Third Party Validation:
Partners in Protection or a Necessary Evil?
The First National Conference on Safe Trade and AEO
Manila, Philippines, May 13-14 2008
Agenda
 SGS Group
 WCO SAFE Framework of Standards
 Validations – a Necessity?
 SGS Proposal “Philippine AEO’s Security Audits”
 Case Studies on Supply Chain Security
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SGS Group
SGS Group
 Founded in 1875 in France
 World headquarters now in Geneva, Switzerland
 International network
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140 countries
845+ offices
335+ laboratories
42,000+ dedicated and trained employees
 World’s largest …
 Verification
 Testing
 Certification
 Asia Pacific
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133 offices
Security Audits
54 laboratories
14,800 employees
495 companies certified by SGS Philippines
SGS Presentation to The First National Conference on Safe Trade and AEO
Philippines
Thailand
Malaysia
China
Singapore
Indonesia
Australia
Japan
Vietnam
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WCO SAFE Framework of
Standards
Core Elements of WCO SAFE Framework
 Advance Cargo Information
 Risk Management
 Container Scanning
 Supply Chain Security
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SGS Capabilities on SAFE core Elements
 Advance Cargo Information.
SGS ACI Capability
 Risk Management
 Côte d’Ivoire (www.oic.ci)
 Container Scanning
 Madagascar
(www.bsgmg.sgs.com)
 Supply Chain Security
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SGS Capabilities on SAFE core Elements
 Advance Cargo Information
 Risk Management
 Container Scanning
 Supply Chain Security
SGS Risk Management
Capability
 Bangladesh
 Mexico
 Guatemala
 Haiti
 Nigeria
 Madagascar
 Ivory Coast
 Kenya
 Angola
 Cameroon
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SGS Capabilities on SAFE core Elements
 Advance Cargo Information
 Risk Management
 Container Scanning
 Supply Chain Security
SGS Scanner Capability
 Mexico
 The Gambia
 Madagascar
 Cameroon
 Haiti
 Nigeria
 Bahrain
 Kosovo
 Uruguay
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SGS Capabilities on SAFE core Elements
 Advance Cargo Information
 Risk Management
 Container Scanning
 Supply Chain Security
SGS Supply Chain Security
Capability
 TAPA
 One of three companies ww
 Leader in certificates – 200 ww
 C-TPAT
 CBP China Pilot Validation
 ISO 28000
 WCO
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SGS Capabilities on SAFE core Elements
C-TPAT
 Questionnaire to C-TPAT requirements
 Developed with Greenberg Traurig LLB in 2003
 Continuously improved with CTPAT, TAPA, CBP Pilot
program experience
 Attributes, Weighting Criteria, Mandatory Requirements,
Scoring Guidelines based on auditing expertise
 Rigorous security auditor selection criteria
 SGS auditor training program developed and presented to
auditors ww from 2003 onward
 Approximately 1500 C-TPAT audits conducted using SGS
checklist or client prepared checklists and 500 more in 08
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SGS Capabilities on SAFE core Elements
China Pilot Validation Program
 SGS approved by US CBP to provide third party auditing
services for China pilot validation project based on:
 Experience in security auditing
 Strength of our security auditing program and detail of our
security questionnaire
 Global presence of 100+ security auditors, in particular in
China and throughout Asia
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Validations A Necessity?
Why Third Parties are Necessary:
Customs
 “Customs Administration, together with representatives from the
trade community will design validation processes…[for] AEOs”5
 Capacity to extend Borders
 Customs have inadequate resources to validate and continually
monitor supply chains outside borders
 As AEO programs expand these resources will be stretched
 Capability for security:
 Customs primary focus is on protection of revenue and economic
interest…… they typically lack security expertise
 Political Jurisdictional rights
 There is no International Jurisdiction for Trade - Customs have no
inspection/enforcement rights outside their own territory
 AEO Supply Chains4 are too complex and evolve too rapidly
 Multiple blind spots – container stuffing, inland dray
 Operational - 20+ handoffs, 25+ documents, 200+ data elements
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Why Third Party Validations
 “Validation process based on principles of audit and
Inspection”6
 Security is Standardised, systems, process approach
 Measurement and proper allocation of Benefits
 “Accreditation procedures that offer incentives”
 US Experience - Validations “Trust and Verify” prerequisite
 Gaming - no validations allows free riding & competitive
disadvantage
 Self verification without assurance leads to lower level of
complaince6
 Disincentives – threat of detection against a reliance “on
companies that we haven't even gone out to check7
 “inadvertently … actually raise the risk of a WMD being
smuggled into the United States via a participant’s supply
chain” 8
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Why Third are Necessary: Private Sector
 “Ensure all service providers commit to the implementation and adherence to security
recommendations”
 “Regular visits to AEO suppliers to verify requirements”11
 “Trading Partner Security extends to AEO suppliers …. assessment and training are
key components” 9
 Customs recognize AEO compliance with other Intergovernmental organizations” 10
Philippines Supply Chain
Raw Materials
Manufacturing
Warehousing
International Supply Chain
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US
Port
Importer
Philippines
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SGS Partner in Protection
Audit Proposal Philippine AEOs
What Philippine AEOs can expect
Proposal: Value of 3rd Party Validations
to Philippine AEOs
 Provide independent and objective assessment of security
and required improvements
 Your Company - “
 Your Business Partners -
 The global vantage point of SGS auditors and trainers can
 Save time and money for you
 provide audits in the local language by auditors who know the
local customs
 An SGS audit program can give you consistent
comparisons across the breadth of your organization’s
supplier base
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Proposal: Options for Philippine AEOs
 Use company’s own AEO security checklist and associated
summary documents
 Use SGS AEO security questionnaire and associated summary
documents
 Combination of the two above
 Customized classroom or Webinar training to AEO requirements for
your suppliers (based on generic AEO requirements, or your own
security program accepted by Philippine Bureau of Customs)
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Proposal: Management of Philippine
AEO Program
 SGS Audit Infrastructure
 Global key account manager overseeing account – final
review of AEO audits
 Regional audit managers responsible for first level, local
review of audits
 Dedicated scheduling and customer care personnel in
affiliates
 Trained and experienced security auditors
 Web-based reporting available – client can review on line,
build their own reports of results
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Proposal: Philippine AEO Training
 One day SGS AEO course covering all areas of Philippine
Bureau of Customs requirements with Q and A time
 Three hour overview of AEO
 Custom designed course to fit your security profile and your
business partners
 Custom designed Webinar training
 Discussion points:
 Where do you want training?
 Who do you want trained?
 When do you need the training
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SGS Supply Chain Security Case
Studies
What our C-TPAT clients have experienced
Case Studies of SGS Security Program (1)
 US based global retail company
 Over 315 supplier security audits completed, with
275 in China alone for first phase
 Audits in Philippines
 US based account manager for audit control
 Checklist developed by client
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Case Studies of SGS Security Program(2)
 US based freight forwarding company
 Over 70 security audits conducted overseas and in US at
ff warehouse locations
 US based account manager for audit control and
scheduling
 Checklist developed by client in consultation with SGS
security manager
 (Prior to C-TPAT program conducted 53 TAPA
certification audits in North America)
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Case Studies of SGS Security Program(3)
 US based freight forwarder security project
 Developed internal auditor checklist for company to use on all
world wide locations
 Developed training program based on their CBP approved
security program (prepared in English and Chinese
languages)
 Held 4 classroom training sessions in…
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Chicago, il
Shenzhen, China
Shanghai, China
Penang, Malaysia
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Contact
Sten Bertelsen
SGS GIS Head of Supply Chain Security
Tel +44 (0)7973 600 990
Email: [email protected]
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