1. RISK IN THE SUPPLY CHAIN

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10. 10 © 2010 Expeditors International of Washington, Inc. Supply Chain Threats Abound – Security & Political Risk © Control Risks, 2010 Source: www.riskmap-controlrisks.com

11. 11 © 2010 Expeditors International of Washington, Inc. Supply Chain Threats Abound – Corruption / Bribery

12. 12 © 2010 Expeditors International of Washington, Inc. Supply Chain Threats Abound – Cargo Theft Courtesy: © Freightwatch International, 2010

13. 13 © 2010 Expeditors International of Washington, Inc. Supply Chain Threats Abound – Cyclones / Hurricanes

14. 14 © 2010 Expeditors International of Washington, Inc.

15. 15 © 2010 Expeditors International of Washington, Inc. Risk Management – A Conscious Choice Risk Assessment – Companies gather internal and external intelligence about their supply chains and the threat environment in order to make well-informed risk choices for the enterprise. Risk Control – Companies may choose to manage a risk by putting controls in place either to reduce the likelihood that the risk will materialize or to reduce the impact on the business should an event occur. Each organization must determine its own appetite for risk. Risk Transfer -- Companies may transfer risks to insurance markets. Such transfers may work in tandem with a risk control strategy. Certain risks, such as damage to reputation, are inherently uninsurable. Risk Acceptance – Companies may decide to accept or ‘self-insure for’ the risk. Doing nothing means accepting the risk. Risk management implies doing so knowingly, after reviewing intelligence about the threats. Risk Avoidance – Companies may change business practices (e.g., by changing sourcing locations) to avoid a high risk practice or area.

16. 16 © 2010 Expeditors International of Washington, Inc. Supply Chain Threats Cargo Theft & Smuggling Laws and Regulations Political Unrest Natural Disasters Labor Disruptions Global Economy Terrorism

17. 17 © 2010 Expeditors International of Washington, Inc. Supply Chain Attack Security Programs Robust, Comprehensive, Documented Personnel Security Information Security Access Control Physical Security / Systems Training & Awareness Incident Reporting & Analysis Service Provider Management Measure, Audit Ownership

18. 18 © 2010 Expeditors International of Washington, Inc. Enhanced Security Goods In Transit Enhanced Security Solutions Security Escorts Team Drivers GPS, Geo-Fencing Tamper-Evident Technology & Deterrents Packaging Tracking & Tracing Communication Insurance!!

19. 19 © 2010 Expeditors International of Washington, Inc. Supply Chain Protection Security Programs Government, Industry, Partnerships C-TPAT FAST PIP AEO BASC & TAPA TSA - IACSSP, CCSP OSHA

20. 20 © 2010 Expeditors International of Washington, Inc. More Information U.S. Department of Homeland Security (DHS) and Customs & Border Protection (CBP) U.S.: Customs-Trade Partnership Against Terrorism (C-TPAT), Free and Secure Trade (FAST) Canada: Partners in Protection (PIP) European Union: Authorized Economic Operator (AEO) Latin America: Business Alliance for Secure Commerce (BASC) TAPA: Transported Asset Protection Association US: Transportation Security Administration, IACSSP US: OSHA (Business Continuity & Emergency Preparedness)

21. SUPPLY CHAIN

22. 22 © 2010 Incoterms ® Incoterms ® = INternational COmmercial TERMS First Developed by the International Chamber of Commerce (located in Paris) in 1936 and revised in 1953, 1967, 1976, 1980, 1990, 2000 & 2010 INCOTERMS ® are available in their full form through the ICC's publication, "INCOTERMS ® 2010". The purpose of Incoterms ® is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. COST - RISK - OBLIGATION Terms of sale International business vs domestic (UCC)

23. 23 © 2010 What Incoterms ® 2010 are not LAW. They must be specified the contract (sales order, purchase order) in order to apply They do not address passage of title or recognition of revenue They are not credit terms Do not protect a party from risk of loss Define the remedies for breach of contract Address more than one contract (drop shipments)

24. 24 © 2010 How to use Incoterms correctly All Incoterms ® must accompany a named place – the more specific the better Ensure both parties are using the correct version of Incoterms

25. 25 © 2010 Break it down!

26. 26 © 2010 Named place (on seller’s side) EXW FCA

27. 27 © 2010 FCA + Named Place (on seller’s side) FREE CARRIER

28. 28 © 2010 Named place (on the buyers side) CPT CIP DAT DAP DDP

29. 29 © 2010 CIP + Named place (on the buyer’s side) CARRIAGE AND INSURANCE PAID TO

30. 30 © 2010 DAT + Named place (terminal on buyer’s side) DELIVERED AT TERMINAL

31. 31 © 2010 DAP + Named place (on the buyer’s side) DELIVERED AT PLACE

32. 32 © 2010 DDP + named place (on the buyer’s side) DELIVER DUTY PAID

33. 33 © 2010 Marine only FAS FOB CFR CIF

34. 34 © 2010 FOB + Named place (loaded on a vessel, seller’s side FREE ON BOARD

35. 35 © 2010 CFR + Named place (a port on the buyer’s side) COST AND FREIGHT

36. 36 © 2010 CIF + Named place (a port on the buyer’s side) COST AND INSURANCE PAID TO

37. 37 © 2010 EXAMPLES: CPT LONDON, INCOTERMS 2010 CIF WARSAW POLAND, INCOTERMS 2010 DDP BROAGER DENMARK, INCOTERMS 2010, MINUS VAT FOB DETROIT MICHIGAN, INCOTERMS 2010

38. 38 © 2010 Incoterms ® 2010 Information gathered from International Chamber of Commerce and available in full form in the Incoterms Chamber of Commerce Incoterms 2010 iccbooksusa.com www.iccwbo.org/incoterms

39. 39 © 2010 Accidents happen….

40. 40 © 2010 Legal Liability Source: Wikipedia DEFINITION: –In Law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. –Under English law, with the passing of the Theft Act 1978, it is an offense to evade a liability dishonestly. Payment of damages usually resolved the liability. –Vicarious liability arises under the common law doctrine of agency-respondeat supior- the responsibility of the super for the acts for their subordinate.

41. 41 © 2010 Is your freight on the water or in the water?

42. 42 © 2010 Ocean Carrier’s Liability Why are carriers allowed to limit their liability? COGSA, the Carriage of Goods by Sea Act, limits carrier’s liability to $500 per CSU CSU = Customary Shipping Unit –1000 cartons –20 pallets –1 container Do you think carriers are always going to be liable?

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44. 44 © 2010 When are Ocean Carriers NOT Liable? Neither the carrier or ship owner will be responsible for loss or damage arising or resulting from: 1. Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship. 2. Fire, unless caused by the actual fault or privity of the carrier. 3. Perils, danger, and accidents of the sea or of other navigable waters. 4. Act of God. 5. Act of war. 6. Act of public enemies. 7. Arrest or restraint of princes, rulers or people, or seizure under legal process. 8. Quarantine restrictions. 9. Act or omission of the shipper or owner of the goods, his agent or representative. 10. Strikers or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general; Provided that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts 11. Riots and civil commotion's. 12. Saving or attempting to save life or property at sea. 13. Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods. 14. Insufficiency of packing. 15. Insufficiency or inadequacy of marks. 16. Latent defects not discoverable by due diligence. 17. Any other cause arising without the actual fault and privity of the carrier without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.

45. 45 © 2010 Now what if this happens….

46. 46 © 2010 Air Carrier’s Liability Warsaw Convention “Except as otherwise provided in carrier's tariffs or conditions of carriage … carrier's liability shall not exceed 19 SDR’s or the equivalent per kilogram of goods lost, damaged or delayed, unless a higher value is declared by the shipper and a supplementary charge paid.”

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48. 48 © 2010 When are Air Carriers NOT Liable? Carriers are not responsible for things that occur outside of their control such as: Act of Nature Act of War Terrorism Consequential Damage Hijacking

49. 49 © 2010 Pacific Coast Hwy, CA. Loss in Excess of US$800,000

50. 50 © 2010 What happened to the driver?

51. 51 © 2010 Truckers’ Liability Truckers’ liability vary by country In the US, truckers are liable for $0.50/lb Truckers are not responsible for losses that occur outside their control

52. 52 © 2010 What about Warehouse Liability?

53. 53 © 2010 Warehouse Liability Warehouse liability differs by region Warehouse liability in the North Central Region is $0.50 per pound with a $50 max, whichever is less Warehouse service providers are not responsible for losses that occur outside their control

54. 54 © 2010 Be prepared for the unexpected!

55. 55 © 2010 What Protects Me From Carrier’s Liability? Carriers Liability is very limited and you must prove carrier was at fault Protect yourself with All-Risk Cargo Insurance

56. 56 © 2007 <<< >>TitleCompany InfoSupply ChainProducts and ServicesManagementConclusion>>> CLAIMS MANAGEMENT What is my appetite for risk? Deductible…. Who purchases insurance / their decisions…. Which departments are involved? How is it being signed for? Why is damage happening? Trends

57. 57 © 2007 <<< >>TitleCompany InfoSupply ChainProducts and ServicesManagementConclusion>>> High Risk Countries – Continental Africa AlgeriaEthiopiaNigerEgypt AngolaGabonRwanda BeninGhanaSenegal BotswanaGuineaSomalia Burkina FasoGuinea Bassau SudanCameroonKenya TanzaniaCentral African Republic LiberiaTogoChad LibyaTunisiaCongo MaliUgandaCote d’Ivoire MalawiWestern SaharaDem. Republic of the Congo MauritaniaZambiaDjibouti MoroccoZimbabweEquatorial Guinea MozambiqueEritreaNamibia *note South Africa is not considered special risk countries

58. 58 © 2007 <<< >>TitleCompany InfoSupply ChainProducts and ServicesManagementConclusion>>> High Risk Countries – Former USSR & SB AfghanistanGeorgia Russia AlbaniaKaliningrad Serbia ArmeniaKazakhstan Tajikistan AzerbaijanKyrgyzstan Turkmenistan BelarusMacedonia Ukraine BosniaHerzegovina Moldova UzbekistanCroatia Montenegro Yugoslavia

59. 59 © 2010 Q&A Kerri Sykes Regional Risk & Insurance Manager Expeditors International – North Central Phone: (734) 857-5047 E-mail: kerri.sykes@expeditors.com

60. © 2010 Expeditors International of Washington, Inc. All information contained herein is business confidential and proprietary and may not be reproduced in any form without advance written consent of an authorized officer of the copyright holder.