International Trade Compliance: Paris, ESGCI - 4SCM - Feb.8 2021

International Trade Compliance
Lecture 3
Paris, ESGCI – 4SCM – Feb.8th 2021
© Copyright 2021 Strictly Private and Confidential Page 1

Session 3, Today Feb.8th 2021
1. Importing & Exporting best practices
2. What does a shipper really want?

Importing & Exporting – Best Practices

Importing & Exporting best practices
Introductions and Market Update
CT-PAT
Contracting Best Practices
Managing Air & Ocean – Best Practices

Air Market Update

Airfreight Demand vs. Capacity (per IATA)
IATA : International Air Transport Association
1- Global air freight markets managed to maintain improved levels of demand.

Air freight markets maintained modest improvement since CY’15Q4, with the size of
the market up 2.5% in December (compared to Y-t-Y)
2- Business confidence levels continue to suggest an increase in manufacturing

activity in the months ahead. Yet much depends on the stability of the Eurozone
3- Carriers continue to reduce capacity expansion, park aircraft, reduce frequencies,
retire older aircraft, and hub splitting (multiple stops on one flight)

Airline Financial Situation (per IATA)
• Losses in cargo divisions might still prevail due to the fuel variable
and global economic market conditions
• Carriers remain focused on sector profitability and yield maximization
• Freighter cancellations or reduction in flight frequencies
Crude Oil (WTI) : x $

Crude Oil (BRENT) : x €
• Fuel prices have remained Up and Down : $120/b to $30/b

Ocean Market Update

2020 Ocean: Market Update
Carrier Financial & Rates Update

• Transpacific shipping lines have stepped up efforts to raise freight rates, to stabilize
recent volatility, to better accommodate growing demand, and to establish a more
compensatory baseline for subsequent negotiation of 2020 longer-term contracts.
Length : 396 m (5 Airbus A380)

Width : 53 m
Capacity : 16 000 TEU

2021 Market Considerations & Projections
TO UPDATE 2021
1 - Total container capacity grew by x% in the last six months of 2020
Approx : 500M TEU ww & 5300 vessels ????

From AAEI to WTO

What Are the General Trends for Trade?
Compliance Facilitation
Safety Security

What Has Actually Happened?
Compliance Facilitation
Safety
Humanitarian
Security

“Trusted Trader” Concept
Concept which describes a company which is:

Highly compliant
Good internal controls
Mitigates risk
“Authorized Economic Operator”
A party involved in the international movement of goods in whatever function that has
been approved by or on behalf of a national Customs administration as complying with
WCO or equivalent Supply Chain security standards.
Authorized Economic Operators include inter alia manufacturers, exporters, brokers, carriers,
consolidators, intermediaries, ports, airports, terminal operators, integrated operators,
warehouses, distributors.”
WCO “SAFE Framework of Standards to Secure and Facilitate Global Trade”
AEO programs are:

Voluntary regimes
Commitment to adopt good importer practices for security and compliance
Trade facilitation benefits

World Customs Organization – SAFE Framework
World Customs Organization – SAFE Framework of Standards to Secure And

Facilitate Global Trade (adopted June 2005) - Exchanges
Objectives of the SAFE Framework

Establish standards for supply chain security & facilitation at the global level to
promote certainty and predictability
Enable integrated supply chain management for all modes of transport
Enhance the role, functions and capability of Customs to meet challenges and
opportunities of the 21st Century
Strengthen cooperation between Customs administrations to improve detection
of high-risk cargo
Strengthen Customs/Business cooperation
CBP : Customs & Border Protection

WCO SAFE Framework – Four Core Principles
Harmonize advance electronic cargo information requirements

Advance Cargo Manifest Rules
Adoption of risk management approach to security

Strategic Targeting
Exporting country perform inspection of high-risk cargo

Automated Export System
Provide benefits to business that meet minimal supply chain security standards
and best practices
C-TPAT Tiers 1 – 3 (Customs – Trade Partnership Against Terrorism)

WCO SAFE Framework – Two Pillars
Twin pillars of SAFE Framework
1 - Customs-to-Customs network arrangements
2 - Customs-to-Business partnerships

WCO SAFE Framework – Benefits
New and consolidated platform to:

enhance world trade
ensure better security against terrorism
increase contribution of Customs and trade partners to
economic and social well-being of nations
Improve ability of Customs to detect and deal with high risk

shipments and efficiencies in the administration of goods to
expedite clearance and release of goods
Capacity building to help implement the framework worldwide

U.S. Authorized Economic Operator Programs
Security: Customs-Trade Partnership Against Terrorism

C-TPAT is a voluntary government-business initiative to build
cooperative relationships that strengthen and improve overall
international supply chain and U.S. border security.
CBP can provide the highest level of cargo security only through close cooperation with
the ultimate owners of the international supply chain.
CBP is asking businesses to ensure the integrity of their security practices and
communicate and verify the security guidelines of their business partners within the
supply chain.
Compliance: Importer Self-Assessment Program

ISA is a voluntary trade compliance program which implements
CBP’s Risk Management Strategy
Self-governance plan built around importer’s procedures and controls
– Internal controls were found to be an excellent predictor of actual compliance.
Added flexibility and non-interference for participating importers
– ISA members are removed from CBP’s Focused Assessment audit pool

Security: C-TPAT Eligibility
Who is eligible to join C-TPAT?

U.S. Importers of record
U.S./Canada Highway Carriers
U.S./Mexico Highway Carriers
Rail Carriers
Sea Carriers
Air Carriers
U.S. Marine Port Authority/Terminal Operators
U.S. Air Freight Consolidators, Ocean Transportation Intermediaries and
Non-Vessel Operating Common Carriers (NVOCC)
Mexican and Canadian Manufacturers
Certain Invited Foreign Manufacturers
Licensed U.S. Customs Brokers
Third Party Logistics Providers (3PL)
Long Haul Highway Carriers in Mexico
CBP now seeking to extend C-TPAT to U.S. exporters
Security: C-TPAT Importer Eligibility Requirements
Be an active U.S. Importer or Non-Resident Canadian Importer into the

United States.
Have a business office staffed in the United States or Canada.
Have an active U.S. importer of record ID in either of the following formats:
U.S. Social Security Number
U.S. Internal Revenue Service assigned ID(s)
CBP assigned Importer ID
Possess a valid continuous import bond registered with CBP.
Have a designated company officer that will be the primary cargo security
officer responsible for C-TPAT.
Commit to maintaining the C-TPAT supply chain security criteria as outlined
in the C-TPAT Importer agreement.
Create and provide CBP with a C-TPAT supply chain security profile, which
identifies how the Importer will meet, maintain, and enhance internal policy to
meet the C-TPAT Importer security criteria.
Security: C-TPAT Importer Security Criteria
Companies must conduct a security assessment of international supply chain

based on C-TPAT security criteria below
Business partners
Written documentation for selecting business partners
Container security
Point of stuffing procedure to seal and maintain integrity of container
Container inspection
Procedures for “seven-point” inspection process to check container structure
Physical access controls
Controls to prevent unauthorized entry to facilities by employees, visitors and vendors
Personnel security
Procedures to screen prospective employees (consistent with laws in jurisdiction)
Procedural security
Procedures to ensure integrity and security of transportation, handling and storage of cargo
Security training and threat awareness
Program to make employees aware of threats posed by terrorists at each point in supply chain
Information technology security
Automated systems using individually assigned accounts with periodic change of password

Security: C-TPAT Benefits
C-TPAT offers trade-related businesses an opportunity to play an active role

in the war against terrorism. By participating in this first worldwide supply
chain security initiative, companies will ensure a more secure and
expeditious supply chain for their employees, suppliers and customers.
Beyond these essential security benefits, CBP will offer benefits to certain
certified C-TPAT member categories, including:
A reduced number of CBP inspections (reduced border delay times)
Access to FAST lanes
Priority processing for CBP inspections. (Front of the Line processing for
inspections when possible.)
Assignment of a C-TPAT Supply Chain Security Specialist (SCSS) who will work
with the company to validate and enhance security throughout the company’s
international supply chain.
Potential eligibility for CBP Importer Self-Assessment program (ISA) with an
emphasis on self-policing, not CBP audits.
Mutual recognition – Canada, New Zealand, Jordan

Security: C-TPAT Application Process
Submit an online electronic application with:

Corporate information
Supply chain security profile
In completing the supply chain security profile, companies must conduct a
comprehensive self-assessment of their supply chain security procedures
using the C-TPAT security criteria or guidelines jointly developed by CBP
and the trade community for their specific enrollment category.
Executed Memorandum of Understanding as an acknowledgement of an
agreement to voluntarily participate
CBP reviews the application
C-TPAT Tiers
Tier I = Certified
Tier II = Validated
Tier III = Best Practices

Compliance: ISA Status
Currently, approximately 350 companies in the Importer Self-Assessment (ISA)

program
Membership has not increased over the last few years
CBP has not aggressively promoted ISA
“Industry ISA” programs
Completed
Petroleum
Aerospace
Chemicals
Pharmaceuticals/Biotech (completed in April 2011)
In negotiations
Automotive (off and on)
Textiles (keep dreaming)

Security: Status of AEO MRAs
(Authorized Economic Operator /Mutual Recognition Arrangement/Agreement)
Examples of Concluded MRAs (non Exhaustive List)

Date Country
China - EU New Zealand – USA
Japan - New Zealand
China - Japan Canada – USA

Jordan – USA
China - Singapore EU – Norway
Japan – USA
EU - USA EU – Switzerland
Canada – Japan
NZ - Singapore Canada – Korea
Canada - Singapore
Norway - Switzerland EU – Japan

Korea – Singapore
Singapore - USA Korea – USA
Andorra – EU
Japan - Korea
Korea – New Zealand
Japan – Singapore

Security: C-TPAT Exporter Security Problem Areas
Companies must conduct a security assessment of international supply chain

based on C-TPAT security criteria below
Business partners
Written documentation for selecting business partners
Container security
Point of stuffing procedure to seal and maintain integrity of container
Container inspection
Procedures for “seven-point” inspection process to check container structure
Physical access controls
Controls to prevent unauthorized entry to facilities by employees, visitors and vendors
Personnel security
Procedures to screen prospective employees (consistent with laws in jurisdiction)
Procedural security
Procedures to ensure integrity and security of transportation, handling and storage of cargo
Security training and threat awareness
Program to make employees aware of threats posed by terrorists at each point in supply chain
Information technology security
Automated systems using individually assigned accounts with periodic change of password

Ultimate Goal = Mutual Recognition
What does mutual recognition mean?
AEO from one major trading block is recognized by another major trading block
via a bilateral agreement. Only companies that apply for a full or safety and
security AEO certificate may participate in arrangements brought about by
mutual recognition agreements.
USA: mutual recognition for C-TPAT only:

Internationalization Efforts:
4 - Mutual Recognition Arrangements: New Zealand, Canada, Jordan , Japan
4 - Mutual Recognition Projects: Argentina, Singapore, Korea, European Union
7 - Technical Assistance Projects: Malaysia, Mexico, Philippines, Guatemala, China, Colombia, Israel
2 - Capacity Building Training Programs: Ghana, Kenya
Security Criteria Implemented:

10 - Business Entity Types: Importers, Air Carriers, Highway Carriers, Mexico Long Haul Highway Carriers, Rail
Carriers, Sea Carriers, Foreign Manufacturers, Customs Brokers, Port Authorities/Terminal Operators, Third Party
Logistics Providers (3PLs).
Tiered Benefits Structure: commensurate with security enhancements. Best Practices Catalog.
310 - Tier 3 Importers

What does a shipper really want?

Shipper Perspective - Plan a strategy!!
Know the Mode

• Ocean service contracts and service agreements
• What is important?
Have a Strategy for alignment

• Get Stakeholders involved to help a line with needs Supply Chain
• Line vs. NVOCC
• Request for Quotation
“Best Practices”
• On Boarding
• KPI / Evaluation

Understanding Ocean …
WHAT ARE THE BASICS?

Ocean: important for a shipper
Container Rates
Type of delivery is needed
Container Size
Container Routing
Rates Essential Accessorial
Terms
Surcharges
Surcharges
Bunker (Fuel)
Peak Season Surcharge
(PSS)
CY, IPI, Bunker
Door? (Fuel) General Rate Increase (GRI)
General
Essential Service Terms
Rate Detention Space Guarantees
Increase
(GRI)
Demurrage Minimum Quantity
Commitment (MQC)
Peak MQC
KPI and
Space
Detention & Demurrage
Season Guarantee Delay In Transit (DIT)
(PSS) Volume
s
Performance levels / KPI
Bookings
Transit times
Rates: define services needed
Rates
What type of delivery is needed?

Container Yard (CY) (1 Y = 0,91 m)
Inland Port Intact (IPI)
Store Door Delivery (SDD)
Container Size
20 FT (TEU), 40 FT (FEU), 40 FT High Cube and 45 FT
Routing
All Water Service (AWS)
Landbridge (Not through Panama Canal)
TEU = Twenty-foot Equivalent Unit (6,096 m)

FEU = Forty-foot Equivalent Unit (12,192 m)

Essential Accessorial Terms
Surcharges
Advance Manifest Fee (AMS)
Chassis Usage Surcharge (CUS)
Document Fee (DOC)
Terminal Handling Fee (THC)
War Risk Surcharge (WRS)
Etc. (See 40+ other terms)
Bunker (Fuel)
Floating schedule
Peak Season (PSS)
Typically June 1st through October 31st
General Rate Increase (GRI) / Rate Restoration (RRI)
Any time based on Carrier / Alliance

Essential Service Terms
Space Guarantees
Hong Kong to Los Angeles – X FEU?
Minimum Quantity Commitment (MQC)
How many FEU’s a year?
What is the right number?
Detention (out gate)& Demurrage (in gate at Port)
Agreed days known as “Free Time”
Days (calendar or working)
Delay In Transit (DIT)
Key Performance Indicator (KPI)
Booking acceptance
Service Strings / Port to Port On-Time

“Best Practice”: get a Boilerplate (passe-partout)
If you don’t have contracts today or do find
undesirable terms then evolve …
One step at a time!

Add
terms to
Partner with internal Legal Counsel RFQ’s
Seek help on “boilerplate” by mode Best

Practice!
Include terms with Request For Quotations (RFQ)
How will incumbents react? Don’t surprise your vendors.
Discuss with internal stakeholders. Understand that terms can cause lengthy
negotiations and potentially impact rates.
Careful not to overbuy!

Understand Ocean Line vs. NVOCC
WHAT ARE THE OPTIONS?

Ocean: Line vs. NVOCC (FMC : Federal Maritime Commission)
Ocean Line NVOCC

Non Vessel operating common carrier
The Positive The Positive
Direct relationship with Line Flexibility with little to no commitment
Leverage MQC FEU volumes directly to Less complex to manage
secure terms/rate/service No FMC required for shipper
Assigned allocation can lead to consistent No MQC requirement
service string transit time No long term commitment
Strong long term partnerships can assist Ability to chase rate
during industry challenges Much closer to the market rates
The Challenge The Challenge

More complex i.e. FMC requirements Subject to volatility of market
Provide forecast of trade lane volumes
Susceptible to surcharge
Manage MQC volumes GRI / RRI
Resources and bench strength to manage PSS
multiple Ocean carriers No direct relationship with Ocean carrier
Challenging to make changes Possible less predictable transit times

Selecting an International Partner …
VENDOR MANAGEMENT

“Best Practice” to Manage International
Define Supply Chain Strategy & Needs
Request for Quote (RFQ)

Know the Market
Document shipper characteristics
Identify and include Stakeholders
Define service expectations
Boilerplate
Stakeholders provide suggested carrier RFQ pool
Container Rate and Surcharge template
Understand service string and transit offering
Cost Analysis on 80%-95% volume lanes
Selection
On Boarding
Performance Evaluation

“Best practice” on boarding
Operational readiness
Define “Who’s who”
Detailed Standard Operating Procedure (SOP)
Escalation path
Limited volume at startup

Slowly turn on the Valve!
Deming Wheel approach

Plan, Do, Check, Act

Shipper needs to be a partner
Shipper provided FEU forecast by lane

Best practice: 3 month rolling forecast
Keep it simple!
Communicate Origin Performance
Is cargo getting booked and COB as expected?
Any rolls, delays, etc.?
Be engaged and ask for feedback

“Best practice” business review
KPI agreement
Reporting requirements
Quarterly or Bi-annual business review
Measure transit expect vs. actual
Cargo Claims
Billing Issues
Service Review
Booking performance
Space guarantees
Transit time metrics

Ocean KPI’s
Relevant field definitions:
Target Transit Time: transit time expectation per lane from contract negotiations.
Transit Time for 95% Of Shipments: Denotes the transit time by lane (or carrier) for which
95% of shipments were equal to or less than.
On-Time %: Percentage of shipments per lane (or carrier) that were equal to or less than
the target transit time.
% Within +/- 1 Day of Target: Percentage of shipments per lane (or carrier) that were
within one day of targeted transit time. The higher the percentage, the more consistent the
transit times are.
Transit Time Range (Days): This the range in days between shortest transit time and
longest transit time per lane or carrier.
Avg Variance (Actual vs Target): Per lane or carrier, this is the average variance in days
between actual transit time and target transit time. The lower the number, the more
consistent the transit times are.

OCEAN KPI’S – QUICK EXAMPLE
Transit Avg
Total Target Transit Time % Within Time Variance:
Shipments Transit for 95% Of On- +/- 1 Day Range Target vs
CARRIER Origin - Destination Per Carrier Time Shipments Time % of Target (Days) Actual
LE HAVRE –
AA Ships LOS ANGELES, CA 219 16 22 77% 69% 20 3
NEW YORK –
ROTTERDAM 181 29 34 36% 31% 30 4
SINGAPORE –
LOS ANGELES, CA 720 20 19 100% 18% 19 3

International Air Freight Forwarding
IMPORTANT TERMS AND

STRATEGY
Contracting for Air Freight:
What is important?
Rates by route
Port-Door, Port-Port, etc.
Recommend add gateway to door as option
Add Service levels that fit your need – Exp, Std, Def
Add tier level weight break
Know your sweet spots!!
Include transit days by service by lane
Define service commitments
Define Fuel surcharge
Peak Season ??
Liability and cargo claims

Forwarder differentials
Full service forwarder vs. niche regional forwarder

Carrier service area
Forwarders usually handle all major lanes
A full service forwarder may compliment a Shippers needs as supply chain becomes
more complex
Don’t underestimate the value of regional niche forwarders

Experts in specific geographies
Forwarders seek different freight mixes to support trade lane

Rates and very drastically between competing forwarders
Shop around for best rate

International Trade Compliance: Paris, ESGCI - 4SCM - Feb.8 2021

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International Trade Compliance

Paris, ESGCI – 4SCM – Feb.8th 2021

© Copyright 2021 Strictly Private and Confidential Page 1

1. Importing & Exporting best practices

2. What does a shipper really want?

© Copyright 2021 Strictly Private and Confidential Page 2

Importing & Exporting – Best Practices

Introductions and Market Update

Contracting Best Practices

Managing Air & Ocean – Best Practices

© Copyright 2021 Strictly Private and Confidential Page 4

© Copyright 2021 Strictly Private and Confidential Page 5

1- Global air freight markets managed to maintain improved levels of demand.

2- Business confidence levels continue to suggest an increase in manufacturing

3- Carriers continue to reduce capacity expansion, park aircraft, reduce frequencies,

© Copyright 2021 Strictly Private and Confidential Page 6

• Carriers remain focused on sector profitability and yield maximization

• Freighter cancellations or reduction in flight frequencies

Crude Oil (WTI) : x $

© Copyright 2021 Strictly Private and Confidential Page 7

© Copyright 2021 Strictly Private and Confidential Page 8

Carrier Financial & Rates Update

Length : 396 m (5 Airbus A380)

© Copyright 2021 Strictly Private and Confidential Page 9

© Copyright 2021 Strictly Private and Confidential Page 10

© Copyright 2021 Strictly Private and Confidential Page 11

© Copyright 2021 Strictly Private and Confidential Page 12

© Copyright 2021 Strictly Private and Confidential Page 13

Concept which describes a company which is:

AEO programs are:

© Copyright 2021 Strictly Private and Confidential Page 14

World Customs Organization – SAFE Framework of Standards to Secure And

Objectives of the SAFE Framework

CBP : Customs & Border Protection

© Copyright 2021 Strictly Private and Confidential Page 15

Harmonize advance electronic cargo information requirements

Adoption of risk management approach to security

Exporting country perform inspection of high-risk cargo

© Copyright 2021 Strictly Private and Confidential Page 16

Twin pillars of SAFE Framework

1 - Customs-to-Customs network arrangements

© Copyright 2021 Strictly Private and Confidential Page 17

New and consolidated platform to:

Improve ability of Customs to detect and deal with high risk

Capacity building to help implement the framework worldwide

Security: Customs-Trade Partnership Against Terrorism

Compliance: Importer Self-Assessment Program

© Copyright 2021 Strictly Private and Confidential Page 19

Who is eligible to join C-TPAT?

Be an active U.S. Importer or Non-Resident Canadian Importer into the

Companies must conduct a security assessment of international supply chain

© Copyright 2021 Strictly Private and Confidential Page 22

C-TPAT offers trade-related businesses an opportunity to play an active role

© Copyright 2021 Strictly Private and Confidential Page 23

Submit an online electronic application with:

© Copyright 2021 Strictly Private and Confidential Page 24

Currently, approximately 350 companies in the Importer Self-Assessment (ISA)

© Copyright 2021 Strictly Private and Confidential Page 25

Examples of Concluded MRAs (non Exhaustive List)

China - Japan Canada – USA

Norway - Switzerland EU – Japan

© Copyright 2021 Strictly Private and Confidential Page 26

Companies must conduct a security assessment of international supply chain