Trade and Transportation Audit in Sri Lanka

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1 Trade and Transportation Audit in Sri Lanka By Suwendrani Jayaratne and Dharshani Premaratne Institute of Policy Studies of Sri Lanka 20 January

2 Outline 1. Background to the Study 2. Rationale and Objectives 3. Methodology 4. Initial Findings 5. Policy Implications 2

3 Background TF an important trade policy tool TF important to SA due to high costs of doing business SL s trade logistics performance commendable in comparison to other SA n countries 3

Background contd. TAB ranking: 85 (2014) to 69 (2015) SL SA Days to Export 16 33.

4 Background contd. TAB ranking: 85 (2014) to 69 (2015) SL SA Days to Export Days to Import Cost to Export US$ 560 US$ Cost to Import US$ 690 US$

5 Background contd. Country Burden of Customs Procedures Quality of Overall Infrastructure Quality of Port Infrastructure Quality of Airport Infrastructure Rank/144 Score Rank/144 Score Rank/144 Score Rank/144 Score Sri Lanka India Bangladesh Pakistan Nepal Singapore Sri Lanka s trade with SA in the past 5 years - low Further facilitation of trade key for SL s expansion of trade, FDI, intra-regional trade & inclusive growth 5

6 Rationale & Objectives 6

7 Methodology Survey stakeholders (Large: 50; Medium: 39; Small 29) 6 Key-Informant Interviews 2 Border Points (i) Colombo Port (ii) Bandaranaike Airport Category Border Point Total Colombo Port Bandaranaike International Airport Freight Forwarder/CHA Exporters Importers Shipping Lines Road Carriers Airline Operators Board of Investment SL Freight Forwarder s Association Ceylon Shipper Council Total

8 Methodology cont. Product Selection: HS 4-digit level Volume of trade Availability of at least 20 companies that export/import relevant product to/from SA Agriculture Non-Agriculture Export Pepper, pepper & capsicum (HS: 0904) Insulated wire/cable (HS: 8544) Import Cane or beet sugar & chemically pure sucrose, in solid form (HS: 1701) Cements, portland, aluminous, slag, super sulfate & similar hydraulic (HS: 2523) Due to low response rates, additional exporters/importers were drawn from the same Chapter 8

9 Initial Findings 9

10 Publication of Trade Related Rules & Regulations 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Availability of information on the website Import Export Procedures Custom Clearance Procedures Applicable Custom Duties Applicable Fees and Charges Average Release Time Average Clearance Time Changes in Regulations Yes No Not Applicable 100% 80% 60% 40% 20% 0% Import Export Procedures 32 Effectiveness of information on the website Custom Applicable Applicable Fees Average Average Clearance Custom Duties and Charges Release Time Clearance Time Procedures Very Low Low Average High Very High Changes in Regulations 10

11 Inquiry Point 60% (73/121) Aware of an inquiry point at the Customs Major concerns Difficulty of accessing it (i.e. calls not being answered) Inability & inefficiency of this service to address their queries. 11

12 Coordination between Border Management Agencies 12

13 Export Documents Sea Cargo CUSDEC Commercial Invoice Packing List Certificate or Origin Air Cargo CUSDEC Commercial Invoice Packing List Certificate of Origin Minimum documents between 3-4 Maximum documents 5 No product specific document requirements for the identified products of the study 38% - No. of required signatures are 1 41% - No. of required signatures are % - Customs do not accept copies of documents which are not authenticated 13

14 Import Documents Sea Cargo CUSDEC Commercial Invoice Packing List Certificate or Origin Bill of Lading Air Cargo CUSDEC Commercial Invoice Packing List Certificate of Origin Airway Bill Document requirements - between 4-5 documents (41/78) 14

15 Automation of Export/Import Procedures 15

16 Advance Rulings 44% - Aware of the facility of advance rulings issued by the Customs 20% - Actually used the service 56% - unaware of it or said no for the availability of the service Lack of awareness of the advance ruling facility available in the country. Customs - Possible to obtain advance rulings of classification (HS Code) from the Commodity Classification Division, prior to importing/exporting. Advance rulings valid for 1 year 16

17 Pre-arrival Processing of Import/Export Consignments 79% - It is either not available in the country or that they are unaware of it. 21% - It is available. According to the Customs pre-arrival processing is available only for a few selected perishable products Legal amendments to Customs Ordinance required to extend this to all goods. 17

18 Risk/Threat Assessment Technique & Physical Inspection of Inward Goods by Customs Recent Customs Initiative: Green Channel September 2013 Available for 240 low-risk consignees 43% - More than 50% of their consignments are subject to physical inspection 21% - Less than 5% of their consignments are subject to physical verification. 18

19 Post Clearance Audit 53% - Customs exercise post clearance audits Majority said that it is not a regular practice carried out by the Customs. Customs: 24 carried out in 2012 (SL Customs Annual Report 2012). Majority rated the effectiveness of the post clearance audit to be average. 19

20 Single Window System 95% - SL does not have a Single Window Except for the Tea Board, RMV, Ministry of Finance, Import/export Control Dep many other relevant organizations are not linked to the system. Automation of systems & documentation of export process has been carried out to a substantial extent Recent Customs initiative - One Stop Shop at Customs: Cosmetics, Devices & Drugs Regulatory Authority (CDDA) Sri Lanka Standards Institution (SLSI) Import and Export Control Department Department of Animal Production and Health Department of Agriculture (National Plant Quarantine) 20

21 Availability of a Non-Judiciary Review/Appeal Procedure Availability of a Non-Judicial Review/Appeal Procedure Majority (95/121): no nonjudiciary review/appeal procedure or did not know about one. 19% 21% Yes No Review process within the Customs: Department level DG (responds within 90 days) 60% Do not know Minister of the Ministry of Finance & Planning Tax Appeal Commission yet to be established 21

22 Average Time Taken to Clear Outward Goods Colombo Port: 1 day-3.5 days Majority 1 day (38/55) SLPA - consignment can be cleared from the terminal within ½ hr after which normal customs checks/procedures follow BIA 1 day 3 days Majority 1 day (25/30) 22

Average Days taken to Clear Inward Goods

days Majority: 83% (19/23) clear goods in 1

23 Average Days taken to Clear Inward Goods Colombo Port: 1 day 5 days Majority: 3 days (25/76) 93% (71/76) clear their goods within the demurrage free time period BIA: 1 day 3 days Majority: 83% (19/23) clear goods in 1 day Customs Efficiency Port Average Airport - Good 23

24 Trade Related Infrastructure & Services 24

Quality of Infrastructure Facilities Airport Good (57%) Port Average (43%) Condition of warehouses, congestion within the ports, out dated equipment

25 Quality of Infrastructure Facilities Airport Good (57%) Port Average (43%) Condition of warehouses, congestion within the ports, out dated equipment Roads Good (41%) Railway Very low/low (72%) Warehouses Average Lack of adequate facilities i.e. lack of proper storage racking systems, inadequate security 25

26 Efficiency: Services Providers High: Banking, Insurance, Maritime Transport Services & FF Average: Road Transport Services, Health/SPS/Quarantine Services, Quality/standard inspection services i.e. Undue delays and inadequate capacities of testing laboratories 26

27 Cost of Logistics Services Road Transport: Low (62/115) Airport Charges: Average Port Charges: Average Maritime Transport Charges: Average FF/Customs Charges: Average 27

28 Priority Areas of Trade Facilitation 28

29 Publication & Administration of Policies Related to Trade Issues Both inquiry point & publication of rules - high priority Current publication of trade related rules/regulations not comprehensive, adequate or effective. Inquiry Point - dissatisfaction of services due to inefficiencies & access issues 29

30 Rules & Procedures for Imports & Exports 30

Trade Related Infrastructure & Services High priority areas: quality/efficiency of ports, roads, quality of warehouses & need to reduce loss/damage of

31 Trade Related Infrastructure & Services High priority areas: quality/efficiency of ports, roads, quality of warehouses & need to reduce loss/damage of cargo & cost of using logistics services While acknowledging recent developments of roads, respondents identified congestion on roads to be a major drawback 31

32 Use of ICT for Exports & Imports 107/121 highlighted the need for a single window in the country Minimize human intervention in the trading process Export process almost entirely automated. Import process, selection of cargo for physical examination carried out by customs officials. 32

33 Policy Recommendations Country Level Set up/strengthen Inquiry Points Reducing Irregular Payments and Payoffs Changing Mindset & Culture at Key Trade Related Agencies Establish an Independent Non-Judicial Review/Appeal Procedure for Customs & Tariff Regulatory Matters Improve Inadequate Warehouse Facilities Extend Pre-arrival Processing to More Products Upgrading of facilities at the Colombo Port Need for a Single Window & Full Automation of Systems 33

34 Policy Recommendations Regional Level Harmonization of Standards & Reciprocal Recognition of Tests & Certification Mutual Recognition Agreement with India on Standard Testing & Certification 34

35 Thank you! 35

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