May 2016 Industry News

 Global Supply Chain disruption cost $56bn last year – and there’s more risk to come

New research from the British Standards Institute (BSI) has found that global supply chains gained a combined $56bn in extra costs last year, incurred by crime, extreme weather, terrorist threats and the migrant crisis that swept across Europe.

The true figures of cargo crime have been hard to come by. Supply security intelligence firm FreightWatch International (FWI) has said it is difficult to accurately assess, but recently concluded that truck theft in Europe amounted to €11.3bn in 2013. But the new 2015 SCREEN Global Intelligence Report from BSI concluded that $22.6bn was lost globally due to cargo crime.

It cited a 30% increase in truck theft in South Africa in the last year alone, “with thieves using high levels of violence and switching from targeting only high value goods to also targeting lower value items”, while China’s Guangdong province has also seen an alarming increase in thefts from moving vehicles on motorways.

In India, criminals have been operating with increasing sophistication, with gangs developing new techniques to steal goods without breaking customs seals in order to avoid detection – in 14 separate incidents, which are through to be the work of just three gangs, export containers were targeted after customs seals had been fitted but before the shipments had reached the load ports. The containers were then diverted to gang-controlled warehouses where the panels were cut out and the goods removed, the seals were left intact, however, delaying discovery of the thefts until arrival at consignees.

While the risk of theft is Europe has not been accelerating at the same rate, the region continues to suffer severe disruptions in trade caused by ISIS terrorist attacks, as yesterday’s events in Brussels are likely to further highlight, and the migration crisis.

The reintroduction of border controls following the November attacks in Paris are estimated to have cost Belgian cargo owners $3.5m alone, and it estimated that if Schengen area border controls are permanently re-established, it would cost the German economy $25bn.

The report also found that the top five natural disasters last year, much of which were induced by the El Nino phenomenon, collectively caused $33bn damage to businesses – forest fires in Indonesia cost $16bn; the Nepal earthquake cost $4-5bn; the typhoon that destroyed swathes of China and the Philippines also had a $4bn bill with it; while floods in the US and India cost $4-5bn and $1.3-3bn respectively.

On top of that was the Tianjin explosion, which is now estimated to be the single most expensive industrial accident, killing 173 people and costing global supply chains $3.3bn, making it far more economically damaging than 1989’s Exxon Valdez spill.

Last year also saw considerable social unrest – factory strikes in China, for example, increased by 58.3% year-on-year.

“The withholding of wages was cited as a major cause in 75% of protests and generated losses of up to $27m in the footwear industry. Labour unrest is likely to continue in China in 2016, regardless of whether the economy improves,” the report said.

“In 2016, BSI has identified emerging health crises, such as the Zika virus, could also pose a significant threat to the global supply chain and may lead to work stoppages and protests similar to the supply chain disruptions seen in conjunction with the Ebola epidemic,” it said. While the effects of El Nino may be subsiding, some 40% of El Nino years are followed by La Nina, which is likely to show itself within a few months from now.

“The Australian Bureau of Meteorology indicates that there is around a 40% chance of La Nina weather events occurring by the second quarter of 2016. La Nina years typically experience the opposite effects of El Nino years, which would most likely suggest an increase in cyclone landfall in China, fewer severe storms in the Indian Ocean, wet weather in Southern Africa and accompanying dry weather in East Africa,” it said.

Jim Yarbrough, global intelligence programme manager at BSI added: “Companies are facing an increasingly wide range of challenges to their supply chain, from human rights issues to acts of violent theft and natural disasters. Such complexity creates extreme levels of risk for organizations, both directly affecting the bottom line but perhaps more seriously, hidden threats to the supply chain which, if ignored, could do serious harm to a company’s hard-earned reputation.”

Indonesia reforms to speed up port customs clearance

The Indonesian government has announced measures to help cut the time needed for imports to be processed by customs at local ports.

Indonesia’s Co-ordinating Ministry for Economic Affairs noted certain procedures, such as licensing of exports and imports, differing criteria for customs inspections and inconsistent risk management processes, were some of the key obstacles faced in customs clearance.

Therefore it now requires all customs permits to be processed through the Indonesia National Single Window web portal, which functions as the country’s national trade repository, as opposed to through the various government agencies with authority at ports.

It has also placed the Indonesia Single Risk Management application in the portal to consolidate information regarding risk profiles for import-export activities.

With the measures, the government is looking to cut customs clearance times at Indonesian ports for pharmaceutical raw materials, food and beverages, as well as other products that require a licence from Indonesia’s National Agency of Drug and Food Control, to an average of about 3.7 days compared with 4.7 days by August 2016.

The reforms were part of the Economic Policy Package XI unveiled by the government to ramp up growth in Southeast Asia’s largest economy.

In October last year, Maersk Group and the Indonesian government agreed to an alliance that sought to enhance the maritime and economic development of the eastern Indonesian city of Bitung, identified as a strategic national transportation hub.

20% of countries still haven't identified the authority to oversee new container weight verification


A new survey of ship agents and brokers has discovered that nearly 20% of countries signed up to IMO international maritime conventions have report to say which national authority will oversee implementation of the new container weight regulations.

A survey conducted by the Federation of National Agents and Ship Brokers Association (FONASBA) of its members across more than 50 countries, found that in 10, the identity of designated authority had yet to be revealed, despite there being just three months before the new rules come into force.

In addition, in almost half the countries, “no guidance has been issued on the practical application of the measures in the country concerned”.

Just 25% of respondents said implementation plans were in place, while 31% said there were no plans and 44% said they remained under development.

FONASBA’s president designate and liner and port agency committee chairman, John Foord, said: “It is staggering that, with such a short time left before the amendments take effect, a significant number of countries had so far failed to take action at national level to ensure that the required measures would be in place on time.

“The SOLAS amendment has been under development in IMO for four years, so it is worrying that at this late stage ship agents, forwarders and shippers in many countries still lack appropriate measures to comply.

“As a supporter of the accurate verification of container weights since its initial proposal, FONASBA’s members have been proactive in working with their national authorities and the container transport chain to ensure the measures are in place in good time, and it is frustrating that so little progress has been made in some member states,” he said.

There was better news in that almost all the weighbridges in countries covered in the survey were already certified by authorities, but there is still concern over the number of weighbridges and their capacity to handle current trade flows.

The survey said: “Where these [weighbridges] exist however, many are reported as being out of service or in need of overhaul. Another common comment is that there are not enough weighbridges available to meet the anticipated demand after implementation.”

A significant variance in container weighing fees was also reported, with a number of respondents advising that no charge will be levied, while elsewhere fees range from $3/€3.50 to as much as $225/€200, some of which includes haulage and other additional costs.

Lower tariffs on trade with Japan have come into effect

It is now cheaper to export more than 1200 different products to Japan after a reduction in tariffs came into effect on April 1, and now 92% of Australian exports are entering the island nation duty-free.

The cuts come as the third round of tariff reductions under the Japan-Australia Economic Partnership Agreement (JAEPA).

Minister for Agriculture and Water Resources Barnaby Joyce said this round of tariff cuts would provide more benefits and opportunities to Australian exporters of a range of agricultural commodities, including beef, dairy products, wine, seafood, nuts and horticulture products.

“Japan remains one of the world’s top buyers of agricultural, food and fishery products from world markets, with imports worth US$70bn in 2014,” Mr Joyce said.

“Japan is also one of the world’s top markets for premium food and beverage products.”

Australian Minister for Trade and Investment Steve Ciobo said the tariff cuts cover high quality Australian Southern Bluefin Tuna, an export worth $116m last year.

“These tariff cuts give Australian exporters a crucial lead over competitors who continue to face the full tariff,” Mr Ciobo said.

He said exports of beef to Japan grew by 14.6% to nearly $2bn in 2015.

“Tariffs on Australian beef have again been cut to 27.5% (frozen) and 30.5% (fresh or chilled), while our competitors continue to pay the higher rate of 38.5%,” Mr Ciobo added.

The minister said other products, including nickel, worth about $80m per year and food products, worth $29m per year, will also see significant tariff cuts.

“This builds on high early utilisation of JAEPA – in the first 11 months of operation, Japanese customs data suggests at least 80% of Australian exports eligible for preferential tariff treatment have entered Japan under JAEPA,” Mr Ciobo said.

The JAEPA came into effect early last year and, according to DFaT, is the most liberalising trade agreement Japan has ever concluded.

More than 97% percent of Australian exports to Japan will either receive preferential access or will enter the country tariff-free when the agreement is fully implemented in 2034.

Japan is Australia’s second biggest trading partner, with two-way trade between the two countries worth close to $63bn in 2014-15 – nearly 12% of Australia’s total international trade.

Australia, Indonesia are set to begin trade negotiations anew


Business between Australia and its massive northern neighbour Indonesia is set for a boost, with Australian trade minister Steven Ciobo recently meeting Indonesian counterpart, Thomas Trikasih Lembong to resume negotiations on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

While the talks started back in September 2012, it is a process that has been stalled by various political dramas since 2013. But in their recent meeting, the ministers agreed trade and investment ties were underdeveloped between the two nations.

In a joint statement, the ministers said the agreement aims to address bilateral investment and trade impediments and would be a platform to build a “modern and dynamic economic partnership that reflects the strong bonds between the two countries”.

The agreement is expected to be as comprehensive as possible and would be built on existing regional agreements and previous negotiations, such as the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA).

The IA-CEPA is to be a “living agreement” that could be expanded to address issues that may arise in the future and it should include mechanisms for stakeholder input.

Mr Ciobo said the trade and economic relationship between Indonesia and Australia should be performing better than it is presently. “The IA-CEPA will launch a new era of closer economic engagement between our countries,” he said.

“We have committed to start work immediately on early outcomes including on skills, education, infrastructure, horticulture, design, agriculture, food processing, professional services and financial services,” Mr Ciobo said.

The Australian trade minister went on to say these sectors would be “a first taste of what can be delivered in this rejuvenated economic relationship”. Officials are to start working on the nitty-gritty of the agreement in short order, with final understandings on the early outcomes expected within the year.

Support - A business partnership group comprised of entities from both countries was formed to ensure the voice of business is a part of the negotiations.

The group is supported by the Australian Chamber of Commerce and Industry, the Australian Industry Group, the Indonesia Chamber of Commerce, the Indonesian Employers Association and several other bilateral business councils.

Australian Chamber of Commerce and Industry director of trade and international affairs Bryan Clark said there were “tremendous” opportunities to expand trade between Australia and Indonesia that could be developed through the agreement.

“It is gratifying to see the trade ministers come together to re-ignite negotiations over IA-CEPA,” he said.  “Our two economies complement each other well, so there are many ways businesses in the two countries can meet the needs of consumers.”

Mr Clark said trade agreements only achieve economic benefits if traders in the countries involved are willing to use it.  “As talks progress, it is vital that businesses have an opportunity to give advice and feedback on the deal; we need a deal that meets the needs of business,” he said.

The opportunities that could open up for bilateral business are manifold, and Mr Clark said the Australian Chamber is looking forward to working with its Indonesian counterparts to develop them.

“Australia’s major exports to Indonesia are wheat, live animals and sugar, while Indonesia exports to Australia crude petroleum, machinery and equipment,” he said.

“Sectors ripe for expansion include food (grains, horticulture, sugar and dairy), vocational education, tourism, maritime, manufacturing, health and beauty products, film production and sustainable development.”

Mr Clark said Australia’s total merchandise trade with Indonesia stands at $11bn and leaves room for improvement.  This means it ranks 12th on Australia’s trade partnerships, which indicates enormous opportunities for growth given our proximity,” he said.

“Past experience on Australia-Indonesia trade has shown that the most productive way forward is to look at broad issues that cut across industries, such as licensing and ownership restrictions; the movement of people; and investment limitations.”

Freight & Trade Alliance partner Travis Brooks-Garrett welcomed the possibility of modernising trade requirements between Australia and its major trade partners, but said care must be taken when upgrading trade regulations.

“For any trade agreements to offer real benefit we must be honest about the ability of these countries to provide Australian industry with valid origin documentation and other requirements that must be obtained from the country of origin before we can claim duty exemptions,” he told Lloyd’s List Australia.

“This also includes the integrity of tariff codes and the quality of the export data provided.” Mr Brooks-Garrett said real-world practicalities must be considered in any trade agreement.

“Not only do we need to work on the headline agreements with DFAT and their overseas counterparts, but we also need to consider the operational, day-to-day realities of a free trade agreement with developing countries such as Indonesia,” he said.

 “The ‘reactivation’ of this negotiation – and the intention for the agreement to be finalised within 12 to 18 months reflect a renewed willingness to maximise both countries’ strategic potential,” he said.

Negotiations for the IA-CEPA were suspended during a tumultuous period in diplomatic and trade relations between the two countries.

In 2013, Australia was accused of listening in on then-President Susilo Bambang Yudhoyono’s telephone, casing a diplomatic furore.

Diplomatic tensions were again inflamed in 2015 when Indonesia executed Australian citizens Andrew Chan and Myuran Sukumaran for drug smuggling.

In 2011, the Australian federal government suspended the export of all live cattle to Indonesia following public outcry over inhumane treatment of the animals in Indonesian slaughterhouses, exposed by ABC’s Four Corners program.

The month-long ban was a major blow to Australian cattle exporters and Indonesians who rely on Australian beef as a major source of protein.

In 2015 beef was again on the agenda when Indonesia slashed its beef import quota from Australia by some 80% in an effort to reduce dependency on imported food.

Despite being one of Australia’s closest neighbours, Indonesia is only Australia’s 12th biggest trading partner.

Trade with Indonesia only accounts for 2% of Australia’s international trade, with the value of merchandise exports and imports over 2014-15 totalling about $11bn.

By comparison, trade with Japan, Australia’s second biggest trade partner was worth close to $63bn over the same period, and trade with the US, its third largest partner, was worth more than $43bn.

China is Australia’s biggest trade partner, however, with total merchandise exports and imports in 2014-15 worth about $139bn.

Indonesia-Australia facts

  • Indonesia is the world’s fourth most populous country with 256m people.
  • It is the largest economy in Southeast Asia and 16th in the world.
  • Australia-Indonesia trade was worth $11 billion in 2014-15, making it Australia’s 12th largest two-way trading partner after Thailand, Germany and India.
  • According to Austrade, there are about 400 Australian companies operating in Indonesia.
  • Indonesia and Australia cooperate on a broad range of issues, including education, security and development, with Australia expected to provide $375.7m in assistance in 2015-16.
  • Major Australian exports to Indonesia include wheat, live animals, sugars and coal.
  • Major Australian imports from Indonesia are crude oil, specialised machinery/parts and wood.
  • Tourism from Australia is an important part of the Indonesia’s economy, with more than 1m Australians visiting the country annually.The Australian Government has recently implemented prohibitions on the carriage of air cargo originating from, or transiting through, Egypt; Syria, Bangladesh; Yemen or Somalia.The measures apply to airlines carrying in-bound air cargo to Australia, regardless of security treatments that may be applied at a transit point or last port of departure to Australia. If during its journey to Australia, the cargo has been transported via a means other than air cargo, such as sea or land freight, before uplift to Australia then it is no-longer regarded as air cargo originating from, or transiting through, the country.The prohibitions are a preventive security measure to manage potential security risks associated with air cargo from those countries.This is a decision of the Government made under 65B(2)(b) of the Aviation Transport Security Act 2004. The prohibitions are a legal requirement of the Government and have been implemented under specific provisions made by the Parliament in 2013 for precisely this purpose. It is not possible for the Department to grant an exemption under the legislation.The Department is working with Australian Border Force to implement the arrangements, however the Department appreciates the complexity of the air cargo system and the potential difficulties that may arise given the short-time frame available for industry to respond to the requirements. 
  • The Government, in cooperation with our international partners, will continue to monitor and assess the aviation security environment.
  • Air Cargo Prohibitions

Rolls-Royce Reveals Latest Vision for Drone Ships: “This Is Happening”

Rolls-Royce’s Advanced Autonomous Waterborne Applications Initiative (AAWA) project has unveiled its vision for how remote and autonomous drone ships will become a reality.

The project’s first year findings were presented at a conference at Helsinki’s Finlandia Hall last week.

“Autonomous shipping is the future of the maritime industry. As disruptive as the smart phone, the smart ship will revolutionize the landscape of ship design and operations,” commented Mikael Makinen, Rolls-Royce, President – Marine, speaking at the conference.

Rolls-Royce says that constant real-time remote monitoring of vessels worldwide will see ships become more closely integrated into logistics or supply chains, enabling global companies to focus on how to best use whole fleets, generating cost savings and improving revenue generation. This has the potential to create new shipping services, such as online cargo service marketplaces, more efficient pooling and leasing of assets, and new alliances. Some of these services will support existing players in the market and others will be more disruptive, allowing new players to enter and potentially capture a significant share of business in the same way as Uber, Spotify and Airbnb have done in other industries, according to Rolls-Royce.

“Remote and autonomous ships have the potential to redefine the maritime industry and the roles of the players in it with implications for shipping companies, shipbuilders and maritime systems providers, as well as technology companies from other sectors, especially automotive,” said Jouni Saarni, Development Manager, Centre for Collaborative Research at the Turku School of Economics.

According to Jonne Poikonen, a senior researcher at the University of Turku who is leading the project’s technology research, said: “The technologies needed to make remote and autonomous ships a reality exist – the sensor technology needed is sound and commercially available and the algorithms needed for robust decision support systems – the vessel’s ‘virtual captain’ – are not far away. The challenge is to find the optimum way to combine them cost effectively in a marine environment.”

A series of tests of the sensor arrays in a range of operating and climatic conditions will be carried out in Finland in the coming months on board Finferries 65-meter double ended ferry, Stella, which operates between Korpo and Houtskär.

The project is also exploring how to combine existing communication technologies in an optimum way for autonomous ship control. It has created a simulated autonomous ship control system which will be connected to a satellite communications link as well as land based systems and will allow the behavior of the complete communication system to be explored.

To secure regulatory approval, the support of ship owners, operators and seafarers, as well as wider public acceptance, the operation of remote and autonomous ships will obviously need to be at least as safe as existing vessels, Rolls-Royce said. According to Risto Jalonen, Senior Research Scientist at Aalto University, who is leading the project’s safety strand: “The marine industry has some experience of systematic and comprehensive risk assessments. However, when new or emerging technology is involved a wider and deeper understanding of a new and changed risk portfolio – with a variety of known and unknown hazards – is needed. The AAWA project is identifying and exploring these hazards and developing approaches to tackle them.”

Because cybersecurity is also be critical to the safe and successful operation of remote and autonomous vessels, the project is identifying and adapting current best practice from a range of industries for application in the marine environment.

The results of such studies will be used to make recommendations to regulators and classification societies to support the development of standards for remote and unmanned vessel operation.

“For remote and autonomous shipping to become a reality we need efforts at all regulatory levels,” according to the project’s legal strand leader Dr.Henrik Ringbom, Adjunct Professor at the Åbo Akademi University in Turku/Finland. “The legal challenges of constructing and operating a demonstration vessel at a national level need to be explored, while simultaneously considering appropriate rule changes at the IMO. Legislation can be changed if there is the political will.”

Questions of liability for autonomous ships are subject to national variations, but generally it seems that there is a less urgent need for regulatory change in this field, according to Rolls-Royce. What also needs to be explored is to what extent other liability rules, such as product liability, would affect traditional rules of maritime liability and insurance. These questions are being studied by researchers at the Faculty of Law at the University of Turku.

The project has been supported by Finnish Funding Agency for Technology and Innovation of Tekes. Rauli Hulkkonen, Tekes, and Chief Advisor, said: “This project is a fantastic opportunity to establish the Finnish maritime cluster as the world leader in maritime remote control technology.”

The conference also introduced the project’s first commercial ship operators; ferry operator Finferries, and dry bulk cargo carriers ESL Shipping Oy. Finferries will assist the project by carrying out a series of tests of sensor arrays in a range of operating and climatic conditions. ESL Shipping Ltd will help the project explore the implications of remote and autonomous ships for the short sea cargo sector.

“This is happening. It’s not if, it’s when,” said Oskar Levander, VP of Innovation at Rolls-Royce Marine at the close of the conference. “This work supports the development of remote controlled and autonomous vessels and will enable proof of concept demonstration following the completion of the project. We will see a remote controlled ship in commercial use by the end of the decade.”