Interest driven approach to enforce the supply chain through the AEO
Interest driven approach to enforce the supply chain through the AEO
WCO 3rd Global AEO Conference Jimmy Pang (Vice President of SCSA)
May 2016 Supply Chain Security Association www.scsasecurity.org
Trade Facilitation Through Supply Chain Security Jimmy Pang 彭偉樂 • Founder & Vice President of Supply Chain Security Management Association • TAPA Asia Hong Kong Representative & Shadow auditor
HKCAD RAR Review Group – Member
Trainer for AEO Auditor Team of HK C&E Dept.(2010)
Lecturer & course advisor of the in IT Risk Management and logistics Security Management of SCOPE of City University of HK
IATA DGR Instructor & HKCAD RAR Qualified Trainer PISA (Professional Information Security Association) former program committee member Speaker in APEC meeting 2015 (Philippine and Taiwan) (APEC's Emergency Preparedness Working Group)
Active participate in world wide supply chain conferences since 2006 (APEC, WCO, ICAO, IATA ) Over 20 years in consulting industry & MBA holder
Interest driven approach to enforce the supply chain through the AEO About Supply Chain Security Association Supply Chain Security Association (SCSA) is founded by a group of professionals, namely - Supply Chain Management - Security management - Information Technology Management in April 2002 SCSA aims to address the awareness and give solutions to the increasing security threats that is unavoidable in the current running and operations of the supply chain’s existing business.
Interest driven approach to enforce the supply chain through the AEO About Supply Chain Security Association Our Mission •
We believe in the joint effort of supply chain and appointed security professionals, we are able to enable safety measures be implemented in the most effective way.
•
It is our ideal to help optimize Supply Chain operations & management with the most effective risk management scheme.
Our Credentials •
With over 1,000 members in Hong Kong and over 100 seminars and training programs related to supply chain security have already been taken place in Hong Kong, China and Singapore, with the cooperation of relative Universities such as (Chinese University of HK, City University of HK) and other professional bodies.
•
Participated in the APEC STAR meeting (Supply Chain Security Conference) since 2006, WCO supply chain security conferences since 2007, WCO AEO conference at Korea 2012 & Madrid 2014.
•
Organized the liaison between the SCSA YMC group and various Universities in the promotion of the concept and the significance of Supply Chain Security concerns.
•
Exclusive seminars for AEO took place since 2008.
•
Supporting organization for Interpol World 2015.
Interest driven approach to enforce the supply chain through the AEO SCSA in AEO Since 2006 •
Researched on WCO Safe framework
•
APEC STAR meeting (Supply Chain Security Conference), 2006-2008
• • • • • • •
1st AEO / WCO safe framework seminar 2008, 2010 WCO conferences since 2008-present Conducted Training Course for Chinese University of Hong Kong Conducted the AEO auditor training for Hong Kong Customs AEO team Initiated 1st HK AEO pilot project in 2011 WCO AEO conference since 2012 Researched on AEO education & integration with other SCS standards (ACC3, TAPA FSR, RAR)
Interest driven approach to enforce the supply chain through the AEO Today’s agenda 1.About the SCSA AEO Pilot Run Project - Focus & Strategic project selection
2.Findings - Various supply chain security standards benchmark
- The changeling that the industry facing
3.Transforming their concerns to be best practice for promoting AEO - Enhancing the AEO security controls to address other concerns
(i.e. hidden DG, counterfeit component and commercial risk)
4.Conclusion
Interest driven approach to enforce About The Pilot Run Project the supply chain through the AEO Why Forwarding Industry? AEO Pilot Run Project
Number of freight forwarders in Hong Kong
Source www.vtc.edu.hk/uploads/files/publications/transport_logistics_training_board/en/2014%20MPS %20Rpt/2014%20TLTB%20MPS%20Report%2020150618(1).pdf
Supply chain Security Association initiated an AEO Pilot Run project for Hong Kong supply chain industry in 2011, Hong Kong as one of the higher number of forwarders’ port, the 1st stage is focused on forwarding industry.
Interest driven approach to enforce About The Pilot Run Project the supply chain through the AEO The Project Mission To Enhance The Hong Kong International Supply Chain Competitive Advantage
AEO Pilot Run Project
Trade Supply Chain Security AboutFacilitation The Pilot Through Run Project Supply Chain Security Related Standards Last update : Jan 2016
Singapore Japan
USA
China
RA program
1437
No RA program
268
162
EU 2014 ACC3 Screening & Validation
Green
Green
Green
Green
C-TPAT
100+
No data
No data
28
3453
121
542
10832
13885
64
129
31
14
142
423
Initiative
Industrial
National
Customs
EU
Hong Kong
AEO
Commercial TAPA (FSR)
No data No data
Green
N/A
No data 9600+ No data
An overview the global popular SCS standard or program, Hong Kong has a very good foundation for supply chain security, which able to continue to keep Hong Kong as one of the important port in the global supply chain, Also enhance the competitive advantage.
Interest driven approach to enforce About The Pilot Run Project the supply chain through the AEO The Project Mission
AEO Pilot Run Project
To Enhance The Hong Kong International Supply Chain Competitive Advantage Approach Integrate their in-house best practices and existing complied with supply chain security standards or regimes;
To learn their concern & challenging to identify the best way to promote and achieving the AEO
Because of that reason, we selected the firm who already have foundation of supply chain security, for example, firm who already certified TAPA, RAR, C-TPAT or ISO28001,‌‌ \Through the Integration their in-house best practices and existing certified program to learn their concern & challenging for identifying the best way to promote and achieving the AEO
Trade Through Supply Chain Security PilotFacilitation Project Implementation SCSA HK AEO Pilot project Invitation Screening Confirmation Preparation •Scoping •Risk Assessment •Risk Management & policy setting
Implementation •Integration •Procedure & training •Pre-assessment •Validation & refinement
Certification After we screened applicants, tailoring a comprehensive road map for each selected project applicants; from risk assessment …to certification stage, review all present activities and in-house practice for identify the scope, and next is risk assessment
Interest driven approach to enforce Project Implementation (Various Standards) the supply chain through the AEO
Major findings
AEO Pilot Run Project (1st stage findings) Establish Related During the risk assessment, we&find there are a lot of control practices Processes Standards Doc.
are present, those may not be 100% perfect fit into the AEO requirement, because… Risk 1. The scope of controls is not comprehensive enough Assessment 2. Focus of threats are not exactly same as AEO Development 3. Those daily controls may not be documented in a systematic SCS Security manner, either procedure or recording
Implementation Monitoring & Refinement
Continues improvement
INTERNATIONAL STANARD
Iiso/iec 17799
IiNTERNATIONAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
INTERNATIONAL STANARD
Iiso/iec 17799
Standards
IiNTERNATIONAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
(AEO, TAPA, RAR,ISO,..) BDVHJD
BDVHJD
TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
Compari s on of Suppl y Chain Security Standards
Corporate Policies & SOP
Regulations
Interest driven approach to enforce Trade Facilitation Through Supply Chain Security Review Major(Easier 3 Standards Commonon Controls to Achieve AEO?) theProject supply chain through AEO Pilot Run (1st stage findings)
the AEO
Major findings
Same Security Principle : No disruption to the supply chain
As mentioned before, the principle of security controls are very similar, common aspects are in AEO and other standards.
Interest driven approach to enforce Common Controls (Easier to Achieve AEO?) the supply chain through the AEO
Major findings
AEO Pilot Run Project (1st stage findings) 1. The scope of controls may different The scope of AEO is including all Air, Sea and Land international trade issues, but for the RAR, it’s concerning the bomb threats to aviation security only; for TAPA, both import and export operations dealing with high-value cargo with threats from theft, so both scope of standards are less comprehensive than AEO.
RAR
AEO
TAPA
Target Group
Shipper , Forwarder, Terminal & Airline
All parties involved in international supply chain
Forwarder, trucking and shippers & Terminal
Threats
Aviation security (Bomb
Trade & Terrorism
Criminal threats
Scope
Air export only
All international trade in all mode
Selected freight operations for high value cargo
threats)
(mainly air operations)
Interest driven approach to enforce Common Controls (Easier to Achieve AEO) the supply chain through the AEO
Major findings
AEO Pilot Run Project (1st stage findings) RAR AEO
All parties involved in international supply chain
TAPA
Target Group
Shipper , Forwarder, Terminal & Airline
Forwarder, trucking and shippers &
Concern Threats
Aviation security (Bomb threats)
Trade & Terrorism
Criminal threats
Scope
Air export only
All international trade in all mode
Selected freight operations for high value cargo
Terminal
RAR
AEO
(mainly air operations)
Requirement
Control procedure + handling practice + training + recording
Comprehensive management system (Control procedure + handling practice + training + recording)
Specific high value shipment handling framework (Control procedure + handling practice + training + recording)
Time for Achieve
Within one month (Audit time
Months till year (Audit time takes 6-10 months)
3-5 months
takes 0.5 day)
TAPA
(Audit time takes 1- 3 days)
Interest driven approach to enforce Common Controls (Easier to Achieve AEO) the supply chain through the AEO
Major findings
Same Security Principle : No disruption to the supply chain AEO Pilot Run Project (1st stage findings) 1. Extend the controls 2. Refine their best practices and; 3. Document their best practice
Therefore, those controls already give a very important SCS foundation to the firm, achieving AEO is much easier when compare to others without any best practice. they only need 3 approaches to build their AEO.
Interest driven approach to enforce About The Pilot Run Project - Other Findings the supply chain through the AEO What is the effective driver to promote the AEO?
Terrorism Trade crime Smuggling However, during starting we find that Not many firm eagers to have AEO, as they don’t find significant benefit in Hong Kong, as a Free Trade Port. We also try to identify the driver for the forwarding industry, however terrorism, trade crime and smuggling is not the 1st priority of concerns;
Interest driven approach to enforce About The Pilot Run Project - Other Findings the supply chain through the AEO What is the effective driver to promote the AEO?
Costing Performance The industry is facing costing competition and performance challenging from neighbor ports.
Interest driven approach to enforce About The Pilot Run Project - Other Findings the supply chain through the AEO What is the effective driver to promote the AEO?
Deception Bad debt Claims Hidden Dangerous Goods Especially their highest concerns from commercial threats like deception, bad debt, claims or hidden Dangerous goods, they eager to spend their extra-investment because the impact and liability are direct and extremely high compare to others threats.
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging)
What is the effective driver to promote the AEO? Concern issues
Hong Kong
Hidden Dangerous Goods (Lithium Battery )
e.g, under a cross border export trade environment, hidden dangerous goods problem is one of the biggest concerns to Hong Kong air cargo forwarder, as nowadays Lithium Battery is commonly find in equipment, toy, gadgets‌etc., which are being produce in southern China,
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging)
What is the effective driver to promote the AEO? Concern issues
Hong Kong
Hidden Dangerous Goods (Lithium Battery )
Total value : 282.4 Billion USD
(2014)
high portion of world supplied via Hong Kong air export, so their products quality and quantities are directly affecting the Hong Kong export logistics performance, in terms of safety and revenue;
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging)
What is the effective driver to promote the AEO? Incidents
Hidden DG cause fire (Lithium battery)
Date: 1 Dec 2015 Location: Louisiana, United States Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and he had only used it for one day before she spotted flames coming from the device while it was plugged in to charge the battery. She said the hoverboard was ordered on Amazon.com from a company called Fit Turbo. The incident is under investigation by the Louisiana State Fire Marshall's Office.
Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/
Because of Lithium battery or it’s products are classified as Dangerous Goods in air logistics, therefore, the cost and safety requirement are much higher than normal general cargo. Higher power battery products are required higher cost for proper packing and limited quantity to ship, responsible brand owner and forwarder understand the importance of safety,
Industry ValueFacilitation Added Concerns Best Practices (Challenging) Trade Through Supply(example) Chain Security What is the effective driver to promote the AEO?
Hidden DG cause fire (Lithium battery)
Incidents Date: 1 Dec 2015 Location: Louisiana, United States Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and he had only used it for one day before she spotted flames coming from the device while it was plugged in to charge the battery. She said the hoverboard was ordered on Amazon.com from a company called Fit Turbo. The incident is under investigation by the Louisiana State Fire Marshall's Office.
Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/
however, because of cost reason and air logistics safety requirement is not well known by some trader and manufacturer; therefore most of the problem is come from the high risk shipper who are ignorance to safety, which may start from product design, component selection, assembly process control and event safety testing, not too difficult to understand why their risk is higher than usual shipment a lot;
Industry Concerns (Challenging) Trade Facilitation Through Supply Chain Security (situation) What is the effective driver to promote the AEO? Concern issues Multi-levels consolidation Limitation of Jurisdiction
Carrier / Forwarder Consolidation
additionally, to the multi-levels consolidation and limitation of jurisdiction, which enhancing the conflict of interest business environment between commercial interest and compliance duty.
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging) Concern issues - MisDeclared / UnDeclared Hidden Dangerous Goods (Lithium Battery )
as long as the trend of demand for higher power battery products & developing web shopping business model, multi-levels cross border consolidation is more complicated, which start from the buyer who sit in front of the computer till to the carrier, the multiple effect of those minor problems can lead to disaster.
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging) Hidden DG cause fire (Lithium battery) Nature of goods LHR AMS
Leather case, plastic cover, screen protector Clothes, Plastic Case, Ring Phone case, keyboard Mobile Accessory (LCD, Screen guard, leather case, charger, without battery)
“The focus of dangerous goods is not LHR
DXB
Source: Aviation Safety Network
only a safety issue but also one of Power supply Power supply security…” SDQ SDQ LIM
Cell phone security display holder set, set incl power adapter, charge line, connector, sticker, cable. Remote control
AMS
Clothes, Plastic Case, Ring Phone case / LED light (without battery) Phone case / LED light (without battery) Leather case, charger, screen guard, no battery, Source: International Civil Aviation Organization (ICAO), no magnet.
LHR LHR DXB
Dangerous Goods Panel (DGP), DGP-WG/07-WP/75 such kind of problem, may possible to cause aviation disaster, International Civil Aviation Organization already name the hidden dangerous goods problem as one of the highest safety & security issue.
Trade Facilitation Through Supply Chain Security Industry Concerns (Challenging) Concern issues - MisDeclared / UnDeclared Hidden Dangerous Goods (Lithium Battery )
Due Diligence Liability & Commercial Risk Most of the Hong Kong forwarder understand this situation, especially the extremely high liability that they may face from due diligence environment. Therefore, liability and commercial risk are effective drivers for promoting AEO.
ValueFacilitation Added Best Practices Trade Through Supply(example) Chain Security Value-added best practice
Hidden DG cause fire (Lithium battery) Incidents LHR
Nature of goods
Leather case, plastic cover, screen protector
So, how to detect it?
Date: 1 Dec 2015 AMS Clothes, Plastic Case, Ring Location: Louisiana, United States
“The focus of dangerous goods is not LHR
Source: Aviation Safety Network
Phone case, keyboard Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and DXB Mobile (LCD, Screen guard, leather he had only usedAccessory it for one day before she spotted flames coming from the device while it was plugged case, in to charge thecharger, battery. without battery)
only a safety issue but also one of Power supply Power supply security…” SDQ SDQ LIM
Cell phone security display holder set, set incl power adapter, charge line, connector, sticker, cable. Remote control
AMS
Clothes, Plastic Case, Ring Phone case / LED light (without battery) Phone case / LED light (without battery) Leather case, charger, screen guard, no battery, Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/ Source: International Civil Aviation Organization (ICAO), no magnet.
LHR LHR DXB
Following is an example is one of the bestDangerous practice thatGoods we learn from(DGP), the pilotDGP-WG/07-WP/75 project and which now Panel helping us to promote the AEO. So, the forwarder, how to detect the shipment may have misdeclarated hidden Lithium battery? Even possible to know they are using counterfeit battery?, even some goods have fake test report?
Value Added Best Practices Trade Facilitation Through Supply(example) Chain Security Value-added best practice
Hidden DG cause fire (Lithium battery)
So, how to detect it? Terrorist
Safety
Profile Smuggler
Bad Debt
During the firm encounter a new client, the well trained salesman conducts a client evaluation, and try to visit the client facility, beside complete the client profile, also further explore the business potential and risk,
ValueFacilitation Added Best Practices Trade Through Supply(example) Chain Security Value-added in security control best practice Business partner evaluation Enhancing Controls - Hand search - Zero credit terms…etc. Enhancing the client loyalty - Free handling charge, - Priority of delivery - Longer free storage period… etc.
Terrorist
Safety
Profile Profile Smuggler
Bad Debt
After all, the output is like hotel / airline loyalty program, each client profile being rated with risk of commercial, criminal, smuggling and hidden DG of Li-battery, it is not only allied with A.E.O. requirement ‘business partner evaluation’, which basically allied with R.A.R. and TAPA, as commercial risk is the priority of concern, especially on bad debt and smuggling from cross boarder cargo, firms are eager to input and update the profile for minimize their risk
Value Added Best Practices Trade Facilitation Through Supply(example) Chain Security Value-added best practice
Hidden DG cause fire (Lithium battery)
So, how to detect it?
e.g. when they walk through the production of the gadgets, they will observe the operation environment, especially the packing box of battery at production, they already know they factory using counterfeit battery in the product, whereas qualified battery would not pack in that way, it will give the firm have an alert to the shipment from this new client.
Interest driven approach to enforce Value Added Best Practices drives Compliance the supply chain through the AEO Value-added best practice
Hidden DG cause fire (Lithium battery) From Commercial Perspective Busine cernsit? (Risk) So howsstoCon detect Commercial - Bad debt - Claims
Criminal
Management
- Deception - Robbery - Smuggling
- Error - Poor Client info.
of course there is no silver bullet, but under the deal diligent and limited jurisdiction cross border trade environment, their liability being minimize, and some problematic client may walk away already. This is only one of the example that when the firm implementing the AEO , and they can managing multi-risk by refining one action, actually, from the pilot run project, also other commercial risk and criminal threats are being improved in different controls activities.
Interest driven approach to enforce Value Added Best Practices drives Compliance the supply chain through the AEO Value-added best practice
Compliance Profitable Business
As long as more controls practice being enhanced, we find more business risk being tackle, which is value added to the AEO applicant, in result which is able to achieve both compliance and creating more profitable business model.
Value Facilitation Added BestThrough PracticesSupply drivesChain Compliance Trade Security A new industry initiative ‘ Li-CAT program’ suggested by our members Li-CAT is a non-profit program bringing new, safe insight to the industry. Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential threats, at the same time maintaining the economic potential of the industry.
After all best practices exchanged, some members further suggested to systematic to those best practices from shipper evaluation, people training, questionable cargo handling procedure…etc.
Value Facilitation Added BestThrough PracticesSupply drivesChain Compliance Trade Security A new industry initiative ‘ Li-CAT program’ suggested by our members Li-CAT is a non-profit program bringing new, safe insight to the industry. Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential threats, at the same time maintaining the economic potential of the industry.
to set up a ‘White-list’ program to give priority to their ‘secure & safe cargo’, which a further enhancement from our A.E.O. pilot program, which is well received by the cargo forwarder.
Interest driven approach to enforce the supply chain through the AEO In conclusion Nowadays the global trade environment is more complex, problem is dynamic, Solution is also need to be dynamic, Government policy and industry best practice integration is the way to go, AEO giving the global supply chain a security framework, continue share and learn from the industry and globally is the way for trade facilitation. Jimmypang@scsasecurity.org
Interest driven approach to enforce the supply chain through the AEO
Thanks you
Let’s share your best practice to drive a safe & secure supply chain!
Jimmypang@scsasecurity.org