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THE EC'S REGULATION ON SUPPLY CHAIN SECURITY COULD COST SMES 55 BN WITHOUT CLEAR BENEFITS

Brussels, August 30th 2006 - Letter to the Editor of FT Europe

Sir,

The Council of Ministers will this week discuss the European Commission’s draft Regulation on enhancing supply chain security (Council Working Group 4-5 September). Whilst wishing to do everything possible to guard against terrorist attacks, the small business community is concerned that the apparent costs of this measure are massively disproportionate to its potential benefits.

The European Commission’s proposal seeks to protect freight transport by road, rail and inland waterways against terrorist attacks, obliging Member States to create a “quality label” for security. However, by the Commission’s own admission, the proposal could cost small and medium-sized enterprises (SMEs) across all sectors 55 billion Euros without any clear benefits.

The scheme would require an audit costing each business an estimated 800 Euro per day. Furthermore, it would also cost each firm in the supply chain a one-off start-up fee of 135,000 Euro and a further yearly cost of 131,000 Euro. This is unsustainable for many small firms.

The potential reach of this proposal is staggering and frankly unworkable. The regulation would apply not only to goods coming in to the EU from abroad or traveling between EU member states but to items being transported within one country. It would also affect businesses across all sectors from manufacturing to retail because each is a step in the supply chain from factory to shop.

We are concerned that the struggle to defeat terrorism, which we all of course support, is being misused to create a heavy-handed and bureaucratic system that will put many people out of work without actually increasing security. Moreover, we believe that this would be an unenforceable standard, which could even serve to mask security weaknesses in the supply chain. At the very least it goes against the EU’s own commitment to Better Regulation as set out in the Lisbon Agenda.

We call on the Council of Ministers to reject this proposal and work more closely with the business sector to reach practical and effective solutions to the challenges posed by the threat of terrorism.

Yours faithfully,

Tina Sommer,

ESBA President.

On behalf of:

Associação das PME - Pequenas e Médias Empresas de Portugal (PME Portugal) - Confédération Européenne de l'Immobilier (CEI) - Enterprise Alliance Malta (GHIMA) - European Research and Education Network of Central European Universities (ERENET) - Gibraltar Federation of Small Businesses (GFSB) - Neutraal Syndicaat voor Zelfstandigen-Syndicat Neutre pour Indépendants, Belgium (NSZ-SNI) - Swedish Entrepreneurs Network SE (SENSE) - UK Federation of Small Businesses (FSB) - Zentral Verband Spedition & Logistik, Austria

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