Securing the Supply Chain
Increasing emphasis has been placed on the need to secure borders and protect the trade supply chain against threats after terrorist incidents around the world. Simultaneously, there has been a shift of focus by regulators from threats to trade to threats from trade. As a result, globally there has been the introduction of a number of new national and international security measures.
Security is similar to safety, but with added emphasis on protection from dangers originating from terrorism and organised crime. As a technical term, security means not only that something is secure but also that it has been secured: a condition resulting from the establishment and maintenance of protective measures that aid to safeguard a state from hostile actions and/or influences.
SITPRO conducted a survey to gain an overview of the kinds of burden and challenges security measures have placed upon business in the last five years. The survey asked six wide-ranging, though not detailed, questions covering a number of immediate concerns as frequently expressed by the trading community. Responses were received from approximately 70 companies across the international trade sector: freight forwarders, agents, airlines, airline cargo handlers, ferry services, port authorities and road hauliers. This report collates these responses.
Although a burden, industry has to comply with security legislation to enable their business to function. Within that process, Government has a clear responsibility to ease that burden and SITPRO is making three recommendations for improvements.
Burdens
- 88% of those who replied to the questionnaire have found that, over the past 5 years, trade related security measures have placed an additional administrative burden on their business. This can range from the recruitment of additional staff to operate security procedures through to an increase in documentation control by freight forwarders and agents.
- Traders doubt that there will be a reverse in the application of security measures and it is therefore an issue high on their agenda.
- The areas of greatest impact on business from security legislation were ranked by respondents (greatest - least) as:
- Training staff in the new legislation and the subsequent procedures or processes that follow as a result
- Additional time taken to move goods
- Third party costs (fees to freight forwarders, consultants etc.)
- Changes to IT systems
- Additional staff (reassigning or hiring additional temporary or permanent staff)
Information
- There is a multiplicity of regulations, legislation and measures that trade needs to contend with.
- Of those surveyed, 71% felt they were able to keep on top of security legislation.
- Just under 30% of trade are struggling to keep up with regulatory changes. This is principally caused by the frequency of change and the fragmented information that accompanies it.
Sources of Information
- Respondents were asked where they would turn for information about security legislation:
- Department for Transport / Transec was seen by far as the main portal for information on security matters. This was followed by BIFA (British International Freight Association) and HM Revenue & Customs.
- Port and airport authorities each have a Port Facilities Security Officer (PFSO) to liaise with DfT/ Transec confirming the vital role played by this Department in informing about, setting and maintaining policy.
Costs
- Additional security costs incurred by the airport and port authorities are passed on to the trade in the form of subsidies such as:
- £14 on the shipment of a container
- Between £0.07 and £0.09 per kilo handling fee to make air cargo "known"
- In an effort to remain competitive some traders are reluctant to pass the full cost on to their customers.
- Administration costs have increased over the last 5 years by 10-20% due to security legislation.
- Authorities have seen costs increase by 100% as they meet the necessary legislative requirements by increasing security controls including more personnel on a 24/7 basis and additional equipment. This is ultimately passed on to trade either as a unit charge or per annum rate.
Influencing Factors
Factors influencing business practices and security thinking include:
- Maintaining up-to-date knowledge on aviation and maritime security regulations, as well as safety and regulatory compliance measures such as:
- The International Ship and Port Facility Security Code (ISPS)
- Immigration, Asylum and Nationality Act 2006 (IAN)
- Aviation and Maritime Security Act 1990 (AMSA)
- Charges from authorities, carriers and airlines.
- Preparation for forthcoming regulations, e.g. Authorised Economic Operator legislation.
- Extra-territorial legislation from other nation states, notably the USA, e.g. C-TPAT; pre-alert demands; security rules on airfreight; proposal to scan all US bound sea freight.
Case Studies
Freight Forwarder
Number of Employees: 10
| Ships 200 containers per month @£14 per container security charge | £2,800 per month £33,600 per year |
| Ships 80,000 kilos of airfreight per month @ £0.09 per kilo "cargo known" charge | £7,200 per month £86,400 per year |
Port Authority
Number of Employees & Contractors: 200
| Security Operating Costs | 4% of operating budget up from 2% over the last 5 years |
| Security Charges | Passed on to the Customer by form of unit dues, i.e. per car, trailer etc., or as a lump sum |
Airline
Number of Employees & Contractors: 125
| Security Operating Costs | Increased costs due to employing additional security guards, CCTV and enhancing security airside with security cages etc. |
| Security Charges | Passed on to the customer in the form of
cargo known charge @ £0.07 per kilo. The airline has always charged a security fee at a rate of £0.05 per kilo |
Global Logistical Supplier
Number of Employees & Contractors: 400
| Security Operating Costs | Increased costs due to additional security equipment |
| Additional Costs | £10,000 |
Food Importer/Exporter
Number of Employees & Contractors: 70
| Increased Security Admin Costs | £30,000 - Increased costs due to additional checks conducted by staff to ensure that the company is not being overcharged for security. |
| Additional Security Costs | $10 per USA inbound container $6 per Far East inbound container €9 per container to Germany £14 per outbound container |
SITPRO’s Recommendations
Availability of Information
Keeping up to date and understanding security legislation is a vital aspect of trade intelligence, which is currently obtained from a variety of sources. The UK is currently developing an International Trade Single Window (ITSW) to provide cross-departmental information and guidance, tools and links related to international trade regulation, through one information portal. SITPRO recommends that all information pertaining to security-related measures be incorporated into the ITSW to meet traders’ information needs.
Consultation with HM Government
Trade benefits from having a close working relationship with HMG specifically the Department for Transport/ Transec, which is seen as the key department on security matters. The trade feel that it is vital for them to be involved in consultation about the movement of freight to avoid confusing announcements, fragmented information or unintended consequences. SITPRO recommends that consultation levels with the relevant departments, particularly DfT/Transec operates at an optimum level to ensure that all parties can function efficiently and effectively.
Improving Competitiveness
The survey has highlighted the emerging costs of security for trade, which are ultimately passed onto the customer and affect the competitiveness of UK business. SITPRO recommends that steps are taken to reduce the overall cost of security on the trade by: eliminating the duplication of data; the timely development of an ITSW; and reducing the number of agencies the trade have to deal with through a co-ordinated approach to border management.
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