Perspectives in Responsible Sourcing

The perils of Chinese trucking

The perils of Chinese trucking
In today’s New York Times, "China’s Exports Perch on Uncertain Truck System", an article on the somewhat chaotic and unregulated world of Chinese trucking featured prominently. Of note in the article was the following:

• Mention of a recent trucker strike in Shanghai involving over 2000 truckers over the climbing cost of fuel and government fees.
• Many of the smaller trucking companies are owner-operated, and compete by offering low prices and over-loading the trucks, which leaves them vulnerable to fines from corrupt government officials.  Corruption, in the form of fines levied by local government officials, is especially onerous to these businesses.
• From a security point of view, one point is especially troubling. Many of the small trucking companies subcontracted by larger (and no doubt global) logistics companies are often forced to cut costs and corners in order to keep their prices low. According to the article, many “ violate the law, pay bribes to avoid heavy fines and transportation restrictions, and even force drivers to sleep in the trucks overnight, sometimes in insecure parking lots.” This last point could indicate that C-TPAT certified global logistics providers subcontract to companies that are unable to meet minimum security standards for the flow of cargo.
• As production moves further into the interior, these issues are likely going to be increasingly problematic. Trucking is surprisingly expensive in China, despite low wages for the drivers, and many small firms are not able to compete, especially when fuel costs are steadily rising.

Should the Chinese and US governments agree to allow C-TPAT validations to take place in China again in the near future as has been announced recently, it will be interesting to see how this issue will be handled. Challenges to truckers in China appear to pose security risks to the supply chains of a large part of the goods that are shipped to the US, and as a result, should not be ignored by CBP or C-TPAT partners who source in China. 

Some C-TPAT inspections may be unannounced



Senators Susan Collins, R-Maine, and Patty Murray, D-Washington, presented the SAFE Port Reauthorization Act of 2011, requesting funding for cargo security programs administered by US Customs, including the Container Security Initiative and the Customs-Trade Partnership Against Terrorism (C-TPAT). While the amount requested in the Act for C-TPAT was $66.4 million, the Obama administration has requested $45 million for 2012, down from the 2010 budget of $51 million, according to American Shipper.

While the recent budgets requested by the administration have shrunk, there are two indications that the reach of the program will expand:

• Commissioner Alan Bersin has recently promoted the concept of expanding the number of members from 10,000 to 40,000 within five years.
• Senators Collins and Murray propose that CBP conduct unannounced inspections of C-TPAT members supply chains when the company has a history of previous concerns.

 

2010 US State Dept Human Rights Reports: Resource for CSR Professionals

Today marks an important day for CSR practitioners, government officials, academics and corporations. Personally, as a member of STR-RS’s Risk Services team, April 8, 2011 will drastically affect the next year of my life. Today the US Department of State releases its' 2010 Country Reports on Human Rights Practices.

According to the State Dept, these reports "cover internationally recognized individual, civil, political, and worker rights, as set forth in the Universal Declaration of Human Rights."

Although many organizations endeavor to accomplish similar tasks, this is the sole report covering over 190 countries and updated annually with significant rights-related events from the prior year. Reviewing these reports year to year can offer valuable insight into a country's progress or digression in relation to promoting respect for human rights.

STR-RS’s consulting services are heavily informed by the report, which provides an important means for advising our clients on countries, regions, industries, products, and suppliers. By combining the annually updated report with STR-RS’s extensive audit database, we are able to produce a near infinite combination of comparisons and trend analyses related to CSR performance the world over.

For example, by combining the country level information garnered from review of the Human Rights report with STR-RS’s cache of country audit grades, we have been able to produce, since 2005, the Country Risk Index. This index ranks over 190 countries according to social, economic, and political factors on both the country and factory specific level in order to advise sourcing decisions, supplier segmentation, and allocation of audit resources. We also use the Country Reports to develop our Country Risk Profiles, which draw an overall picture of the most egregious human rights violations and explain them through analysis of audit violation data.

Both as a general means for understanding human rights conditions at the country level and as a tool to stay afloat in the ever changing landscape of globalization, the reports serve as an incredible resource for the CSR industry. As you can see, we use the reports for our risk related projects and as internal training tools. We recommend applying the reports as a means for surveying supply chain programs and targeting identified issues. Used in conjunction with reports put out by NGOs and internal data, the reports can serve as a useful tool for any multi-national company.