We all have to eat. Unfortunately, that's a vulnerability in the war against terror.
Just as the banking industry has taken important steps to meet the anti-money laundering and anti-terrorism challenges of the USA PATRIOT Act, the food industry will have to protect its critical infrastructure in accordance with the Bioterrorism Act of 2002. Given the immense logistical challenges involved with managing the global supply chain for agricultural products, banks may find themselves playing an important role in the process.
Agricultural security has been identified as a top priority for Operation Liberty Shield, a series of initiatives of the Department of Homeland Security. Consequently, the Food and Drug Administration (FDA) has already issued guidelines for food importers, producers, processors and transporters, and plans to issue final regulations well in advance of the statutory deadline of December 12, 2003.
A key provision in the Bioterrorism Act calls for prior notice of imported food shipments. Consequently, food importers will not be able to play fast and loose with shipping schedules, ports of entry, or shipment contents. In these areas, published FDA guidelines recommend (among other things) that importers consider:
* Establishing delivery schedules, not accepting unexplained, unscheduled deliveries or drivers, and investigating delayed or missed shipments;* Requesting that transporters have the capability to verify the location of the load at any time, when practical; * Reconciling the product and amount received with the product and amount ordered and the product and amount listed on the invoice and shipping documents, taking into account any sampling performed prior to receipt; * Taking reasonable steps to encourage suppliers, distributors and transporters to practice appropriate food security measures. (For example, auditing, where practical, for compliance with food security measures that are contained in purchase and shipping contracts or letters of credit or using a vendor approval program.)
Accordingly, the ultimate solution should include the type of functionality made possible through the latest generation of trade finance software.
"These regulations are really shifting right now," said Mike Versace, National Director of Financial Services, Niteo Partners, a wholly-owned subsidiary of NEC based in New York that provides consulting and systems integration services. "They're requiring shippers, consigners, carriers, and banks not only to submit enhanced declarations--such as a bill of lading--but also to do it in a more timely manner."
"The extent to which more of these documents and more of this reporting can be done online in a very secure way, it's going to lead to some of these time improvements," added Versace.
Niteo Partners and NEC have developed a trade finance package for Sumitomo Mitsui Banking Corporation, which it expects will reduce paperwork, overall cost and risk for the bank, while also improving customer service for importers and exporters. (Read more about the XBRL-based solution in the May 2003 issue of BS&T.)
This article originally appeared in Bank Systems & Technology eNEWS, a weekly e-mail newsletter. To order a free subscription, click here: http://www.submag.com