User fees to finance supply chain security still an option
Setting up supply chain security policies throughout the world may be difficult, but the cost to implement them may be even tougher, especially for developing countries.
The cost of international supply chain security remains a hot topic for World Customs Organization members and international shippers and carriers. The issue surfaced again during a session of the WCO task force in Brussels this week.
A study sponsored by the WCO’s general secretariat this spring suggests that one possibility for funding supply chain security initiatives is through a tax or user fee based on the value of the cargo, or by container, or weight of the goods.
“Because the agents who participate in the international supply chain benefit directly from the public good security … part of the costs of security can be borne by certain users and beneficiaries,” said Philippe Dulbecco and Bertrand LaPorte, researchers at the University of Auvergne in France, in their study.
The study findings also suggest that user fees may be combined with other funding sources from the private and public sectors. Private sources are defined as direct contributions made by companies to finance supply chain security initiatives. Public sources may be linked to general taxes and loans from international banks.
In addition, the study envisions a role for the WCO with helping its customs administration members to meet their supply chain funding requirements.
“Indeed, in our opinion, the WCO represents the main international institution which can facilitate the implementation of the network sphere, indispensable to the production of the global public good,” the study said. “The role and attributions of the WCO will consequently be a direct function of the scenario adopted.”
The WCO has made no decisions regarding the findings of the study. “I think it’s a good idea to keep all options open,” Jouko Lempiainen, head of the WCO’s Compliance and Facilitation Directorate.
It’s anticipated, however, that funding will be achieved through a combination of user fees and the other options identified in the study.
“Of course there are many funding options and there are valid arguments to support self-funding options, because many of these steps can be seen as enhancements to national security,” said Thomas Timlen of the Baltic and International Maritime Council (BIMCO) in an interview with American Shipper. “Therefore, in a logical sense, this could fall under the expenses of a national defense budget.”
The industry is expected to oppose any attempt by the WCO or national governments to force them to cover the entire supply-chain security price tag.