonstrate same. Mexico will be the first requirements i.e to export efficiently and securely. Latin American participant to the “Tradefacilitate transatlantic initiative” and full details of the partners and Large multinational corporations such as participants will be announced by Gabriel in April 2008 Colgate-Palmolive, or Tupperware, as well as regional at the Mexican UN Cefact Forum. or local companies such as US Trinity Industries or Mexican CIPSA among others, trusts Digital B2B to With a significant Latin American client base and a take care of all their communication with suppliers, each global partner network throughout the world, Digital one according to their needs and interests for actions B2B is becoming a standards leader in paper free trade including product catalog, requisitioning, RFQ, price and is ideally positioned to provide similar services to comparison, order approval, sending and confirmation, their operations in different countries from their Mexican warehouse receipt, electronic invoicing and payment base. notification, plus inventory reports and even VMI (vendor managed inventory) as well as foreign trade operations and services.