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Securing Merck`s worldwide supply of chemical products


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Title: Securing Merck`s worldwide supply of chemical products

Securing Mercks worldwide supply of chemical
products Supply chain security versus trade
  • Securing Mercks worldwide supply of chemical
    products Supply chain security versus trade

The aim of the case study is to show how new
legal requirements can be implemented smoothly
and put into practice appropriately.
Manufacture of CocaineApproximate Quantities
Required for the Manufacture of 100 kilograms
Coca Leaf
Sulfuric Acid (100 to 400 liters)
Coca Paste
Potassium Permanganate 20 kilograms
Acetone/ Ethyl Ether/ Methyl Ethyl
Ketone/Toluene (1500 to 2000 liters) Hydrochlori
c Acid (30 liters)
Cocaine Base
Cocaine Hydrochloride (100 kilograms)
Dual-Use Australia Group BAFA Einschätzung
Research, Education,Training
Products, Labels, BrandEasy to recognize its
Merck Subject to product piracy and imitation
Our Customers
Supply Chain
Partnership Programmes
  • Australia 1991 Frontline
  • Canada 1995 Partners in Protection
  • USA November 2001
  • Customs-Trade Partnership against Terrorism
  • Sweden 2002 Stairway und 2004 Stairsec
  • EU 2005 Authorized Economic Operator (AEO)

  • 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)

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
  • 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.

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.

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

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
  • Elimination of Pre-Shipment Inspections

New Customs Code
  • Customs related security initiatives of the EU
  • EC Regulation 648/2005 and its implementing
  • 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
  • EC-U.S. Expert groups
  • Co-operation on supply chain security with China

New Customs Code
US Rules
  • Security rules - US import

US Rules
  • Abriviations

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

Merck 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.

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
  • 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
  • Additional national regulations

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
  • 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.

Merck Policy
  • Superior responsibility for legal compliance
  • Assigning the right persons with control
  • Maintaining a proper and efficient organization
  • Providing necessary training and education
  • Reporting incidents immediately to Darmstadt

Merck Policy
  • Foreign trade activities as well as the domestic
    trade with critical products require the
    nomination of a responsible person within the
  • The Trade and Export Compliance Manager.

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 companys 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
  • 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

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 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.

Organizational requirements
  • Buildup of a Virtual Organisation

country 1/CMG
country 3/CMG
country 2/CMG
CMG Company of the Merck Group
The role of the Trade Compliance and Export
Control Manager
  • Aligning the general control policy deducted
    from the companys
  • 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

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

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

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

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

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
  • External Audits
  • Support service for external auditors and

State of the Art IT-SupportGlobal Trade Services
  • 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
  • The GTS Software Application offers this

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
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
  • It will fit into the Global Merck IT-Program
  • A 24 hours support from the technical side is
  • Enterprise Resource Planning

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.
  • 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

Global (Data distribution, data checking)
Regional (Operations)
ERP Europe
ERP Asia
ERP Latin America
ERP North America
MDM Master Data Management EHS Environment,
Health Safety
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 gt 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.)

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

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

  • Automated processes replace manual ones which are
  • 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

IT-Sytem Global Trade Services
IT-Sytem Environment Health Safety
Dangerous Goods
  • Securing Mercks worldwide supply of chemical
    products Supply chain security versus trade

Industry in cooperation with national
authorities already provides a high level of
security. This is due to the natural
selfinterest 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.
New Challenges Explosive PrecursorsIB 2006-4
(Threat Card Bulletin).pdfIB 2006-4-1 (Threat
  • The Brussels Conference on Explosives
  • 9 and 10 October 2006
  •  Ø     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
  • 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.

Securing Mercks worldwide supply of chemical
products Supply chain security versus trade
Thank you for your attention!
Karlheinz Schnägelberger Director Export
Control Customs Regulations