Impact of security legislation on industry

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Impact of security legislation on industry

• Introduction
• What is supply chain security?
• Which regulations has the US implemented?
• Which other regulatory initiatives have been
  launched?
• What is the roll of the World Customs
  Organisation?
• What is response from multinationals?
• Working towards ISO Standards
• Costs and benefits for players in the supply
  chain

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Foundation established 1864
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DNV
As a ship classification society DNV is an
independent foundation with the objective To
safeguard life, property and the environment

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Main industries

Process
Rail
Oil Gas
Shipping
Automotive
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Business
Other
Consulting
Certification
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International Network
Americas 900
Asia and Australia 1.100
Europe 4.500
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Objectives of the DG-TREN Project

• DG-TREN has requested us to perform a study which
• Shall provide detailed, concrete and practical
  input to the development of EU supply chain
  security legislation
• us means DNV Consulting
• DNV Maritime
• BMT Transport Solutions (Hamburg)
• PMSI Consulting (Eurotunnel-Folkestone)

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Skeleton of the Project

• Risk Inventory
• Analyses Analyses
• based on based on
• number of fatalities economic damage
• Recommendations

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For the Supply Chain System

• For cargo and transportation (derived from a
  criticality ranking)
• Define risk factors (root cause analyses)
• Define possible mitigation measures
• Assess feasibility
• Cost/benefit analyses
• Inventory of existing measures/best practices
• Definition of possible instruments
• Start development of instruments (together with
  stakeholders)
• Propose measures to ensure implementation
  (together with member states and stake holders)

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For the Infrastructure

• Inventory of EU and international best practices
• Based on the Criticality Ranking
• Determine the economically critical
  infrastructure by using STAN (Strategic Transport
  Analyses)
• List vulnerabilities per economically critical
  element in the infrastructure
• Define mitigation measures for each type of
  critical element per security level in a
  security plan
• Estimation of investments needed
• Estimation of consequential cost to EU trade

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Implementation

• European coordination
• Procedures and legislation to implement security
  measures
• Possible course of action for the EU
• Bearing in mind the competitiveness of Europe in
  a securing world economy

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Supply Chain Security
Regulated Regime
Port
(Air) Port
(Air) Port
Barge
(Air) Port
(Air) Port
Shipper
Train
Final destination
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What is supply chain security ?

• Actions taken to protect people, facilities,
  infrastructures and the intermodal supply chain
  against terrorist acts, sabotage, infiltration or
  other undesirable events.
• E.g.
• illegal infiltration of cargo with weapons or any
  other dangerous substances,
• infiltration with other unauthorised cargo or
  passengers or
• theft of or damage to cargo

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The Transport System as a target

• Vulnerability of the Supply Chain
• Is an open structure with millions of access
  points
• Is the life line for world economy
• Interruption may cause huge economic damage
• Is the means to also transport terrorists and
  their goods

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The supply chain as a means

• Vulnerability of the Supply Chain
• A 10-20 KTon nuclear device detonated in a
  container terminal will
• Cause an economic damage of US 150-700 Billion
• And 50.000 to 1.000.000 casualties.

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What has the US implemented?

• Upon 9/11 US introduced a.o
• Container Security Initiative
• Custom-Trade Partnership Against Terrorism
  (C-TPAT)
• Advance Cargo information
• Operation Safe Commerce

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What happens elsewhere?

• The IMO (ISPS) and ICAO Regulations for air and
  sea transportation (compulsory)
• StairSec, part of the Swedish Stairway Program,
  delegates most tasks to manufacturer
• New Zealand's Customs Secure Exports
  Partnership program, compulsory for all
  exporters.
• Asian Pacific Economic Cooperation (APEC) Private
  Sector Supply Chain Security Guidelines,
  voluntary
• EU Directive on supply chain security (under
  development)
• Revised EU-Customs Code (under development)
• WCO framework of standards to secure and
  facilitate global trade (under development)
• Increasing number of multinationals apply their
  own standards
• ISO Standard (under development)

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What is the roll of the WCO?

• WCO has 161 members, 2/3 from less developed
  countries
• Council resolutions can not be enforced
• Upon request of G-7 and IMO in 2002 they
  established a joint Customs-Trade Security Task
  Force
• Unique Consignment Reference
• 27 data elements
• Advanced cargo information
• A supply chain security standard

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The WCO security standard

• WCO framework of standards to secure and
  facilitate global trade
• Pillar 1 Customs to Customs
• Pillar 2 Customs to Trade
• Problems
• Mutual recognition
• Implementation cannot be enforced
• Lack of capacity (quantitative and qualitative)
• How to maintain a global level playing field

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Working towards an ISO standard

• TC 8 (Maritime equipment)
• Develop an ISO Publicly Available Specification
  (PAS)
• Develop Guidelines to this PAS
• Include statutory requirements
• Similar to ISO 9000
• Ready by end 2005
• To be further developed into a full ISO standard
• Aiming at accredited certification (similar to
  ISO 9000) to create the level playing field

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Why certification to an ISO Standard?

• Transparent communications
• Underpin trust and confidence between
  partners in the supply chain
• Facilitate mutual acceptance of secure
  traders
• One world wide level playing field for all
  players in the supply chain
• Avoid multiple assessments
• A clear and concise reference in contractual
  agreements
• A risk-assessment tool for authorities and
  industry
• A tool to select suppliers/sub-contractors

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What have all these standards in common?

• Assess the risk of your own operations
• Take adequate hardware measures to prevent
• Unauthorised access
• Tampering of cargo
• Take adequate organisational measures to ensure
  that
• Only reliable staff is employed
• Staff is motivated and aware
• Only the correct cargo is loaded
• Information is correct and secured

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Cost and Benefits

• Cost depending on how well you are organised now
  
• Implemneting ISPS costed USD 25.000 / ship
• Benefits depending on how well you are organised
  now
• Reduced risk to loss of reputation
• Reduced loss due to theft and damage
• Increased competitive advantage
• AEOs will get preferential treatment by customs
• Certified management systems create efficiency
  gains

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for your attention. Peter.Mackenbach_at_dnv.com 31
10 292 27 86