Challenges in Conformity Assessment for developing countries

U N I T E D N A T I O N S I N D U S T R I A L D E V E L O P M E N T O R G A N I Z A T I O N

Challenges in Conformity Assessment for developing countries

Ouseph Padickakudi, Programme Manager, UNIDO

UNIDO’s Perspective

Challenges in Conformity Assessment for developing countries, December 2004


World trade 1970 – 99 (trillion US$ - constant 1995)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1970 1975 1980 1985 1990 1995

world

low & middle income

2000

high income

CURRENT TRADE SCENARIO



World trade 1970 – 99 (trillion US$ - constant 1995)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1970 1975 1980 1985 1990 1995 2000

low incomeLDCs

world

low & middle income

high income

CURRENT TRADE SCENARIO

EXPORT PROMOTION(& MarketOpportunities)

ITC(AGOA + EBA)

INTERNATIONAL AGREEMENTS & RULES FOR TRADE

WTO

INVESTMENT FACILITATIONFINANCIAL FLOWS

UNCTADUNIDO

STANDARDS &

CONFORMITY

ASSESSMNT

INFRASTRUCTUR

E

(TBT, SPS)

UNIDO

CUSTOMS

PROCEDURES

TRANSPORTATIO

N

DOCUMENTATIO

N

UNCTAD, IMO

SUPPLY

DEVELOPMENT

(Capacity &

Competitivenes

s)

UNIDO

A CONCERTED INTER-AGENCY STRATEGY FACILITATES MARKET ACCESS

Compete Conform Connect



Introduce supporting legislation,

policies and institutional

reform

Strengthen supply

capacity /improve

competitiveness

Support compliance with

international standards

and regulations

Set up accreditation/certification

systems

Strengthencapacity for implementation of

the WTO agreements and tradenegotiations

Remove supply side constraints

Prove Conformity

with Technical Requirements

Integrate into the

multilateral trading system

UNIDO WTO

Module I Module II Module III

The UNIDO-WTO Framework Concept – The main programme modules



WTO ACCESSION REQUIREMENTS WTO ACCESSION REQUIREMENTS



• 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

TECHNICAL BARRIERS TO TRADETECHNICAL BARRIERS TO TRADE



• 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.

Lab Testing

TECHNICAL BARRIERS TO TRADETECHNICAL BARRIERS TO TRADE



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

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)




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,




M1…n

Lab Test1…n

Certification1…n

Inspection

1…n

C1…n

C1…n

C1…n

TotalConformity

Cost

(TConfC)S1…n

Calibration1…n

P1…n TBT/SPS1…n

Sectors(S)

Sectors(S)

Products in respective sectors

(P)

Products in respective sectors

(P)Markets

(M)

Markets(M)

Requirements(TBT/SPS)

Requirements(TBT/SPS)

Conformity(TCCI)

Conformity(TCCI)

Costs(C)

Costs(C)

UNIDO TCB Metrics Stage 1UNIDO TCB Metrics Stage 1



SHRIMPS/The NetherlandsSHRIMPS/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)

UNIDO The case of shrimps exportsUNIDO The case of shrimps exports



15,350,000Total annual cost for 50 companies to export 100 thousand tonnes of shrimps to The Netherlands in 100,000 consignments.

HACCP (food)

ISO 9000

SA 8000

ISO 14000

Chemical

Chemical

Chemical

Chemical

Chemical

Type of Test / Certificate

2,050,000504,000Environmentally sound production

2,050,000504,000Quality related market requirements

500,000503,000Social market requirements

2,450,000508,000Packaging: Good Manufacturing Practice, Minimization of packaging

2,400,000

1,200,000

2,400,000

1,800,000

500,000

Total cost of testing ($C*Xn)

20,000

20,000

20,000

20,000

20,000

Nr. of tests (Xn)

120Maximum Residue Levels (MRLs)

60Contaminants in Food

120Polychlorinated Biphenyles (PCBs) and Terphenyles (PCTs)

90Cadmium, lead and mercury

25Additives and Flavorings in Food

Cost per test ($C)

REQUIREMENTS

TBT/SPS

SECTOR

S

PRODUCT

P

MARKET

M

Fisheries

Shrimps

EU / The Netherlands

Hypothetical Country X

Annual exports of shrimps: 100,000 tonnes

Consignment rate/year: 100,000

Consignment inspection rate : 20% per consignment

UNIDO TCB for Shrimp Exports to the NetherlandsUNIDO TCB for Shrimp Exports to the Netherlands



SECTOR (S): Seafood/Fish

PRODUCT (P): Shrimps

100,000 tons/year @ $ 4.00/kg = $ 400 million

Total Number of Exporting Enterprises: 50Minimum Number of Test Samples:

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

COSTS FOR SETTING-UP COSTS FOR SETTING-UP DOMESTIC TESTING DOMESTIC TESTING FACILITIESFACILITIESLaboratory Equipment Expertise Training Accreditation

Chemical $550,000 $ 60,000 $60,000 $20,000

Microbiology $ 300,000 $ 40,000 $ 40,000 $ 15,000

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

Metrology Laboratory

Equipment Expertise Training Accreditation

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

Total cost micro-biological and chemical labs: $ 1,085,000

Total cost metrology/calibration labs: $ 1,030,000

GRAND TOTAL TCB INVESTMENT: Total $ 5, 415,000

GRAND TOTAL TCB INVESTMENT MAINTENANCE (10 %) : annual $ 542,000

Costs include only TA not local requirements, such as buildings, etc.

Cost will be compared to costs of out-sourcing the tests and calibration

Cost for setting up required systems @ $ 50,000/annually: $ 2, 500,000

TCB for Shrimp Exports to TCB for Shrimp Exports to the Netherlandsthe Netherlands



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

UNIDO Summary Findings from the Shrimps CaseUNIDO Summary Findings from the Shrimps Case



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



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



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



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


THANK YOUTHANK YOUOuseph Padickakudi, Programme Manager, UNIDO

E-mail: [email protected]: www.unido.org

Documents

Challenges in Conformity Assessment for developing countries