Facilitating Trade in the New Security Environment Mr Tom Butterly United Nations Economic Commission for Europe March 2004

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

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

Response to 9/11 US undertook emergency analysis of vulnerability and identified sea-borne containers as main threat Major shift in focus – to the threat FROM trade –Push Back the Boarders – CSI –Risk Profiling – Advance information United Nations Economic Commission for Europe

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.

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 United Nations Economic Commission for Europe

Source: Philippe Christ: OECD

CSI Ports in Europe Le Havre Felixstowe Bremerhaven Hamburg Algeciras Spain France Germany Italy Genoa La Spezia Coming Soon United Kingdom Göteborg, Sweden Rotterdam, Netherlands Antwerp, Belgium Currently Operating (Click anywhere to continue or press to exit this presentation)

Advance Cargo Information

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

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)

WCO ACI Guidelines Advance information concept for risk analysis Defines core set of data for security ( 24 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

International Ship and Port Security Code (ISPS) Developed by IMO Comes into effect on July Mandatory Big push to get in place by 1 July

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

Source: Philippe Christ: OECD

Integrated and Secure Supply Chain Authorised Trader Concept Authorised Supply Chain - Authorised Trader, Port, Shipper, Agent, ….

US Customs-Trade Partnership Against Terrorism (C-TPAT) Authorised Trader Concept Partnership approach Benefits to the “good guys” Voluntary

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 United Nations Economic Commission for Europe

Source: Philippe Christ: OECD

So, the security system is in place. Can trade still function??

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) United Nations Economic Commission for Europe

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 Cost Guard

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 ? A bility to understand the new security environment as a whole?

Cost on Inaction Port shutdown – $10s of billions Total disruption in international supply chains

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 Increased detection rates

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 United Nations Economic Commission for Europe

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 United Nations Economic Commission for Europe

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)

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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