U.S. CUSTOMS C-TPAT OVERVIEW

U.S. CUSTOMS C-TPAT OVERVIEW C-TPAT MEMA Brand Protection Council Overview 7-23-09

Graf Soden Graf Zeppelin Max Haag Brief ZF Overview The beginning of ZF goes back to August 20th 1915 1st. plant 1916

Brief ZF Overview

Brief ZF Overview ZF is a Worldwide Company • 126 Productions Locations • 25 N. America Locations • 6 Main R & D Locations • 26 Sales and Service Centers and Representative Offices • 20 Aftermarket Trading Companies • More than 500 After Sales Service Points Worldwide • 16 € Billion Sales • > 66,000 Employees

U.S. CUSTOMS C-TPAT OVERVIEW Customs –Trade Partnership Against Terrorism (C-TPAT)

Agenda • Intro – General overview of the program • Discussion of program requirements • Benefits of program to USA (customs) and importer • Need for Management commitment • Validation – initial and future (by US Customs) • Sample Questionnaire • Sample Customs Validation Survey

No One is above suspicion

U.S. CUSTOMS C-TPAT OVERVIEW The Focus Today Given today’s worldwide focus on preventing terrorism, the transportation and logistics industry is looking for ways to ensure the safety of their shipments and those who receive them. How do you know if your cargo has been opened and tampered with? How do you know if extra stops have been made along the way?

U.S. CUSTOMS C-TPAT OVERVIEW Objective: • Enhance National Security at the U.S. Border and beyond • Industry and Customs fortify supply chain against implements of terror • Customs will partnership with “known” importers to ensure shipping security • Customs will focus on exceptions and companies not classified as “low risk” • Industry to recognize their role in U. S. Security

U.S. CUSTOMS C-TPAT OVERVIEW C-TPAT Commitments: Businesses agree to… • Conduct a comprehensive security self-assessment • Submit a supply chain security questionnaire to Customs • Develop and implement a program to enhance security throughout their supply chains • Communicate C-TPAT guidelines to other companies in the supply chain and promote their use • Communicate program needs throughout their internal organization and ensure all locations are participating

U.S. CUSTOMS C-TPAT OVERVIEW Potential benefits of C-TPAT: More efficient and secure supply chain for employees, suppliers, and customers • Reduced inspections • Assigned account manager • Access to C-TPAT membership list • Self-policing and assessment • Eligibility for Importer Self Assessment Program • Minimize Intensive Inspections – especially when Customs is conducting 15 & 30 day “Blitz Audits” • Avoid delays associated with above Intensive Inspections – which could amount to several weeks depending on the “back-log” Customs would have to inspect (100%) Enable shipments to continue when heightened security alerts are in enacted

U.S. CUSTOMS C-TPAT OVERVIEW

U.S. CUSTOMS C-TPAT OVERVIEW The Parties Involved • Shipper • Consignee and / or Buyer • Consolidators / Forwarders • Exporting Governments • Importing Governments • International Carriers • Brokers • Domestic Carriers / Draymen

U.S. CUSTOMS C-TPAT OVERVIEW Shipper • Know who you are selling to. • Know who you are shipping to. • May need to pay the cost of security or add it to the selling price. • Choose Forwarders and Carriers carefully.

U.S. CUSTOMS C-TPAT OVERVIEW Consignee and / or Buyer • Know who you are buying from • Know who the carriers used in the shipment are. • Make ES an essential part of your PO • Provide to the seller your ID number • Select Brokers who have the ability to transfer information electronically

U.S. CUSTOMS C-TPAT OVERVIEW How Consignee & Buyer Can Help Issue PO with your ID and Instructions Supplier gets PO & Sends Back Routing Be able to receive ES Electronically Intl Carrier Provide POD Select Broker Who Can Communicate Customs Domestic Carrier

U.S. CUSTOMS C-TPAT OVERVIEW Consolidators & Forwarders • Typically key to the booking information • Selection of Carriers • Selection of Flights and or Voyages • May be actually loading the containers. • May be responsible for closure on the container

U.S. CUSTOMS C-TPAT OVERVIEW Possible Consolidator Forwarder Process Flow Import Govt. Acquire and Use ES Export Govt. Authority Put in Movement Plan Information via WEB Send Record to Exp. Govt./Shipper Release to Ship Intl Carrier Lock Container With ES Seal & Provide Seal to Forwarder Get Tracking & POD Data

U.S. CUSTOMS C-TPAT OVERVIEW Export / Import Governments • Can provide standards for ID of parties • Can have its own intelligence systems fed by a new industry system • Can Share with other Governments • Provide Police action when cargo is diverted.

U.S. CUSTOMS C-TPAT OVERVIEW Process Flow Between Governments Freight Forwarder • Pre-Clearance • Intelligence on Parties • Classification • Statistics Export Gov’t Import Gov’t International Carrier • Audit Ability • Statistics • Proof of Final Disposition of goods

U.S. CUSTOMS C-TPAT OVERVIEW International Carriers • Manifest Data is attached to a given Flight or Voyage • Container Interchange could be part of global tracking • Transmitting devices could get power from onboard devices • Intelligence for tracking of vessel for less sophisticated lines

U.S. CUSTOMS C-TPAT OVERVIEW International Carrier Process Booking of Container Shipper/Forwarder Receipt/ Interchange Drayman/Trucker Customs Export & Import Loading & Departure Port Authority Transshipment of Container Delivery at Port Unload Drayman/Trucker

U.S. CUSTOMS C-TPAT OVERVIEW Custom Clearance Brokers • Responsible for Customs Releases • Arranges for Inland Transport • Provides Documentation for Inland moves

U.S. CUSTOMS C-TPAT OVERVIEW Customs Broker Process Get Clearance Assigns Trucker Forwarder sends to the Shipper Issues Delivery Order Sends POD to Exporter/Forwarder Gets POD

U.S. CUSTOMS C-TPAT OVERVIEW To: All Suppliers Subject: Customs-Trade Partnership Against Terrorism (C-TPAT) Recently the United States Customs Service has asked ZF/Lemforder to participate in a joint government-business initiative, C-TPAT, in order to strengthen our overall supply chain and improve border security in response to the threat of future terrorist attacks in the United States. Like many of you who were also asked for your participation in this program ZF/Lemforder has accepted that request and will play an active role in that endeavor going forward. Part of the requirement for participation in this program involves asking for cooperation from you, our supplier base, in determining the assessment of the level of supply chain security that exists. To that end we have enclosed a security survey that will help both of us in determining whether we are at a level in the supply chain that can adequately protect us against any terrorist activity. If you are already a partner in this program you do not have to fill out the enclosed survey. For those of you who are not already a partner in this program please complete the survey and return it to the ZF/Lemforder logistic manager that your facility is associated with. We will hold any information provided by you in strict confidence. The events of September 11, 2001 have changed our lives forever and the future potential for a repeat of those tragic events can only be lessened if we make sure that we take the necessary steps within our supply chains to create a safe environment for our employees, suppliers and customers. To that end I strongly encourage you to participate with us in this program. Best regards, Robert J. Edge Director Customs Compliance ZF North America

U.S. CUSTOMS C-TPAT OVERVIEW • Security Recommendations • Procedural Security • Physical Security • Access Controls • Personnel Security • Education & Training Awareness • Manifest Procedures • Conveyance Security

U.S. CUSTOMS C-TPAT OVERVIEW Security Procedures • Point of Origin – security processes • Participate in Foreign Customs Security Programs • Service provider screening and selection • Customer/vendor screening procedures

U.S. CUSTOMS C-TPAT OVERVIEW Container Security • Consolidator’s ensure all contracted services • Container inspection procedures in place • Container seals – written procedures • Container storage – must be secure

U.S. CUSTOMS C-TPAT OVERVIEW Personnel Security • Screening process must be in place • Pre-employment verification • Background checks & verifications • Personnel Termination Processes

U.S. CUSTOMS C-TPAT OVERVIEW Procedural Security • Document Processing – legible, accurate, complete • Manifesting Procedures – timely & accurate • Shipping & Receiving – cargo manifest reconciled • Cargo Discrepancies – O S & D procedures

U.S. CUSTOMS C-TPAT OVERVIEW Security Training & Threat Awareness • Threat awareness program • Conspiracy Recognition • Shipping & Receiving – training on security • Mail room training

U.S. CUSTOMS C-TPAT OVERVIEW Physical Security • Perimeter fencing - cargo hold or storage • Gate houses – must be manned • Parking – private cars not allowed near cargo • Building structure – resist unlawful entry • Locking devices and Key controls • Alarms and Video surveillance Cameras

U.S. CUSTOMS C-TPAT OVERVIEW I T Security • Protect data from unauthorized manipulation • Password protection • IT security policies, procedures, and standards • Accountability – identify abuse

U.S. CUSTOMS C-TPAT OVERVIEW • Other Areas C-TPAT Action Taken at ZF VH • C-TPAT added to Customs Compliance Manual • ISO procedures updated to include C-TPAT • North American Security Policy Addressed • Questionnaire developed and sent to all suppliers • Employee Awareness Training • European Suppliers Trained • HR Employee Screening

ZF SECURITY POLICY • PURPOSE • ZF is committed to the goal of creating a secure and efficient supply chain through management of plants and supply chain partnerships. • DEFINITIONS • Security – Security will include the areas of Procedural Security, Physical Security, Personnel Security, • Education and Training, Access Controls, Manifest Procedures, and Conveyance Security. • These security areas will be compliant within the spirit of the U.S. Customs and Border Protection C-TPAT program. • POLICY • ZF will notify U.S. Customs and Border Protection and other law enforcement agencies in cases where anomalies or illegal activities are detected or suspected. Through ZF’s supply chain partnerships, procedures will be in place to protect against un-manifested material being introduced into the supply chain. • ZF will secure all building to prevent unlawful entry and protect against outside intrusion. Physical plant security will be assessed and appropriate security l evels will be determined for each location. Unauthorized access to facilities will be prohibited. In addition, pre-employment screening will include background checks and application verification. • ZF will provide security awareness training in the spirit of the C-TPAT program. This training will be designed to enlighten the workforce to potential security breaches, notification procedures, and encourage employee participation in the maintaining of cargo integrity. • ZF will ensure that all manifests are complete, legible, accurate and submitted in a timely manner to U.S. Customs and Border Protection. Supply chain partners will be expected to participate in the C-TPAT program. These partners will be responsible to maintain the conveyance integrity to protect against the introduction of unauthorized personnel and material.

Visitor Control • Must Sign In • Visitor’s Badge • Escorted • Truck Drivers in Shipping Lounge only U.S. CUSTOMS C-TPAT OVERVIEW Employee Responsibilities in C-TPAT • Building Access Control - Badge in and out • Report any suspicious materials received • Manifest Control • Proper packaging and markings • Logistic provider – selection and control

U.S. CUSTOMS C-TPAT OVERVIEW Next Steps: • Customs is conducting “Validations” (USA & Overseas) • C-TPAT Levels 1, 2, 3 • Annual Risk Assessment • Sr. Management Involvement • Overseas Container Inspections – pre-loading • Self Assessment & Self Audit • SVIP Program = Status Verification Interface Participants

U.S. CUSTOMS C-TPAT OVERVIEW 7 Point Inspection Container & Truck Inspection

Customs CSI “Container Security Initiative” CSI Consists of 4 Core Elements 1. Using intelligence and automated information to identify and target containers that pose a risk for terrorism 2. Pre-screening those containers that pose a risk at the port of departure before they arrive at U.S. ports 3. Using detection technology to quickly pre-screen containers that pose a risk 4. Using smarter, tamper-evident containers

Customs “24 Hour Rule” • Effective February 2, 2003 • Must provide a detailed description of the contents of sea container bourn for the USA 24 hours before the container is loaded on board a vessel • Allows Customs to analyze, inspect, & identify potential terrorist threats before it arrives in USA • Customs issues a “do not load” message if containers are in violation

CSI Foreign Ports Currently Operational Ports In the Americas: Montreal, Vancouver & Halifax, Canada Santos, Brazil Buenos Aires, Argentina In Europe: Rotterdam, The Netherlands Bremerhaven & Hamburg, Germany Antwerp and Zeebrugge, Belgium Le Havre and Marseille, France Gothenburg, Sweden Piraeus, Greece Algeciras, Spain Lisbon, Portugal La Spezia, Genoa, Naples, Gioia Tauro, and Livorno, Italy Felixstowe, Liverpool, Thamesport, Tilbury, and Southampton, United Kingdom (U.K.) In Asia and the East: Singapore Yokohama, Tokyo, Nagoya and Kobe, Japan Hong Kong Pusan, South Korea Port Klang and Tanjung Pelepas, Malaysia Laem Chabang, Thailand Dubai, United Arab Emirates (UAE) Shenzhen and Shanghai Kaohsiung Colombo, Sri Lanka In Africa: Durban, South Africa Total of 43 ports Participating in The CSI Program

The 7 points to check The verification should take place inside and outside looking for possible double ceilings, floors or walls to prevent explosives or other kind of hazards to be hidden in the container.

Container 7 Point Check List __________________________________ Ceiling Inside and Out Front Side Inside and Out Floor Inside and Out Left Side Inside and Out Right Side Inside and Out Back (Doors) also inspect locking devices Inside dimensions see enclosed charts It is required to tap the walls with a hammer to verify nothing has been tampered with and this procedure and checklist will need to be completed for every container shipped. The shipping location should keep a copy of the inspection check lists. Container Number _______________________ Date __________________ Bill of Lading or Tracking Number ________________ Signature of Person who inspected the container ________________________________

U.S. CUSTOMS C-TPAT OVERVIEW