Written by Dennis Anthony P. Caronan, 22 November 2007
SINCE 9/11, the issue on supply chain security has taken a perspective of very high prominence in the area of global trade. In fact, from a customs perspective, the role of security in most of the developed countries, e.g., United States (US), European Union (EU), Canada, Japan, China, Korea, Australia, Singapore, etc., seems to have taken an even greater role than the collection of duties.
Thus, various types of customs control and security measures have been put in place by these countries. This important development in global trade is a major concern to our Philippine exporters considering that approximately 80% of our total exports for the year constitute exports to these countries.
New US measure
On 27 July this year, the US Congress adopted "H.R. 1" legislation implementing a security requirement for 100% scanning of all containers bound for the US. This scanning will take place in overseas ports using non-intrusive detection equipment such as large scale X-ray machines and radiation detectors. The US requirement is intended to be implemented on July 1, 2012.
The new regulation has attracted concerns from a number of US trade partners citing that the 100% scanning requirement for US bound shipments would be of no benefit to it when it comes to security and would cost a lot of money for legitimate US exporters.
Authorized Economic Operators (AEOs)
Last December 2006, the European Commission adopted regulations for AEOs in the EU. The EU supply chain security program is voluntary and is based on existing security standards for maritime and air transport and the World Customs Organization’s SAFE Framework (Framework of Standards to Secure and Facilitate Global Trade). The goal of the WCO SAFE Framework is to detect high risk shipments and reduce customs processing time for security compliant companies.
The AEO certification is most likely to be used by companies moving large volumes of goods into or out of the EU. Import and export privileges to be enjoyed by companies certified as AEOs include priority response to requests for customs ruling, reduced inspections, less information to be provided for pre-arrival/departure declarations, centralized customs clearance; guarantee waiver or single guarantee for all customs procedures.
The first AEO certificates will be granted in the EU in mid March 2008. AEO certificates will be valid and recognised in all EU countries (the certificate obtained in one EU country will be valid in other EU member states).
Other security initiatives
Customs authorities from other countries are also working together on mutual recognition of supply chain security certificates. The EU and US, for example, are working together on mutual recognition of US C-TPAT and EU AEO certificates. The US C-TPAT (Customs and Partnership against Terrorism) is a joint government and business partnership where companies voluntarily agree to improve in their supply chains.
The EU and Chinese Customs are also working on bilateral recognition of supply chain security standards. Canada’s Partners in Protection (PIP) and US C-TPAT certificates already have mutual recognition. Australia is conducting an AEO pilot program in cooperation with the US and New Zealand. Singapore has completed its AEO pilot program, and last May 2007 the "Secure Trade Partnership" was officially launched. Singapore is planning to work on mutual recognition with New Zealand, Australia while US, Japan, China and Korea declared that they will work closely to evaluate possible directions of bilateral AEO programs.
Impact on export manufacturers
Although these certification programs will take time before they are mutually recognised at a global scale and may not yet impact on Philippine based-exporters/manufacturers immediately, it is very possible soon that global contractors will require their Philippine-based partners (e.g. toll manufacturers, sub-contractors) to be compliant to certain degrees of supply chain security measures before they are allowed to export.
The new HR 1 measure may also likely impact transshipment of Philippine goods to the US considering the delay that exporters will likely experience as a result of the scanning and radiation monitoring requirement. Considering that the US is among the biggest Philippine export market, it is important that Philippine exporters remain competitive through their ability to make on-time deliveries.
It is important that companies should look seriously into the various security programmes and understand the impact of said programmes on the timely movement of their goods across international borders.
The security programs are complex and may require more detailed understanding given the extent of the company’s trade involvement and the impact on its business.
If we are to be globally competitive and at par with our rival traders, it is high time that Philippine exporters already include this important item in their operational budget.
