UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
Challenges in Conformity Assessment for
developing countries
UNIDO’s Perspective
Ouseph Padickakudi, Programme Manager, UNIDO
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
CURRENT TRADE SCENARIO
World trade 1970 – 99 (trillion US$ - constant 1995)
9.0
world
8.0
7.0
high income
6.0
5.0
4.0
3.0
low & middle income
2.0
1.0
0.0
1970
1975
1980
1985
1990
Challenges in Conformity Assessment for developing countries, December 2004
1995
2000
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
CURRENT TRADE SCENARIO
World trade 1970 – 99 (trillion US$ - constant 1995)
9.0
world
8.0
7.0
high income
6.0
5.0
4.0
3.0
low & middle income
2.0
1.0
low income
LDCs
0.0
1970
1975
1980
1985
1990
Challenges in Conformity Assessment for developing countries, December 2004
1995
2000
A CONCERTED INTER-AGENCY STRATEGY FACILITATES MARKET ACCESS
Compete
Conform
Connect
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
The UNIDO-WTO Framework Concept – The main programme modules
Module I
Module II
Prove
Conformity
with Technical
Requirements
Remove
supply side
constraints
Introduce
supporting
legislation,
policies and
institutional
reform
Strengthen
supply capacity
/improve
competitiveness
Set up
accreditation/
certification
systems
Support
compliance with
international
standards
and regulations
Module III
Integrate
into the
multilateral trading
system
Strengthen
capacity for implementation of
the WTO agreements and trade
negotiations
UNIDO
Challenges in Conformity Assessment for developing countries, December 2004
WTO
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
WTO ACCESSION REQUIREMENTS
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
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.
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity
Management Systems- Becoming Standards
• 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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity
Management Systems- Becoming Standards
• Hazard Analysis & Critical Control Point HACCP
– 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)
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
MARKET COMPLIANCE- Standards, Metrology, Testing, Conformity
Management Systems- Becoming Standards
• 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,
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
UNIDO TCB Metrics Stage 1
Sectors
(S)
Products in
respective sectors
(P)
Markets
(M)
Requirements
(TBT/SPS)
Conformity
(TCCI)
Lab Test1…n
Costs
(C)
C1…n
Total
Conformity
Cost
Calibration
1…n
S1…n
P1…n
M1…n
TBT/SPS1…n
Certification
1…n
Inspection
1…n
C1…n
C1…n
Challenges in Conformity Assessment for developing countries, December 2004
(TConfC)
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
UNIDO The case of shrimps exports
SHRIMPS/The Netherlands
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)
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
UNIDO TCB for Shrimp Exports to the Netherlands
SECTOR
S
PRODUCT MARKET
P
M
REQUIREMENTS
TBT/SPS
Type of Test
/ Certificate
Cost
Nr. of
per test tests
($C)
(Xn)
Total cost
of testing
($C*Xn)
Additives and Flavorings in Food
Chemical
25
20,000
500,000
Cadmium, lead and mercury
Chemical
90
20,000
1,800,000
Polychlorinated Biphenyles (PCBs) and
Terphenyles (PCTs)
Chemical
120
20,000
2,400,000
Contaminants in Food
Chemical
60
20,000
1,200,000
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
Social market requirements
SA 8000
3,000
50
500,000
Consignment rate/year: 100,000
Quality related market requirements
ISO 9000
4,000
50
2,050,000
Consignment inspection rate : 20% per
consignment
Environmentally sound production
HACCP (food)
4,000
50
2,050,000
EU / The
Netherlands
Shrimps
Fisheries
Hypothetical Country X
Annual exports of shrimps: 100,000 tonnes
Total annual cost for 50 companies to export 100 thousand tonnes of shrimps to The
Netherlands in 100,000 consignments.
Challenges in Conformity Assessment for developing countries, December 2004
15,350,000
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
TCB for Shrimp Exports to
the Netherlands
SECTOR (S):
Seafood/Fish
ORGANIZATION
COSTS FOR SETTING-UP
DOMESTIC TESTING FACILITIES
Costs include only TA not local
requirements, such as buildings, etc.
Cost will be compared to costs of outsourcing the tests and calibration
Laboratory
Equipment
Expertise
Training
Accreditation
Chemical
$550,000
$ 60,000
$60,000
$20,000
Microbiology
$ 300,000
$ 40,000
$ 40,000
$ 15,000
Total cost micro-biological and chemical labs: $ 1,085,000
PRODUCT (P): Shrimps
100,000 tons/year @ $ 4.00/kg = $ 400 million
Metrology
Laboratory
Equipment
Expertise
Training
Accreditation
Total Number of Exporting Enterprises: 50
Minimum Number of Test Samples:
Mass
$200,000
$ 30,000
$30,000
$20,000
Dimension
$ 250,000
$ 20,000
$ 20,000
$ 15,000
Temparature
$ 70,000
$15,000
$ 10,000
$ 10,000
Pressure
$ 90,000
$ 15,000
$ 15,000
$ 10,000
MARKET (M): The Netherlands
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
Total cost metrology/calibration labs: $ 1,030,000
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
GRAND TOTAL TCB INVESTMENT: Total $ 5, 415,000
GRAND TOTAL TCB INVESTMENT MAINTENANCE (10 %) : annual $ 542,000
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
UNIDO Summary Findings from the Shrimps Case
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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
SAARC BACKGROUND
• 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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
India –Nepal- Bi lateral trade treaty
• 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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
ISSUES TO BE ADDRESSED
• 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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
ORGANIZATION
CONCLUSIONS
• 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
Challenges in Conformity Assessment for developing countries, December 2004
UNITED
NATIONS INDUSTRIAL DEVELOPMENT
THANK YOU
Ouseph Padickakudi, Programme Manager, UNIDO
E-mail: O.Padickakudi@unido.org
Web: www.unido.org
ORGANIZATION