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Challenges in Conformity Assessment for developing countries

U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N. Challenges in Conformity Assessment for developing countries. UNIDO’s Perspective. Ouseph Padickakudi, Programme Manager, UNIDO. world. high income. low & middle income.

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Challenges in Conformity Assessment for developing countries

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  1. U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N Challenges in Conformity Assessment for developing countries UNIDO’s Perspective Ouseph Padickakudi, Programme Manager, UNIDO

  2. world high income low & middle income World trade 1970 – 99 (trillion US$ - constant 1995) CURRENT TRADE SCENARIO 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2000 1970 1975 1980 1985 1990 1995

  3. world high income low & middle income low income LDCs World trade 1970 – 99 (trillion US$ - constant 1995) CURRENT TRADE SCENARIO 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2000 1970 1975 1980 1985 1990 1995

  4. A CONCERTED INTER-AGENCY STRATEGY FACILITATES MARKET ACCESS STANDARDS & CONFORMITY ASSESSMNT INFRASTRUCTURE (TBT, SPS) UNIDO CUSTOMS PROCEDURES TRANSPORTATION DOCUMENTATION UNCTAD, IMO SUPPLY DEVELOPMENT (Capacity & Competitiveness) UNIDO Compete Conform Connect INVESTMENT FACILITATION FINANCIAL FLOWS UNCTAD UNIDO EXPORT PROMOTION (& Market Opportunities) ITC(AGOA + EBA) INTERNATIONAL AGREEMENTS & RULES FOR TRADE WTO

  5. The UNIDO-WTO Framework Concept – The main programme modules Module I Module II Module III Remove supply side constraints Prove Conformity with Technical Requirements Integrate into the multilateral trading system Introduce supporting legislation, policies and institutional reform Strengthen supply capacity /improve competitiveness Set up accreditation/ certification systems Support compliance with international standards and regulations Strengthen capacity for implementation of the WTO agreements and trade negotiations UNIDO WTO

  6. WTO ACCESSION REQUIREMENTS

  7. TECHNICAL BARRIERS TO TRADE • Non acceptance of test results by the national laboratories due to its non accreditation. • Costly re-testing or products in the laboratories of importing countries. • Non acceptance of certification mark of the exporting country. • Imposing special conditions for packaging and labeling

  8. TECHNICAL BARRIERS TO TRADE Lab Testing • Lack of awareness of IC ISO 17025 standards for quality management system in laboratories. • Inadequate facilities for calibration traceable to international standards.. • No proper institution for organizing proficiency testing of accredited laboratories. • Difficulty in obtaining certified reference materials.

  9. Quality Management System(ISO 9000) ISO 9000 does not signify specific quality level Can apply for company or opt for THIRD Party Third party certification facilitate trade Used as a advertising/marketing slogan Environment Management System(ISO 14000) Minimum compliance to environment laws and commitment to Continuous improvement Important for global trade/ Environment protection Management Systems- Becoming Standards MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

  10. Hazard Analysis & Critical Control PointHACCP A food safety standard Becoming mandatory for USA (Also possibly EU) New ISO 22000 Food Safety Management Expected Mid 2005 Social Accountability Standard SA 8000. Avoid Child labour, exploitation Union rights, Collective bargaining etc. (controversy) ISO to develop a new SA standard _June 2004 Occupational safety standards (OHAS) Management Systems- Becoming Standards MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

  11. Traceability EU Directive EC 178/2002 – 2005 All Edible products, despite of their origin, will have to be accompanied by detailed information on source, production system and processing procedures so as to make consumers, sanitary and inspection institutions able to follow back and forward the distribution stream of the product. A new Challenge – UNIDO Egypt First project Terrorism related Safety (Shipping) Bio terrorism, Management Systems- Becoming Standards MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity

  12. Sectors (S) Products in respective sectors (P) Markets (M) Requirements (TBT/SPS) Conformity (TCCI) Costs (C) Lab Test1…n C1…n Total Conformity Cost (TConfC) Calibration 1…n M1…n S1…n P1…n TBT/SPS1…n Certification 1…n C1…n C1…n Inspection 1…n UNIDO TCB Metrics Stage 1

  13. Requirements: Product specific: Maximum Residue levels (Aldrin, DDT, Chlordane, Endrin, HCH, HCB) Cadmium, lead, mercury levels Polychlorinated Biphenyls (PCB), Terphenyles (TCB) Pathogenic micro-organisms Irradiation of Food Packaging Requirements applicable in the Netherlands Market specific: (from consumers) HACCP, ISO 14000, ISO 9000, SA 8000 International label for fish from -Marine Stewardship Council Environmentally Sound Production (ESP) SHRIMPS/The Netherlands UNIDO The case of shrimps exports

  14. UNIDO TCB for Shrimp Exports to the Netherlands REQUIREMENTS TBT/SPS Type of Test / Certificate Cost per test ($C) Nr. of tests (Xn) Total cost of testing ($C*Xn) Additives and Flavorings in Food Chemical 25 20,000 500,000 EU / The Netherlands Cadmium, lead and mercury Chemical 90 20,000 1,800,000 Polychlorinated Biphenyles (PCBs) and Terphenyles (PCTs) Chemical 120 20,000 2,400,000 Shrimps Contaminants in Food Chemical 60 20,000 1,200,000 Fisheries Maximum Residue Levels (MRLs) Chemical 120 20,000 2,400,000 Packaging: Good Manufacturing Practice, Minimization of packaging ISO 14000 8,000 50 2,450,000 Hypothetical Country X Annual exports of shrimps: 100,000 tonnes Consignment rate/year: 100,000 Consignment inspection rate : 20% per consignment Social market requirements SA 8000 3,000 50 500,000 Quality related market requirements ISO 9000 4,000 50 2,050,000 Environmentally sound production HACCP (food) 4,000 50 2,050,000 Total annual cost for 50 companies to export 100 thousand tonnes of shrimps to The Netherlands in 100,000 consignments. 15,350,000

  15. Laboratory Metrology Laboratory Equipment Equipment Expertise Expertise Training Training Accreditation Accreditation Mass Chemical $200,000 $550,000 $ 60,000 $ 30,000 $30,000 $60,000 $20,000 $20,000 Microbiology Dimension $ 300,000 $ 250,000 $ 40,000 $ 20,000 $ 40,000 $ 20,000 $ 15,000 $ 15,000 Temparature $ 70,000 $15,000 $ 10,000 $ 10,000 Pressure $ 90,000 $ 15,000 $ 15,000 $ 10,000 GRAND TOTAL TCB INVESTMENT: Total $ 5, 415,000 GRAND TOTAL TCB INVESTMENT MAINTENANCE (10 %) :annual $ 542,000 Costs include only TA not local requirements, such as buildings, etc. Cost will be compared to costs of out-sourcing the tests and calibration TCB for Shrimp Exports to the Netherlands COSTS FOR SETTING-UP DOMESTIC TESTING FACILITIES SECTOR (S): Seafood/Fish PRODUCT (P): Shrimps 100,000 tons/year @ $ 4.00/kg = $ 400 million Total Number of Exporting Enterprises: 50 Minimum Number of Test Samples: MARKET (M): The Netherlands Total cost micro-biological and chemical labs: $ 1,085,000 Total cost metrology/calibration labs: $ 1,030,000 • MARKET REQUIREMENTS (TCCI): • TESTING • Maximum Residue Levels (MRLs) in fishery products • Cadmium, lead and mercury in food • Polychlorinated Biphenyles (PCBs) and Polychlorinated Terphenyles (PCTs) in fishery products • Pathogenic micro-organisms in food and drink products • (Details, see attached) • CERTIFICATION: • HACCP, ISO 9000, ISO 14000, SA 8000, OHSAS Environmental conditioning of a laboratories @ $ 100,000: $ 200,000 Cost for standards services, ISO 9000 and ISO 14000 advisory capabilities: $ 300,000 Cost for HACCP and SA 8000 advisory capabilities: $ 300,000 Cost for calibration per enterprise @ $ 3,000/annually: $ 150,000 Cost for setting up required systems @ $ 50,000/annually: $ 2, 500,000

  16. Import of 100,000 Tonnes to Netherlands: Annual Total Conformity Cost (TConfC): $15 Mn Conformity Cost: 3.8% of total market value Setting-up of Conformity Infrastructure: $ 5,4 Mn TConfC can be reduced by xxx % Maintaining of Conformity infrastructure: 0.5 Mn UNIDO Summary Findings from the Shrimps Case

  17. Significant economic growth in the Region China, India, Bangladesh 6% to 8% per anum Opportunity for mutually beneficial regional trade January 2002 SAARC summit declaration Draft SAARC free trade treaty by end 2002 Recent Bi-lateral trade agreements India with Nepal and Sri Lanka Standards /testing related problems in Trade Example Nepal-India Free trade agreement SAARC BACKGROUND

  18. Signed 1996 -Automatic extension Benefits Nepali exports to India grew 40% yoy in 1999/2000 Nepal balancing 50% of imports from India through exports Nepali exports to India declined 15% yoy 2000/2001 India sought New Negotiations Rules of Origin questioned Nepal accused of importing from Thailand/Korea & re-exporting India insisting on minimum local value addition Nepal Accusing India Imposing SPS (Plant Quarantine laws) India requiring compliance to Indian standards Indian State Government imposing taxes New agreement 6th March 2002 for 5 years with 4 new clauses Minimum 25 % value addition Tariff rate quotas imposed for (acrylic yarn, copper products, zinc oxide, vegetable fat) Demonstrate product origin (“acceptable certificate of origin) In case of “unusual surge in imports” India can take remedial measures India –Nepal- Bi lateral trade treaty

  19. ACCREDITATION Beneficial to rely on regional capacities ? Could NABL be the accreditor for the region? Politically acceptable? Should there be a SAARC accreditation Board? Sponsorship SAARC-UNIDO-PTB-EU CALIBRATION - Traceability Could NPL India be used (support from Pakistan, SRL) Politically acceptable? SAARC Calibration Service? SARC/PTB/ UNIDO IMMEDIATE ACTION POSSIBLE India NPL, Pakistan NPSL launch inter-comparison scheme India NABL – Launch inter laboratory testing scheme ISSUES TO BE ADDRESSED

  20. Tremendous SAFTA Trade Potential Harmonisation of standards- lessons from EU Lessons from Bi-lateral agreements Nepal- India, Sri Lanka- India Need for Recognised Testing & Conformity Recognised Calibration NPL India, NPSL Pakistan, ITI Sri Lanka Recognised Accreditation India NABL Sri Lanka accredited (SWEDAC path) Pakistan PNAC CONCLUSIONS

  21. U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N THANK YOU Ouseph Padickakudi, Programme Manager, UNIDO E-mail: O.Padickakudi@unido.org Web: www.unido.org

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