Reinforcing trade security : an unavoidable path…

Ever since the terrorist attacks of September 11 2001, the international community has been looking for ways to reinforce trade security for the entire supply chain.
Washington has put in place a considerable number of regulations especially designed to control importation flows. They include notably the C-TPAT (Customs – Trade Partnership Against Terrorism).

There is consensus that a security certification system for the transportation of goods is a necessary instrument in the fight against international terrorism. At stake is to respect these new rules without affecting the fluidity of global traffic whilst ensuring an acceptable profitability threshold for supply chain professionals. CONEX is rising to the challenge. After having efficiently put in place the new customs procedure, DELTA, the company is now finding innovative solutions and new IT tools in response to this most recent demand.

This article aims to decode the discussions in progress and outline what is at stake … 149 of the 171 WCO (World Customs Organisation) member countries have signed the SAFE agreement enabling designation of ‘safe’ supply chain operators, with the objective of making international trade easier and more secure. The 27 European Union member states have, for their part, adopted the “Authorised Economic Operator” (AEO) procedure, a voluntary certification granted by each national customs administration to manufacturers, transporters, forwarding agents and customs brokers or depositors who apply.

Since 2003, the US customs CBP – Customs and Border Protection obliges ports of departure to scan ‘high risk’ containers or those presenting ‘a reasonable doubt’ as part of their CSI (Container Security Initiative)

. American Congress has just voted an additional text, the ICS (International Container Security), but also known as “100% scanned” or even the “9/11 commission act”, which by 2012 will make it an obligation to scan 100% of container-transported goods destined for the US before being loaded, obliging some 700 ports around the world to install two types of scanner: one for verifying the presence of radioactive materials and the other giving 3D images of all goods. .

What do these various regulations really mean?

The European AEO procedure is faithful to the SAFE standards decreed by the WCO. Nevertheless, according to French Customs, the benefit of this certification is not necessarily to obtain advantages already conceded by the BOD. The European Customs Union has the possibility of signing bilateral agreement with third countries. In fact this kind of mutual understanding agreement should be reached between the EU and China, Japan and the United States of America in 2009. Negotiations are already underway with Switzerland and Norway. What remains to be seen is how to develop the practical application of these agreements and to understand their implications for logistics companies!

The American CSI application affects only containers imported into the US; these measures don’t apply to American exporters, the US customs administration having no real authority over exports. The least we can say is that this non-reciprocal arrangement is rather a competitive edge offered to American logistics operators.
The future “100% scanned” procedure maintains this advantage since it too is applied to imported containers only. As for traffic flow, one can only imagine how many operators will be affected by this double-scanning in each port! Even the US Customs authorities express reservations about how efficient these measures will be.

The AEO is currently planning 3 types of voluntary certification :
1/ Customs Simplifications
2/ Security – Safety
3/ Customs Simplifications- Security – Safety, grouping the first two and which should eventually disappear, blending with the previous type in the future “Modernised Community Customs Code”.

The advantages of choosing Customs Simplifications certification are: a commitment from Customs to carry out fewer physical or documentary controls, as well as benefiting from priority treatment in the event of a control. In addition the conditions for being granted further customs simplifications will not mean re-examining those already investigated upon obtaining an AEO certification.
Concerning the Security – Safety or Complete certification, the company opting for either of these certifications will obtain the same advantages as those mentioned above and in addition have the possibility of providing the Customs administration with summary declarations for the entry and exit of goods with a reduced number of requirements.

>>> What is slowing down the setting up of the AEO ?

Switzerland, which is currently negotiating with Europe, recognises only few advantages given the number of customs facilitations operators already possess in their country, the EFTA (European Free Trade Association) providing them with relatively fluid bilateral trade. As for the sometimes costly investments required by the Security – Safety certification (site security measures, means of transport, personnel etc.), these are not seen as being sufficiently compensated by the proposed simplifications..

Since the AEO came into force on 1st January 2008, more than 300 requests have been made and 80 certifications granted in Germany, 250 requests and 24 certifications in The Netherlands and around 60 requests with only 5 certifications in France. Why so few? Because the AEO does not provide supply chain operators with any real customs simplifications. It is true that this is a voluntary certification but it could become indispensable and French operators will have every interest to become affiliated. The map of physical flows may well be re-drawn in favour of the most reactive countries such as Germany and The Netherlands. It is essential to stay in step!

The American “100% scanned” procedure, which plans to scan systematically all containers exported towards the US, goes counter to the AEO which, by certifying the company upstream, guarantees the security of supply chain companies which have subscribed (pre-alert), and represents a guarantee for greater traffic fluidity.

Another significant example of the AEO certification procedure’s lack of simplicity and harmonisation is that its application varies from one EU member state to another: Portugal uses the “Surveillance and fraud services” to carry out the work; Luxembourg operates through the “Customs litigation services”; Germany the “Local customs offices”; and Poland the “Regional customs offices” and so on. This is the same certification system that France has chosen to use, at least in terms of the company audit procedure, as the final agreement is granted at a national level by the DG-DDI-E3 (The Directorate General for Customs and Indirect Duties, Bureau E/3).

>>> A new modernised community customs code

Here again this new Code will represent real progress for the EU Customs Union which celebrates its 40th year of existence this year. The text has just come into force, however decisions concerning its application will only be made in 2 or 3 years time… ‘Wait and see’ is the response given by certain supply chain operators. Nevertheless, it is essential to remain informed in order to follow developments: CONEX is on the lookout for you.

What actions are CONEX and its subsidiary ED Editions taking ?

In light of this new customs and global security challenge and faced with a situation which is at the very least disparate (various overlapping international treaties with in addition numerous bilateral agreements under negotiation and a large number of unanswered questions), CONEX is active! Wasn’t it CONEX who appointed the first ever customs anthropologist in 2005, who was at the time already given the task of making a customs specifications inventory of emerging countries such as India and China ?

- CONEX is keeping track of conclusions from the various bilateral agreements currently underway, as much between Europe and third countries as between the USA and the rest of the world, not forgetting how they are applied in the field.

- CONEX is informing future users and its customers. The first information day on the subject of the AEO, the 27th May 2008, at ED Editions in Neuilly-sur-Seine, brought together some 150 participants; other training events will be organised in the future.

- CONEX is helping its customers to fill out the certification request questionnaire. Being linked to its DELTApass platform now already gives them an added advantage, as this certification requires a certain number of criteria in the area of commercial or accounting records, electronic access to these records by the customs authorities, and a data archival storage system.

- CONEX offers a “wealth of propositions” to the authorities who are developing the practical aspects of these new regulations. CONEX participated actively for example, at the EFA European Customs Union Conference in Luxembourg on 5th and 6th June 2008, where these subjects were vigorously debated.