interest driven approach to enforce the supply chain...
TRANSCRIPT
Interest driven approach to enforce
the supply chain through the AEO
WCO 3rd Global AEO Conference
Jimmy Pang (Vice President of SCSA)
May 2016
Supply Chain Security Associationwww.scsasecurity.org
Interest driven
approach to enforce the
supply chain through the AEO
Trade Facilitation Through Supply Chain Security
HKCAD RAR Review Group – Member
Trainer for AEO Auditor Team of HK C&E Dept.(2010)
Lecturer & course advisor of the in IT Risk Management and logistics
Security Management of SCOPE of City University of HK
IATA DGR Instructor & HKCAD RAR Qualified Trainer
PISA (Professional Information Security Association) former program
committee member
Speaker in APEC meeting 2015 (Philippine and Taiwan)
(APEC's Emergency Preparedness Working Group)
Active participate in world wide supply chain conferences
since 2006 (APEC, WCO, ICAO, IATA )
Over 20 years in consulting industry & MBA holder
Jimmy Pang 彭偉樂
• Founder & Vice President of Supply Chain Security Management Association
• TAPA Asia Hong Kong Representative & Shadow auditor
Interest driven approach to enforce
the supply chain through the AEOAbout Supply Chain Security Association
Supply Chain Security Association (SCSA) is founded by a group of professionals, namely
- Supply Chain Management
- Security management
- Information Technology Management in April 2002
SCSA aims to address the awareness and give
solutions to the increasing security threats that
is unavoidable in the current running and
operations of the supply chain’s existing
business.
Interest driven approach to enforce
the supply chain through the AEOAbout Supply Chain Security AssociationOur Mission• We believe in the joint effort of supply chain and appointed security professionals, we
are able to enable safety measures be implemented in the most effective way.
• It is our ideal to help optimize Supply Chain operations & management with the most
effective risk management scheme.
Our Credentials• With over 1,000 members in Hong Kong and over 100 seminars and training programs related to
supply chain security have already been taken place in Hong Kong, China and Singapore, with the
cooperation of relative Universities such as (Chinese University of HK, City University of HK) and other
professional bodies.
• Participated in the APEC STAR meeting (Supply Chain Security Conference) since 2006, WCO supply
chain security conferences since 2007, WCO AEO conference at Korea 2012 & Madrid 2014.
• Organized the liaison between the SCSA YMC group and various Universities in the promotion of
the concept and the significance of Supply Chain Security concerns.
• Exclusive seminars for AEO took place since 2008.
• Supporting organization for Interpol World 2015.
Interest driven approach to enforce
the supply chain through the AEOSCSA in AEOSince 2006
• Researched on WCO Safe framework
• APEC STAR meeting (Supply Chain Security Conference), 2006-2008
• 1st AEO / WCO safe framework seminar 2008, 2010
• WCO conferences since 2008-present
• Conducted Training Course for Chinese University of Hong Kong
• Conducted the AEO auditor training for Hong Kong Customs AEO team
• Initiated 1st HK AEO pilot project in 2011
• WCO AEO conference since 2012
• Researched on AEO education & integration with other SCS standards (ACC3,
TAPA FSR, RAR)
Interest driven approach to enforce
the supply chain through the AEO
Today’s agenda
1.About the SCSA AEO Pilot Run Project
- Focus & Strategic project selection
2.Findings
- Various supply chain security standards benchmark
- The changeling that the industry facing
3.Transforming their concerns to be best practice for promoting AEO
- Enhancing the AEO security controls to address other concerns
(i.e. hidden DG, counterfeit component and commercial risk)
4.Conclusion
Interest driven approach to enforce
the supply chain through the AEOWhy Forwarding Industry?
Supply chain Security Association initiated an AEO Pilot Run project for Hong Kong supply chainindustry in 2011, Hong Kong as one of the higher number of forwarders’ port, the 1st stage is focusedon forwarding industry.
Source www.vtc.edu.hk/uploads/files/publications/transport_logistics_training_board/en/2014%20MPS
%20Rpt/2014%20TLTB%20MPS%20Report%2020150618(1).pdf
AEO Pilot Run Project Number of freight forwarders in Hong Kong
About The Pilot Run Project
Interest driven approach to enforce
the supply chain through the AEO
The Project Mission AEO Pilot Run Project
To Enhance The Hong Kong International
Supply Chain Competitive Advantage
About The Pilot Run Project
Trade Facilitation Through Supply Chain Security
Supply Chain Security Related Standards
Hong Kong China Singapore Japan USA EUInitiative
Industrial RA program 1437No RA
program268 162 No data No data
National
EU 2014 ACC3
Screening &
ValidationGreen Green Green Green Green N/A
C-TPAT 100+ No data No data No data 9600+ No data
Customs AEO 28 3453 121 542 10832 13885
Commercial TAPA (FSR) 64 129 31 14 142 423
Last update : Jan 2016
An overview the global popular SCS standard or program, Hong Kong has a very good foundation for supply
chain security, which able to continue to keep Hong Kong as one of the important port in the global supply
chain, Also enhance the competitive advantage.
About The Pilot Run Project
Interest driven approach to enforce
the supply chain through the AEO
The Project Mission AEO Pilot Run Project
To Enhance The Hong Kong International
Supply Chain Competitive Advantage
Approach
Integrate their in-house best practices and
existing complied with supply chain security standards
or regimes;
To learn their concern & challenging to identify the best
way to promote and achieving the AEO
About The Pilot Run Project
Because of that reason, we selected the firm who already have foundation of supply chain security,
for example, firm who already certified TAPA, RAR, C-TPAT or ISO28001,……
\Through the Integration their in-house best practices and existing certified program to learn their
concern & challenging for identifying the best way to promote and achieving the AEO
Trade Facilitation Through Supply Chain Security
SCSA HK AEO Pilot project
Invitation
Screening
Confirmation
Preparation•Scoping
•Risk Assessment
•Risk Management & policy setting
Implementation
•Integration
•Procedure & training
•Pre-assessment
•Validation & refinement
Certification
Pilot Project Implementation
After we screened applicants, tailoring a comprehensive road map for each selected project applicants; from
risk assessment …to certification stage, review all present activities and in-house practice for identify the
scope, and next is risk assessment
Interest driven approach to enforce
the supply chain through the AEO
Related
Standards & Doc.
INTERNATIONAL
STANARD
Iiso/iec
17799
IiNTERNATIONAL TECHNOLOGY – CODE OF
PRACTICES FOR INFORMATION SECURTITY
IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
INTERNATIONAL
STANARD
Iiso/iec
17799
IiNTERNATIONAL TECHNOLOGY – CODE OF
PRACTICES FOR INFORMATION SECURTITY
IiUIBVASJKBADJKVB BN AVAL TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
BDVHJDBDVHJD
TECHNOLOGY – CODE OF PRACTICES FOR INFORMATION SECURTITY
Corporate
Policies & SOP
Regulations
Establish
Processes
Risk
Assessment
Development
Implementation
Monitoring &
Refinement
Continues
improvement
SCS Security
Standards(AEO, TAPA, RAR,ISO,..)
Majo
r fi
nd
ing
s
During the risk assessment, we find there are a lot of control practicesare present, those may not be 100% perfect fit into the AEOrequirement, because…
Comparison of Supply
Chain Security Standards
1. The scope of controls is not comprehensive enough
2. Focus of threats are not exactly same as AEO
3. Those daily controls may not be documented in a systematic manner, either procedure or recording
Project Implementation (Various Standards)
AEO Pilot Run Project (1st stage findings)
Interest driven approach to enforce
the supply chain through the AEOAEO Pilot Run Project (1st stage findings)
Ma
jor
fin
din
gs
As mentioned before, the principle of security controls are very similar, common aspects are in AEO and other
standards.
Review on Major 3 StandardsTrade Facilitation Through Supply Chain Security
Same Security Principle : No disruption to the supply chain
Common Controls (Easier to Achieve AEO?)
Interest driven approach to enforce
the supply chain through the AEOAEO Pilot Run Project (1st stage findings)
1. The scope of controls may different
RAR AEO TAPA
Target
Group
Shipper , Forwarder,
Terminal & Airline
All parties involved in
international supply chain
Forwarder, trucking and
shippers & Terminal
Threats Aviation security (Bomb
threats)
Trade & Terrorism Criminal threats
Scope Air export only All international trade in
all mode
Selected freight
operations for high
value cargo (mainly air operations)
Ma
jor
fin
din
gs
The scope of AEO is including all Air, Sea and Land international trade issues, but
for the RAR, it’s concerning the bomb threats to aviation security only; for
TAPA, both import and export operations dealing with high-value cargo with
threats from theft, so both scope of standards are less comprehensive than
AEO.
Common Controls (Easier to Achieve AEO?)
Interest driven approach to enforce
the supply chain through the AEOAEO Pilot Run Project (1st stage findings)
Ma
jor
fin
din
gs
RAR AEO TAPA
Requirement Control procedure +
handling practice +
training + recording
Comprehensive
management system
(Control procedure +
handling practice +
training + recording)
Specific high value
shipment handling
framework
(Control procedure +
handling practice +
training + recording)
Time for
Achieve
Within one
month (Audit time
takes 0.5 day)
Months till year
(Audit time takes 6-10
months)
3-5 months(Audit time takes 1- 3
days)
RAR AEO TAPA
Target
Group
Shipper , Forwarder,
Terminal & Airline
All parties involved in
international supply chain
Forwarder, trucking
and shippers & Terminal
Concern
Threats
Aviation security
(Bomb threats)
Trade & Terrorism Criminal threats
Scope Air export only All international trade in
all mode
Selected freight
operations for high
value cargo (mainly air operations)
Common Controls (Easier to Achieve AEO)
Interest driven approach to enforce
the supply chain through the AEO
AEO Pilot Run Project (1st stage findings)1. Extend the controls
2. Refine their best practices and;
3. Document their best practice
Ma
jor
fin
din
gs
Therefore, those controls already give a very important SCS foundation to the firm,
achieving AEO is much easier when compare to others without any best practice. they only need 3 approaches to build their AEO.
Common Controls (Easier to Achieve AEO)
Same Security Principle : No disruption to the supply chain
Interest driven approach to enforce
the supply chain through the AEO
Terrorism
SmugglingHowever, during starting we find that Not many firm eagers to have AEO, as they don’t find
significant benefit in Hong Kong, as a Free Trade Port.
We also try to identify the driver for the forwarding industry, however terrorism, trade crime and
smuggling is not the 1st priority of concerns;
Trade crime
About The Pilot Run Project - Other Findings
What is the effective driver to promote the AEO?
Interest driven approach to enforce
the supply chain through the AEO
The industry is facing costing competition and performance challenging from neighbor ports.
Costing
Performance
About The Pilot Run Project - Other Findings
What is the effective driver to promote the AEO?
Interest driven approach to enforce
the supply chain through the AEO
Deception
Claims
Especially their highest concerns from commercial threats like deception, bad debt, claims or
hidden Dangerous goods, they eager to spend their extra-investment because the impact and
liability are direct and extremely high compare to others threats.
Bad debt
Hidden Dangerous Goods
About The Pilot Run Project - Other Findings
What is the effective driver to promote the AEO?
Trade Facilitation Through Supply Chain Security
Concern issuesHidden Dangerous Goods (Lithium Battery )
Industry Concerns (Challenging)
Ho
ng
Ko
ng
What is the effective driver to promote the AEO?
e.g, under a cross border export trade environment, hidden dangerous goods problem is one of the
biggest concerns to Hong Kong air cargo forwarder, as nowadays Lithium Battery is commonly find in
equipment, toy, gadgets…etc., which are being produce in southern China,
Trade Facilitation Through Supply Chain Security
Concern issuesHidden Dangerous Goods (Lithium Battery )
Industry Concerns (Challenging)
Ho
ng
Ko
ng
Total value :
282.4 Billion USD (2014)
What is the effective driver to promote the AEO?
high portion of world supplied via Hong Kong air export, so their products quality and quantities
are directly affecting the Hong Kong export logistics performance, in terms of safety and revenue;
Trade Facilitation Through Supply Chain Security
IncidentsDate: 1 Dec 2015
Location: Louisiana, United States
Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and
he had only used it for one day before she spotted flames coming from the device while it was plugged
in to charge the battery.
Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/
She said the hoverboard was
ordered on Amazon.com from a
company called Fit Turbo.
The incident is under investigation
by the Louisiana State Fire
Marshall's Office.
Hidden DG cause fire (Lithium battery)
What is the effective driver to promote the AEO?
Industry Concerns (Challenging)
Because of Lithium battery or it’s products are classified as Dangerous Goods in air logistics,
therefore, the cost and safety requirement are much higher than normal general cargo.
Higher power battery products are required higher cost for proper packing and limited quantity
to ship, responsible brand owner and forwarder understand the importance of safety,
Trade Facilitation Through Supply Chain Security
IncidentsDate: 1 Dec 2015
Location: Louisiana, United States
Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and
he had only used it for one day before she spotted flames coming from the device while it was plugged
in to charge the battery.
Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/
She said the hoverboard was
ordered on Amazon.com from a
company called Fit Turbo.
The incident is under investigation
by the Louisiana State Fire
Marshall's Office.
Value Added Best Practices (example)
What is the effective driver to promote the AEO?
Industry Concerns (Challenging)
Hidden DG cause fire (Lithium battery)
however, because of cost reason and air logistics safety requirement is not well known by some
trader and manufacturer; therefore most of the problem is come from the high risk shipper who are
ignorance to safety, which may start from product design, component selection, assembly process
control and event safety testing, not too difficult to understand why their risk is higher than usual
shipment a lot;
Trade Facilitation Through Supply Chain Security
additionally, to the multi-levels consolidation and limitation of jurisdiction, which enhancing the conflict
of interest business environment between commercial interest and compliance duty.
Concern issues
Multi-levels consolidation
Limitation of Jurisdiction
Carrier /
Forwarder
Consolidation
Industry Concerns (situation)
What is the effective driver to promote the AEO?
Industry Concerns (Challenging)
Trade Facilitation Through Supply Chain Security
as long as the trend of demand for higher power battery products & developing web shopping
business model, multi-levels cross border consolidation is more complicated, which start from the
buyer who sit in front of the computer till to the carrier, the multiple effect of those minor problems can
lead to disaster.
Concern issues - MisDeclared / UnDeclaredHidden Dangerous Goods (Lithium Battery )
Industry Concerns (Challenging)
Trade Facilitation Through Supply Chain Security
Hidden DG cause fire (Lithium battery)
Source: Aviation Safety Network
Nature of goods
LHR Leather case, plastic cover, screen protectorAMS Clothes, Plastic Case, RingLHR Phone case, keyboardDXB Mobile Accessory (LCD, Screen guard, leather
case, charger, without battery)
SDQ Power supplySDQ Power supplyLIM Cell phone security display holder set, set incl
power adapter, charge line, connector, sticker,
cable. Remote control
AMS Clothes, Plastic Case, RingLHR Phone case / LED light (without battery)LHR Phone case / LED light (without battery)DXB Leather case, charger, screen guard, no battery,
no magnet.
Source: Aviation Safety Network
Nature of goods
LHR Leather case, plastic cover, screen protectorAMS Clothes, Plastic Case, RingLHR Phone case, keyboardDXB Mobile Accessory (LCD, Screen guard, leather
case, charger, without battery)
SDQ Power supplySDQ Power supplyLIM Cell phone security display holder set, set incl
power adapter, charge line, connector, sticker,
cable. Remote control
AMS Clothes, Plastic Case, RingLHR Phone case / LED light (without battery)LHR Phone case / LED light (without battery)DXB Leather case, charger, screen guard, no battery,
no magnet.
“The focus of dangerous goods is not
only a safety issue but also one of
security…”
Source: International Civil Aviation Organization (ICAO),
Dangerous Goods Panel (DGP), DGP-WG/07-WP/75
such kind of problem, may possible to cause aviation disaster, International Civil Aviation Organization
already name the hidden dangerous goods problem as one of the highest safety & security issue.
Industry Concerns (Challenging)
Trade Facilitation Through Supply Chain Security
Most of the Hong Kong forwarder understand this situation, especially the extremely high liability that
they may face from due diligence environment.
Therefore, liability and commercial risk are effective drivers for promoting AEO.
Concern issues - MisDeclared / UnDeclaredHidden Dangerous Goods (Lithium Battery )
Industry Concerns (Challenging)
Liability & Commercial Risk
Due Diligence
Trade Facilitation Through Supply Chain Security
IncidentsDate: 1 Dec 2015
Location: Louisiana, United States
Jessica Horne of Lafitte said her son received the self-balancing scooter as a birthday gift Nov. 20 and
he had only used it for one day before she spotted flames coming from the device while it was plugged
in to charge the battery.
Source: http://fox40.com/2015/11/30/exploding-hoverboard-blamed-for-destroying-louisiana-familys-home/
Value-added best practice
Source: Aviation Safety Network
Nature of goods
LHR Leather case, plastic cover, screen protectorAMS Clothes, Plastic Case, RingLHR Phone case, keyboardDXB Mobile Accessory (LCD, Screen guard, leather
case, charger, without battery)
SDQ Power supplySDQ Power supplyLIM Cell phone security display holder set, set incl
power adapter, charge line, connector, sticker,
cable. Remote control
AMS Clothes, Plastic Case, RingLHR Phone case / LED light (without battery)LHR Phone case / LED light (without battery)DXB Leather case, charger, screen guard, no battery,
no magnet.
Source: Aviation Safety Network
Nature of goods
LHR Leather case, plastic cover, screen protectorAMS Clothes, Plastic Case, RingLHR Phone case, keyboardDXB Mobile Accessory (LCD, Screen guard, leather
case, charger, without battery)
SDQ Power supplySDQ Power supplyLIM Cell phone security display holder set, set incl
power adapter, charge line, connector, sticker,
cable. Remote control
AMS Clothes, Plastic Case, RingLHR Phone case / LED light (without battery)LHR Phone case / LED light (without battery)DXB Leather case, charger, screen guard, no battery,
no magnet.
“The focus of dangerous goods is not
only a safety issue but also one of
security…”
Source: International Civil Aviation Organization (ICAO),
Dangerous Goods Panel (DGP), DGP-WG/07-WP/75
So, how to detect it?
Value Added Best Practices (example)
Hidden DG cause fire (Lithium battery)
Following is an example is one of the best practice that we learn from the pilot project and which now
helping us to promote the AEO. So, the forwarder, how to detect the shipment may have
misdeclarated hidden Lithium battery? Even possible to know they are using counterfeit battery?,
even some goods have fake test report?
Trade Facilitation Through Supply Chain Security
Value-added best practice
Hidden DG cause fire (Lithium battery)
So, how to detect it?
During the firm encounter a new client, the well trained salesman conducts a client evaluation, and
try to visit the client facility, beside complete the client profile, also further explore the business
potential and risk,
Terrorist Safety
Smuggler Bad Debt
Profile
Value Added Best Practices (example)
Trade Facilitation Through Supply Chain Security
Value-added in security control best practice
Terrorist Safety
Smuggler Bad Debt
ProfileProfile
Enhancing Controls - Hand search - Zero credit terms…etc.
Enhancing the client loyalty - Free handling charge,- Priority of delivery- Longer free storage period… etc.
Business partner evaluation
After all, the output is like hotel / airline loyalty program, each client profile being rated with risk
of commercial, criminal, smuggling and hidden DG of Li-battery, it is not only allied with A.E.O.
requirement ‘business partner evaluation’, which basically allied with R.A.R. and TAPA, as
commercial risk is the priority of concern, especially on bad debt and smuggling from cross
boarder cargo, firms are eager to input and update the profile for minimize their risk
Value Added Best Practices (example)
Trade Facilitation Through Supply Chain Security
Value-added best practice
Hidden DG cause fire (Lithium battery)
So, how to detect it?
e.g. when they walk through the production of the gadgets, they will observe the operation
environment, especially the packing box of battery at production, they already know they factory
using counterfeit battery in the product, whereas qualified battery would not pack in that way, it will
give the firm have an alert to the shipment from this new client.
Value Added Best Practices (example)
Interest driven approach to enforce
the supply chain through the AEO
Hidden DG cause fire (Lithium battery)
So how to detect it?Commercial
- Bad debt
- Claims
Criminal
- Deception
- Robbery
- Smuggling
Management
- Error
- Poor Client
info.
Business Concerns (Risk)
From Commercial Perspective
Value Added Best Practices drives Compliance
Value-added best practice
of course there is no silver bullet, but under the deal diligent and limited jurisdiction
cross border trade environment, their liability being minimize, and some problematic
client may walk away already.This is only one of the example that when the firm implementing the AEO , and they can managing
multi-risk by refining one action, actually, from the pilot run project, also other commercial risk and
criminal threats are being improved in different controls activities.
Interest driven approach to enforce
the supply chain through the AEO
Compliance
Profitable
BusinessAs long as more controls practice being enhanced, we find more business risk being tackle, which is
value added to the AEO applicant, in result which is able to achieve both compliance and creating
more profitable business model.
Value Added Best Practices drives Compliance
Value-added best practice
Trade Facilitation Through Supply Chain Security
A new industry initiative ‘ Li-CAT program’ suggested by
our members
Li-CAT is a non-profit program bringing new, safe insight to the industry.
Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential
threats, at the same time maintaining the economic potential of the industry.
Value Added Best Practices drives Compliance
After all best practices exchanged, some members further suggested to systematic to those best
practices from shipper evaluation, people training, questionable cargo handling procedure…etc.
Trade Facilitation Through Supply Chain Security
A new industry initiative ‘ Li-CAT program’ suggested by
our members
Li-CAT is a non-profit program bringing new, safe insight to the industry.
Seeking to safeguard the world’s vibrant aviation industry from Li-battery potential
threats, at the same time maintaining the economic potential of the industry.
Value Added Best Practices drives Compliance
to set up a ‘White-list’ program to give priority to their ‘secure & safe cargo’, which a further
enhancement from our A.E.O. pilot program, which is well received by the cargo forwarder.
Interest driven approach to enforce
the supply chain through the AEO
In conclusion
Nowadays the global trade environment is more complex,
problem is dynamic,
Solution is also need to be dynamic, Government policy
and industry best practice integration is the way to go,
AEO giving the global supply chain a security framework,
continue share and learn from the industry and globally is
the way for trade facilitation.
Interest driven approach to enforce
the supply chain through the AEO
Let’s share your
best practice to drive
a safe & secure
supply chain!
Thanks you