SCRLC Regulatory/Security Track

1. SCRLC Regulatory/Security Track January 29, 2008

2. Topics/Agenda • Import Safety Overview Brian Gill, FedEx • TSA Certified Cargo Screening Program Ely Kahn, TSA • “10+2” Rule, COAC/WCO PSCG Update Bruce Leeds, Boeing • Various topic updates Ken Konigsmark, Boeing • Aerospace Industry Assoc initiative • WCO SAFE Framework Conference • One page summary of supply chain security initiatives

3. Why Important to SCRLC Members? • Import safety issues/regulations a hot topic: may impact SCRLC members • New law mandates TSA cargo screening program: • will impact all cargo on passenger aircraft • may add cost/potential delays to shipments • may require security enhancements to SCRLC member shipping sites • “10+2” requirements will affect future US imports; SCRLC members can offer feedback to COAC and WCO PSCG thru B. Leeds • Many initiatives underway around the world may impact SCRLC members

4. Regulatory/Security Track Scope Included: • Understand existing supply chain security programs; track proposed changes • Track emerging supply chain security programs (AEO, other) • Monitor legislation/ policies related to supply chain security • Monitor other regulatory initiatives (beyond supply chain security) • Track supply chain security best practices • Monitor open source intelligence reports; identify supply chain security risks • Contingency planning/continued operations in post-incident scenarios • Monitor latest technological solutions to supply chain security concerns • Monitor international regulations and policies impacting supply chain security Excluded: • Import/export compliance regulations or policies • Security/reliability risks to supply chains from non-human sources

5. U.S. Actions to Improve Import Product Safety Brian Gill/Alan Black

6. 2007 Events Multiple product safety events occurred in 2007 involving imported product safety, with significant public reaction. • Contaminated toothpaste • Contaminated pet food • Defective automobile tires • Chinese seafood • Unsafe toys (lead paint, small parts, product design issues, etc.)

7. Import Safety Working Group • Pres. Bush issued Executive Order 13439, 7/17/07, creating the President’s Working Group on Import Safety • Working Group consists of Cabinet heads from 12 Federal agencies and departments • Mission is threefold: • Review and assess current import procedures • Identify means to enhance product safety • Survey authorities of governmental agencies to identify best practices and enhance coordination

8. ISWG Strategic Framework (Sept, 2007) • Three Organizing Principles • Prevention • Intervention • Response • Six “Cross Cutting Building Blocks” • Advance Common Vision • Increase Accountability • Focus on Risk over product life cycle • Build Interoperable Systems • Foster a culture of collaboration • Promote technological Innovation

9. Examples of ISWG Principles in Action • N.O.A.A. fee-based seafood inspection program • FDA Prior Notice for imported foods • Utilizes a single data stream submitted to Customs and Border Protection • USDA staff offshore for fruit and vegetable inspections Each of these examples supports the ISWG principle of “prevention”.

10. ISWG Action Plan (Nov, 2007) Action Plan contains 14 broad recommendations and 50 action steps. • Action Plan proposes strategy focused on risk-based prevention • Magnitude of import and export volume precludes the nation inspecting itself to safety • Action Plan reflects Administration commitment to continually strengthen and improve the import safety system.

11. Highlights of Action Plan Recommendations • Create a stronger certification process. • FDA should have authority to require certain foreign producers to certify that products meet U.S. FDA standards • Voluntary certification should be encouraged for foreign manufacturers of other products • Encourage Good Import Practices • Incentives would be provided to maintain highest standards • Increase Transparency • Names of certified producers and importers would be made public for use by consumers and distributors. • Exchange of Import Data • Information sharing between private industry and Federal agencies, for better decisions on import shipments.

12. Additional Recommendations • Increased U.S. Presence Overseas • Product safety to become a guiding principle of U.S. agreements with foreign governments • Increased training for foreign inspection agencies • Enhanced Standards • Congress should give import safety and inspection agencies the ability to strengthen standards, as needed. • Higher Penalties • To hold both foreign and domestic entities accountable and discourage the sale of unsafe products

13. Significant Issues • Increased civil and criminal liability, e.g. FDA refusals, CBP penalties, CPSC fines • Increased CBP surety bond amounts for importers • New FDA authority for destruction of medical products refused admission • Mandated use of International Trade Data System (ITDS) by CY2009 • Creation of new interactive Import Safety Information Network • Harmonized procedures for Federal agencies administering imports

14. Intellectual Property Rights and Consumer Safety ISWG identified a significant correlation between violative IPR commodities and product safety. ISWG recommends greater IPR enforcement to enhance consumer safety. Actions include: • Focus Federal Govt. and other IPR enforcement efforts on import safety issues • Expand information sharing about counterfeit and IPR infringing goods across U.S. department and agencies • Encourage rights holders to register trademarks with CBP

15. FDA Food Protection Plan (Nov, 2007) FDA issued a plan concurrent with the ISWG Action Plan, focused on imported food supply chain. FDA plan contains extensive actions and legislative changes to extend FDA’s authority over imported food safety. Recommended actions include: • Risk-based inspections and sampling • Foreign plant inspections • FDA personnel stationed in foreign countries • Use of third parties for food inspections • Use of advance screening technology at the border • Improved data quality and handling capacity

16. FDA Regulated Commodities • Medical devices (includes eyeglasses, sunglasses) • Pharmaceuticals • Human food • Animal feed and drugs • Seafood • Cosmetics • Biologics • Radiation emitting devices All these commodities will be especially affected by the FDA Action Plan and the ISWG Action Plan.

17. CPSC Import Surveillance CPSC announced on 1/07/08 a newly formed Import Surveillance Division. • New initiative working closely with CBP at port of entry • Goal is to target, stop, and inspect high risk shipments at U.S. port • First time that CPSC personnel are assigned full time at a U.S. port • Program started at ports of Seattle, Oakland, Long Beach • CPSC budget was increased 30% for Federal FY08

18. Major Legislative Proposals to Date • CPSC Reform • HR4040: Consumer Product Safety Modernization Act of 2007 • S2045: CPSC Reform Act of 2007 • FDA Reform • HR3610: Food and Drug Import Safety Act of 2007 • S1776: Imported Food Security Act of 2007

19. CPSC Reform Act of 2007 HR4040 is leading legislative vehicle at this time. Provisions include: • Third party testing and certification • Tracking labels for children’s products • Substantial product hazard reporting requirements • Identification of manufacturer for certain commodities • Increased penalties for repeat violators • Sale or re-export of prohibited articles would be prohibited

20. FDA Legislative Changes HR3610 is the leading legislative vehicle at this time. Provisions include: • New $50 fee on each “line item” of imported food • New $1000 fee on each “line item” of pharmaceuticals • Food imports restricted to designated ports of entry • New research required on testing techniques and sampling methods for import inspections • FDA would be required to develop a voluntary food safety program within two years of enactment

21. What Should You Do? • Monitor Import Safety Working Group website for updates • Monitor regulatory agency websites • Get involved with trade associations • Monitor legislative activity • Alert foreign suppliers • Make suggestions!

22. Additional Actions • Review commodity lines for potential impact • Require foreign suppliers to provide better documentation • Certify all items manufactured to specifications • Complete and accurate descriptions on AWB and commercial invoice (CI) • Complete and accurate CI • Additional information that may be required for other regulatory agencies, e.g. manufacturer name • Include HTS classification on CI

23. IPR Considerations Reminder: ISWG has identified a high correlation between IPR violative merchandise and unsafe import products. • Secure trademark releases from rights holder for any affected merchandise • Record your own trademarks with CBP Expect increased enforcement for IPR.

24. Resources • Import Safety Working Group (Action Plan): • www.importsafety.gov • Customs and Border Protection: www.cbp.gov • IPR Information: www.cbp.gov/xp/cgov/import/commercial_enforcement/ipr/ • Food and Drug (Food Protection Plan): • http://www.fda.gov/oc/initiatives/advance/food.html • CPSC: www.cpsc.gov • American Association of Exporters and Importers: • www.AAEI.org • Library of Congress (Legislative information): • http://thomas.loc.gov/

25. What questions do you have?

26. Commercial Operations Advisory Committee (COAC)AIA Update – Jan. 24, 2008 Bruce Leeds The Boeing Company COAC Chair

27. CTPAT Updates • New parties eligible for CTPAT • Third party logistics providers • Still working issue • Definition is key • Exporters • COAC initiative • Required for mutual recognition • Resource and jurisdiction issues with CBP • Tier 3 benefits • Still open issue • Hoping for at least one significant breakthrough this year

28. The Big Issue – NPRM on “10+2” • What’s the issue? • Responses to Notice of Proposed Rulemaking due on 3/3/08 • COAC Advance Data subcommittee resurrected to provide comments • COAC will also ask for extension of 60 day comment period • Implementation date of Final Rule could be as early as 9/1/08 – is anyone prepared?

29. Future Meetings • Next meeting: Feb. 13 • Will include demo of SBInet at border on Feb. 12 • COAC will vote on 10+2 resolutions • Future meetings • May (Washington DC) • August (Seattle) • November (Washington DC)

30. AIA C-TPAT Initiative January 2008

31. Background January 2006: AIA initiated member discussions on the Customs Trade Partnership Against Terrorism (C-TPAT) at the request of AIA’s Board of Governors. • 21 Members from 11 AIA member companies. • Six meetings over 24 months. • Participants agreed on an approach that: • Defines common aerospace quality standards. • Ensures foreign suppliers act upon consistent, established standards. • Promotes third-party validations/certifications. • Assures importers of supplier compliances. • Minimizes impacts to suppliers from repetitive customer assessments and conflicting guidance.

32. Process AIA Members Promote System to International Suppliers AIA C-TPAT Initiative Established Market to AIA Membership International Supplier Completes AIA Questionnaire for a Specific Facility and Inputs Status & Contact Info to Database AIA C-TPAT Supplier Database AIA Importers monitor Supplier Status on Database; Use it to define their company risk-based compliance approach. International Supplier Contracts for Optional Third-Party Assessment Successful Assessment Completed. International Supplier Inputs Status to Database

33. WCO SAFE Framework Conference Summary Brussels, December 11-12, 2007

34. Conference Summary • 5 WCO “principles” for Supply Chain Security • Foster prior electronic submission of shipment data • Use risk analysis to prioritize inspections (not 100% inspection) • Use automated, technical means for non-intrusive inspections at export • Close partnership efforts between governments and industry • Mutual recognition of programs • Resentment at US initiatives (100% ocean container inspections) • WCO will appeal to Congress in April on impacts of new law • Also commenting on 10+2 requirements • 145 of 171 WCO countries will implement the SAFE Framework; 110 have asked for WCO assistance for “capacity building”

35. Summary (con’t) • Mutual recognition in work between US and EU, Japan, Jordan, and Canada but dependant on full implementation first • China will support WCO efforts • Japan has new program: Goal is 50% of all EXPORTS in their AEO program by YE 2008 • Singapore implementing “Secure Trade Partnership” program • Australia did pilot, will move to operational in 2008 • Road map to EU/US mutual recognition by YE 2008 • US CBP: “not precluding the need to add more requirements”

36. GLOBAL WCO SAFE Framework of Standards Mutual Recognition? INTERNATIONAL Sweden (Stairsec), EU (AEO), Canada (PIP), New Zealand (SES), Japan (Asia Gateway Initiative), BASC, Jordan, (Golden List), Singapore (Secure Trade Partnership), Australia, China, US (C-TPAT) • US Congress • Safe Port Act 9/11 Commission Act Import Safety? • TSACBPFAA, FDA, Commerce, etc • TWIC - C-TPAT • CCSP - CSI (Container Security Initiative) - FAST (Free and Secure Trade) - SFI (Secure Freight Initiative) - 10+2 Advance Data Filing - OSC (Operation Safe Commerce) (Transportation Worker Identity Card) (Certified Cargo Screening Program) FUTURE?: US Exports? Cargo carrier screening? International air cargo? Mutual recognition? Reciprocal requirements? Risk mgt vs. 100% screening? Import safety?