Securing Merck`s worldwide supply of chemical
products –
Supply chain security versus trade facilitation
Page 1
“Securing Merck`s worldwide supply of chemical
products – Supply chain security versus trade
facilitation”
The aim of the case study is to show
how new legal requirements can be
implemented smoothly and put into
practice appropriately.
Page 2
Manufacture of Cocaine
Approximate Quantities Required for the Manufacture of
100 kilograms Cocaine-hcl
Coca Leaf
Sulfuric Acid
(100 to 400 liters)
Coca Paste
Cocaine Base
Cocaine Hydrochloride
(100 kilograms)
Potassium Permanganate
20 kilograms
Acetone/ Ethyl Ether/
Methyl Ethyl Ketone/
Toluene
(1500 to 2000 liters)
Hydrochloric Acid
(30 liters)
Page 3
Dual-Use – Australia Group
BAFA Einschätzung Kampfstoffe.xls
Item
No
803273
814310
814553
801658
800945
841645
450182
101160
458027
870348
101575
159508
800140
841509
800555
803646
Product Name
2-(DIETHYLAMINO)-ETHANOL for
Synthesis
2-(DIETHYLAMINO)-ETHANTHIOL
for Synthesis
2-(DIISOPROPYLAMINO)ETHYLCHLORIDHYDROCHLORID
for Synthesis
2-BROMACETOPHENON for
Synthesis
2-CHLORETHANOL for Synthesis
3,3-DIMETHYL-2-BUTANON for
Synthesis
AMMONIUMHYDROGENDIFLUORID
GPR(TM)
AMMONIUMHYDROGENDIFLUORIDE pure
AMMONIUMHYDROGENDIFLUORID
TECHNICAL
ARSENTRICHLORID
ATROPINSULFAT KRIST. PH
EUR,BP,JP,USP
Chemical Warfare/ Reason for Control
Production of VM and VG (both related to VX )
Production of VM and VG (both related to VX )v
Production of VM and VG (both related to VX )
Related to Omega-Chloracetophenon (Teargas)
Sulfuric Lost (Mustard Gas), Nitrogene Lost (N-Lost )
Soman
Sarin, Soman, Ethylsarin,
Methylphosphonsäurecyclohexylester
Sarin, Soman, Ethylsarin,
Methylphosphonsäurecyclohexylester
Sarin, Soman, Ethylsarin,
Methylphosphonsäurecyclohexylester
In former times arsen was the basis for chem. warfare
Atropine Sulfate is an Antidot against Sarin as well as
against E 605 (=civil use)
Atropine Sulfate is an Antidot against Sarin as well as
ATROPINE SULFATE
against E 605 (=civil use)
BENZILIC ACID FOR SYNTHESIS
Production of BZ ( Psychological warfare)
DIETHYL-2,2-DIETHOXYSarin, Soman, Ethylsarin,
ETHANPHOSPHONAT for Synthesis Methylphosphonsäurecyclohexylester
DIETHYLPHOSPHIT for Synthesis
Sarin, Soman
DIISOPROPYLAMINE
Production of VX
Page 4
Overview
Page 5
Research, Education,Training
Page 6
Products, Labels, Brand
Easy to recognize – it´s Merck
Subject to product piracy and imitation
Page 7
Logistic
Page 8
Our Customers
Page 9
Supply Chain
Page 10
Partnership Programmes
Australia
1991 Frontline
Canada
1995 Partners in Protection
USA
November 2001
Customs-Trade Partnership against Terrorism (C-TPAT)
Sweden
2002 Stairway und 2004 Stairsec
EU
2005 Authorized Economic Operator (AEO)
Page 11
Basics
• World Customs Organization (WCO) June 2005
– „Framework of Standards to Secure and Facilitate Global Trade“
• European Union May 2005
– Regulation (EU) 648/2005 Community Customs Code
• Implementing Provisions (by end of 2006)
Page 12
WCO - Framework of Standards to Secure and
Facilitate Global Trade Standard 1 – Partnership
Authorized Economic Operators involved in the international trade
supply chain will engage in a self – assessment process measured
against pre-determined security standards and best practices to
ensure that their internal policies and procedures proved adequate
safeguards against the compromise of their shipments and containers
until they are released from Customs control at destination.
Standard 2 – Security
Authorized Economic Operators will incorporate pre-determined
security best practices into their existing business practices.
Standard 3 – Authorization
The Customs administration, together with representatives from the
trade community, will design validation processes or quality
accreditation procedures that offer incentives to businesses through
their status as Authorized Economic Operators.
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WCO - Framework of Standards to Secure and
Facilitate Global Trade Standard 4 – Technology
All parties will maintain cargo and container integrity by facilitating the
use of modern technology.
Standard 5 – Communication
The Customs administration will regularly update Customs-Business
partnership programs to promote minimum security standards and
supply chain security best practices.
Standard 6 – Facilitation
The Customs administration will work co-operatively with Authorized
Economic Operators to maximize security and facilitation of the
international trade supply chain originating in or moving through its
Customs territory.
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Required Standards
•
•
•
•
•
•
Use of international standards
Pre Arrival Clearance
Expedited Procedures for Express Shipment
Risk Management/Analysis, Authorized Traders
Post-Clearance Audits
Separating release from Clearance Procedures
Page 15
Required Standards
• Publication of Fees and Charges and Prohibition of
Unpublished ones
• Periodic Review of Fees and Charges
• Limitation of Inspections and Controls as the result of risk
management
• Right of Appeal
• Use of Computerized systems to Reduce/Eliminate
Discretion
• Elimination of Pre-Shipment Inspections
Page 16
New Customs Code
• Customs related security initiatives of the EU
• EC Regulation 648/2005 and its implementing provisions
• Customs Security Program (CSP)
• Authorized Economic Operator (AEO)
• Transport related security initiatives of the EU
• Security cooperation with third countries
• Agreement with the United States of America on intensified
customs co-operation on Container Security
• EC-U.S. Expert groups
• Co-operation on supply chain security with China
Page 17
New Customs Code
Page 18
US Rules
• Security rules - US import
Page 19
US Rules
• Abriviations
Page 20
The Approach of Merck
• Trade Compliance and Export Control Policy
– Clearly defined roles and responsibilities
• State of the Art IT-Support
– Global Trade Services - GTS
Page 21
Merck Policy
MERCK TRADE COMPLIANCE AND EXPORT CONTROL POLICY
•
National and international regulations restrict or prohibit the import, export or
the domestic trade with goods, technology or services, the use of designated
products as well as the movement of capital and payments. The restrictions
and prohibitions may result from the character of the product, its country of
origin or end use or from the identity of the business partner.
•
Trade and production control regimes are a key concern for globally operating
companies given the serious implications non-compliance with the relevant
regulations may have.
•
Penalties with significant economic impact, criminal sanctions, the suspension
of privileges in legal trade and the loss of reputation may be the consequence
as well as the debarment from governmental tenders.
•
Therefore it is of utmost importance to maintain a sophisticated control
organization with clearly defined roles and responsibilities in every Company
of the Merck Group (CMG).
•
Foreign trade activities as well as the domestic trade with critical products
require extensive practical knowledge and operational excellence.
Page 22
Merck Policy
Relevant Legislation:
•
Drug Precursor legislation
•
Dual-use goods regulations
(Australian Group, Nuclear Suppliers’ Group –NSG, Missile Technology
Control Regime – MTCR)
•
Chemical Weapons Convention CWC
•
United Nations Actions Against Terrorism, Embargo Conventions
•
Single Convention on Narcotic Drugs
•
Rotterdam Convention – Import and Export of Dangerous Chemicals
•
Montreal Convention on Ozone Depleting Substances
•
US-Legislation with International Impact (Extraterritoriality principle, re-export
authorizations)
•
Additional national regulations
Page 23
Merck Policy
The Merck management will take all necessary measures to avoid legal
offences and bad publicity. This includes the policy that Merck will – if
there is any doubt – rather let a business deal go than to take the risk of
misuse and resulting liability.
All employees of the Merck Group are liable to comply with the relevant
legal regulations and the Merck guidelines. When evaluating the risk of a
not listed dual-use good not the good itself but the intended end use by
the customer is of relevance.
It is the goal of Merck to be the partner of control and not the target of
control. Therefore cooperation with competent authorities and the
awareness for active voluntary compliance are the key for success.
Export control is a management issue.
Page 24
Merck Policy
Superior responsibility for legal compliance:
•
Assigning the right persons with control functions
•
Maintaining a proper and efficient organization
•
Providing necessary training and education
•
Reporting incidents immediately to Darmstadt Headquarters
Page 25
Merck Policy
Foreign trade activities as well as the domestic trade with critical products
require the nomination of a responsible person within the organization:
The Trade and Export Compliance Manager.
Page 26
Merck Policy
The CMGs executive body appoints the Trade and Export Compliance Manager
• He or she is responsible for all organizational measures to ensure the company’s
compliance with the relevant regimes
• He or she is the responsible contact person regarding all questions originating
internally and externally
• He or she is in particular in charge to create and update the CMG control
procedures with regard to the control regimes.
• As far as the control subject is affected, the manager is even outside his own
hierarchic structure authorized to execute the necessary measures.
• He or she is allowed to delegate particularized tasks. This delegation is
continuously reviewed and subject to audits.
• Adequate management level
• Meeting the general acceptance of the management
Page 27
Merck Policy
Within Merck KGaA executive board ……… is the appointed person for
Trade Compliance. He is personally responsible for the compliance with the
export control regulations. He has delegated particularized tasks to the
export control unit within the central function …………of Merck KGaA in
Darmstadt: Export Control & Customs Regulations ECR.
ECR has a corporate control function regarding trade and production control
regimes. ECR has also the duty to support the entire organization. ECR
cannot substitute internal control systems or management responsibilities,
but it can give consulting services and training to the operative business
concerning the improvement of process efficiency and effectiveness. All
topics concerning trade and production control can be raised with ECR.
Page 28
Organizational requirements
• Buildup of a Virtual Organisation
Global Function Export Control
& Customs Regulations (Headquaters)
Trade Compliance
& Export Control
Manager
Trade Compliance
& Export Control
Manager
Trade Compliance
& Export Control
Manager
country 1/CMG*
country 2/CMG*
country 3/CMG*
…
*CMG = Company of the Merck Group
Page 29
The role of the Trade Compliance and
Export Control Manager
• Aligning the general control policy – deducted from the company’s
General Code of Conduct
• Establishing a proper general control programme
• Laying down rules and guidelines for education and training
• Laying down the organizational structure
• Fixing the binding process organization
• Selecting of proper staff
• Performing internal audits
• Interface to the competent authorities
• Cooperation with industry councils
Page 30
Rules and Responsibilities
•
Raising awareness for active voluntary compliance
– Internal rules and guidelines how to deal with suspicious
enquiries and how to report suspicious facts to the
competent authorities
Page 31
Rules and Responsibilities
•
Rules for the role out of new products
– Network plan technique
 Customs tariff classification
 (export) control classification
 Only authorized staff may update the relevant master data
 New products are blocked until the control classification is done
– Cross check of all existing products in the case of legal changes/
updates of the control lists
•
New customers
– Maintaining a screening system regarding the restricted person lists
“Know your Customer”
Page 32
Detailed topics
• Order processing
– How to recognize that a licence is obligatory
– Regulatory holds, red flags
– Only well trained and authorized staff shall release blocked orders
for delivery (IT-authorization concept )
– Even shipments of samples (new business) are subject to control
• Quality management system – documentation
– Rules/Guidelines
– Standard operating procedures
– Interface documents
Page 33
Main Tasks
• Education and training
– Tailor made training programmes for
• Management
• Order processing
• Customer service units
• Product managers
• Research and development units
– Documentation
• Annual compliance report
Page 34
Main Tasks
• IT-Support
– General rules for customizing
– Archiving rules for relevant transactions
– Authorization concepts
– Approval of User Requirement Specification
• Documentation
- Record keeping, periodic reports to competent
authorities
• External Audits
– Support service for external auditors and inspectors
Page 35
State of the Art IT-Support
Global Trade Services - GTS
• In global business there is the need to
– comply with local and global laws
– satisfy trade security measures
– meet documentation requirements
– understand complicated tariffs
• This cannot be handled manually anymore as the risk of
failure can be very costly
• The functionality of the ERP system is not sufficient
• The GTS Software Application offers this functionality
Page 36
What is in the scope of GTS?
GTS is to ensure the smooth
process of the flow of goods
across borders
Compliance Management
…for the compliance of complex international regulations
Customs Management
…for the realization of an efficient customs handling
Risk Management
…for the usage of privileges and refunds in the international trading
Page 37
System Landscape
• GTS is a central system
• It works on its own server
• All regional productive ERP* systems will be connected to
one central, global productive GTS system
• It will fit into the Global Merck IT-Program TEMPO
• A 24 hours support from the technical side is guaranteed
*Enterprise Resource Planning
Page 38
System Landscape
Implementation of Global Trade Services (GTS) in order to use
special functionalities for import and export control and to avoid
gaps and modifications within existing ERP system.
customs
Corporate
MDM
Global
(Data distribution,
data checking)
Regional
(Operations)
EH&S
Program functions:
• receive requests from ERP systems
(e.g. customer order entry)
• check centrally
• send back flag about checking result
• maintain master and control data
• customs notifications
• reports
•Interface to authorities
GTS
ERP
ERP
ERP
ERP
Asia
Europe
Latin America
North America
MDM = Master
Data Management
EH&S =
Environment,
Health & Safety
Page 39
What is in the scope of GTS
• Compliance Management:
– The Sanctioned Party List (SPL) screening = Lists with persons,
organizations and institutions with potentially terroristical
background => business contacts are forbidden
– The Export Control = products which require a license in order to
be sold (e.g. Dual Use article, narcotic drugs etc.)
– The Import Control = products which require a license in order to
be purchased (e.g. Dual Use article, narcotic drugs etc.)
Page 40
How does the Compliance
Management work?
• The GTS will be contacted during the creation or change
of
– the customer master
– the vendor master
– the material master
– a sales order
– a delivery
– a purchase order
• Plant Access
• If necessary the above described objects will be blocked
for a further processing and can be released.
Page 41
Benefits of GTS
• Automated processes replace manual ones which are
prone to error
• Better usability for the user
• Good data quality
• Efficient processes, as far as possible automated
GTS will decrease the workload for the
employees and guarantees the
required
legal compliance
Page 42
• Automated processes replace manual ones which are
IT-Sytem Global
fault-prone
Trade Services
• Better usability for the user
• Good data quality
• Efficient processes, as far as possible automated
GTS will decrease the workload for the
employees and guarantees
the
IT-Sytem Environment
required
legal compliance Health & Safety
Dangerous Goods
Page 43
“Securing Merck`s worldwide supply of chemical
products – Supply chain security versus trade
facilitation”
Industry – in cooperation with national authorities – already provides a
high level of security. This is due to the natural self–interest of all
companies which want to get their services and products safely to their
destinations. Transport security is a key parameter for competitiveness
already being observed in a responsible manner and with comprehensive
measures by forwarding companies and the transport industry. In
particular the more stringent standards required by the insurance industry
in the aftermath of the terrorist attacks in Madrid and New York have
resulted in high standards being introduced.
For industry, effective terrorism protection means that measures must be
proportionate and based on a risk assessment taking into account market
realities of supply chains i.e. be geared to the potential level of risk
involved for an individual company of infrastructure.
Page 44
New Challenges – Explosive Precursors
IB 2006-4 (Threat Card Bulletin).pdf
IB 2006-4-1 (Threat Card).pdf
The Brussels Conference on Explosives
9 and 10 October 2006

General background
The use of explosives has been the most common method used by terrorists. Recent
terrorist attacks, and the recently foiled terrorist plot in London, confirm the need to do all
that is necessary to prevent terrorists, or those who support them, from getting hold of
such dangerous material.
The Commission considers that EU's policy approach must be extensive and one that
involves, control of substances used for constructing Improvised Explosive Devices (IEDs),
regulation of commercial explosives (including the reporting of suspicious transactions),
marking of explosives, stronger security constraints for transport and storage, the use of
technology to detect, tag and track explosive material, information sharing and
investigative support.
The complementarity of public and private measures is crucial to a successful policy in
this area. With the pooling of efforts by all concerned Commission aims at preparing a
comprehensive EU-wide plan for the enhanced security of explosives in Europe in which
industry and the research community become vital actors in the process.
Page 45
“Securing Merck`s worldwide supply of chemical
products – Supply chain security versus trade
facilitation”
Thank you for your attention!
Karlheinz Schnägelberger
Director Export Control
& Customs Regulations
Page 46