Food fraud represents a significant risk to brands and stakeholders of the food supply chain and threatens consumer confidence and in turn trust. This presentations focuses on the Australian agri-food export opportunity in china and looks closely at some of the risks for brands in that market. The presentation also showcases some of the #SourceCertain solutions. The explosion of the daigous phenomenon demonstrates that Chinese consumers do not TRUST the supply chain - there is great opportunity for innovative exporters that look to connect securely with their prospective Chinese consumers. This presentation was delivered in part to the ASA 100 forum in 2016 by Source Certain Chairman Cameron Scadding

1. FRAUD IN SUPPLY CHAINS:
THE RISKS, THE SOLUTIONS &
THE OPPORTUNITIES
© Source Certain International Pte Ltd – 2016
Cameron Scadding (Non-Executive Chairman – Source Certain International)

2. TAKE HOME MESSAGES
1. Chinese consumers already trust Australian food.
2. Chinese consumers do not trust the supply chains that
deliver the food to them.
3. Securing supply chains from source to consumer is
essential to fixing this problem.
4. The value of the “Australian” promise is why the
adulteration, substitution and counterfeiting problem
exists. The promise is cheap, the reward is high, the
consequences are small (to nothing).
5. There is no silver bullet – this issue is a complex one and
requires a supply chain wide solution.
6. Open supply chains are a reality – a supply chain solution
may be difficult to implement but we must do what we can
to manage the some of the business risks associated with
this problem.
Confidential © SCI 2016 2

3. FOOD SUPPLY CHAINS
Confidential © SCI 2016 3
• The way food is grown, sourced,
aggregated, distributed, represented and
sold is more complex than ever.
• Food supply chains are a vital connection
between producers and consumers.
• Modern consumers want this connection to
feel confident that their food is safe to eat.
• The demand or trust of a product can be
destroyed by a single incident.
• Security and integrity in each segment of the
supply chain that connects consumers to the
source of their food (farmers, producers and
their stories) is critical.
• In food - TRUST is all you really have.

4. THE SITUATION IN AUSTRALIA
Confidential © SCI 2016 4
• Consumers in Australia
generally trust Australian
foods.
• A large part of this trust has
resulted from investment
biosecurity strategies which
have kept Australian ‘clean’.
• Some of this has resulted from
our food safety and quality
management infrastructure (in-
house corporate plus
regulated requirements).
• There is general trust in the
food delivered through
Australian supply chains

5. FOOD IN CHINA
Confidential © SCI 2016 5
• Food safety incident after food safety incident - high profile and
some resulted in fatalities.
• Amongst consumers in China, there is a general mistrust in the food
delivered through their supply channels.
– Melamine in infant milk powder
– Meat bleaching
– Fish species substitution
Time 19 September 2016. http://time.com/4498998/china-
meat-food-safety-bleach-police-guandong-shenzhen/

6. MELAMINE IN INFANT MILK POWDER
Confidential © SCI 2016
2008 Melamine Issue in China 2016 Nationwide Australian Formula Shortage
• 300 000 people affected
• Six infant deaths, 54 000 babies hospitalized
• 11 countries banned Chinese formula imports
• Those prosecuted and convicted were jailed or given the
death penalty
• Shortage of infant formula nationwide in Australia.
• Purchase limits imposed by the major retailers.
• The concern is still real for consumers in China and
Chinese-born mothers living in Australia
6

7. ALL OF THESE VALUE PROMISES ARE CREATED BY
THE SOURCE AND DELIVERED BY THE SUPPLY
CHAIN.
Confidential © SCI 2016 7
Free Range High Quality Safe
Working
Conditions
& No Slave
Labor
Provenance
(e.g.
Margaret
River, WA)
Organic
Natural GM Free
Ethically
Sourced
Grass Fed
Pasture
Raised Farm Fresh

8. THE PROBLEM
Confidential © SCI 2016 8
SOURCE
(CHARACTERISTICS)
MILKPOWDER;
AUSTRALIA
ORGANIC
BRAND
MILKPOWDER;
CHINA
• Milk
Powder
• ChinaD
• Milk
Powder
• Australia
• Organic
• Brand
W
• Milk
Powder
• Australia
• Organic
• Brand
D
• Milk
Powder
• Australia
• Organic
• Brand
W
SUPPLY CHAIN CONSUMER
$ $$ $$$$$
$$$ $$$$ $$$$$
D DISTRIBUTION W WHOLESALE

9. THE SUPPLY CHAIN IS NOT TRUSTED
Confidential © SCI 2016 9
The Australian Promise Halo;
ü Clean
ü Green
ü Ethical
ü High Quality
ü Safe etc.
That’s why it is being copied.
Chinese consumers don’t trust
the supply chain!!

10. DAIGOU PERSONAL SHOPPER – A NEW
INDUSTRY
Confidential © SCI 2016 10
• The rise in popularity of ‘daigous’ in
Australia has not come about because
Chinese consumers have an issue or
problem with the food products’ promise
of ‘Australian’, or their perceptions of
‘Australia’.
• The problem lies in the supply channels
through which the food is distributed to
the consumers.
• Trust has deteriorated in the supply
chains that deliver them food – driven
by incidents like Melamine adulteration.

11. DAIGOU PERSONAL SHOPPER
Confidential © SCI 2016 11
• Estimated 40,000 of these shoppers accessing AU retail outlets to supply their clients in
China.
• P2P approach where effectively the client communicates with the buyer – often the buyer
will show their client themselves removing the items from the shelf in AU.
• There are issues with this “grey channel” but the Chinese consumer is speaking – are we
listening?
Australian Financial Review, Oct 2 2016. http://www.afr.com/business/retail/
golden-week-explodes-as-daigous-scramble-for-milk-powder-vitamins-and-
cosmetics-20160920-grksey
The Sydney Morning Herald, 27 Jan 2016. http://www.smh.com.au/business/retail/
chinas-daigou-army-plan-fresh-assault-on-our-stores--and-this-time-theyre-coming-
for-our-cherries-20160126-gme8ec.html

12. RECAP – THE PROBLEM AND FOOD FRAUD
• FDA defines this as economically motivated
adulteration.
• AU tends to focus on IP (brand protection) and
food counterfeiting.
• Food Fraud is broader than this and refers to any
fraud that happens within the food supply chain.
The focus (highest profile) is deceptive conduct,
substitution and adulteration but also includes tax
avoidance, money laundering and other
organised criminal activities.
In the context of AUSTRALIA – CHINA
• EMA (Economically Motivated Adulteration)
• EMS (Economically Motivated Substitution)
Confidential © SCI 2016 12
Source
Supply
Chain
Consumer

13. Big Business + Big Opportunities = Criminal Infiltration
Most substituted products:
– Vanilla Extract
– Maple Syrup
– Wines
– Juices
– Coffee / Tea
– Saffron
– Honey
– Milk
– Olive oil
These sorts of lists are built from reported case
Confidential © SCI 2016 13
http://www.cbsnews.com/news/60-minutes-agromafia-food-fraud/
FOOD FRAUD: GLOBAL PERSPECTIVE

14. • The consumer must have confidence that a product they have
purchased has come from where it has been claimed.
• The ability to ensure that a product from a source gets to the
consumer is fundamental in food supply chains.
• Data based traceability is a minimum requirement.
• Anti-counterfeit ‘secure’ labels and data tracking is also a
possible part of a solution.
• Forensic verification of the food itself is an absolute way of
linking a food to its source and build integrity and confidence.
• ALL strategies must be deployed to deliver more transparency
to consumers.
Confidential © SCI 2016 14
SUPPLY CHAIN INTEGRITY & SECURITY
NO SILVER BULLET AVAILABLE

15. SOURCE CERTAIN
A SUPPLY CHAIN INTEGRITY & SECURITY SOLUTION
Confidential © SCI 2016 15
• Source Certain builds trust through the security of the
production and supply chain so that consumers are
confident that the food they purchase was produced or
sourced as claimed and promised.
• Source Certain services are forward looking and
proactive rather than reactive. Our objective is to
establish a secure supply chain which all stakeholders
can be confident in. We aim to prevent or rectify
problems in supply chains by uncovering and dealing
preemptively with the issues, so the risk of integrity
breaches are substantially reduced.
• Source Certain has access to a world class forensic
capability that facilitates the verification of a food’s origin.
• Source Certain uses a TSW TraceTM technology to
deliver Verified Supply Chain Integrity

16. SOURCE CERTAIN VALUE PROPOSITIONS
BRAND ENHANCEMENT AND PROTECTION
Confidential © SCI 2016 16
Risk Management –
Assists with Managing Recall & Crisis, Supply Chain
Threats (Economically motivated adulteration and
substitution, Fraud), System Verification
Supply Chain Security –
Surveillance: Independent third-party presence within the
supply chain
Builds Trust with Consumers –
Connects and communicates with consumers
VERIFIEDSUPPLYCHAININTEGRITY

17. HOW WE DO IT - REAL VERIFICATION
A ROBUST SCIENTIFIC METHOD FOR THE DETERMINATION OF
PROVENANCE
Confidential © SCI 2016 17
TM

18. SOURCE CERTAIN FOOD ORIGIN
TECHNOLOGY
What is TSW Trace TM
TSW TraceTM has
been developed by
TSW Scientists over
the past 30 years.
TSW TraceTM is a
method that robustly
determines the
provenance of an
item.
TSW TraceTM uses a
variety of scientific
approaches to
determine the
fingerprint of a sample
and link it to its origin.
TSW TraceTM is
routinely employed as
a Forensic tool and is
delivered by Expert
Forensic Chemists
and Investigators.
Confidential © SCI 2016 18
Every substance, whether natural
or synthetic, is not pure and will
contain a cocktail of “contaminants”
in concentrations that range from
single atoms or molecules to
percentages.
SOURCE CERTAIN HAS EXCLUSIVE, GLOBAL LICENSE FOR APPLICATION OF
TSW TRACE TO FOOD
Chemical Profiling
TM

19. BROAD APPLICATION
Confidential © SCI 2016 19
Gold, Diamonds, Precious & Conflict Metals
• Routinely applied to tracing stolen gold or diamonds back to their mine of origin. In
addition, the method is used to determine if a Diamond is synthetic and investigate
commodities sourced from conflict zones (blood diamonds) and assist to provide basis for
integrity promises such as welfare practices (e.g child or slave labour).
Scene of Crime Investigations
• The TSW forensic science services team undertake routine forensic investigations which
employ the TSW TraceTM method. Typical example include the analysis and profiling of
scene of crime evidence. E.g paint, glass, bullets or metal fragments.
Drugs and Pharmaceuticals
• The TSW TraceTM method can be used to trace the origin of drugs. For example the
growing location of Marijuana or alternatively the batch of a particular pharmaceutical.
Food
• The TSW TraceTM determines the provenance (origin) of a food including its production
system (e.g Free Range v Cage Eggs). This method has been employed successfully to
provide rapid traceability of meat (36 hours) back to farm of origin and also complete
investigations into food substitution and mislabeling.
TM

20. 20
Farmers /
Producers &
Their Story
Consumers &
Their Need for
Information
Transparency & Integrity
Confidence & Trust
Confidential © SCI 2016
SUPPLY CHAIN INTEGRITY & SECURITY

21. SOURCE CERTAIN SERVICES
Confidential © SCI 2016 21
Source Certain Services fall within one of three categories:
- Compliance with a Source
Verification Standard
- Statement of Compliance
for production sources
Verifiable supply chain
integrity:
- Source Check
- Source Secure
- Source Certified
- Support service
- Food Fraud Investigation
Unit

22. Confidential © SCI 2016 22
SOURCE CERTAIN SERVICES
1. SOURCE CONNECT
• Source Connect is designed for suppliers who wish to communicate to third
party business buyers and regulators that they have invested in the effort to
provide origin verification capability for their products.
• Once set-up requirements of the SC1000 Source Verification Standard have
been complied with, the Supplier is issued with a Statement of Compliance.
• The SC1000 Source Verification Standard sets a minimum source verification
capability requirement for food supply chains.
– Capacity to complete a Verification request as to whether the product’s origin
matches the stated production source at any point in the supply chain.
– Individual product Verifications can be requested by supplier-permitted users.
STATEMENT OF COMPLIANCE
SC1000:2016

23. SOURCE CERTAIN SERVICES
2. SUPPLY CHAIN SECURITY
Confidential © SCI 2016 23
• Risk Management
• QA / QC
Source
Check
• Brand differential and
value creation
Source
Secure
• Dynamic consumer
communications
Source
Certified
- Validation of paper-based QA/QC systems.
- Comprehensive supply chain analysis.
- Batch and manufactured product traceability.
- Internal communication only – NO external
consumer-engaging communication.
- Standard, recommended service.
- Enables verifiable marketing claims of
product provenance.
- Reduced risk of product substitution.
- Value adding, mass communication options.
- Add-on to Source Secure Service.
- Consumer-facing, on product, Source Certified
trademark available under license.
- Dynamic consumer communication options
regarding service and source of product, specific
to product and supply chain.

24. 24
1.
Supply Chain
Mapping & Risk
Assessment
• Definition of
supply chain
segments
• Supply chain
segment risk and
threat analysis
2.
Stakeholder
Induction &
Education
Sessions
• For supply chain
participants
• Outline of
objectives of
service and
service activities
• All stakeholders
on notice
3.
Supply Chain
Communication
• Inside supply
chain
communication
strategy
implemented
• All stakeholders
on notice of
security strategy
implemented
4.
Reference &
Verification
Sampling
• Independent
sampling
conducted by SCI
• SCI staff present
and visible in
supply chain
5.
Verification
Testing &
Reporting
• Forensic testing
of sample to verify
source
• Failed verification
initiates
investigation and
further action
6.
Consumer
Communication
• Source Certified
TM option of
service customers
• Communicate
directly with
consumers
• Provide
consumers with
information on
supply chain
security
SECURING A SUPPLY CHAIN: SOURCE SECURE SERVICE COMPONENTS
Confidential © SCI 2016
BUILDING THE SOURCE SECURE SERVICE
2. SUPPLY CHAIN SECURITY

25. Confidential © SCI 2016 25
• CCIC Traceability Service – data based traceability of product from production à retail market
• Source Certain secure supply chain service (includes in market verification and all other security
strategies)
• Combined CCIC and SCI communication with consumer market.
Confidential © SCI 2016 25
Services
Benefits
OPPORTUNITY
COMBINED SCI:CCIC SERVICE
• Physical inspection pre-shipment and official documentation preparation and review.
• Real time tracking of product inside Chinese market.
• Chinese based resources (CCIC) for traceability services.
• Consumer-based verification services of SCI.
• Expedited clearance through Chinese Customs as CIQ accept CCIC pre-shipment inspection outcomes.
• In market communication – build trust and confidence, in China, with consumers.
• Enhance market value.
• Immediate communication with consumers as they are familiar with CCIC branding and processes.

26. • Unique combination of investigation, scientific and digital forensic expertise.
• Applicable to almost any food fraud, food contamination or supply chain based investigation.
26
Food Fraud Investigation Unit
Forensic
Science
Investigation
Digital
Forensics
SOURCE CERTAIN SERVICES
3. SOURCE INVESTIGATION
Confidential © SCI 2016

27. Confidential © SCI 2016 27
SUPPLY CHAIN INTEGRITY, SECURITY
& RISK MANAGEMENT
PREMIUM AU FOOD PRODUCT
MORE SOLD IN CHINA THAN IS
EXPORTED
CLEAR SUBSTITUTION AND
COUNTERFEIT PRODUCT PROBLEM IN
CHINESE MARKET
DISEASE OR RESIDUE (e.g. BSE) DETECTED
IN CLAIMED AU PRODUCT
CRISIS
MANAGEMENT PLAN
Example Scenario

28. A SOURCE SECURE SERVICE EXAMPLE
Confidential © SCI 2016 28
Milk Powder
- Export

29. EXAMPLE – MILK POWDER EXPORT
29
Objective: Secure Milk Powder Export Supply Chain
1) Facilitate rapid verification of milk powder batch Identification (has a milk
powder come from a covered supply chain source?)
2) Build trust with export consumers by connecting them to the source of the milk
powder
Local Farm Processing Warehouse &
Distribution
Export Retail
Confidential © SCI 2016

30. BUILDING THE SOURCE SECURE SERVICE
30
1.
Supply Chain
Mapping & Risk
Assessment
• Definition of
supply chain
segments
• Supply chain
segment risk and
threat analysis
2.
Stakeholder
Induction &
Education
Sessions
• For supply chain
participants
• Outline of
objectives of
service and
service activities
• All stakeholders
on notice
3.
Supply Chain
Communication
• Inside supply
chain
communication
strategy
implemented
• All stakeholders
on notice of
security strategy
implemented
4.
Reference &
Verification
Sampling
• Independent
sampling
conducted by SCI
• SCI staff present
and visible in
supply chain
5.
Verification
Testing &
Reporting
• Forensic testing
of sample to verify
source
• Failed verification
initiates
investigation and
further action
6.
Consumer
Communication
• Source Certified
TM option of
service customers
• Communicate
directly with
consumers
• Provide
consumers with
information on
supply chain
security
SECURING A SUPPLY CHAIN: SOURCE SECURE SERVICE COMPONENTS
Confidential © SCI 2016

31. 1. SUPPLY CHAIN MAPPING & RISK ASSESSMENT
31
Farm
Processing
Warehouse
&
Distribution
Retail
10 farms
2 processing
facilities
4 warehouses
100 retail
outlets
1 x
processing
centre is
contracted
by many
farmers
All farms
clearly
defined with
sound history
No DD
information
available
on
operating
staff
SC Brand in
use – must
include retail
Confidential © SCI 2016

32. 32
• A key part of the Source Secure
strategy is the education of the key
supply chain stakeholders.
• The education program informs supply
chain stakeholders about the Source
Certain service, the capability of the
verification process, and the objectives
of the Source Secure service.
• This education / induction program will
be delivered in person to a client’s key
personnel and management, and is
distributed to other stakeholders
(farmers, distributors, packers, buyers
etc) via the platform.
• Completion of the induction program
will be monitored and reported.
Confidential © SCI 2016
2. SUPPLY CHAIN STAKEHOLDER INDUCTION &
EDUCATION PROGRAM

33. 33
• In addition to the proposed education
program, the Source Secure service will
be communicated to all segments of the
supply chain.
• This communication will detail the
objectives of the service, and outline the
key capabilities of Source Certain.
• Source Certain and Retail Partner
signage will be placed in key areas of
the supply chain.
SUPPLY CHAIN:
MILK POWDER EXPORT
This supply chain is
part of a Source
Secure program and
subjected to random
verification of origin
testing.
Confidential © SCI 2016
3. SUPPLY CHAIN COMMUNICATION
(ON SERVICE IMPLEMENTATION)

34. 34
4. REFERENCE & VERIFICATION SAMPLING
• Source Certain staff will visit processing
facilities to collect reference samples.
• Source Certain team members will
undertake random, unannounced sampling
at key supply chain segment locations (e.g.
packing facilities or warehouses).
• Source Certain team members will make
unannounced visits to retail outlets to collect
random verification samples.
• Source Certain staff will be clearly
identifiable to supply chain stakeholders.
• Sample collection logistics managed
through
Confidential © SCI 2016

35. 35
Elemental
Fingerprint by
Production
Source
Source Samples
Reference
Database
Elemental
Fingerprint
Source
Verification
Process
Verification
Samples Verification Data
Verification Data
compared to
Reference
database
Action following
Verification
Process
Source Certain
reports measure
of confidence
Remedial action
plan if required
Service
parameters
reviewed
Confidential © SCI 2016
5. VERIFICATION TESTING & REPORTING

36. 36
• Available to SOURCE SECURE
customers which have achieved or are
undertaking a minimum amount of
security activity inside the target supply
chain.
• Minimum activity to access the use of
the mark is commodity specific, but in all
cases ALL reference locations must be
sampled and in the custody of Source
Certain.
• Verification sampling must be completed
in ALL segments of the supply chain.
• Use of the Source Certified Mark is
governed by the License agreement
which forms part of the Source Secure
Service Agreement.
Confidential © SCI 2016
6. CONSUMER COMMUNICATION
SOURCE CERTIFIED TRADEMARK
www.sourcecertain.com
PROGRAM ID NUMBER: 0038H3
Program ID Number
relates to specific supply chain.
e.g. Milk Powder Export

37. 37
IN STORE
SOURCE SECURE
THE US MILK POWDER EXPORT CO
SUPPLY CHAIN IS PART OF A
SOURCE VERFICATION PROGRAM
VISIT WWW.SOURCECERTAIN.COM
AND ENTER THE UNIQUE VSC FOR
MORE INFORMATION
EXAMPLE SIGNAGE
A6TEAROFF
Other mass communication options
available ON PACK
Confidential © SCI 2016
SOURCE SECURE
EXPORT MILK
POWDER
CONSUMER COMMUNICATION
STORE COMMUNICATION OPTIONS

38. 38
SUPPLY CHAIN: INFANT MILK FORMULA
The Program ID Number: 0038H3 refers to the
following supply chain:
v Infant Milk Formula
Source Certain Interna@onal has implemented its Source
Cer@fied program to secure the supply chain for infant milk
formula. Source Certain achieves this by verifying that the
Infant milk formula purchased by you are from sources inside
the defined supply chain from sources claimed on pack.
FOOD STORY
The Happy Cows Farm has been owned and operated by the
Wellingham Family for 3 genera@ons. The family supply their
premium milk and other dairy products to processing facili@es
that manufacture infant milk formula. To learn more about the
prac@ces on the farm and the Happy Cows Farm story, follow
this link: www.happycows.com
*Disclaimer: Source Certain does not assure the validity of the
claims made by the Happy Cows Farm with respect to their farm practices. Rather, Source Certain
provides verification of the origin of the milk products within the defined supply chain.
RECENT ACTIVITY
UPDATE: 2/10/2016
Source Certain Team Member Amanda was in store collec@ng samples
for origin verifica@on.
UPDATE: 2/08/2016
Samples collected by Source Certain Team Member Chris at the distribu@on
warehouse number four were received for origin verifica@on tes@ng.
UPDATE: 2/05/2016
Source Certain team member Michelle visited the Happy Cows
Processing facility collec@ng samples for origin verifica@on.
Confidential © SCI 2016
CONSUMER COMMUNICATION
ONLINE COMMUNICATION OPTIONS

39. MORE INFORMATION
39Confidential © SCI 2016
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SINGAPORE 038987
Call: +65 6430 6626
Customer Service Locations
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MORE INFORMATION
www.sourcecertain.com
CONTACT
Email Enquiries: info@sourcecertain.com