THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE

COTECNA INSPECTION • • • Founded in 1974 A leading Inspection Company with over

Container Security EVOLUTION OF SECURITY vs. FACILITATION HIGH GO SLOW ! LOW November 22,

THE « SECURITY » REACTION: EU « 24 -Hour » Rule (coming soon) EU

GOVERNMENTS: Balancing Compliance & Security Cost for Business High Security cost for trade &

THERE IS A « PRICE » FOR SECURITY … • € 1 billion Euros

THE SUPPLY CHAIN SECURITY BENEFITS FOR BUSINESS ARE … Manufacturer Exporter > > >

Manufacturer Receive purchase order Consolidation warehouse Local port Terminal Customs and terminal authorities checks

COTECNA’S EXPERIENCE IN TRADE SECURITY AND TRADE COMPLIANCE PROGRAMS: Þ Trade Security / Supply

WHERE CAN COTECNA HELP? > Supply Chain and Trade Security for imports into the

CONCLUSIONS > There is a balance for governments: > Security Cost and Business Compliance

POINT OF CONTACT INFORMATION Mark R. Miller COTECNA Supply Chain Security - COSEC Tel:

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THE IMPACT OF SUPPLY CHAIN SECURITY ON TRADE FACILITATION AND SUPPLY CHAIN MANAGEMENT Workshop on Trade Facilitation Moscow, The Russian Federation 22 -23 November 2004 Mark R. Miller November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com

COTECNA INSPECTION • • • Founded in 1974 A leading Inspection Company with over 30 years experience Privately owned and managed; parent company based in Geneva, Switzerland; offices in 120 countries Core Business - Inspection of Cargo Member of the International Federation of Inspection Agencies (IFIA) Operates under multiple Government and private sector contracts throughout the world A leading innovator in the use of advanced technology in the inspection process, including: X-ray scanning, Risk Management, Valuation systems, and Container Tracking Cotecna (as a member of the Innovative Trade Network) is a Category A Liaison to Technical Committee No. 8 (TC 8) of the International Standards Organization (ISO) ISO Certified Certificate N° 200202361 November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 2

THE « SECURITY » REACTION: EU « 24 -Hour » Rule (coming soon) EU « approved economic operator » EU « known shipper » Secure Trade in the APEC Region (STAR) US 24 -Hour Rule Container Security Initiative (CSI) Smart and Secure Tradelanes (SST) Operation Safe Commerce (OSC) November 22, 2004 « If you are not with me, then… » > > > Constraints Delays Costs Economic penalites Substitute products Customs-Trade Partnership Against Terrorism (C-TPAT) Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 4

GOVERNMENTS: Balancing Compliance & Security Cost for Business High Security cost for trade & logistics Optimum Compliance Total cost of security compliance Cost for implementing & operating the security measures Governments aim to shift the optimum compliance point toward full compliance! Cost for being noncompliant: penalties and lost incentives Low November 22, 2004 Security compliance level Copyright © 2004 COTECNA S. A. All rights reserved. High >>> www. cotecna. com 5

THERE IS A « PRICE » FOR SECURITY … • € 1 billion Euros in up-front costs and € 560 million Euros in annual costs will be required to meet International Ship and Port Facility Security (ISPS) Code requirements • In addition to this, US maritime security requirements are expected to push shipping costs up by approximately € 6. 2 billion Euros over the next 10 years • Trucking companies in the US have to send complete cargo information to Customs Border Protection (CBP) at an annual cost of $91 million USD “Infinite” Cost of security delivery for trade & governments “ 0 euro” “ 0%” “ 100%” Security efficiency level SOURCE: Deloitte Research But there are significant benefits to business as well !! November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 6

THE SUPPLY CHAIN SECURITY BENEFITS FOR BUSINESS ARE … Manufacturer Exporter > > > Port of Loading Transit Port of Unloading Wholesaler Distributor Retailer & Consumer Supply chain efficiency resulting from trade security lowers costs (e. g. SST – potential savings of $378 to $462 per container as reported to the US Transportation Security Administration). Retail and wholesale visibility with RFID tags facilitates higher turnover ( « full shelf » for the consumer). Proactive security policies and plans enable companies to better manage risk (including additional areas such as pilferage and theft). Crisis response mechanisms provide the opportunity for companies to protect their brands when facing an event. There is a « Good Corporate Citizen » effect resulting from participation in security initiatives. Trade Facilitation for goods undergoing trade security processes. From various sources including: Smart and Secure Tradelanes (SST), Deloitte Research, Hewlett Packard November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 7

Manufacturer Receive purchase order Consolidation warehouse Local port Terminal Customs and terminal authorities checks Containers are loaded on a feeder vessel Truck transport Loading into containers and sealing END-TO-END SUPPLY CHAIN SECURITY IN PRACTICE Final Customer Distribution centre Destination port Transit port Ocean transport Customs and terminal release November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. Ocean transport Transfer to the mother vessel >>> www. cotecna. com 8

COTECNA’S EXPERIENCE IN TRADE SECURITY AND TRADE COMPLIANCE PROGRAMS: Þ Trade Security / Supply Chain Security - COTECNA has been involved in 7 of the 18 trade lanes under the US Operation Safe Commerce (OSC): LOAD CENTER / DESTINATION ORIGIN • Oakland <= Germany • Seattle-Tacoma <= Japan • New York – New Jersey <= Brazil • New York – New Jersey <= Turkey • Los Angeles – Long Beach <= China / Hong Kong • Los Angeles – Long Beach <= Singapore • Los Angeles – Long Beach <= South Africa / Singapore Þ COTECNA (as a member of the Innovative Trade Network) is a Category A Liaison to Technical Committee No. 8 (TC 8) of the International Standards Organization (ISO) Þ Trade Compliance and Trade Facilitation Programs for Governments November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 9

WHERE CAN COTECNA HELP? > Supply Chain and Trade Security for imports into the Russian Federation > Supply Chain and Trade Security for Russian Federation exports into the European Union, the United States and the APEC Region > C-TPAT certification support for companies exporting to the United States November 22, 2004 COTECNA Inspection & Control Services End-to-End Supply Chain Security Cargo Physical Verification Risk Management System Destination Inspection Cargo Data Validation Origin Verification X-ray Scanning Counterfeit Detection Standards Conformity Commercial Inspection Credentialing Personnel Other COTECNA Services Container Tracking Collateral Management (Warehouses) Social Accountability Monitoring ISO Certification Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 10

CONCLUSIONS > There is a balance for governments: > Security Cost and Business Compliance > Trade Facilitation and Security > There are cost reduction and revenue benefits to business in trade security implementation > The challenge of compliance for the business and trade communities can be clearly addressed November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 11

POINT OF CONTACT INFORMATION Mark R. Miller COTECNA Supply Chain Security - COSEC Tel: + 41 22 849 7821 Fax: + 41 22 849 7807 E-mail: mark. miller@cotecna. ch Web site: www. cotecna. com November 22, 2004 Copyright © 2004 COTECNA S. A. All rights reserved. >>> www. cotecna. com 12