Less and Better Data to build Trust and Efficiency Pioneering Paperless Trade: The way covered and the way ahead Experience of IATA UN/CEFACT Executive Forum Geneva , 20-21st June 2005

Who we are and what we do Who we are: What we do: IATA: International Air Transport Association What we do: represent, lead, and serve the airline industry drive “Simplifying the Business” (via CEO mandate) Simplifying the Business covers: Air Passenger: 100% e-ticket, CUSS, RFID, Bar Coding Air Cargo: IATA e-freight Brief introduction into your company.

Background/Business Drivers Air cargo: a good news story Air cargo: a complex business! In 25 years average end-to-end transport time for a consignment remains at approx 6.5 days (excluding flight time). Average of 20-30 paper documents accompany “Master Air waybill” for each consignment (enough to fill 39 747-400 freighters p.a.!) Air cargo: a simplification opportunity! Cost to issue and process paper docs is c.30 US$ per consignment when electronic methods could reduce this figure by 80% Cost saving opportunity for air cargo industry of 1.2b US$ p.a. Background on the implementation of the Single Window or Integrated Logistics Platform (SW). Who/what were the business drivers? What problem had to be solved? Which agendas/policies were addressed? Role of technology and standards. Requirements of cross border trade. Who are the main participants in the Single Window - i.e. which government Departments, business and other agencies participate?

IATA e-freight: Objectives Eliminate need to produce and transport paper documents for air cargo shipments by moving to an industry-wide, simpler, electronic, paper-free environment Enable air cargo industry benefits of c. $1.2billion per annum, arising from freeing the supply chain process from dependency on paper. Target “early adopter” implementation by end 2007, full adoption by end 2010 Often single window platforms are implemented in several phases, such as a solution for Customs declaration, then integrating other regular bodies and banks and finally integrated logistics platforms. It would be interesting to see whether there is a common pattern and what could be the growth path in the future. What was the initial scope of the project? How did the project evolve? What are the likely future trends?

IATA e-freight: Strategy Drive a simpler, electronic, paper-free, air cargo industry. Align industry energies Harness forces for change from Customs / Security, and Forwarder “voice of the customer”. Enable industry infrastructure that delivers a simplified electronic operating environment for air cargo. Often single window platforms are implemented in several phases, such as a solution for Customs declaration, then integrating other regular bodies and banks and finally integrated logistics platforms. It would be interesting to see whether there is a common pattern and what could be the growth path in the future. What was the initial scope of the project? How did the project evolve? What are the likely future trends?

IATA e-freight: Blueprint

IATA e-freight Roadblocks: Today we would have paper free air cargo business processes if…….. Governments & Customs have agreed to accept electronic data records as a paper substitute We have satisfied Security Requirements We have agreed industry common procedures for handling electronic versions of ancillary paper documents (invoices etc.) We have introduced an updatable FWB record into airline systems We have improved industry messaging quality We have justified the required programme investment

…And Their Removal We can start now by: Building pilot network linking those authorities ready to move now. Identifying key gaps in major trade flows, and lobbying those authorities to sign necessary treaties, or grant necessary permissions. Ensuring compliance with existing security regimes, and working through WCO / UN to harmonise future requirements. Using data imaging to capture non-standard documents for electronic storage and transmission. In conjunction, promote use of digital signatures or other means of document authentication. Developing necessary messages & system protocols to provide for updatable FWB records. Building on Cargo 2000’s work to date on quality improvement. Developing standard cost/benefit templates for individual use, and providing supporting industry data.

IATA e-freight: Progress so far Dec 04: Development of initial proposal. Mar 05: Broad agreement of IATA Cargo Committee Mar 05: Preliminary “Industry Action Group (IAG)” (CV, LH, BA, EK, SQ, FX) Apr 05: IAG commitment to be “early adopters” Apr 05: IAG commitment to IATA e-freight approach May 05 ->: Forwarder and Customs engagement Often single window platforms are implemented in several phases, such as a solution for Customs declaration, then integrating other regular bodies and banks and finally integrated logistics platforms. It would be interesting to see whether there is a common pattern and what could be the growth path in the future. What was the initial scope of the project? How did the project evolve? What are the likely future trends?

IATA e-freight: Current Structure StB Program Director IATA e-freight Project Director What were the costs for development, implementation and maintenance? Was seed money or subventions needed to start the project? How is system development, implementation and maintenance financed? How are costs recovered and how much are users paying? What was/is the motivation that makes business/governmental agencies use the system (mandatory use of system, saving costs and time, green channel …)? Are there external costs/benefits (Example: economic actors that benefit without contributing to the costs)? Are there any lessons learned/crucial success factors to ensure the financing for development and maintenance of the system? Process & Standards Legal and Regulatory Systems Communications Stakeholder Management

IATA e-freight: Current Structure Board of Governors IATA StB Program Director IATA e-Freight Industry Action Group IATA e-freight Project Director IATA e-Freight Pilots IATA e-Freight Stakeholder Gps What were the costs for development, implementation and maintenance? Was seed money or subventions needed to start the project? How is system development, implementation and maintenance financed? How are costs recovered and how much are users paying? What was/is the motivation that makes business/governmental agencies use the system (mandatory use of system, saving costs and time, green channel …)? Are there external costs/benefits (Example: economic actors that benefit without contributing to the costs)? Are there any lessons learned/crucial success factors to ensure the financing for development and maintenance of the system? Process & Standards Legal and Regulatory Systems Communications Stakeholder Management Planned

IATA e-freight: What are the Benefits? General Accelerated delivery Satisfies new and forecast customs requirements (e.g. US AMS) Reduced error and corresponding dispute rates Reduced labor costs Greater process efficiencies and opportunities Note: We are looking for benefits in general and contribution paperless trade to Security and Efficiency in particular (if there is a significant benefit). It would be interesting to see which groups benefits from paperless trade and how. General: Who are the users? Who benefits from paperless trade? What are the benefits for users the (Government agencies , private sector,...)? What are the benefits for the society at large (contribution to export promotion, security, development of service sector,...)? Are there external costs/benefits (Example: economic actors that benefit from paperless trade without contributing to the costs)? Security and efficiency: Who benefits? Does/how does paperless trade contribute to security (regulatory compliance, counter smuggling, anti-terrorist, ?). Does/how does paperless trade contribute to efficiency of the trade transaction (reducing costs, delays, uncertainties, ?). Is the potential of paperless trade adequately leveraged? What can/should be done? Is Government/private sector aware of potential benefits? If no: why; if yes: is this reflected in system usage?

IATA e-freight: What are the Benefits? Airlines and Freight Forwarders Decrease in FTEs Reduced printing, warehousing and distribution costs Improved cash flow Diminished working capital requirements Revenue retention and growth Increase in market share (versus other transport modes) Aggregate industry financial benefits of USD 1.2 billion per year Note: We are looking for benefits in general and contribution paperless trade to Security and Efficiency in particular (if there is a significant benefit). It would be interesting to see which groups benefits from paperless trade and how. General: Who are the users? Who benefits from paperless trade? What are the benefits for users the (Government agencies , private sector,...)? What are the benefits for the society at large (contribution to export promotion, security, development of service sector,...)? Are there external costs/benefits (Example: economic actors that benefit from paperless trade without contributing to the costs)? Security and efficiency: Who benefits? Does/how does paperless trade contribute to security (regulatory compliance, counter smuggling, anti-terrorist, ?). Does/how does paperless trade contribute to efficiency of the trade transaction (reducing costs, delays, uncertainties, ?). Is the potential of paperless trade adequately leveraged? What can/should be done? Is Government/private sector aware of potential benefits? If no: why; if yes: is this reflected in system usage?

IATA e-freight: What are the Benefits? Importers and Exporters Reduced levels of buffer stock Decrease in insurance premiums Recovery of unclaimed duties Improved cash flow Diminished working capital requirements Note: We are looking for benefits in general and contribution paperless trade to Security and Efficiency in particular (if there is a significant benefit). It would be interesting to see which groups benefits from paperless trade and how. General: Who are the users? Who benefits from paperless trade? What are the benefits for users the (Government agencies , private sector,...)? What are the benefits for the society at large (contribution to export promotion, security, development of service sector,...)? Are there external costs/benefits (Example: economic actors that benefit from paperless trade without contributing to the costs)? Security and efficiency: Who benefits? Does/how does paperless trade contribute to security (regulatory compliance, counter smuggling, anti-terrorist, ?). Does/how does paperless trade contribute to efficiency of the trade transaction (reducing costs, delays, uncertainties, ?). Is the potential of paperless trade adequately leveraged? What can/should be done? Is Government/private sector aware of potential benefits? If no: why; if yes: is this reflected in system usage?

The Top 5 Crucial Success Factors … and Lessons Learned Mandate from the “top” Force for Change (e.g. Customs / Security) Skills and Experience (e.g. Change Management) Critical mass of “early adopter” forwarder, carrier, and customs authorities Implementation focus (e.g. pilots) All paper, not just the Master Air Way Bill! Stakeholder (“Ego”) Management!!! Success factors: From your experience what are the top five crucial success factors (such as national Champion, Government support, PPP, community integration…). Limitations: What are the limiting factors right now (what prevents more users to use the system, what hinders a wide spread uses of paperless trade, the cross border exchange of digital documents)? What are the lessons learned? If we would do it again we would… Which are the future plans?

To sum up: To make paperless trade happen we need to deal with…. Inconsistent Legal and Regulatory Frameworks Customs requirements Data and Communication Standards Data Confidentiality and Security Systems ownership and control Note: This is to contribute to the development of a “Roadmap” for the migration from paper based trade information to paperless trade. We try to identify the crucial framework conditions that will enable paperless trade. Some of the requirements may be a consequence of the ”Limitations” under the previous slide. . What do we expect from our Governments, …? What do we expect from the United Nations system? What are the legal/regulatory requirements that are missing? Do we need a global agenda on paperless trade/pilot projects/funding? Standards and interoperability? …

<Aleks Popovich (popovicha@iata.org)> Thank you! <Aleks Popovich (popovicha@iata.org)>