Supply Chain Threats, Risks, and Trends | Global intelligence report

Supply Chain Risk Exposure Evaluation Network
Supplier Compliance Manager
2014 SCREEN Global
Intelligence Report
Supply Chain Threats, Risks, and Trends

Table of Contents
1 Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Asia-Pacific. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Increasing Threat of Illegal Drug Introduction in China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Methamphetamine Trade in Malaysia and the Threat to Air Cargo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 China’s Emerging Environmental Legislation and Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Waning Manufacturing in China and the Threat to Human Rights in Developing Countries . . . . . . . . 6
2.5 Environmental Protection Under a Pro-Business Administration in India. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Asian Ports Experience Serious Congestion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 A Persistent Threat of Sea Piracy in Southeast Asia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Counterfeiting in South and East Asia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 Europe, the Middle East, and Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Increasing Threat of Cargo Theft in Germany. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Increased Hijackings in South Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 ISIS and Terrorist Exploitation of the Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 The Migrant Crisis at the Port of Calais. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Moving Beyond Compliance for Conflict Minerals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Ebola’s Impact on the Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 The Changing Nature of Labor Unrest in Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 The War in Ukraine Causes Limited Supply Chain Disruption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4 The Americas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Supply Chain Corruption Facilitating Illegal Drug Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 The Apparel Industry in Central America and the Caribbean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Congestion at U.S. and Canadian West Coast Ports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Normalistas in Mexico and Their Impact Upon the Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Drought, Poor Water Management, and the Impacts on Business in Brazil. . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Increasing Actions to Combat Cargo Theft in South America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5 Looking Ahead to Supply Chain Challenges in 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Emerging Markets, Emerging Supply Chain Threats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 A New Face for Old Challenges in the Established Economies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Looking Beyond Headlines to Forecast Supply Chain Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1BSI Supply Chain Solutions 2014 SCREEN Global Intelligence Report
1 Executive Summary
Businesses faced a bewildering array of supply chain threats in 2014, from a disease outbreak that threatened
the export of key commodities from West Africa to an array of strikes and other labor actions that disrupted
supply chains throughout Europe and North America. There were a few key drivers for these supply chain threats.
The first is rapid economic growth in emerging economies. This often left governments struggling to adjust their
regulatory standards in a quickly changing environment, leaving companies exposed to accusations of human
rights abuses or environmental issues in their supply chains. A similar dynamic existed in South America, where
government struggled to develop policies to address cargo theft. Developing economies were unable to adapt
their transportation infrastructure to jumps in cargo throughput, leading to delays at important ports throughout
Asia. New challenges with labor unions, which have become more activist as their membership dwindles in the
United States and Europe, lead to disruptions throughout 2014. Lastly, weak governments and political instability
aided the emergence of ISIS in Iraq and helped the Ebola outbreak become a pandemic that threatened supply
chain throughout West Africa.
Supply chains across the Asia-Pacific region saw a number of challenges emerge during 2014, including new
threats from the methamphetamine trade, counterfeit production, piracy, and changes to existing environmental
legislation in major emerging markets. In addition to direct risks to cargo integrity, port congestion across the
region severely impacted business continuity in a number of countries, including Hong Kong, India, the Philippines,
and Vietnam. New challenges emerged in China and India, where policy shifts are likely to have significant impacts
on environmental protections going forward.
Europe, the Middle East, and Africa saw cargo disruption rates stay stable, with the exception of Germany
and South Africa, while significant new threats emerged to the supply chain in the Middle East and Africa
Governments in Western Europe also attempted to push supply chains towards greater compliance with social
and ethical norms. ISIS control and influence over supply chains in the Middle East helped them earn $3 million
in revenue per day, though recent fighting has diminished these sources of funding. The Ebola outbreak in West
Africa caused significant disruption to businesses in West Africa and forced companies to adopt costly measures
to preserve their supply chains. In Europe, labor unrest frequently disrupted supply chains in key countries such as
France, Germany, and Belgium, and 2014 saw the migrant crisis at Calais grow into a problem affecting shippers at
ports along the entire breadth of the English Channel.
In 2014, the Americas region experienced a variety of incidents, including an uptick in corruption-related illegal
drug smuggling incidents in several countries, major interruptions to business operations from natural disasters
and social unrest, and poor working conditions that impacted supply chains. Both North and South America
continued to see seizures of illegal drugs from truck and sea cargo shipments. However, BSI noted an increase
in the number of illegal drug seizures from cargo in Brazil, Argentina, and the Dominican Republic that involved
corrupt officials and organized criminal groups seeking to expand their operations. BSI noted serious threats to
human rights in the apparel industry in Central America and the Caribbean, where countries like Haiti have
approximately 29 percent of all children between the ages of five and 14 working in slave-like conditions. The
Americas region also experienced congestion at ports on the west coast of the United States and student protests
in Mexico, both of which affected business continuity and resulted in major interruptions to trade and business
operations. In Brazil, a severe drought, exacerbated by poor water management, began to force companies to
resort to costly alternative measures to sustain water supplies in 2014, an issue that has continued into 2015.
This report addresses the high-level challenges each region faced. A more complete view of supply chain risk
can be found in the BSI SCREEN tool, which features risk ratings and analysis for 203 countries.

32 BSI Supply Chain Solutions 2014 SCREEN Global Intelligence Report BSI Supply Chain Solutions 2014 SCREEN Global Intelligence Report
2014 SCREEN Global Intelligence Report
Supply Chain Threats, Risks, and Trends
Droughts in
Sao Paulo forced
companies
to delay or halt
production
Drug smuggling incidents
involving corrupt
officials increased in
Argentina, Brazil, and the
Dominican republic
ISIS generated $3
million per day
from oil smuggling
and extorting
businesses
Only 23 percent of companies
filing conflict minerals
disclusures reported that
their supply chains were
conflict free
South Africa
experienced a
10 percent
increase in cargo
truck hijackings
59.7 percent of the
underground water in
China is of poor
quality due to pollution
85 percent of
methamphetamine
shipments bound
for Malaysia were
found in air cargo
29 percent
of children in
Haiti are forced
to work
Airline strikes
in France
$300 million
Train strikes
in Germany
$375 million
Airline strikes
in Germany
$198 million
Belgium
general strikes
$1 billion
Direct Losses to Businesses to Man Made Disruption
Four Largest Strikes in Europe – 2014
2014
BSI THREAT
RATING
TRENDS
GERMANY
INDIA
CHINA
Most common types of commodities in Unmanifested Cargo Introduction
(UMC) incidents in South-Southeast Asia
Consumer goods
28.2%
Agriculture, Food,
and Beverage
20.5%
Industrial material
and machinery
15.4%
Apparel
6.4%
PUERTO RICO
Cargo Theft
CANADA
UMC-Drugs
COLOMBIA
Cargo Theft
Counterfiets
CHILE
Cargo Theft
ARGENTINA
Anti-Western
Terrorism
DOMINICAN
REPUBLIC
UMC-Drugs
Cargo Theft
UMC-Drugs
Environment
Cargo Theft
Weapons
HAITI
Child Labor
Protestors in Guerrero,
Mexico have hijacked an
average of one truck per
day since September
Natural Disasters
Four Costliest Natural Disasters – 2014
Drought in
Brazil
$4.88 billion
Flooding in
Pakistan and India
$11.9 billion
Tropical Cyclone
Hudhud
$9.35 billion
Winter Weather
in Japan
$6.7 billion
Cargo thefts in Germany
increased and became
more sophisticated
Two days of strikes in Belgium
delayed 49,315 twenty-foot
equivalent units (TEUs) of
cargo at the port of Antwerp

4 BSI Supply Chain Solutions 2014 SCREEN Global Intelligence Report
2 Asia-Pacific
Supply chains across the Asia-Pacific region saw a number of challenges emerge during 2014, including new
threats from the methamphetamine trade, changes to existing environmental legislation in major emerging
markets, and congestion at ports across the region caused by labor actions, natural disasters, and poor
management. In addition to direct risks to cargo integrity, port congestion across the region severely impacted
business continuity in a number of countries, including Hong Kong, India, the Philippines, and Vietnam. BSI also
noted how new challenges in China and India, where policy shifts are likely to have significant impacts on
environmental protections going forward.
2.1 Increasing Threat of Illegal Drug Introduction in China
A rapidly growing consumer market both domestically and abroad has fuelled growing production and exportation
of amphetamine-type stimulants in China. BSI statistics from 2013 and 2014 indicate that roughly 44 percent
of regional methamphetamine and precursor seizures in Asia originated in China. Similarly, non-governmental
drug monitoring organizations report that approximately 45 percent, or 16 tonnes, of global methamphetamine
seizures occurred in China.
Criminal groups in China use all modalities, from trucking and sea shipments to air cargo, to smuggle illegal drugs
to other countries in the region. Criminal groups in China smuggle precursor chemicals in sea shipments, typically
from ports in Guangdong. Myanmar officials report that from 2013 to 2014, customs agents at the Muse-Jiegao
border crossing seized a total of 11 tonnes of precursor chemicals smuggled in cargo trucks from China. Further,
the report estimates that 500 trucks cross into Myanmar from China along the Muse-Jiegao route every day,
leaving numerous opportunities from criminals to exploit the trucking modality. However, criminal groups in
China are increasingly exploiting air cargo and express parcels to smuggle smaller consignments of finished
amphetamines. According to BSI statistics, in 2013 methamphetamine and precursors were smuggled in the air
modality 43 percent of the time. However, by 2014 that number increased to 54 percent while the share
smuggled in sea shipments sank from 30 percent to 25 percent. Methamphetamine smugglers in China are
known to use major airports in Guangdong and Hong Kong, often targeting shipments of consumer goods or
using front companies. In September, for instance, Australian security officials raided a chemical supply front
company smuggling precursor chemicals from China in air cargo consignments.
2.2 Methamphetamine Trade in Malaysia and the Threat to Air Cargo
2014 represented another growth year for the illicit methamphetamine market, with new global players emerging
in Southeast Asia that pose direct threats to air cargo in the region. In particular, BSI noted the emergence of
Nigerian drug trafficking organizations (DTOs) as major stakeholders in Malaysia’s methamphetamine market.
BSI data collected during 2014 show that 85 percent of cargo
shipments involving methamphetamine destined for
Malaysia exploited the air cargo modality. Further, 41
percent of incidents involving methamphetamine
smuggling via air cargo originated in Nigeria. Many of
these shipments were transshipped through other
territories, such as Hong Kong and other areas of China,
prior to arriving in Malaysia, likely to avoid suspicion by
the authorities. Additionally, the vast majority of shipments containing methamphetamine were air cargo
consignments of small appliances or other consumer goods with cavities in which drugs may be concealed.
BSI data collected during 2014 show that
85 percent of cargo shipments involving
methamphetamine destined for Malaysia
exploited the air cargo modality.

PHILIPPINES
MALAYSIA
CHINA
INDONESIA
VIETNAM
SOUTH KOREA
AUSTRALIA
JAPAN
LAOS
MYANMAR
Singapore
THAILAND
Ho Chi Minh City
Manila
Incheon
KaohsiungShenzhen
Hong Kong
NORTH KOREA
PAPUA NEW
GUINEA
TAIWAN
Jakarta
Kuala Lumpur
Tokyo
CAMBODIA
Sydney
NIGERIA
CAMEROON
TOGO
BENIN
GHANA
Methamphetamine Smuggling Trade Routes
Precursor Chemical Smuggling Trade Routes
Methamphetamine and Precursor
Drug Smuggling Trade Routes in Asia

2.3 China’s Emerging Environmental Legislation and Enforcement
China, long one of the world’s worst polluters, took steps in 2014 to address environmental pollution following the
publication of reports detailing the scale and severity of land and water pollution in the country. According to one
report, approximately 16 percent of arable farmland, or 3.3 million hectares, contains toxic levels of metallic and
carcinogenic elements. Villages in the most contaminated areas, specifically the eastern provinces of Anhui, Hebei,
Henan, Jiangsu, and Shandong, record higher-than-average rates of cancer and disease. Shortly after publication
of the land pollution report, China’s land and resource ministry reported that 59.7 percent of underground water in
the country was of poor quality. Additionally, of the 203 cities included in water site tests, only three percent could
be designated as clean.
In an apparent response to the reports, Chinese lawmakers passed amendments to the environmental protection
law for the first time in over two decades in April 2014. The legislation grants more power to environmental
inspectors and calls for greater penalties for violators of the law, which went into effect on January 1, 2015. In a
possible show of this environmental legislation, in December a Chinese court in the province of Jiangsu ordered
six companies to pay a fine of $26 million for dumping 22,678.6 tonnes of acid waste into the Rutai and Gumagan
waterways. The penalty is the largest environmental fine ever imposed by a Chinese court.
The Supreme People’s Court of China released a statement at the start of the year encouraging the prosecution of
polluters throughout China by giving special status to public interest groups and reducing court fees. The country’s
apparent drive to punish businesses harming the environment suggests that the country is making a legitimate
effort to reduce environmental damage. With the imposition of China’s most recent measures, court cases are
likely to surge in 2015 as the nearly 700 government-registered environmental groups look to prosecute polluters.
2.4 Waning Manufacturing in China and the Threat to Human Rights in
Developing Countries
After years of manufacturing dominance, wages in China have begun to rise amid growing worker discord over
wages, labor hours, and working conditions, causing some manufacturers to turn to neighboring countries such as
Vietnam and Myanmar. However, China is still the world’s number one exporter, and the ability of Chinese manu-
facturers to produce goods at low costs has sometimes come at the expense of laborers, with reports surfacing
serious abuses including the use of child labor, excessive working hours, unpaid wages and benefits, and poor
ventilation in factories. Despite the Chinese government’s commitment to addressing human rights issues, reports
continue to surface of poor working conditions, lack of government oversight, and official corruption. For instance,
in August 2014, a factory explosion at an automotive parts factory
in Kunshan, Jiangsu killed 75 workers and injured about 180.
However, an inspection at the plant the week before the
explosion did not reveal any non-conformity.
Vietnam’s industrial sector grew approximately 7.5
percent in 2014 and its size is expected to continue to
increase as more production shifts to the region. Despite
the shift, Vietnam’s government lacks the resources to carry out
inspections and the willingness to enforce corrective action measures on employers and factory sites. For example,
a four-year industrial survey of garment factories in Vietnam, concluded in December 2014, found that 50 percent
of factories were not incompliance with fire safety regulations. Very little progress had been made in the area of
fire safety since 2012, indicating a lack of prioritization on the part of regulators. Sweatshop-type conditions are
frequently recorded at factories in the country, as workers often work over 100 hours extra per month, sometimes
Vietnam’s industrial sector grew
approximately 7.5 percent in 2014 and is
expected to continue to increase as more
production shifts to the region.

without compensation. Many of Vietnam’s regional labor inspectorates have a limited number of inspectors and
rampant corruption in all levels of the country’s government further decreases the likelihood that inspections will
produce better working conditions in the country.
Investment in Myanmar’s apparel and footwear and telecommunication industry is growing, reaching at least $5
billion in investment in 2014. The country exhibits many of the same labor rights shortcomings as both China
and Vietnam. Currently, the rule of law in Myanmar is extremely weak and corruption is a major issue among the
nation’s labor inspectorate. As the government pushes for economic development, laws in place to provide for
worker’s health and safety are likely to be overlooked to avoid increased production costs.
2.5 Environmental Protection Under a Pro-Business Administration in India
With the election of Narendra Modi in May 2014, India’s voting population gave a clear mandate to Prime Minister
Modi and the pro-development platform that was a central pillar of his campaign. In the first months of Mr. Modi’s
time in office, his administration announced a number of initiatives designed to reduce regulations perceived to
be a burden on industry. While business leaders are hailing the proposed changes, environmental watchdogs are
concerned that some aspects of Mr. Modi’s new initiatives
will lead to further environmental degradation and
a weakened regulatory framework. Additionally, the
proposed changes to India’s environmental laws may
contribute to increased disjointedness among federal,
state, and local laws, thereby increasing the risk posed
to the environment in India.
Among the earliest changes to come from the newly-elected
Modi government was a revision of the pollution index published by the country’s main environmental protection
agency, the Ministry of Environment and Forests. Ministry officials announced that some industries that were
previously barred from establishing new operations due to pollution will now be permitted to expand their
businesses. While few details about the nature of the changes to the index have been publicly revealed, the
reformulated index is expected to fit into the larger pro-business policies of the Modi Administration. If the new
index does prove more permissive to industrial expansion, the risk to the environment, particularly water and air
pollution, is very likely to increase.
In late November 2014, a committee charged with reworking the country’s environmental laws recommended
reducing the number of governmental inspections required for new industrial projects in an effort to reduce
bureaucratic red tape. According to the committee’s recommendation, the government will rely on business
owners to voluntarily disclose the amount of pollution that their company’s operations will produce. Further,
businesses, not government inspectors, would be required to monitor and report upon compliance with
environmental regulations under the committee’s recommendations. While these proposed changes attempt
to reduce unnecessary government interference, they also create a monitoring system fraught with conflicts
of interest and will likely have a negative impact in overall regulation of environmental harm in India.
2.6 Asian Ports Experience Serious Congestion
Throughout 2014, BSI recorded congestion at major ports in China, Hong Kong, India, the Philippines, Singapore,
Taiwan, and Vietnam. Shipping delays and container capacity shortages at several port facilities can largely be
attributed to growing consumer demand and antiquated port infrastructure. At Kwai Chung terminal in Hong
In the first months of Mr. Modi’s time in office,
his administration announced a number of
initiatives designed to reduce regulations
perceived to be a burden on industry.

NEPAL BHUTAN
PHILIPPINES
MALAYSIA
CHINA
INDONESIA
VIETNAM
SOUTH KOREA
BANGLADESH
INDIA
JAPAN
LAOS
MYANMAR
Singapore
32,240,000 TEUs
THAILAND
Ho Chi Minh City
5,542,049 TEUs
Manila
3,770,000 TEUs
Chennai
1,470,000 TEUs
Jawaharlal Nehru
4,550,000 TEUs
Busan
17,686,099 TEUs
Kaohsiung
9,937,719 TEUs
Shenzhen
23,278,000 TEUs
Hong Kong
22,352,000 TEUs
NORTH KOREA
PAPUA NEW
GUINEA
TAIWAN
Supply Chain Risk Exposure Evaluation
Asian Ports Experiencing Significant Congestion and Delays in 2014
Kong, the increasing size of container ships and a lack of container storage capacity at the port have substantially
reduced the port’s ability to quickly process cargo. The limited container storage space has resulted in cargo
discharge times of up to a week, increasing operational costs for companies shipping through Hong Kong by
nearly $1 million per month. Further, port officials indicated that current port facilities are insufficient to handle
ships over 10,000 twenty-foot equivalent units, which subsequently take up to a day longer to load and offload.
Shippers have complained that congestion at Kwai Chung forced the diversion of cargo to the Port of Shenzhen,
China, resulting in congestion and shipping delays. While the port in Hong Kong is expected to be deepened by
mid-2015 in order to handle larger ships, offloading capacity is likely to remain the same, creating delays both at
Hong Kong and the neighboring port of Shenzhen, China.
The Port of Manila in the Philippines and Vietnam’s largest port facility, Cat Lai, also had significant container terminal
backlogs due to government regulations and increased consumption globally. For instance, the implementation of
a truck ban ordinance in Manila, Philippines resulted in numerous truck strikes and serious container congestion at
the port. During the ban, Manila International Container Terminal was said to be operating at 110 percent capacity
with clearance times of up to a month. Additionally, overflow of 37,000 containers from Manila caused congestion
at container yards in Taiwan, Hong Kong, Singapore, and South Korea. Shippers reportedly lost $122 million due to
the port congestion, with many industries, specifically apparel, food and beverage, and electronics, citing significant

Major Sea Ports
Dispersion of Piracy Threat
CHINA TAIWAN
VIETNAM
PHILIPPINES
INDONESIA
CAMBODIA
THAILAND
LAOS
MYANMAR
MALAYSIA
Distribution of 2014 Piracy Incidents in Southeast Asia
Supply Chain Risk Exposure Evaluation N
losses. In Vietnam, transport authorities implemented measures in January 2014 requiring officials to oversee the
loading of containers, causing cargo clearance delays by up to two days.
Ports in India saw severe weather systems, labor actions, and the dramatic increase in imports of certain
commodities cause port congestion in 2014. In the second half of 2014, several major cyclone systems forced the
closure of port facilities on the country’s eastern coast. While some of these ports were able to reopen soon after the
cyclones’ passing, others suffered significant damage, causing further delays to cargo vessels. Other factors, including
labor actions and an increase in commodity imports, also led to congestion at port facilities. While the issues specific
to these incidents helped resolve congestion problems in the short term, the underlying causes of these types of
events do not appear to have been permanently addressed, underscoring the potential for similar disruptions in 2015.
2.7 A Persistent Threat of Sea Piracy in Southeast Asia
The waters of Southeast Asia saw an increase in the number of sea piracy attacks, despite an overall drop in
the number of pirate incidents globally in 2014. The waters surrounding Malaysia and Indonesia are particularly
vulnerable to pirate attacks, and the International Maritime Bureau recorded 15 attacks on vessels in Southeast
Asian waters in 2014. Pirates operating in the region typically target vessels carrying petroleum products, as these

products generally command a high price on the black market and face significant traceability issues. Unlike
pirates operating off the Horn of Africa, pirates in Southeast Asia are typically less concerned with ransoming off
crewmembers and more concerned with reselling stolen cargoes of marine fuel on the black market. Despite the
significant impact of piracy on maritime security, the international community has yet to organize a coordinated
response to combat sea piracy in the region. Territorial and political disputes stand in the way of such an effort,
making any future coordination among regional stakeholders a limited possibility. Additionally, it remains to
be seen what impact low oil prices will have upon piracy rates in the region; however, pirate organizations may
conclude that their operations still provide a net profit despite the glut in global oil supplies.
2.8 Counterfeiting in South and East Asia
China remained the largest producer of imitation goods in the world in 2014, accounting for 68.6 percent of
global counterfeit seizures BSI recorded last year. The provinces of Guangdong and Zhejiang are known to produce
the widest range and largest amounts of counterfeit goods. China is expected to continue to remain the world’s
largest counterfeit producer in 2015, with emerging manufacturing bases in Chongqing and Guangxi possibly
acting as new areas of counterfeit production. However, as the manufacturing of products like apparel, consumer
goods, and electronic parts continues to shift from China to emerging industrial bases such as Vietnam, Western
countries may see an influx of fake goods produced in these nations in 2015.
Although China remains the global leader in counterfeit
goods production and exportation, other parts of
Asia, including India and Indonesia, are playing
increasingly larger roles in the production of
counterfeit goods. The pharmaceutical industry
continues to face significant threats from
counterfeiters in South and Southeast Asia.
For example, pharmaceutical counterfeiters in Indonesia
have improved their imitation products to such an extent that lab work is sometimes required to distinguish
between real and fake medications. Further, while China remains the principle source country for fake luxury
items, increased consumer demand in India could see a dispersal of counterfeit manufacturing facilities closer to
consumer markets in India.
Pharmaceutical counterfeiters in Indonesia have
improved their imitation products to such an extent
that lab work is sometimes required to distinguish
between real and fake medications.

3 Europe, the Middle East, and Africa
Europe, the Middle East, and Africa saw cargo disruption rates stay stable, with the exception of Germany and
South Africa, while significant new threats emerged to the supply chain in the Middle East and Africa. Additionally,
governments in more developed countries attempted to push supply chains towards greater compliance with
social and ethical norms. ISIS control and influence over supply chains in the Middle East helped them earn $3
million in revenue per day, though recent actions have diminished these sources of funding. The Ebola outbreak
in West Africa caused significant disruption to businesses in West Africa and forced companies to adopt costly
measures to preserve their supply chains. In Europe, labor unrest frequently disrupted supply chains in key
countries such as France, Germany, and Belgium, and 2014 saw the migrant crisis at Calais grow into a problem
affecting shippers at ports along the entire breadth of the English Channel.
3.1 Increasing Threat of Cargo Theft in Germany
BSI noted an increase in cargo thefts in Germany and also saw a shift towards more sophisticated cargo theft
operations in the country. The median value of cargo thefts in the country increased from $39,882 in 2013 to
$49,457 in 2014. More importantly, BSI recorded incidents that demonstrated increasing sophistication of cargo
theft operations. Cargo thieves in these incidents targeted specific high-value goods such as high-specification
aluminum, pharmaceuticals, or machinery. Thieves often targeted warehouses during holidays or other major
events to take advantage of decreased levels of security. In one particularly notable example, BSI recorded the
theft of $2.91 million of beer from a warehouse shortly after the German national soccer team won the 2014
World Cup. Especially worrying were pharmaceutical thefts in Germany, including a major warehouse invasion in
Neuss where thieves stole pharmaceuticals made by 40 different manufacturers.
In addition to the increased value of goods being stolen, BSI noted a change in the geographic areas where cargo
theft takes place in Germany. The percentage of thefts that took place in the traditional cargo theft hotspots of
North Rhine-Westphalia, Hesse, and Lower Saxony decreased from 58.4 percent in 2013 to 42.9 percent in 2014.
Conversely, BSI recorded a greater number of thefts in Western Bavaria, especially near Wurzburg, in Thuringia,
and in Saxony-Anhalt. One law enforcement official stated that 107 pilferage thefts occurred along the A2 and A14
highways in a single district of Saxony-Anhalt this year. The change of the geographic area where cargo thefts take
place suggests that thieves in Germany are becoming
more adaptive and are moving to new areas in orga-
nized groups to avoid pressure from law enforcement.
3.2 Increased Hijackings in South Africa
In 2014, the number of hijacking incidents in South
Africa continued to increase. Through October 2014,
South Africa suffered more than 1,100 incidents of
cargo truck hijackings, compared to only 991 incidents
in all of 2013. Though official year-end statistics have
yet to be released, this number was expected to rise
significantly with the increased truck traffic typically
present during the holiday season.
The majority of hijackings continued to take place in
the central province of Gauteng, the nation’s primary
population and commercial hub. 2014 was notable for
the especially high rate at which police and security
2
2
2
2
2
2
3
1
1
1
1
1
Durban
2.53 million TEUs
Cape Town
790,000 TEUs
Ngqura
510,000 TEUs
O.R. Tambo International
309,000 Tonnes
Cape Town International
44,000 Tonnes
Limpopo
Gauteng
Mpumalanga
KwaZulu-Natal
Free State
North West
Northern Cape
Western Cape
Eastern Cape
SOUTH AFRICA CARGO
HIJACKING EXPOSURE
Provincial level of risk
posed by hijackings
SEVERE
HIGH
ELEVATED
Major Sea Ports
Major Air Ports
Major Highways
Threat of Hijackings in
South Africa by Province
Supply Chain Risk Exposu
Supply Cha
Supplier Co

official were implicated in hijacking and other instances of cargo theft in South Africa. Investigations beginning
in June revealed the presence of several “blue-light” hijacking gangs operating mainly in Gauteng that were
composed of street-level police and directed by senior officers; BSI recorded at least four incidents in which these
gangs hijacked cargo trucks in the past six months, including two involving the use of GPS jamming devices.
3.3 ISIS and Terrorist Exploitation of the Supply Chain
The Islamic State of Iraq and Syria (ISIS) group utilized widespread exploitation of the local and international
supply chains to further its terrorist operations in the Levant region of the Middle East last year. After rapidly
advancing across a large swath of Syrian and Iraqi territory in early 2014, ISIS sought to systematically control
many supply chain operations in the areas it had seized using a blend of traditional terrorist and more criminal,
‘mafia-style’ extortion tactics. ISIS was estimated to be generating as much as $3 million in revenue per day in the
fall of 2014, much of it through its extortion and supply chain control schemes.
In one of the starkest examples of ISIS’s supply chain exploitation efforts, the group began to impose a tax on
all cargo trucks it allowed to cross into Iraq from Jordan through a border crossing it controlled in mid-2014,
generating as much as $12,000 per day in illicit revenue. The terrorist group also kidnapped 32 Turkish cargo
truck drivers in June, releasing the drivers 23 days later likely after a ransom was paid. Control and extortion of
local production sites also played a major part in ISIS’s attempts to exploit territory under its control, with the
group generating as much as $2 million per day in oil smuggling revenue and up to $8 million per month from
illegally taxing local businesses at their peaks in late 2014. Although sustained coalition airstrikes against ISIS have
reportedly constrained its finances to some degree, the broad scope of the group’s illicit revenue activities up to
that point suggests that it is still generating at least several hundred thousand dollars, if not more, per week
Georgia
COSTA RICA
Countries With Supply Chain Terrorism Incidents 2004-2014

Amsterdam
CologneBrussels
Le Havre
Paris
London
FRANCE
NETHERLANDS
BELGIUM
GERMANY
UNITED KINGDOM The Hague
Bruges
Antwerp
Rouen
Liverpool
Bristol
Southampton
LUXEMBOURG
Saint-Malo
Calais
Dunkirk
Caen
Cherbourg
Roscoff
Ostend
Zeebrugge
E40
E40
Norwich
Amiens
E40Major Cross-Channel Port E40 Highway
Stowaway Incident Major City
The threat of human
smuggling in cargo
SEVERE
HIGH
ELEVATED
GUARDED
LOW
HUMAN SMUGGLING
EXPOSURE
3.4 The Migrant Crisis at the Port of Calais
While the challenge of illegal migration via stowing away in freight posed problems for shippers at the port of
Calais in France, the spillover effects of the migrant crisis at the facility could be felt throughout northwest Europe
in ports as far away as Amsterdam in the Netherlands. Conflicts in Iraq and Syria have caused the number of
migrants attempting to enter the United Kingdom to swell by approximately 61 percent in 2014. This increased
migratory pressure led to serious trade interruptions at the port of Calais, particularly in September, when
migrants stormed the port’s ferry terminal and the mayor of Calais threatened to close the port. Towards the end
of the year, BSI noted some changes to security measures at the port, and the United Kingdom committed $19.4
million to help secure the facility.
Increasing security at Calais, however, may simply shift the problem to other ports located along the English
Channel. BSI has already noted increasing numbers of migrants entering cargo trucks near other ports in France,
Belgium, and the Netherlands. For instance, the increasing frequency of stowaway discoveries forced authorities in
Belgium to close rest areas along the E40 highway in April 2014. In the Netherlands, trucking companies reported
discovering 201 stowaways in the Hook of Holland area of Rotterdam port, with smaller numbers reported in the
Europort area of Rotterdam and the Ijmuiden area of Amsterdam port. Towards the end of 2014, BSI recorded an
increasing number of stowaway introductions in eastern areas of the Netherlands as well.
The presence of stowaways in cargo can lead to serious losses for shippers due to fines from national authorities,
contamination causing the loss of loads, and physical damage to cargo trucks. One carrier in the Netherlands
reported six incidents of stowaway introduction in a two-week period in 2014, leading to losses of $168,500.
Stowaways jeopardized food shipments into the United Kingdom as well, as officials there reported that their
discovery in cargo trucks led to the destruction of a large number of loads in the weeks before Christmas.
Stowaway Incidents and Major Ports in Northwest Europe

3.5 Moving Beyond Compliance for Conflict Minerals
June 2014 saw the first deadline for conflict minerals disclosures as mandated by Section 1502 of the Dodd-Frank Act,
marking the first actual filing under the United States’ 2010 conflict minerals legislation. Approximately 1,300 large
companies from a variety of industries, including the aerospace, automotive, electronics, industrial, and retail sectors,
submitted their first disclosure reports, indicating whether any of their products contained minerals sourced from the
11 Central African nations covered by the Act. Of the companies that filed disclosures by the June deadline, only about
23 percent determined that all of their applicable products could be described as ‘conflict free’ – most of the remaining
1,000 entities filed their status as ‘conflict undeterminable’, necessitating further due diligence action.
COSTA RICA
To China
MEXICO
Mineral: Iron Ore
Industries: Construction
Issue: Armed group control of mineral trade
Groups: Mexican drug cartels
Human Rights Concern: Rights violations by
cartels, including extrajudicial killings and
human trafficking; poor health and safety
concerns in iron ore mines
COLOMBIA
Mineral: Tungsten
Industries: Automotive and Aerospace;
Construction; Electronics
Issue: Armed group control of mineral trade
Groups: Revolutionary Armed Forces of
Colombia (FARC)
Human Rights Concern: Illegal charging of
indigenous miners; poor health and safety
conditions in often illegal mines
VENEZUELA
Mineral: Columbite-Tantalite (Coltan)
Industries: Electronics
Issue: Armed group control of illicit mineral
smuggling routes
Groups: Armed Venezuelan/Colombian
smuggling networks
Human Rights Concern: Extortion of miners;
poor health and safety conditions in
unregulated mines
DRC + SURROUNDING COUNTRIES
Minerals: Tantalum, Tungsten, Tin, Gold
Industries: Electronics; Food and Beverage;
Automotive and Aerospace; Apparel; Construction
Issue: Armed groups exploiting extraction and
trade of minerals in Central Africa
Groups: M23, other rebel groups including those
receiving support from regional governments
Human Rights Concern: Extortion of miners; forced
mining of indigenous peoples; poor health and
safety conditions in mines
Top Global Exporters - Gold
1. Australia
2. Romania
3. Russia
4. Turkey
5. Dodd-Frank countries
204,973
150,678
117,346
62,356
38,711
Country 2013 Exports (Tonnes)
Top Global Exporters - Tin, Tantalum, and Tungsten
1. South Africa
2. Australia
3. Indonesia
4. Ukraine
12. Dodd-Frank countries
400,645
82,289
49,395
35,641
9,578
Country 2013 Exports (Tonnes)
*BSI’s Conflict Minerals Country and Trade Map does not represent an attempt to record every country where conflict minerals risk exists. Futhermore,
this map should not be interpreted as showing relative levels of risk in the highlighted nations but rather points out notable countries of concern.
Dodd-Frank countries
Other major exporters of conflict minerals
Section 1502 Country Exports -
3Ts + Gold
1. China
2. Southeast Asia (Malaysia,
Thailand, Vietnam)
3. Europe (Austria,
Spain, Italy)
32,837 (68%)
14,970 (31%)
483 (1%)
Destination 2013 Exports (Tonnes)
Conflict Minerals: Major Countries of Concern and Trade Flows

The filing of the first reports marked a major step in the implementation of the world’s first conflict minerals
legislation. However, in addition to simply complying with the regulation, several major companies demonstrated
in 2014 their intent to incorporate more holistic social responsibility practices into their sourcing, supply chain,
and general business operations. These efforts included successful attempts to develop entirely ‘conflict-free’
supply chains for specific products as well as extending due diligence efforts to minerals or other materials
sourced from countries outside those covered by the Dodd-Frank Act.
In one notable example, the European Union has proposed the adoption of conflict minerals regulations that
would not only apply to the African countries listed in Dodd-Frank but also nations in South America, highlighting
the global scale of the threat posed by conflict minerals to brand and product integrity. Looking even beyond
conflict minerals, the EU council also issued a directive in October mandating as many as 6,000 European
corporations disclose information about their policies and procedures to address environmental, human rights,
working conditions, and corruption risks in their companies by 2017. The passage of the EU legislation underscores
the wider adoption of responsible sourcing efforts around the world, as well as the broadening scope of these
initiatives.
3.6 Ebola’s Impact on the Supply Chain
Beyond the headline-grabbing fear of an Ebola outbreak emanating from West Africa, the breakout of the disease
caused a number of disruptions to supply chains in both the affected countries and in nations attempting to
prevent the virus’s spread to their borders. Fears surrounding the spread of Ebola also caused countries outside
of West Africa to implement measures aimed at ensuring that their populations and port facilities remained
protected from the spread of the virus. These measures ranged from airport screenings to denial of entry for cargo
vessels arriving from affected countries until the virus’s incubation period was completed.
Nations directly affected by the Ebola outbreak saw their healthcare
systems overwhelmed by the severity of the health crisis, forcing
companies to bear the burden of funding and carrying out mea-
sures designed to contain the virus and preserve their supply
chains. In one notable instance, a major tire and rubberized
products company operating in Liberia helped limit the spread
of the virus among its thousands of workers and their tens of
thousands of dependents, at considerable cost to the company.
At time of writing, many of the countries that once enforced land border closures with affected nations have
reopened these borders as the epidemic comes increasingly under the control of health officials. Additionally, the
countries that saw minor outbreaks, including Mali, Nigeria, Senegal, and the United States, have all been declared
free of Ebola, underscoring the relative success of containing the spread of the virus beyond the three hardest-hit
countries.
While the implementation of quarantines had positive effects on containing the disease, this and similar measures
frequently have negative effects on economic activity. The final economic impact of the Ebola outbreak is yet to be
determined; however, current projections estimate that Guinea, Sierra Leone, and Liberia suffered between
$1.6 and $2 billion in economic losses due to the epidemic.
Current projections estimate that
Guinea, Sierra Leone, and Liberia
suffered between $1.6 and $2 billion in
economic losses due to the epidemic.

3.7 The Changing Nature of Labor Unrest in Europe
Labor strikes and protests continued to cause major disruptions to business and trade in Europe despite major
declines in union membership in nearly every country on the continent. The combination of smaller, more activist
union bases combined with a willingness on the part of employers to wait out strikes rather than give in to the
demands of unions led to significant losses due to strikes in 2014. BSI estimates that the four largest strikes in
Europe generated at least $1.873 billion in direct losses for businesses. This estimate does not include delays that
continue after strikes end or indirect effects of strikes, such as higher shipping fees when less-than-optimal routes
are used due to strikes or port outages.
The most significant labor actions in Europe last year occurred in Belgium, France, Germany, and Italy. In Germany,
a country that is not known for experiencing frequent labor unrest, strikes by train drivers and airline pilots caused
serious disruption to air cargo transportation and rail freight. Most goods carried by rail in Germany are “primary”
goods such as coal and steel (50 percent of the steel in Germany is carried by rail) needed for the production of
other products, which increases the knock-on effects of rail strikes. The rail strikes also disrupted the chemical
industry, as German law requires that some chemicals be carried by rail. Belgium is one of the few countries in
Europe where nationwide general strikes had a major impact on trade, as protestors were successful in closing
major ports such as Antwerp, Zeebrugge, and Ghent. Strikes in Belgium in November and December 2014 led to
the delay or disruption of an estimated 49,315 TEUs of freight at the port of Antwerp in just two days.
3.8 The War in Ukraine Causes Limited Supply Chain Disruption
The conflict between pro-Russian separatists and the central government of Ukraine renewed fears of a
confrontation between Russia and the West, though the conflict’s impact on the supply chain was relatively l
imited. Western businesses were able to continue operating in Russia so long as they did not do business with
sanctioned individuals or companies, which were mostly confined to the banking, energy, and defense sectors.
Russian sanctions on food imports from Europe cost the European Union an estimated $23.79 billion in 2014,
according to one estimate. The conflict itself caused disruption to the coal mining industry and other industries
in eastern Ukraine who saw their businesses seized by rebels and then shelled by the government. Fighting has
been almost entirely restricted to Donetsk and Luhansk regions in eastern Ukraine and there has been little
disruption to businesses operating in the western half of the country.

4 The Americas
In 2014, the Americas region experienced a variety of incidents, including an uptick in corruption-related illegal drug
smuggling incidents in several countries, major interruptions to business operations from natural disasters and social
unrest, and poor working conditions that impacted supply chains. Both North and South America continued to see seizures
of illegal drugs from truck and sea cargo shipments. However, BSI noted an increase in the number of illegal seizures
from cargo in Brazil, Argentina, and the Dominican Republic that involved corrupt officials and organized criminal groups
seeking to expand their operations. BSI noted serious threats to human rights in the apparel industry in Central America
and the Caribbean, where countries like Haiti have approximately 29 percent of all children between the ages of five and 14
working in slave-like conditions. The Americas region also experienced congestion at ports on the west coast of the United
States and student protests in Mexico, both of which affected business continuity and resulted in major interruptions to
trade and business operations. In Brazil, a severe drought, exacerbated by poor water management, began to force compa-
nies to resort to costly alternative measures to sustain water supplies in 2014, an issue that has continued into 2015.
4.1 Supply Chain Corruption Facilitating Illegal Drug Introduction
Throughout 2014, BSI noted an uptick in the number of illegal drug seizures in Brazil, Argentina, and the Dominican
Republic that were aided by corrupt officials and organized criminal groups seeking to expand their operations.
For instance, police in Brazil dismantled a cocaine trafficking ring that included members of the First Capital Command
(PCC) and introduced cocaine into sea shipping containers at the Port of Santos with the help of a corrupt official at the
facility. The PCC, which began as a prison gang in Sao Paulo, has expanded operations in Paraguay and Bolivia in recent
years, facilitating the trafficking of illegal drugs to Brazil for distribution. The illegal drugs trafficked from the Port of Santos
by the PCC is, however, the first known instance in which gang smuggled contraband abroad and is an indication of the
group’s rising power and increasing threat to Brazilian exports.
BSI noted a rise in illegal drug activity in Argentina in 2013, and this trend largely continued to hold true in 2014. In
October, authorities were forced to raid Terminal Four at the Port of Buenos Aires due to a rise in cocaine trafficking
attempts involving the “blind-hook” method, including one incident in which the tactic was used to introduce cocaine into a
container that was seized by police at the Port of Durban, South Africa. The blind-hook, a tactic in which smugglers remove
the seal on a shipping container, place the drugs inside, and then attach a fake seal on the container, typically occurs
without the owner of the shipment’s knowledge and with the assistance of corrupt officials. According to early police
reports, corrupt officials at the terminal intentionally transported sea container shipments to areas of the facility that
were not covered by security cameras, enabling illegal drugs to be introduced and transported abroad. These incidents,
combined with escalating violence associated with the illegal drug trade, suggest that the increase in illegal drug activity
in Argentina will continue throughout 2015.
Late in the year, investigators in the Dominican Republic arrested several ranking members of the Dirección Nacional de
Antinarcóticos (DICAN), a federal police organization tasked with countering the trade of narcotics in the country, including
the head of the agency, after allegations emerged that he and 21 other officers actively engaged in illegal drug trafficking.
The corrupt officers include three colonels, several lieutenant colonels, three prosecutors, and several low-ranking agents.
The officials would steal and resell seized cocaine to the trafficking organization that initially shipped the drugs.
This is not the first scandal that has affected the nation’s counter-narcotics police agencies. However, the chief of the
agency is one of the highest-ranking members of a Dominican police force to face charges of corruption. Despite the
relatively large number of security officials arrested in this sweep, it is highly unlikely that the Dominican Republic’s
counter-narcotics agencies have been fully cleared of corrupt officers. For instance, one self-proclaimed trafficker in the
nation stated that she paid bribes to officers at multiple points when smuggling drugs into the country. While the
testimony of this individual has not been verified, it certainly supports the allegations made against the DICAN officers.

4.2 The Apparel Industry in Central America and the Caribbean
Many Central American and Caribbean nations, notably the Dominican Republic, El Salvador, Guatemala, and Haiti,
are reliant upon the export of apparel and textile products. However, these industries are marred by the presence
of child and forced labor and poor working conditions. These practices are largely present because of poor
governmental enforcement of legal regulations, a lack of qualified inspectors, or both.
In El Salvador, for example, BSI has specifically noted poor working conditions for women in the apparel industry.
Laborers face verbal abuse, threats of violence, and sexual harassment while at work. These practices continued in
2014 despite the continued efforts to implement a 2012 labor law promoting occupational safety. Despite having
a workforce that is half the size of the Dominican Republic’s, El Salvador saw nearly twice the number of industrial
accidents in 2012. The Ministry of Labor, charged with effectively implementing the law and overseeing work
environments, is unable to enforce the regulations due to an insufficient number of labor inspectors. The
government is often content to let companies repeatedly pay fines, suggesting that the penalties are not large
enough to deter poor business practices.
The Haitian government has been largely unable to enforce many workplace regulations since the 2010
earthquake that devastated the nation, as a huge portion of the budget is now devoted entirely to reconstruction
efforts. Apparel manufacturing businesses frequently use child labor and forced labor with little to no threat of
government intervention, largely due to the incomplete nature of labor regulations. Notably, laws do not exist
that specify what occupations are too dangerous for children or a minimum working age for the domestic sector.
Across the nation, a staggering 29 percent of children ages five to 14 are work in forced labor positions, compared
to 5.8 percent in the Dominican Republic and 8.4 percent in Jamaica. The Ministry of Social Affairs and Labor
lacks the political will, the funds, and the staffing necessary to enforce what regulations exist in the nation.
4.3 Congestion at U.S. and Canadian West Coast Ports
Throughout 2014, congestion at ports on the U.S. West Coast proved to be a major hindrance to business
operations. As a particularly bad winter had severely affected rail operations servicing these ports, congestion was
recorded at Los Angeles and Long Beach as early as February. With the expiration of the International Longshore
and Warehouse Union contract in July looming, many companies chose to expedite cargo shipments through the
West Coast before any potential interruption. This increased cargo throughput began to strain capacity at several
points, most notably Los Angeles and Long Beach.
As the negotiations continued, labor slowdowns at ports along the coast, the mismanagement of cargo truck
chassis at several facilities, and a slew of other minor issues caused congestion to reach catastrophic levels.
With the ports operating at near-total capacity, cargo transiting through most West Coast ports, specifically
Los Angeles, Long Beach, Oakland, Seattle, and Tacoma, are now facing major delays. Ports in southern California
are particularly hard-hit, with cargo at Los Angeles and Long Beach delayed by two weeks on average. Some
shipments have been delayed even longer, out to nearly five weeks.
While the impact to Canadian ports as a result of congestion in the United States has been less severe, some
delays have been noted. Early on in the negotiation period, the ports of Prince Rupert and Vancouver began
receiving a significant amount of diverted cargo from the United States. The quantity of this cargo caused minor
delays at Vancouver and prompted most rail businesses servicing the port to assess surcharges on U.S.-borne
cargo or turn away such shipments entirely. While delays at these two ports have not persisted, the facilities are
still handling an increased amount of cargo due to uncertainty surrounding the U.S. West Coast.

Oakland
Los Angeles
7.87 Million TEUs
Long Beach
6.73 Million TEUs
2.35 Million TEUs
Seattle
1.59 Million TEUs
Tacoma
1.72 Million TEUs
Vancouver
2.83 Million TEUs
Manzanillo
2.12 Million TEUs
2
2
Prince Rupert
536,439 TEUs
Portland
151,564 TEUs
San Diego
100,754 TEUs
Lazaro Cardenas
739,192 TEUs
Congestion at
North American
Paciﬁc Ports
SUPPLY CHAIN
DISRUPTION RISK
Level of risk posed by
cargo theft, unmanifested
cargo introduction,
counterfeit production, and
sea piracy
SEVERE
HIGH
ELEVATED
GUARDED
LOW
2012-2013
2012-2013 2013-Present
4.2% 7.8%
2012-2013 2013-Present
4.0% 4.7%
2012-2013 2013-Present
18.4% 12.2%
2012-2013 2013-Present
5.0% 14.0%
2012-2013 2013-Present
15.4% 8.3%
5.2%
2012-2013 2013-Present
6.3% 12.5%
2012-2013 2013-Present
.09% 4.8%
2012-2013 2013-Present
11.9% 1.7%
2012-2013 2013-Present
13.5% 10.0%
2012-2013 2013-Present
2.1% 1.6%
Annual
Volume Change
Los Angeles
Long Beach
Vancouver
Oakland
Manzanillo
Tacoma
Seattle
Prince Rupert
Portland
Lazaro Cardenas
San Diego
Labor
Disputes
Capacity
Issues
Supply Chain Risk Exposure Evaluation
Supply Chain Risk Expo
Supplier Compliance Man

4.4 Normalistas in Mexico and Their Impact Upon the Supply Chain
After 43 students from a teacher’s school in Ayotzinapa, located in Guerrero State, Mexico were kidnapped and
allegedly murdered in September by municipal police officers and members of a small cartel in the nearby city of
Iguala, protest activity led by groups of students erupted throughout Mexico. While these demonstrations caused
significant disruptions to trade on some major highways, the student protesters, or normalistas, also engaged in
direct attacks upon the supply chain. Groups of students hijacked cargo trucks in order to block major highways,
and typically leave cargo shipments consisting of goods other than food and beverage items intact. More
frequently, the protesters will hijack food and beverage delivery trucks and steal their cargo.
BSI noted an increasing trend of violent hijackings beginning in early December, in a departure from the peaceful
incidents typically observed in September and October. Whereas many incidents in September and October
involved students simply asking truck drivers to leave their vehicles, there have been more reports of drivers
resisting the students, and being forcibly pulled from their vehicles and beaten. This may be due to the increased
involvement of students and teachers’ unions, which have a long history of targeting the supply chain during
demonstrations. These unions often commandeer cargo vehicles to block traffic and disrupt daily life, thereby
drawing attention to their cause. These types of attacks are likely to continue into 2015, especially as the
government investigation into the disappearance of the 43 students faces growing criticism.
4.5 Drought, Poor Water Management, and the Impacts on Business in Brazil
In 2014, Sao Paulo, Brazil began to experience one of the worst droughts since 1961, a disaster that,
combined with poor water management, continues to deeply impact business operations in the country’s most
economically-important. Sao Paulo’s economy represents approximately 33 percent of Brazil’s total GDP, the
state’s industry accounts for 36 percent of the country’s entire industrial output, and its agricultural sector
constitutes about 12.17 percent of Brazil’s entire agricultural sector. The severe water shortage is now forcing
businesses in the region to implement costly contingency plans for securing water. According to a survey conduct-
ed by the Department of Research and Economic Studies of the Federation of São Paulo State Industries (FIESP)
in May 2014, approximately 62.2 percent of the 413 responding companies indicated that production would be
reduced, but not necessarily halted, due to an interruption of their water supply. Businesses in almost every sector,
including manufacturing and agriculture, are adopting costly measures that include closing factories, reducing
or temporarily halting production, using tanker trucks to sustain water supplies, and purifying the more polluted
river and reserve waters. As Brazil heavily relies on hydropower for electricity, it is also likely that businesses in the
region will face increased costs for power.
According to a survey conducted by the Department of Research and Economic Studies
of the Federation of São Paulo State Industries (FIESP) in May 2014, approximately 62.2
percent of the 413 responding companies indicated that production would be reduced,
but not necessarily halted, due to an interruption of their water supply.

Lomas de
Zamora
Lanus
Quilmes
Moron
La Matanza
Merlo
Moreno
Berazategui
Florencio
Varela
Almirante
BrownEsteban
Echeverria
Buenos Aires
City
Tres de
Febrero
Avellaneda
General
San
Martin
Vicente Lopez
San Isidro
Tigre
San
Fernando
Escobar
Pilar
Ezeiza
San Miguel
Jose C. Paz
Malvinas
Argentinas
Ituzaingo
Hurlingham
Northern
Region
Western
Region
Southern
Region
Potential Shiftin Cargo Theft
CARGO THEFT
Level of risk posed by
cargo theft
SEVERE
HIGH
ELEVATED
GUARDED
LOW
EXPOSURE
*The overall threat of cargo t
to the other regions of Great
Greater Buen
Buenos
Aires
Province
Potential Shift in Cargo Theft
Greater Buenos Aires Municipalities
*The overall threat of cargo theft in Argentina is Severe.
These regional ratings are in respect to the other regions
of Greater Buenos Aires only and are not comparing these
regions to other countries
4.6 Increasing Actions to Combat Cargo Theft in South America
Many countries in South America began to devote an increasing amount of resources and implemented policies
aimed at reducing the consistently high rates of theft in 2014. Cargo theft continued to plague South American
countries in 2014, with Brazil again suffering from the highest rate of theft in the world. This was particularly
evident in the country’s electronics sector, where sophisticated cargo theft gangs in and around the region of
Campinas, Sao Paulo used assault-like tactics and heavy weaponry to steal multimillion dollar loads of goods from
cargo trucks, factories, and distribution centers.
However, BSI also noted that several countries in South America, including Brazil, Argentina, Chile, and Colombia,
instituted new policies directly aimed at combatting cargo theft. Several state governments in Brazil, including
Sao Paulo (where more than half of all cargo theft in the country occurs), enacted legislation that increased the
penalties for receiving stolen cargo. Authorities in Buenos Aires Province, Argentina, where about 79 percent of all
cargo theft in the country takes place, created a new prosecutor group tasked with conducting further research
on cargo theft gangs operating in the western region of Greater Buenos Aires, The group will analyze past theft
incident data and create strategies to reduce theft and dismantle gangs. The government of Chile, along with
trucking associations in the country, created working groups in 2014 to reduce the number of cargo theft and
arson attacks affecting the industry. In Colombia, increased police patrols, checkpoints, and penalties led to a
14-year-low in the number of cargo theft incidents reported in 2014.
These actions have the potential to reduce cargo theft in South America. Specialized prosecutor groups are
currently active in the northern region of Greater Buenos Aires and were largely successful in reducing the rate
of theft in the area, providing firm evidence to suggest that the new group in the west will also be successful.
While less active in nature, the legislative framework put in place in Brazil and Chile allows states and regions in
those countries to develop additional anti-theft measures. Other Brazilian state governments, for example, are
enacting similar laws targeting the receivers of stolen cargo. However, factors, such as the rule of law and level
of corruption in each country, will ultimately determine the success of these new measures. While the rate of
cargo theft in countries like Brazil and Argentina is not expected to dramatically decrease due to these measures,
consistent and additional efforts over the next few years may succeed in slowly reducing theft in South America.

5 Looking Ahead to Supply Chain Challenges in 2015
5.1 Emerging Markets, Emerging Supply Chain Threats
Extremely rapid economic growth in countries such as China, India, Indonesia, and Vietnam has also created
challenges for business and supply chains as government institutions, laws, and infrastructure struggle to keep pace
with the breakneck speed of growth. This trend manifests itself in different ways across the spectrum of business
continuity, corporate social responsibility, and security risks. Major increases in cargo throughput resulting from
economic growth have put serious strain on transportation infrastructure in countries such as the Philippines and
Vietnam, leading to delays at ports and on roads. Similarly, industrialization in Brazil has created water management
challenges that now threaten production at factories in the country. In the corporate social responsibility arena,
production is rapidly shifting to countries with poor regulatory infrastructure, such as Myanmar and Vietnam, leaving
companies more exposed to accusations of worker abuse and mistreatment.
These trends are likely to accelerate in 2015, as the economies of China, India, Indonesia, Myanmar and Vietnam are
all projected to grow at rates above five percent this year. In some cases, such as in India, it is relatively simple to
project when supply chain disruptions will occur, since they typically coincide with the cyclone season that stretches
from April to December. In other cases, looking to simple metrics can help forecast how long disruptions will
continue. In Sao Paulo, Brazil, for example, rainfall in January was only half of the historical average, indicating that
water management problems will continue to disrupt production in the country. When evaluating the risk of human
rights violations or environmental issues with suppliers, it is not enough to simply look to past incidents as a guide
to the future, especially when dealing with emerging economies. In these cases, BSI’s indicators of enforcement,
regulatory quality, and corruption are the best metrics to use when judging risk.
Similarly, poor rule of law can leave companies at the mercy of organized crime and corrupt officials. While the
problem that organized crime and drug trafficking poses to supply chain in Mexico is well-documented, emerging
threats in countries such as the Dominican Republic and China will threaten businesses in 2015. Despite efforts
by Chinese security officials to curb amphetamine and precursor smuggling, consumption of methamphetamine
has risen sharply in many of the region’s most populous nations, and production will rise to meet this demand. The
Philippines suffers from the highest usage rates of methamphetamine of any nations in East or Southeast Asia, while
Indonesia, Japan, and Vietnam are continuing to see year-over-year increases in methamphetamine usage. In the
Dominican Republic, members of two major criminal networks, a Colombian drug cartel and the Italian ‘Ndrangheta
mafia, were arrested in the country in 2014. These and other criminal organizations are certainly expanding their
influence in the Dominican Republic. Dominican authorities will continue to struggle with corruption among customs
and police forces as traffickers attempt to move more cocaine through the Caribbean nation.
Although sourcing from Africa has increased significantly in recent years and foreign companies have made strides
toward improving their corporate social responsibility practices, responsible sourcing initiatives continue to be
seriously threatened by rampant corruption and weak regulatory enforcement in the region. The recent boom in the
African palm oil industry highlights this problem. While numerous countries across the continent have very recently
begun significant production of this oil (Nigeria became the world’s fourth-largest palm oil producer last year), graft
and weak oversight in this sector have enabled both human rights and environmental abuses to proliferate.
BSI’s new threat ratings for regulatory oversight further underscore this trend, as the average threat rating for
emerging African palm oil producers is High, compared to an average of only Elevated for the top 10 traditional
manufacturers of the oil, primarily located in Southeast Asia and Central America. These issues extend to a range of
other emerging sectors in Africa, especially the region’s rapidly expanding metals/minerals and cotton industries.

5.2 A New Face for Old Challenges in the Established Economies
Labor unrest has long caused supply chain disruptions in both Europe and North America, though BSI saw the
nature of labor unrest shift towards greater disruption in 2014. This pattern will likely continue into 2015, as
employers are increasingly willing to wait out strikes knowing that public support does not favor the unions.
Already in 2015, BSI has seen strikes by metalworkers in Germany and Turkey and truck drivers in France, causing
widespread disruption in the logistics, automotive, and aerospace industries. As membership in labor unions
continues to dwindle in most developed countries, the remaining members are more likely to be more radical and
willing to use strikes, protests, and other forms of labor action to interrupt commerce and trade.
In the United States, prolonged negotiations between port operators and dockworkers caused record-breaking
congestion and delays at ports along the West Coast. This congestion spilled over into 2015, and delays are likely
to continue for the foreseeable future. A tiered solution requiring input from all sectors of the shipping community
will likely be required before the situation can be resolved. Meanwhile, the negotiations set a dangerous precedent
for 2018, when labor contracts for both East Coast and West Coast dockworkers will expire. Should dockworker
unions view the slow-down tactic as successful in securing additional concessions from the port operators, then
equally disruptive actions affecting both the East and West Coasts could threaten all U.S. shipping in 2018.
5.3 Looking Beyond Headlines to Forecast Supply Chain Impacts
Major events such as the Ebola outbreak and the rise of ISIS in Iraq and Syria had important second-order
impacts on the supply chain. BSI indicators for political stability and terrorism can help companies understand
what they can expect in the Middle East and Africa and help them prepare for events that by nature can have
difficult-to-predict outcomes. Major headline-grabbing events and their accompanying impacts on supply chains
may seem surprising in hindsight, but their causes can often be found in longstanding problems in historically
unstable regions.
Though governments and international NGOs have started to successfully tackle the Ebola epidemic in West
Africa, BSI indicators suggest that weak governments in the region will struggle to cope with new challenges in
2015, whatever their source. For instance, corruption in the Nigerian military and poor rule of law in the country
has hampered the fight against Boko Haram, a terrorist group that regularly targets the supply chain. Similarly,
the speed of ISIS’ advance in Iraq took many by surprise, as did the amount of money the organization was able
to make by exploiting the supply chain. However, BSI indicators of political stability and terrorism in Iraq both
suggested that terrorist groups would be able to thrive in the country’s highly tenuous political environment.
Sometimes, even good news for the supply chain can have downsides. In 2014, the inaugural “21st-century Silk
Road” freight train shipment from Chengdu, China to Spain launched, raising hopes that the new trade route will
provide a faster and cheaper alternative to sea-borne cargo in 2015. The three-week shipping route will take
approximately half the time of traditional maritime trade, but the China to Europe trade route traverses several
high risk countries for illegal drug introduction or cargo theft, increasing the risk of disruption compared to
maritime shipments. Two of the rail lines three transfer points are located in Kazakhstan and Russia, where
BSI has seen theft and illegal drug introduction targeting rail shipments. Trains along the route also have to be
changed every 804 kilometers, which equates to approximately 16 stops along the 13,000 kilometer railway,
providing thieves with additional opportunities for theft. However, it remains to be seen whether this “New Silk
Road” will emerge as a serious alternative to maritime shipping between Asia and Europe.

BSI Supply Chain Solutions
BSI Supply Chain Solutions is the leading global provider of supply chain intelligence, auditing services, audit
compliance and risk management software solutions, and advisory services. Our mission is to help corporations,
governments and associations identify, manage and mitigate global supply chain risks and maintain world class
governance risk and compliance programs. Our holistic supply chain risk management suite is designed to predict
and visualize risk, and develop robust risk mitigation and compliance management programs to protect your
supply chain, brand and reputation. Our intelligence-infused supply chain solutions and global network empower
our clients to understand global supply chain risk with unequaled precision.
BSI America Professional Services Inc.
4250 Drinkwater Boulevard, Ste 210
Scottsdale, AZ 85251
Tel: +1 480 421 5099
BSI Professional Services Inc. EMEA
Kitemark Court, Davy Avenue
Knowlhill
Milton Keynes, United Kingdom
MK5 8PP
Tel: +44 0845 080 9000
BSI Professional Services Inc. APAC
23rd Floor, Cambridge House, Taikoo Place,
979 King’s Road, Island East, Hong Kong
Tel: +852 3149 3300
Copyright © 2015 The British Standards Institution. All Rights Reserved.
For more information, please visit bsi-supplychainsolutions.com or contact us:
Supply Chain Risk Exposure Evaluation Network (SCREEN), allows organizations to actively
identify and monitor supply chain security, social responsibility, and business continuity
threats and trends at a country level. SCREEN’s robust modules provide insight into
geographic risk for over 20 proprietary risk indicators in more than 200 countries.
Supplier Compliance Manager (SCM), is an automated self-assessment and audit analysis
solution that quantifies and tracks supplier risk and compliance through various assessment
methods to ensure your supply chain, brand and reputation are protected. SCM provides
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Our audits provide your organization cost-effective assurance that your suppliers are not
exposing your brand to potential security, social responsibility or business continuity risks.
BSI’s Advisory Services are driven by experienced supply chain professionals that leverage
proven risk-based methods to provide timely insights into potential problems within a supply
chain to ensure an organization can effectively identify, manage and mitigate risk. BSI’s
advisors will assist you in developing or enhancing a risk management program, preparing
and applying for a government program certification and analyzing your supply chain on a
country or lane-to-lane basis to gain a better understanding of potential global risks.
BSI’s Training Programs help build awareness and develop a deeper understanding of supply
chain security, corporate social responsibility and business continuity risks and how to
manage them. Our customizable training programs will provide your operations with the
information they need to proactively identify, and mitigate global threats. Training can be
provided through an e-learning course or presented on-site by one of BSI’s experts.

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