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Dermot J. Leeper

speaking for:

UNECE3rd Executive Forum on Trade Facilitation

Paperless Trade in International Supply Chains Geneva, June 20th 2005

“Private Sector Experiences on new Information Requirements for Secure and Efficient Supply Chains”

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Introduction to FFI Freight Forward Europe (FFE) created in 1994 -

Freight Forward International (FFI) since 1/1/2004

Interest group of nine of the leading global freight forwarders & logistics providers

Employ more than 210,000 people Transport more than 5 million tons air and 5 million teu ocean Turnover of more than 37.7 billion Euro 30% of the Forwarding market worldwide

Kuehne + Nagel

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contents:

Our experiences with air & ocean transportation

What we have learnt

The benefits

The risks

Recommendations

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customs clearance

NOTES: Within GeoLogistics, data transfer is standard.

Customs in every country is different, but sorted out at destination. Some Customs are paperless which speeds the transaction, but

requires EDI Commercial Invoices.

GeoLogistics origin branch

GeoLogistics dest'n branch

value added network

Customs at destination

GeoLogistics origin branch

GeoLogistics dest'n branch

Customs at destination

GLOBAL IT SYSTEM

GeoLogistics origin branch

GeoLogistics dest'n branch

value added network

Customs at destination

GeoLogistics origin branch

GeoLogistics dest'n branch

Customs at destination

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Security pre-alerts

NOTES: Information now has to flow from the origin to destination customs. Different customs requirements makes this model impossible. E.g. AMS, ACI and EU details differ.

GeoLogistics origin branch

value added network

Customs at destination

GeoLogistics origin branch

Customs at destination

GeoLogistics origin branch

value added network

Customs at destination

GeoLogistics origin branch

Customs at destination

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Security pre-alerts

NOTES: So we create quality departments at destination. These have to operate 24/7. So while AMS & ACI are paperless, they are very labour intensive. Note: being compulsory, they were implemented in very short time.

GeoLogistics origin branch

GeoLogistics dest'n branch

value added network

Customs at destination

GeoLogistics origin branch

GeoLogistics dest'n branch

Customs at destination

GLOBAL IT SYSTEM

GeoLogistics origin branch

GeoLogistics dest'n branch

value added network

Customs at destination

GeoLogistics origin branch

GeoLogistics dest'n branch

Customs at destination

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EDI with Carriers

NOTES: EDI supplements paper, it does not replace it. So audit trails are not rigorous and poor data integrity is tolerated. The benefits are uneven, and not strong enough to drive rapid deployment.

space reservation

MAWB or B/L Instruction

consol manifest (HAWB's)

status messages

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EDI with Shippers

NOTES: EDI between shippers and their forwarders is happening. But the

development is very slow. Until this becomes commonplace, we do not have true paperless

trade in the international supply chain.

space reservation

Commercial Invoices

status messages

freight invoices

Ge

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isti

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Security considerations Fraud through forged and incorrect documentation harms consignees, government revenues,

forwarders, and the public: Estimated Euro 3 - 8 Billion Fraud in EU Transit Movements in mid 1990’s due to forged documents

in old paper Old Transit System*. (Evidence is that EU “New Computerised Transit System” has largely eradicated this particular Fraud.)

Unquantified global fraud through forged paper Certificates of Origin should also be eradicated through paperless trading.

But with Electronic Trade there is a Security and Fraud risk from: Hackers accessing electronic systems or portals within the supply chain. Unauthorised diversion of sensitive data.

Physical Security is improved by good track & trace (knowing where the goods are and where they are meant to be). This benefits: The owners of the goods. Governmental security.

* Source - EU Parliament Committee of Enquiry Report

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Benefits of Paperless Trade in International Supply Chains Speedier Data Availability and Transmission Improved Accuracy through less re-keying of data Improved D2D Transit Time Enhanced Customer Service e.g Track and Trace Reduced Fraud / Security Risk Reduced Costs

Labour Stationery Postage & Courier Fees Filing Space Insurance

Less Adverse Environmental Impact

but only if it is done right !

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examples of “not done right”: AMS & ACI are different creating additional work and cost. EDI with airlines is supplementary to paper, so more work & cost. Customs clearance in many countries is only finalised when paper

copies are delivered. Carriers refuse to sign Non-disclosure Agreements [and do not act to

protect data], thus increasing security & fraud risks. Forwarders are too slow to develop paperless processes with shippers.

Re-keying leads to more work and data integrity problems downstream.

Result: the benefits of paperless trade are only partially gained: The supply chain is less efficient and less secure than it should be. Costs are shuffled along the chain, not eliminated.

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What have we learned? Governments have the power to make things happen much more

quickly. Governments can make the supply chain less efficient by failing to

co-ordinate on a multinational basis or between national agencies. Making one transaction paperless does not improve the whole supply

chain – it merely moves the bottleneck (and costs) along the chain. Commercially driven developments have not shown sufficient

benefits for all parties to allow speedy development. Data integrity and audit trails are essential at every stage. There are new risks for forwarders:

Potential liability for Customs debt, and possible criminal proceedings, for submitting Electronic Data as Agents on behalf of the real Principles.

Hackers into any system within the supply chain. Disclosure of commercially sensitive data.

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How can Governments facilitate Paperless Trade? Less “competition” between Governmental Agencies on security issues for political purposes. Instead,

greater co-ordination between Customs and OGA’s to align data requirements and standards to WCO recommendations: Internationally Between National Governmental Agencies

More “partnership” with legitimate trade experts to achieve synergistic benefits for both Trade and Governmental Agencies E.g. the EU Commission’s “Trade Contact Group”

Greater involvement of relevant Governmental Agencies in Electronic Trade initiatives proposed by Trade bodies E.g. the IATA e-Freight Initiative Possible financial support for portals that standardise and facilitate information flow.

Recognition of C-TPAT (Customs Trade Partnership Against Terrorism) status in the US towards Authorised Economic Operator status in the EU, and vice versa.

Eventual pooling of security data between aligned Customs Administrations and OGA’s for optimised Security Risk analysis.

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Freight Forwarding International Vision

FFI is uniquely placed, ready, and eager to work in global partnership with all parties to provide an International Supply Chain that has the optimum efficiency and security for all.

This will only happen with closer co-operation between global Customs Administrations, OGA’s and legitimate trade experts.

FFI is actively participating in the EU “Trade Contact Group” and is in regular contact with US CBP and WCO, advocating the items on the previous slide.

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Dermot J. Leeper

speaking for:

Thank you