Trade facilitation as a key to unlocking trade potential along OBOR

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1 Trade facilitation as a key to unlocking trade potential along OBOR Tengfei Wang Economic Affairs Officer Trade, Investment and Innovation Division UNESCAP wangt@un.org GIZ-ESCAP Workshop on promoting economic diversification of the Landlocked Developing Countries and the One Belt One Road Policy: Assisting sustainable development, Bangkok, 14 May 2016

2 Agenda 1. Why Trade Facilitation important for OBOR? 2. How to address trade facilitation along OBOR - A holistic approach covering at-the-border and behindthe-border matters - Business Process Analysis for simplification of trade procedures - Trade facilitation monitoring at Macro-level 3. What should be done to advance trade facilitation along OBOR? 2

3 What is trade facilitation? There is no universal definition but trade facilitation is often referred to as the plumbing of international trade. The (WTO) Trade Facilitation Agreement contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT): The simplification, standardization and harmonization of procedures and associated information flows required to move goods from seller to buyer and to make payments. 3

Mandates for ESCAP to promote trade facilitation along OBOR Vienna Programme of Action for Landlocked Developing Countries for the Decade 2014-2024 Priority 1: Fundamental transit policy issues

4 Mandates for ESCAP to promote trade facilitation along OBOR Vienna Programme of Action for Landlocked Developing Countries for the Decade Priority 1: Fundamental transit policy issues Priority 2: Infrastructure development and maintenance (a) Transport infrastructure (b) Energy and information and communications technology infrastructure Priority 3: International trade and trade facilitation (a) International trade (b) Trade facilitation Priority 4: Regional integration and cooperation Priority 5: Structural economic transformation Priority 6: Means of implementation Letter of intent between ESCAP and China on promotion regional connectivity and the Belt and Road Initiative Article 9 lists trade facilitation as a prioritized areas Article 11 emphasizes crossborder paperless trade and transport facilitation

5 Why Trade Facilitation important for OBOR? - from the State Council of China 5

6 Why Trade Facilitation important for OBOR? IV. Cooperation Priorities Policy coordination Facilities connectivity Unimpeded trade Financial integration People-to-people bond Some keywords: trade facilitation, customs cooperation, WTO Trade Facilitation Agreement, singlewindow, information exchange, investment 6

7 Why Trade Facilitation important for OBOR? Extraordinary claims require extraordinary evidence - Carl Sagan Trade costs (excluding tariff) Trade facilitation makes trade cheaper and faster Implementation of the WTO TFA narrow trade facilitation - is expected to reduce global trade costs by 11% to 15% (OECD, 2014; based on ESCAP-World Bank Trade Cost Database). 400% 300% 200% 100% Trade facilitation generates new trade and employment Strong correlation between trade facilitation and trade costs 0% 0% 20% 40% 60% 80% 100% Trade facilitation implementation (%) Peterson Institute estimates that trade facilitation reforms will expand global trade by as much as $ 1 trillion annually and generate 21 million jobs. ESCAP studies reveal that the potential export gains from cross-border paperless trade could be $250 billion annually. However, barriers for trade facilitation along OBOR remain A study jointly carried out by ESCAP and Islamic Development Bank provides empirical evidence that countries along OBOR corridors still face complex trade procedures. For instance, it typically takes 35 days to export fabrics from China to Kyrgyzstan involving over 20 trade procedures and over 20 actors. 7

8 Trade facilitation and trade diversification Export diversification vs. trade costs Export diversification 8

Documents related to Export of Rice in Thailand (from purchase order until the cargo container leaving the sea port) 36 Documents involving 15 parties, and more than 1,140 data elements to be filled

9 Documents related to Export of Rice in Thailand (from purchase order until the cargo container leaving the sea port) 36 Documents involving 15 parties, and more than 1,140 data elements to be filled in 1. Proforma Invoice (35) 2. Purchase Order (39) 3. Commercial Invoice (51) 4. Application for Letter of Credit (24) 5. Letter of Credit (32) 6. Packing List (25) 7. Cargo Insurance Application Form (20) 8. Cover Note (23) 9. Insurance Policy (24) 10. Booking Request Form Border Crossing (25) 11. Booking Confirmation Border Crossing (30) 12. Booking Request Form Inland Transport (16) 13. Booking Confirmation Inland Transport (18) 14. Bill of Lading (42) 15. Empty Container Movement Request (TKT 305) (20) 16. Request for Port Entry (TKT 308.2) (27) 17. Equipment Interchange Report (EIR) (24) 18. Container Loading List (28) 19. Container List Message (32) 20. Outward Container List (34) Buy/Pay Docs Transport Docs 21. Master Sea Cargo Manifest(17) 22. House Sea Cargo Manifest (37) 23. Export Declaration (114) 24. Good Transition Control List (27) 25. Application for Permission to Export Rice (KP. 2) (24) 26. Sales Report (KP 3) (21) 27. Application for the Collection of the Permit for the Export of Rice (A. 3) (35) 28. Permit for the Export of Rice (A. 4) (35) 29. Application for Certificate of Standards of Product (MS. 13/1) (44) 30. Certificate of Analysis (17) 31. Certificate of Product Standards (MS. 24/1) (45) 32. Certificate of Fumigation (21) 33. Application for Phytosanitary Certificate (PQ. 9) (29) 34. Phytosanitary Certificate (33) 35. Application for Certificate of Origin (42) 36. Certificate of Origin (38) * Number in parenthesis is the no. of data elements Regulatory Docs

UN/CEFACT Buy-Ship-Pay Model Supplier Intermediary Authorities Customer Buy Ship Pay Prepare for export Export Transport Prepare for import Import Commercial Procedures Establish contract Order goods

10 UN/CEFACT Buy-Ship-Pay Model Supplier Intermediary Authorities Customer Buy Ship Pay Prepare for export Export Transport Prepare for import Import Commercial Procedures Establish contract Order goods Advise on delivery Request payment Transport Procedures Establish transport contract Collect, transport and deliver goods Provide waybill, gods receipt and status reports Regulatory Procedures Obtain export/import licenses, etc. Provide customs declaration Provide cargo declaration Apply trade security procedures Clear goods for import/export Financial Procedures Provide credit rating Provide insurance Provide credit Execute payment Issue statements Source: UN/CEFACT Recommendation No. 18 UN/CEFACT: the United Nations Centre for Trade Facilitation and Electronic Business 10

11 Use Case Diagram of Rice Export 3) Ship 3.1) Obtain Export License Ministry of Commerce (Directorate of Trade) Private Bank MCB Customs department ICD 3.2) Arrange Shipping (maritime) Feeder line &/or Box operator 1) Buy 1.1) Conclude Sales Contract 3.3) Arrange Pre-Inspection And Fumigation Transporter 3 rd party inspector Importer 2) Pay Exporter (or representative) 3.4) Declare CusDec 2 3.5) Terminal Procedure and Customs Exam at Port Customs broker 2.1) Make Advance Payment Port Customs Importer s bank Exporter s bank 3.6) Arrange Berthing of Vessel Ship UNNExT Business Process Analysis Guide for the Simplification of Trade Procedures 3.7) Arrange Port Clearance for Vessel Departure 3.8) Prepare Shipping Documents Ministry of Finance (Revenue Department) UMFCCI SAD DMA MPA

Transporter 3.5.2 Transporter delivers loaded container to terminal Port terminal 3.5.2 Review documents Exporter (or representative) 3.5.1 Request for delivery of loaded container 3.5.1 Prepare for security card Shipping Instructions National Registration Card 3.

12 Transporter Transporter delivers loaded container to terminal Port terminal Review documents Exporter (or representative) Request for delivery of loaded container Prepare for security card Shipping Instructions National Registration Card Request for fumigation 3.5.1Request examination of goods Sealed case file from Customs headoffice (ED, EL, Invoice, Packing List) (Original) 3 rd party inspector Receive the request for fumigation Customs department (at port) Receive documents Register case file Check Export License & duty Shipping Agency Department (SAD) Issue security card Receive terminal charges Review documents and issue gate pass Weigh container at export container yard Verify documents and Customs seal Complete challen as in shipping instructions for terminal charges Make payment Terminal charges; (lift on/lift off; cargo inspection & labor fees) Prepare to obtain gate pass for container Paid challen 103 challen Shipping instructions (Copy) Equipment interchange receipt Prepare documents for terminal operation procedure Fumigate the container(s) after Customs Examination Arrange X-ray of cargo (random selection) Assign Customs exam group (Group A to J) Found correct Examination of goods Found Incorrect Case file is sent back to the Customs department Sealed container Transport container to the container terminal Load the cargo onto the vessel 103 challen Prepare cargo loading list based on mate receipt

13 Trade Facilitation: at-the-border, behind-the-border and beyond-the-border issues Day days days 1 day 4 1 day 5 1 day day 9 3 days days 1 14 days Buy - Conclude sales contract and trade terms 2. Have product sampled and technically examined 3. Arrange transport 4. Prepare export permit 5. Apply for cargo insurance 6. Prepare and submit customs declaration 7. Stuff container and transfer it to port of departure 8. Clear goods through customs 9. Handle container at terminal and stow it on vessel 10. Prepare documents required by importer as listed in L/C 11. Pay - Claim payment of goods Process 13

14 BPA: the first step to be taken before introducing other trade facilitation measures There is no one-size-fits-all solution. It is imperative to apply BPA for analysis of the uniqueness of each trade process and procedure 5 6 e-single Window and paperless trading Cross Border Data Exchange 4 National Data Harmonization 3 Document Simplification & Standardization 2 Process Simplification and Harmonization 1 Business Process Analysis for Trade Facilitation

15 Completed studies in selected LLDCs in Central Asia BPA studies were carried out for selected products along specific corridors From China to Kyrgyzstan; from Kyrgyzstan to Kazakhstan; and from Kazakhstan to Azerbaijan 15

16 A typical export process from China to Kyrgyzstan 16

17 Similar studies in South Asia including LLDCs Inception Workshop in Bangkok 2013 National workshop in Phuentsholing Bhutan 2014 National Workshop in Dhulikhel Nepal 2014 National Workshop in Dhaka Bangladesh

18 Ad-valorem trade costs (per cent) TF Monitoring at Macro-level ESCAP-World Bank Trade Costs Database LDCs LLDCs SIDs LDCs, LLDCs, SIDs Asia-Pacific East Asia-3 ESCAP-led joint United Nations regional Commissions survey on TF and paperless trade implementation 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 18

70/6) The second meeting of the Interim Intergovernmental Steering Group on Cross- Border Paperless Trade Facilitation held in

19 Framework Agreement on Facilitation of Crossborder Paperless Trade in Asia and the Pacific Legislative Enabling paperless trade (Res. 68/3) Regional Arrangement on cross-border paperless trade facilitation (Res. 70/6) The second meeting of the Interim Intergovernmental Steering Group on Cross- Border Paperless Trade Facilitation held in Bangkok on March 2016, with the participation of 31 ESCAP member States, finalized the text of the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific

20 Proposed activities/projects (1): Mapping and analysis of trade procedures along selected OBOR corridors Capacity building Government officials and business representatives in the participating countries have increased capacity to develop and implement appropriate trade facilitation measures. Database and study report to support evidence-based policy making A mapping of trade procedures and bottlenecks is available, along with baseline data to monitor future progress.. Action plans Action plans are available for trade facilitation and paperless trade implementation in OBOR Trade procedures along the selected OBOR corridors are analyzed by country teams

Proposed activities/projects (2): Pilot cross-border electronic exchange of trade-related data among OBOR countries Model for crossborder electronic exchange of selected trade-related data A

21 Proposed activities/projects (2): Pilot cross-border electronic exchange of trade-related data among OBOR countries Model for crossborder electronic exchange of selected trade-related data A preferred model for cross-border electronic exchange of selected trade-related data and documents among the selected OBOR countries has been identified, including list of technical and legal requirements to be harmonized. Analytical report A report highlighting the lessons learned from the pilot exchanges and describing the relevant technical and legal models is made available to other OBOR countries and the Parties to the new Framework Agreement. A pilot project to electronically exchange selected trade data and documents across border is implemented among interested OBOR countries

Kazakhstan to Azerbaijan Trade Poverty reduction Logistics Inclusive development

22 SDGs BPA studies were carried out for selected products along specific corridors Investment From China to Kyrgyzstan; from Kyrgyzstan to Kazakhstan; and from Kazakhstan to Azerbaijan Trade Poverty reduction Logistics Inclusive development employment A journey of a thousand miles begins with a single step: Trade Facilitation 22

UNNExT Workshop on Implementation of e-sps and Automation for Agriculture Trade Facilitation. 1-3 November 2016 Bangkok, Thailand

UNNExT Workshop on Implementation of e-sps and Automation for Agriculture Trade Facilitation 1-3 November 2016 Bangkok, Thailand Business Process Analysis (BPA) Somnuk Keretho, PhD UNNExT Expert 2 Kasetsart