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Trade Facilitation Modernization and Supply

Chain Security

Douglas BrowningMarch 2006Sandler & Travis Trade Advisory Services

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The Supply Chain Management Challenge

Experts fear that the Marine Transportation System will be used by terrorists to attack the cargo supply chain.

A single occurrence anywhere within the supply chain could require at least six months to inspect and release all cargo

Container and facility security have never been concerns for the general public

► Media has locked onto risk of attack with reports that have spread fear and concern about the security of the supply chain

►The sheer volume of global maritime container trade with its inherent vulnerabilities makes it an attractive target

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Key Drivers

Strengthen safety and security

Improve productivity and efficiency

Reduce costs

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Assumptions► International trade is projected to at least double to

$2.2 T by 2020► Major shippers will continue to rely on “just in time

delivery” and many will move to freight in transit as a virtual warehouse, requiring greater visibility into the supply chain

► Security of the supply chain will continue to be an issue in all modes of transportation (air, sea, and land) as the threat of terrorism persists

► There will be a continuing move by companies to outsource functions and activities that are not core to their business

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Assumptions (continued)► Regulatory efforts by governments to enhance their zones of

security will continue to place responsibility on key players in global trade to take steps to secure and improve visibility into their supply chains

► It is estimated that at least 15% of the cost of global trade represents inefficiencies in the process that companies could recover

► Information facilitating supply chain logistics will flow almost exclusively in electronic form, the management of which will be critical to a company’s success

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Government Response Created Department of Homeland Security Created Transportation Security Administration Reorganized Customs, Immigration and Agriculture inspections into single Bureau Passed Maritime Transportation Security Act – 2002 Allocated more than $700 million in Port Security grants for US port authorities

and terminal operators Implementing Transportation Worker ID Cards (TWIC) to improve access control

at port facilities Operation Safe Commerce grants to demonstrate some technologies that will

enhance supply chain security Smart Box, Smart Borders and related initiatives Executed an aggressive implementation strategy

— Improving targeting systems using advance information – 24 hour rule— Partnering internationally to extend the zone of protection – Container Security

Initiative— Increasing security by partnering with the private sector – Customs – Trade

Partnership Against Terrorism— Deployed advanced inspection technologies and equipment – Non-intrusive

inspection equipment

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Global Security Requirements that Impact Trade Facilitation & Supply Chain Management

ISPS – International Ship and Port Security MTSA – Maritime Security Act of 2002 CSI – Container Security Initiative C-TPAT – Customs Trade Partnership Against Terrorism 24-Hour Advanced Notification 96-Hour Advanced Notice of Arrival

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…are driving the need to balance security and trade modernization

Trends in the Global Trade Environment

Growth in Supply Growth in Supply Chain CapabilitiesChain CapabilitiesProliferation of Proliferation of

Global Trade Global Trade                     

Department of Homeland Security

Secure Cargo Secure Cargo InitiativesInitiatives

11/9/01World Events

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So What Is on The Horizon?

• Security

• Modernization/Facilitation

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SECURITY

• Standards• Competitiveness issues• Specific program areas

C-TPAT CSI

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Modernization/Facilitation

• Security = Modernization

• WCO Framework

• ACE

• ATDI

• ITDS

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The Solutions Will require an integrated approach that combines efficiency with security and

regulatory compliance Will address all existing and new governmental and international standards and

requirements in the international trade, ports and supply chain arena Outsourcing and managed services solutions that allow companies to focus on

their core business There will continue to be a need to balance flow with security

— Developing a multimodality Transport Visibility Chain— Container and cargo non-intrusive inspection and similar detection systems — Smart box, seals, intrusion detection and notification— Ship/port/logistics provider interfaces— Global data exchange on a timely basis

Greater role in identifying and structuring regulatory and process requirements within the supply chain environment

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Thank YouDouglas Browning

Senior VP Global Modernization

and Development

Sandler & Travis Trade Advisory Services

dbrowning@strtrade.com