Facilitating Trade in the New Security Environment

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Facilitating Trade in the New Security
Environment

• Mr Tom Butterly
• United Nations Economic Commission for Europe
• May 2004

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Trade Security

• Recent Developments in International Trade
  Security
• Potential Economic Impact
• Some Possible Approaches

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Trade Security

• Security - major issue in international trade,
  with significant potential costs and economic
  impact
• Response needs to be considered rather than
  reactionary,
• Need to ensure that trade security does not
  become a new non-tariff barrier
• The challenge is to facilitate the secure
  movement of the vast majority of legitimate
  international cargo
• Need to grasp this opportunity to implement
  existing trade facilitation standards and tools

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Response to 9/11

• Major shift in focus to the threat FROM trade
• Push Back the Boarders CSI
• Risk Profiling Advance information
• US undertook emergency analysis of vulnerability
  and identified sea-borne containers as main
  threat

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Why containers?

• 200 million containers move annually amongst the
  worlds top sea ports
• 90 of world cargo moves by container.
• almost half of incoming trade (by value) in the
  US arrives by container
• In the United Kingdom, Japan and South Korea,
  over 90 of trade volume arrives or leaves by
  sea.

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US Container Security Initiative (CSI)

• Shift in Customs emphasis checking goods at
  export as opposed to import pushing back the
  borders the border is too late!
• Container Security Initiative (CSI) 20 Mega Port
  Initiative
• US officers in Ports Risk analysis
• Huge expense
• Reciprocal
• US moving to second stage of CSI - other ports

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Source Philippe Christ OECD
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Source Philippe Christ OECD
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CSI Ports in Europe
UnitedKingdom
Göteborg, Sweden
Hamburg
Bremerhaven
Felixstowe
Germany
Le Havre
France
Genoa
La Spezia
Spain
Italy
Algeciras
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Advance Cargo Information
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US 24 Hour Rule

• Trade Act 2002 Introduced by US
• 24 Hours Rule - before lading - risk analysis
• Major shock (and cost) to shipping industry
• Could deny entry otherwise
• Moving to implement rules for air and land

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European Community 24 Hour Rule

• Currently under discussion
• Possible 24 hours before the goods are brought
  into the customs territory of the Community
• Less time (4 hours) for short sea voyage
• Air, road and rail 4 hours (or 2 hours if data
  supplied electronically)
• Possible flexibility for authorised trade schemes
• Special rules for movements covered by the New
  Computerised Transit System (NCTS)

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WCO ACI Guidelines

• Advance information concept for risk analysis
• Defines core set of data for security ( 27 data
  elements)
• Broad set of guidelines for the exchange of
  information, customs customs and trade
  customs.
• Should be approved by WCO Task Force in April

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International Ship and Port Security Code (ISPS)

• Developed by IMO
• Comes into effect on July 1 2004
• Mandatory
• Big push to get in place by 1 July

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ISPS

• 56,000 ships will have to be certified
• 20, 000 ports worldwide
• 75,000ship security officers need to be trained
  and certified

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Source Philippe Christ OECD
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Integrated and Secure Supply Chain

• Authorised Trader Concept
• Authorised Supply Chain - Authorised Trader,
  Port, Shipper, Agent, .

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US Customs-Trade Partnership Against Terrorism
(C-TPAT)

• Authorised Trader Concept
• Partnership approach
• Benefits to the good guys
• Voluntary

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Swedish Customs/business partnership

• Swedish StairSec Programme provides examples
  where compliance costs for accredited operators
  decreased by 76 while Swedish Customs has seen
  increases in some hit rates from 5 to 45
• StairSec was developed in close co-operation
  between Customs and trade

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Source Philippe Christ OECD
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So, the security system is in place. Can trade
still function??
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Possible dangers

• Added costs - who pays?
• Rolling back the gains of trade facilitation??
• Any benefits for trade?
• Danger of Security becoming new non-tariff
  barrier to trade
• Possible relocation of production to safe
  locations (especially SC related)

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Costs ISPS Example of the US

• Vessel Security 188 million in Year 1 annual
  cost appaox. 144 million.
• Facility Security 963 million Year 1 annual
  cost 535 million
• Port Security 120 million in Yr 1 46 million
  per year thereafter.
• Paperwork 1.7 million hours in first year
  approx 1 million hours per year thereafter.
• Source US Coast Guard

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Costs

• The NZ Government is to raise 20million a year
  to pay for new border security measures
• tax of 450 on an airfrieght shipment
• Source Export New Zeland

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Concerns for developing countries

• Exclusion
• High level of technology required available?
• Necessary expertise ?
• Managerial capacity to implement the required
  measures and keep updated with the future
  requirements of this area still in evolution ?
• Ability to understand the new security
  environment as a whole?

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Cost on Inaction

• Relatively modest nuclear device detonated in a
  major US Port
• 0.5 to 1 million fatalities
• 500 billion worth of property destroyed
• Trade disruption costs of 100-200 billion
• Further indirect costs of 1.2 trillion
• Source US Centre for Trade Policy Studies (April
  2004)

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Some Potential Benefits

• More rapid implementation of existing trade
  facilitation measures, risk management and
  advance information,
• Better systems facilitate the movement of the
  legitimate international cargo
• Greater links between customs and business
  (StairSec)
• Reduced theft, smuggling, contraband and
  increased detection rates

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Possible Strategies

• Establish TF and security as key elements of
  trade development strategy (as in APEC) at the
  regional and national level
• Focus on implementation of new and existing TF
  standards and tools
• Ensure that implementation of TF and security
  initiatives results in real gains for traders
  quality control approach
• Establish a strong government trade partnership

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Possible Strategies

• Look at possibilities for implementing advance
  information systems and procedures
• Standardised and harmonised documentation
• Mutual recognition of authorized traders based
  on guidelines / recommendation
• Focus on multilateral approach, international
  standards and conventions

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What is UNECE doing?

• Two conferences on trade facilitation and
  security in 2003 (also major topic in Forum)
• Implementation of existing UNECE standards,
  recommendations and tools (UN/EDIFACT, UNTDED, UN
  Layout Key, Codes for trade, etc, etc)
• Development of UNeDocs last mile connection
• Single Window Recommendation and Guidelines
• Security Management Standard and Modelling
• Work of UNECE Transport Division
• Working closely with other agencies (WCO, IMO,
  UNCTAD, etc)

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Conclusion

• Trade Security has huge potential cost
  implications
• Need to take focussed and considered approach to
  security implementation
• Need for multilateral approach
• Need to ensure security does not become a new NTB
  to Trade
• Need to grasp the opportunity to implement
  existing standards and recommendations

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UNECE Resources

• All UNECE UN/CEFACT Recommendations, codes,
  standards and publications are available for free
  on our website at
• www.unece.org
• www.unece.org/cefact
• For other inquiries, please contact
• tom.butterly_at_unece.org

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• THANK YOU FOR
• YOUR ATTENTION

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