Working as a Customs enforcement
agent in Pakistan, supply chain security and the facilitation of legitimate
trade flows is one of the primary areas of concern for me in my day to day work.
This is also a theme covered in this week’s readings, with an entire Price
Waterhouse Cooper paper devoted to it. In this blog, I talk about some
practices Pakistan Customs has put into place to keep the supply chain secure.
But before we can get to them, it is important to understand the magnitude of
the problem that confronts us when we speak of, ‘securing the supply chain’.
International trade, the flow of
goods and services across border, seas, and continents, and the supply chains
underpinning and facilitating this trade, represent nothing short of a ballet.
At any given point in time, private enterprise, governments, customs
administrations, transport and logistics companies, port operators, and
shipping lines come together to choreograph the transit of millions of containers
through the high seas, at ports, or across highways to their final destination.
According to World Bank data, China alone handled a staggering 139.7 million
twenty-foot containers in 2011 (USA: 42.9 million)[1].
Annually, the world’s ports combined handle billions of containers.
Given these huge volumes, it is
simply not practical or cost-effective for governments around the world to
safeguard their security or revenue interests by opening up each every
container and examining the contents therein. Therefore, customs
administrations around the world have moved towards a security paradigm based
on risk management, under which only about 5-10% of containerized traffic is
actually subjected to some form of intrusive physical examination. This
translates into a huge challenge to ensure that the 90% of global container
traffic is legitimate and contains what it is supposed to. Additionally, there
are many other diverse and varied challenges that the global supply chain faces,
which further complicate the issue:
In the not so distant past, we have
seen terrorism, natural disasters (hurricanes, a tsunami, and a volcanic
eruption), geopolitical or diplomatic uncertainty (Pakistan stopping NATO
supply routes into Afghanistan), and even the collective social conscience of a
people (the Dabbawallas strike in support of anti-corruption activist Anna
Hazare in India[2]),
disrupt supply chains and affect global trade or military supplies. (Well, in
the case of the Dabawallas, only a few hundred thousand office workers missed
their midday lunch.) And then there’s piracy. We’ve all heard about the Somali
pirates. Trouble is, they’re not the only ones, as the Piracy & Armed
Robbery Map 2013 published by the International Chamber of Commerce Commercial
Crime Services shows[3].
All such events, whether they involve theft, vandalism, or hostage-taking, cost
money. Organized crime is perhaps the biggest threat to the legitimate flow of
goods across borders. Whether its narcotics, counterfeit goods, arms, exotic
animals, or any other form of contraband, smuggling is a major concern. The
global interdiction rate of narcotics is less than 5%. Counterfeit goods
represent an annual loss of millions of dollars to legitimate right holders.
As if coping with the caprice of
supply and demand forecasts wasn’t enough, managers must also contend with
these, often unpredictable factors that can disrupt supply chains. There are a
number of activities, falling under the umbrella of supply chain security, to
mitigate the problems discussed above. Solutions include programs that certify
the credentials of all the various actors in a supply chain, such as the
Authorized Economic Operator program falling under the World Customs
Organization’s Framework of Standards to Secure and Facilitate Global Trade.
Scenario planning, and a mix of preventive and reactive measures are also
employed to minimize disruptions and recover from supply chain upheavals.
One particularly innovative
solution that I wanted to share was the Integrated Cargo Container Control
(IC3) Program – a strategic partnership between the United States and Pakistan
customs administrations. This program involves joint screening and scanning of
US-bound containerized cargo from Pakistan. Containers are scanned for
contraband, prohibited items, and radioactive materials. They arrive at a
special, state of the art facility, constructed near the port, where they are
passed through various scanners (while still on the trucks). Images of those
scans are shared by Pakistani customs officers in real time with their US
counterparts. Experts on both sides, examine the images and in case of any
anomaly, the container is subjected to intrusive examination protocols. Such
collaboration, sharing of information and expertise ensures that only
legitimate cargo passes through customs’ border controls, without delay, and
that the supply chain is kept secure. The benefit of this facility comes from
not only enhanced cooperation between the customs administrations of the two
countries, but it is also beneficial to businesses, as goods flow quicker and
faster, with less overhead associated with the costs of delays and intrusive
examination.
Another innovation is Pakistan
Customs’ implementation of the joint United Nations Office on Drugs and Crime –
World Customs Organization’s Container Control Program. Under this program,
which has been rolled out to select ports around the world, Port Control Units
(PCUs) have been established at various customs stations around the country.
They not only collaborate with each other, but also communicate with others
around the world. Using traditional human intelligence, data analysis and risk
management practices, these units profile cargo flowing in and out of the
country for suspicious consignments. The strategic advantage of these units is
the speed and flexibility with which they are able to respond to threats. Since
all these units are linked electronically with one another, they are able to
bypass time consuming bureaucratic layers of communication. In a stellar
example, an interdiction operation conducted by one of the units at Karachi
resulted in the seizure of synthetic drugs with a street value of $68 million.
These units have also collaborated with counterparts around the world to seize
drug shipments in the UK, China, Spain and Sri Lanka. The Pakistan arm of this
program has been so successful that Pakistan Customs has become a regional
center of excellence and is currently spearheading a roll out of the program to
neighboring countries by imparting training.
These are just some examples of how
one of the actors in global supply chains, namely governments, play their part
in securing global trade flows. There are many other initiatives, both on the
ground and underway. The question is whether, this is enough to keep supply
chains secure?
