The Survey on Enhancement for Fast Lane System in Mekong region countries

Transcription

1 The Survey on Enhancement for Fast Lane System in Mekong region countries March Nittsu research Institute and Consulting, Inc.

2 INDEX CHAPTER 1 THE PURPOSE AND METHOD OF THIS SURVEY PURPOSE SURVEY METHOD... 1 CHAPTER 2 INITIATIVES TO SIMPLIFY CUSTOMS PROCEDURES IN ALL BODIES AND INTRODUCE A FAST LANE...4 SECTION 1 INITIATIVES BY THE WORLD CUSTOMS ORGANIZATION (WCO) WCO ROCB Content of Cooperation Implemented for Mekong Region Customs... 6 SECTION 2 INITIATIVES BY THE ASIAN DEVELOPMENT BANK (ADB) Details of Efforts for Realization of ADB s CBTA Outline of Cooperation Planned Henceforth SECTION 3 INITIATIVES BY THE JAPANESE GOVERNMENT AND GOVERNMENT BODIES Overview of Cooperation by JICA Overview of Initiatives by the Customs and Tariff Bureau, Ministry of Finance Outline of Cooperation Planned for the Future CHAPTER 3 INITIATIVES FOR FACILITATION OF COUNTRIES CUSTOMS SYSTEMS...19 SECTION 1 DIRECTION FOR IMPROVEMENT OF CUSTOMS PROCEDURE SECTION 2 THAILAND Export Customs procedure Import Customs procedure Preferential System AEO System SECTION 3 VIETNAM Export Customs procedure Import Customs procedure Preferential Treatment System AEO System SECTION 4 LAOS Export Customs Clearance Import Customs Clearance Preferential Treatment System SECTION 5 CAMBODIA Import and Export Customs Clearance... 35

3 2. Preferential System SECTION 6 CONCLUSION CHAPTER 4 DEVELOPMENT PROCESS OF EAST-WEST ECONOMIC CORRIDOR...38 SECTION 1 EAST-WEST ECONOMIC CORRIDOR Purpose Transit procedure at the time the route opened Border facilities at the time the route opened Transportation time at the time the route opened Current situation Issues to be addressed concerning East-West Economic Corridor SECTION 2 SOUTHERN ECONOMIC CORRIDOR CHAPTER 5 FACT-FINDING SURVEY ON EAST-WEST ECONOMIC CORRIDOR...51 SECTION 1 PURPOSE SECTION 2 PROCEDURE Eastbound service Westbound service SECTION 3 SERVICE TIME LINE SECTION 4 CUSTOMS CLEARANCE IN VIETNAM SECTION 5 TRANSIT Customs clearance procedure Border Facilities SECTION 6 CUSTOMS CLEARANCE IN THAILAND CHAPTER 6 PROBLEMS AND SOLUTIONS FOR INTRODUCING THE FAST LANE SYSTEM 67 SECTION 1 SUMMARY OF PROBLEMS OF THE EAST-WEST CORRIDOR ROUTE SECTION 2 IMPROVEMENT MEASURES Time reduction in customs clearance procedure in Vietnam Re-crossing the border by a Vietnamese vehicle on the same day SECTION 3 INTRODUCTION OF FAST LANE SYSTEM FOR TRANSPORTATION COMPANIES Section 4 Conditions for Authorizing Fast Lane System to Transportation Companies CHAPTER 7 PROJECT AND ROAD MAP...81 SECTION 1 TASK SECTION 2 TASK SECTION 3 TASK

4 CHAPTER 8: ANALYSIS OF ECONOMIC EFFECT OF FAST LANE SYSTEM...87 SECTION 1 PRECONDITIONS OF CALCULATING THE ECONOMIC EFFECT Scope of the Economic Effect Analysis Definition of Opportunity Gain-specific Reduction in Time Definition of Formulas for Calculating Economic Effect Preconditions SECTION 2 RESULTS OF ECONOMIC EFFECT CALCULATION Results of Economic Effect Calculation Related to Export from Thailand to Vietnam Results of Economic Effect Calculation Related to Export from Vietnam to Thailand Other Effects Summary of Economic Effect Analysis related to Introduction of the Fast Lane System

5 Chapter 1 The purpose and method of this survey 1. Purpose Mekong region is increasing its economic presence in the global economy. The indusial development in this region has been accelerating in recent years, which is effected by current boosting China Risk and regional potential. In order achieve further development, not only hard infrastructure but also software infrastructure development is essential for realizing trade facilitation. The trade and logistics facilitation come to be a important issue because regional integration will progressing toward at the year of 2015 targeting regional duty exemption. Until then, it is critical to reduce cost and transit time in regional cross border transportation. This expects to promote economic corridor in Mekong regions Since it is generally regarded that long customs procedural time is the bottle neck for smooth cross border transportation, the facilitation of customs procedure should be taken it into account. Although fast lane system is regarded one of the most effective solution for this matter, it is unfortunate that its introduction does not necessarily start in this region. Japanese government promises to promote and support for regional introduction of fast lane system at the MJ-CI cooperation initiative action plan(2010,oct) Thus, it is necessary to investigate how to solve technical problems and deployment for promoting fast lane introduction. 2. Survey method 1Clarifying customs procedure facilitation Firstly, study team would like to clarify the tackles of custom facilitation programs oriented/supported by international and related organization. This is because adopting a fast lane system certainly aims on cutting customs procedural time. Secondly, it focused on clarifying user s appreciation for customs process, AEO system and other related preferential treatment system from the point of good practice customers/ customs brokers. This is because a large gap between policy and reality is likely to result in the user s complains for the ordinal public announcement emphasizing that customs procedures facilitated in the line with global standard. So, the viewpoint from private sector seems important and useful. 2Survey for East West Economic Corridor transport service Survey team selects the East West Economic Corridor as the target route for adopting fast lane system. This results from the reason that a great effect is predicable by introducing fast lane system and that calculating transport time is available from logistics providers. The site survey 1

6 aims on identifying the bottleneck for hindering smooth/speedy cross border transportation. 3Solution Based on the result of site survey, survey team focuses on the identifying solutions for smooth cross border transportation in accordance with adopting fast lane system. In order to make fast lane system practical, detailed program and implementation schedule are taken it into account. Simultaneously, the degree of time reduction effect on EWEC transport will also be calculated when fast lane system is fully implemented. 4Economic benefit calculation Finally, it is planed to calculate economic benefit by adopting fast lane system. Fig. 1-1: Survey chart 2

7 Table 1-1: MJ-CI action plan (Trade facilitation and Logistic division) 3

8 Chapter 2 Initiatives to Simplify Customs Procedures in all Bodies and Introduce a Fast Lane International bodies such as the Asian Development Bank (ADB) and the World Customs Organization (WCO) as well as national governments including Japan are implementing, or have plans to implement, initiatives for system-related support to facilitate the flow of goods in the Mekong region, which include development of a system to reduce the time required for customs clearance when crossing borders as well as human resources development. Based on the Mekong-Japan Economic Industrial Cooperation Initiative (MJ-CI) prepared at the Japan-Mekong economic ministers meeting in August 2010, in order to support the introduction of a fast lane in countries in the Mekong and to contribute to facilitation of the flow of goods in this region, we conducted a study on what sorts of initiatives are being planned or implemented by other bodies to facilitate the flow of goods, and particularly to introduce a fast lane and to facilitate the procedures for cross-border customs which are closely connected with the realization of this system. Section 1 Initiatives by the World Customs Organization (WCO) 1.WCO ROCB The WCO is an international body founded in 1952 with the aim of contributing to the development of international trade by harmonizing and standardizing various national customs systems through international cooperation among tax authorities. Japan became a member of the WCO in The WCO engages in diverse activities, including the preparation of treaties and standards, but among these activities, it is notably engaging in an initiative to boost customs capacity through capacity building in the Asia-Pacific region by establishing a Regional Office for Capacity Building Asia Pacific (ROCB AP) in Bangkok, Thailand, in Fig. 2-1: Main Activities of WCO ROCB Promotion of a Framework of Standards to Secure and Facilitate Global Trade (SAFE) Implementation of technological cooperation on customs Strengthening of cooperation with donor bodies Studies and research Dispatch of missions to diagnose operations, analysis of gaps between international standards and the current state plus recommendations for improvement, and provision of support for preparation of action plans Holding of seminars and workshops on customs technology, such as customs tax classification, customs tax evaluation, and risk management Dispatch of experts to participate in technological support implemented by the World Bank and ADB Study and analysis of best practices The ROCB AP has jurisdiction over 33 countries and regions in the Asia-Pacific region, and among these in particular, it is conducting cooperative projects to boost customs capacity in least-developed countries and developing countries where systems and procedures are not yet developed, such as the Democratic Republic of Timor-Leste, Afghanistan, and Bangladesh. 4

9 APEC The ROCB AP s capacity building activities cover not only guidance for the purpose of boosting the human resources capacity of customs staff, but also include reforms in the overall system, such as strengthening of organizational power through structural reform, digitalization of customs procedures, and introduction of equipment for x-ray inspection of containers. Table 2.2 shows the current state of initiatives in the 33 countries and regions under the jurisdiction of the ROCB AP for membership in the International Convention on the Harmonized Commodity Description and Coding System (HS Convention), the AEO system, and actualization of a single window system. Country Table 2-2: Status of and Cooperation Undertaken by the 33 Countries and Regions under Jurisdiction of the WCO ROCB AP Ratification of revised Kyoto Convention Membership in HS Convention Fulfillment of HS2007 Framework of Standards to Secure and Facilitate Global Trade AEO System Single Window Implemented 1 Australia Brunei 3 China Hong Kong 5 Indonesia Japan South Korea Malaysia New Zealand Papua New Guinea 11 Philippines Singapore Thailand Vietnam Afghanistan 16 Bangladesh Bhutan Cambodia Fiji Indonesia Iran Laos Macao (China) 24 Maldives Mongolia Myanmar Nepal Pakistan Samoa 30 Sri Lanka East Timor 32 Tonga 33 Vanuatu : Implementation complete, :Under construction (in process) Shaded sections indicate cooperation from WCOROCB AP. Prepared based on WCO ASIA PACIFIC REGION REGIONAL STRATEGIC PLAN

10 2.Content of Cooperation Implemented for Mekong Region Customs Currently, there is no cooperative project being implemented or scheduled for implementation exclusively in the Mekong region, but there are many cooperative projects underway for system-building that focus on ASEAN overall. The priority areas mentioned in the WCO s regional strategic plan for the Asia-Pacific region are broadly divided into four areas, as follow. The WCO Regional Project Office and governments of member countries act as coordinators and administer the various cooperation projects. Table 2-3: Summary of Cooperation for Priority Implementation in the Regional Strategy for the WCO Asia-Pacific Region Summary of Main Cooperation Area Coordinator Topic Scheduled for Implementation in Ensuring facilitation and security of trade Australia, South Korea Ensuring of trade security in accordance with WCO standards, particularly the Framework of Standards to Secure and Facilitate Global Trade (SAFE) Implement cooperation to increase signatory countries in SAFE, establish and launch of AEO system, and realize AEO mutual certification Facilitated trade in accordance with WCO standards, particularly the revised Kyoto Convention Strengthening of risk management Increase signatory countries in the revised Kyoto Convention, increase countries prepared for HS2012, establish prior instruction system, establish self-certification for Rule of Origin, implement cooperation for standardization and spread of WCO data model 3.0 Prepare risk management tools (guidelines, etc.), hold workshops, prepare national risk management database, etc. 2.Compliance and implementation China, RILO AP (WCO Asia-Pacific Regional Information Study Liaison Office) Building of an international customs network (Customs-Customs, Customs-Private Sector) Realization of effective CBM (Coordinated Border Management) Cooperation with other bodies to develop and unroll a coherent approach to trade promotion and security assurance Improvement of flow related to informational studies and quality of information exchanged Implementation of regional operations (Feasibility study in progress) Based on initiatives to strengthen international borders, establish consulting groups for border control bodies, and attend CBM regional meetings; based on UN Recommendation 33, introduce a national single window (NSW) Participate in WTO trade facilitation negotiations, strengthen collaboration with trade bodies to improve opportunities to participate in the WTO negotiation process on customs, confirm the conditions surrounding the approach of regional bodies such as ASEAN and APEC, etc. Implement input into the CEN (Customs Enforcement Network), establish a system for information exchange with Customs and other enforcement bodies Comprehend needs related to informational studies and enforcement, perform regional operations, invite others to participate in such operations, etc. 6

11 Strengthening of realization of initiatives related to WCO compliance Spread of tools for WCO compliance Implement measures for illegal products, analyze current conditions, trends, and countermeasures, etc., offer information related to the issue of intellectual property rights, and take steps to raise consciousness Input to CEN of data related to confiscated goods, advocate utilization of CEN 3.Capacity building Japan, ROCB AP Strengthening of cooperative relations between member countries, regional bodies, and donor countries Utilization of available resources for capacity building of regional members Improvement of quality of capacity building activities by comprehending and reflecting member countries needs Development and presentation of capacity building programs for the implementation of WCO rules and legal documents, etc. Share experiences related to capacity building, promote cooperative projects between international and local donor bodies Identify available resources, build a framework for utilization of local experts, utilize e-learning, promote cooperation with local capacity building to which advanced countries contribute Comprehend member countries needs through surveys and consulting, develop and implement capacity building in a form that considers such needs, implement evaluations jointly with the WCO Secretariat, feedback the results Implement capacity building for trade promotion and security assurance, capacity building for compliance and enforcement, and capacity building for informational studies Initiatives to improve the ethical standards of member countries Develop and implement leadership management training programs, implement integrity action plans 4.Study and analysis New Zealand, Thailand Evaluation of the outcome of WCO committee meetings Comprehend the state of implementation of WCO rules in each country and analyze the obstacles Further improvement of performance and activities by the regional liaison office Ongoing implementation of advanced initiatives by the WCO Input the needs of member countries revealed by needs studies to the regional liaison office, reflect the activities of the regional liaison office in regional strategy Participate in debate on The Shape of Customs in the 21 st Century, prepare Green Customs Action Plan Sharing of best practices among members Share good practices among regions, promote utilization of WCO best practices guidelines, utilize website, prepare English-language sites for all member country Customs authorities Cooperative projects are being widely implemented with the aim of resolving issues shared with the WCO as mentioned above, such as spread and expansion of the WCO standardized data model (format), and standardization and improvement of customs rules for the entire globe, including risk management and unification of HS codes. When selecting cooperation themes for countries in the ASEAN region, the selection has been made based on the demands and concerns of the governments of the ASEAN countries who receive the support. Because the themes of the demands 7

12 and requests of ASEAN countries are, specifically, establishment of an AEO system, development of systems for building a risk management structure, guidance on actual procedures and processes for risk management, and standardization of the HS codes, projects focused on these themes are being implemented. As cooperation that is deeply correlated with the fast lane system, a project is being implemented for establishment an AEO system and capacity building for risk management capacity, with the aim of achieving both trade facilitation and security assurance. WCO is not dispatching experts for each ASEAN country in these fields of cooperation, but seminars and workshops are being held and guidelines are being prepared for ASEAN overall. Section 2 Initiatives by the Asian Development Bank (ADB) 1.Details of Efforts for Realization of ADB s CBTA Following the ADB s holding of an economic development program for six countries in the GMS (Great Mekong Sub-region) in 1992, it has conducted various types of cooperation for development of the Mekong region. In particular, after the signing 1 of the Cross-Border Transport Agreement (CBTA) in the Mekong Region in 1999, technological cooperation was conducted on development of systems for distribution in order to actualize the policy for facilitation of cross-border transport advocated in the agreement Within this, three projects were implemented as direct cooperation projects with the aim of actualizing CBTA, namely Implementing the Agreement for Facilitation of the Cross-Border Transport of Goods and People in the Greater Mekong Sub region Phase 1 (project number: 36682), Implementation of the GMS Cross-Border Transport Agreement Phase 2 (project number: 37523), and Enhancing Transport and Trade Facilitation in GMS (project number 40437). (1) Implementing the Agreement for Facilitation of the Cross-Border Transport of Goods and People in the Greater Mekong Sub-region Phase 1 (project number: 36682) Funds provided Special Fund for Technological Cooperation (ADB) US$800,000 Status Completed December 2006 Outline of Cooperation 2 1 A CBTA (trial) was signed among the three countries of Thailand, Vietnam, and Laos in 1999, and subsequently, Cambodia began participation in 2001, China in 2002, and Myanmar in ADB Technical Assistance Completion Report, Implementing the Agreement for Facilitation of the Cross-Border Transport of Goods and People in the Greater Mekong Sub-region Phase 1, Project 8

13 Assistance with negotiations related to preparation of important items in the CBTA annexes and protocols, promotion of the signing, completion of preparation of all 20 annexes and protocols, and completion of signing of 16 of them. Assistance in holding the 1 st CBTA Joint Committee Meeting of GMS transport minister-level and deputy minister-level attendees (December 2004, Vientiane) Implementation of study on fare system for passing transit jointly with UNESCAP; contribution to preparation of CBTA protocol No. 2 Implementation of capacity building for government staff in GMS countries for realization of CBTA on national borders through cooperation with Chinese customs authorities and the International Cooperation Bureau Holding of workshop with six GMS member countries on the establishment of a security body and discussion on the GMS transit method Provision of a CBTA Implementation Operation Manual on the national borders at Laobao and Densavan (2)Implementation of the GMS Cross Border Transport Agreement (project number: 37523) Funds provided Special Fund for Technological Cooperation (ADB) US$400,000 support) China Regional Cooperation and Poverty Reduction Fund US$400,000 Australia Technical Cooperation Fund US$1 million (additional Status In progress (completion scheduled for June 2011) Outline of Cooperation (Specifications and targets at time of plan preparation in March 2006) 3 a) Measures for CBTA implementation on national borders Standardization of forms and procedures, simplification, streamlining, and preparation of manuals (ensure consistency with regional agreements including WCO s related international agreements and ASEAN agreements) Information communication technology (ICT) for customs clearance prior to cargo arrival/specification of items demanded for management information system (MIS) Actualization of a single window based on ASEAN customs cooperation initiatives Provision of the minimum essential ICT equipment and software to cross-border customs for establishment of an electronic customs system Recommendation for research and implementation on modern cross-border management systems. Number: ADB Technical Assistance Report, Implementation of the Greater Mekong Sub-region Cross-Border Transport Agreement, Project Number: 37523, March

14 Implementation of capacity building including special regional training and provision of manuals, guidelines, and procedures Verification of effective promotional strategies using before-and-after comparisons of reduction in cross-border customs clearance time as well as studies on cross-border-related indexes Monitoring of CBTA progress status and consistency, setting of deadlines, provision of advice regarding consistency to National Transport Facilitation Committees (NTFCs) and related bodies b) Preparation of and final decision on an agreement for CBTA implementation at time of a second cross-border clearance. Preparation of MOU draft related to bilateral CBTA action deadline at borders Holding of meetings for MOU negotiations and decisions Identification of demands for setting up an effective border control system and actualization of a single window and single inspection Monitoring of the conditions of MOU implementation and advice to NTFCs on consistency c)start of effective and sustainable CBTA Strengthening of organizational mechanisms of local bodies, such as the Ministerial Joint Committee (JC) and national bodies such as NTFCs Implementation of reviews of the structure of NTFCs, JC, and sub-communities and provision of advice to all management bodies Study of important unresolved issues in CBTA Ex-ante and ex-post comparative studies of benefits from improvement of cross-border transportation Spreading of information on start of CBTA Provision of secretariat functions for JC and NTFCs (3) Enhancing Transport and Trade Facilitation in GMS (project number: 40437) Funding Australia Technological Cooperation Fund US$250,000 Regional Cooperation/Integration Fund (ADB) US$1 million China Regional Cooperation/Poverty Reduction Fund US$500,000 Status In progress Overview of Cooperation (Specifications and targets at time of plan preparation in March 2008) 4 4 ADB Regional Technical Assistance Report, Enhancing Transport and Trade Facilitation in the 10

15 a)capacity building related to streamlining/strengthening of structural distribution/trade functions Holding of more than seven training sessions and workshops on customs clearance, sanitary and phytosanitary measures (SPS), distribution development, and CBTA with the participation of over 200 government and private experts b)strengthening of distribution functions (technological cooperation by dispatching experts) Preparation of a comprehensive plan for completion of ratification of all CBTA annexes and protocols by GMS countries Review of unresolved legal problems to prepare for realization of CBTA Support for advanced mutual cooperation building among customs authorities, including strategic reviews for introduction of a system based on risk management and a unified border control system Formation of a comprehensive capacity building plan for realization of CBTA c)control and prevention of infectious diseases (technological cooperation by dispatching experts) Risk management and mutual certification and support among research centers Verification of consistency between efforts by WTO and ASEAN and the legal framework which is necessary for risk avoidance and observation of laws by small and medium enterprises Implementation of training, with farm villages as the main targets in the initial stages d)business and distribution support (technological cooperation by dispatching experts) Boost efficiency of supply chain by promoting utilization of modern distribution practices and promoting government-private cooperation Support for preparing national distribution action plans for all GMS countries, with the focus on improvement of center efficiency, strengthening of the organization, and bottleneck regions Collaborate with GMS business forums, implement preliminary studies for proposing trade promotion policies, and simultaneously aim to strengthen functions for GMS business forums e)preparation of information platform for trade facilitation (technological cooperation by dispatching experts) Greater Mekong Sub-region, Project Number: 40437, March

16 Conducting of feasibility study to prepare an information platform with the aim of facilitating prevention of infectious diseases by improving information sharing among customs authorities, sanitation control and quarantine stations, and distributors 2.Outline of Cooperation Planned Henceforth Through assistance from the Australian government (AUSAID), a cooperation project (project number ) based on the GMS Regional Transport and Trade Promotion Action Plan was approved in November The plan is to implement multiple technical cooperation efforts as a package, investing a total of US$5.7 million over roughly six years, up to 2016, in support for distribution systems in the East-West Economic Corridor, the North-South Economic Corridor, and the Southern Economic Corridor. In this project, the plan is to implement the following technical cooperation, particularly as support for preparation of legal infrastructure for cross-border transportation. 5 Furthermore, this 6-year project is to be divided into three sub-project periods. Sub-project 1 will be from 2010 to 2012 with funding assistance of US$2 million; sub-project 2 will be from 2012 to 2014; sub-project 3 will be from 2014 to 2016, and sub-projects 2 and 3 will receive funding assistance of US$1.85 million each. 5 Extract from ADB Proposed Technical Assistance for Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Sub-region (Nov. 2010). 12

17 Table 2-4: Main Content of Cooperation Project (project number ) based on GMS Regional Transport and Trade Promotion Action Plan Cooperation Item Expansion and streamlining of reciprocal access by vehicles Improvement of Customs Transit System (CTS) and improvement of border-crossing procedures Establishment of GMS Freight Transporters Association (GMS FRETA) Strengthening of land transport industry in Cambodia and Laos Coordinated Border Management (CBM) Current Understanding and Issues Areas which allow reciprocal access are limited. Even when the agreements themselves have been approved, they are not implemented. Further expansion is necessary. Still in the process of building a system. There exist issues related to design problems in the CTS system, including a realizable security system, and implementation of that system. To facilitate trade and transport through participation by private companies, the GMS business forum proposes the establishment of a GMS Freight Transporters Association (GMS FRETA). As practical initiatives for realization of CBTA, GMS FRETA is expected to (1) establish standards for preferred and confer certification, (2) extend fast lane treatment to association members at borders, (3)offer investment matching opportunities to local companies, and (4) provide information to distributors. The role of international institutions in conducting border control is limited. There is no effective information-sharing system. Goal of Cooperation To expand and streamline agreement on reciprocal vehicle access by holding bilateral and trilateral talks and by supporting MOU negotiations. In the long term, the aim is to build a cross-border transport network among six countries. Initiatives for improvements in route limitations, the insurance system for coping with crossing borders, and the security system. For the establishment of GMS FRETA, to provide support for holding promotional meetings and preparation of a business plan. As a precondition for the establishment of CTS, we aim to establish GMS FRETA in the sub-project period of To aim to strengthen the system and facilitate fund access for the improvement of vehicles and building of cooperative relationships among the transport industries and trade businesses in Cambodia and Laos. To conduct capacity building related to border management, such as fortifying the connections among customs authorities, quarantine and disease control stations, and related bodies in different GMS countries. We aim to realize modern border control through cooperation among different countries customs authorities, putting online the registered customs and border customs, and standardization of data forms. The planned items that are related to building a fast lane are the establishment of GMS FRETA, preparation of certification standards for preferred transporters and screening of them by GMS FRETA, and provision of a fast lane to preferred transporters when they are clearing border customs. ADB plans to provide support for the establishment of GMS FRETA during 2014 to 2016, the third sub-project period. In addition to the above-mentioned cooperation program through the assistance of the Australian government, it is anticipated that a cooperation program will be undertaken in the future for economic development and facilitation of trade in the Asian region, with funding provided by the 13

18 Japanese government and implementation managed by the ADB. At the 17 th APEC Finance Ministers Meeting held in Kyoto in November 2010, Japanese Finance Minister Yoshihiko Noda announced that Japan would provide assistance of US$25 million through the ADB to facilitate prevention of infectious diseases, such as by accelerating customs procedures and evaluating customs tax in accordance with international standards. The specific content of the cooperation program has not been disclosed, but in his announcement, Finance Minister Noda mentioned that, when the cooperation is implemented, a program will be drawn up to utilize the expertise of various bodies in cooperation with WCO and ADB and to actualize an action plan for trade facilitation. Section 3 Initiatives by the Japanese Government and Government Bodies 1.Overview of Cooperation by JICA There were three projects, as shown below, implemented by JICA in 2010 that were related to improvement soft infrastructure for distribution in the Mekong region. The three countries targeted were Thailand, Cambodia, and Vietnam, and cooperation such as dispatching individual experts was not conducted with Laos and Myanmar. (1)Customs Risk Management Project in the Mekong Region (Thailand, Cambodia, and Vietnam) Bodies in Partner Countries Royal Thai Customs, Cambodia s General Department of Customs and Excise, and General Department of Vietnam Customs Cooperating Body in Japan Customs and Tariff Bureau, Ministry of Finance Period February 2008 March 2011 Overview of Cooperation In addition to dispatching to Bangkok, Thailand, three long-term experts in customs administration, risk management, and operations coordination/training with the aim of strengthening the risk management capacity of customs in the target countries, short-term experts are also being dispatched as appropriate in fields such as customs screening standards and customs clearance systems. Preparation of an action plan related to risk management, preparation of an implementation system at the central level and in regional model areas, and development of a risk management information database are being carried out. 14

19 (2)Instructor Training Project for Modernization of Customs Administration (Vietnam) Body in Partner Country General Department of Vietnam Customs Cooperating Body in Japan Customs and Tariff Bureau, Ministry of Finance Period September 2009 September In , the Project to Strengthen the Training System to Boost Capabilities of Customs Administration was implemented, and this project is being implemented in the same flow of activity. Overview of Cooperation In addition to dispatching two long-term experts in the fields of customs administration, and operations coordination/customs administration services, short-term experts are being dispatched as appropriate, at a pace of seven persons per year for three years, in the fields of training management, updating of training materials for customs evaluation and HS classification, support for creating a collection of case studies, support for carrying out instruction in advance, and x-ray image analysis. The project is providing suggestions to improve training management for customs training centers, customs tax evaluation at major regional customs offices, collection and analysis of case studies of HS classifications, etc., preparation of a system for sharing case studies, development of training materials including a help desk and advance training, training implementation, strengthening of cooperative relationship with customs administration service users, and summarization of improvement plans for issues in customs administration services. (3)Dispatch of Individual Experts for Strengthening Customs Risk Management (Cambodia) Body in Partner Country Cambodia s General Department of Customs and Excise Cooperating Body in Japan Customs and Tariff Bureau, Ministry of Finance Period July 2009 July 2011 Overview of Cooperation As the counterpart of Cambodia s General Department of Customs and Excise, Japan mainly supports the fields of HS classification (customs tax rate table or imported cargo) and ex-post studies (studies to confirm transaction documents to check whether there are unfair prices following import clearance). Furthermore, because this is the first trial of an ex-post study in Cambodia, we first conduct technical guidance by implementing educational activities regarding the system itself and pilot ex-post studies. 15

20 2.Overview of Initiatives by the Customs and Tariff Bureau, Ministry of Finance The Customs and Tariff Bureau of the Ministry of Finance is carrying out various initiatives for trade facilitation in the Asia-Pacific region, based on the 16-point common action plan for the purpose of harmonizing and simplifying customs procedures stipulated by the Sub-Committee on Customs Procedures (SCCP) under the Committee on Trade and Investment (CTI) of APEC. Table 2-5: APEC Common Action Plan concerning Customs Item (1) Harmonization of customs classifications by the HS Convention (HS2007) Japan Coordinator (2) Disclosure of information on customs-related laws Hong Kong, Singaore (3) Simplification and harmonization based on the WCO Kyoto Convention (4) Paperless trade Australia (5) Adoption and observance of the principles of the WTO Evaluation Agreement (6) Adoption and observance of WTO/TRIPs Agreement US New Zealand, Japan Canada, US (7) Introduction of rules for lodging complaints Canada, Philippines (8) Introduction of advance education system involving customs tax classification (9) Granting of temporary import facility US, Taiwan New Zealand, South Korea (10) Adoption of shared data elements Canada, Australia (11) Risk management (reduce high-risk cargo) Australia, US (12) Express cargo US, China (13) Employee rules Australia, Hong Kong (14) Cooperation between customs and business Hong Kong, Mexico, Taiwan (15) Implementation of WCO s standards framework in the APEC region US, Japan, South Korea (16) Study on time required at customs stations Japan, Indonesia, South Korea Prepared based on the website of the Customs and Tariff Bureau, Ministry of Finance ( At the APEC Customs Directors-General and Commissioners Conference held in Tokyo in September 2010, a chairperson s statement was adopted which stated that the eight items in Table 2-6 are critical items for ensuring trade security and trade facilitation. 16

21 Table 2-6: Eight Critical Points Agreed Upon at the APEC Customs Directors-General and Commissioners Conference 1. Support for AEO building, promotion of reciprocal recognition, and initiative for trade resumption 2. Support for building of single window and utilization of high technology 3.Strengthening of IPR s control at the border Countries and regions will introduce the Authorized Economic Operator (AEO) System advocated by the WCO and promote reciprocal recognition. Promote steady implementation of the AEO Action Plan such as by preparing AEO best practices, etc. Continue work involving building of an information exchange network when large-scale confusion occurs in international distribution. With the aim of building a single window by 2020 for countries and regions, we will study adoption of the WCO data model and other international standards among countries and regions and will actualize an international collaboration system that electronically shares information and documents. Provide capacity building by promoting information sharing and studies/research related to utilization of advanced technology such as electronic tags. Promote cooperation between rights holders and customs authorities as well as between various customs authorities, based on the APEC Model Guidelines for Reduction of Transactions in Imitations and Pirated Edition, approved at the APEC summit meeting in 2004 for the border control of transactions in imitations and pirated editions. 4. Collaboration with border-related ministries and bodies and cooperation among customs authorities 5. Steady implementation of the APEC Common Action Plan 6. Strengthen cooperation with WCO 7. Strengthening of cooperation with international development finance institutions 8. Contributions to WTO trade facilitation negotiations Utilize the framework of CMAA and search for plans to advance and strengthen information exchange with APEC customs authorities, Promote the six unachieved items among the 16 items in the common action plan (CAP) so that all countries and regions achieve them by 2020 through provision of appropriate capacity building. While considering 21 st century customs discussed by WCO and contributing to the debate, share information related to the debate in the sub-committee on customs procedures. Recognize the importance of utilization of tools and international standards prepared by the WCO and work to further strengthen cooperation with the sub-committee on customs procedures and the WCO. Conduct study for promotion of cooperation with international development financial institutions in the sub-committee on customs procedures because it is important to further strengthen cooperation among international development financial institutions, WCO, and APEC customs authorities in order to effectively and efficiently promote further modernization of customs in the APEC region. Continue to contribute as customs authorities, with consideration for the fact that trade facilitation negotiations are being advanced by the WTO. Prepared based on the website of the Customs and Tariff Bureau, Ministry of Finance ( To resolve these issues raised by the APEC sub-committee on customs procedures the Customs and Tariff Bureau of the Ministry of Finance has been conducting technical cooperation including capacity building for APEC countries and regions by dispatching experts through JICA as mentioned above. Moreover, apart from the initiatives conducted through JICA, the Ministry of Finance has been deeply involved in the establishment of WCO ROCB AP, as a leading member of the WCO Asia-Pacific region. The ROCB officially began its activities in October 2004, and the Customs and Tariff Bureau of the Ministry of Finance is conducting cooperation such as capacity building for customs in the Asia-Pacific region including the Mekong region by dispatching an office director and two expert staff members to the ROCB AP. 17

22 3.Outline of Cooperation Planned for the Future JICA implemented a study from October 2010 to January 2011 entitled Study on Improvements in Customs Operation for the Promotion of Distribution in the Mekong Region for the purpose of understanding the current situation and the issues in distribution and customs operation in the Mekong region. The study covers the current condition of each country s response to CBTA and MOU, etc., in addition to the current condition of customs operations overall, including systems and policies of customs operations in relation to the overall current condition and issues in distribution, in particular the 24-hour operation of border customs and standardization of written forms, introduction of a fast-track system and EDI, and boosting of the capacity of customs officials. Based on the results of this study and in light of the demands from governments of partner countries, we are preparing cooperation programs for the future. As mentioned in Section 2, the Japanese government plans to provide US$25 million in assistance to ADB over the next five years for development and improvement of the economy and trade facilitation in the Asian region. It is planned for this cooperation to contribute to trade facilitation, including acceleration of customs procedures and customs evaluation in accordance with international standards, but the specific content of the program is not yet clear. Henceforth, JICA and the Customs and Tariff Bureau of the Ministry of Finance plan to made adjustments so that redundancies do not occur between the above-mentioned JICA cooperation scheme and the cooperation to be implemented by ADB with funds from the Japanese government, and so that synergistic effects are realized through the complementary relation of the two schemes. 18

23 Chapter 3 Initiatives for facilitation of Countries Customs Systems Section 1 Direction for Improvement of Customs procedure The aim of simplification of customs procedure is to make the procedures as fast and efficient as possible. However, the large difference in the customs procedures of different countries is an obstacle to regional integration, and so as we saw in Chapter 2, efforts are underway to standardize procedures through initiatives and support by public organizations. As a result, ASEAN and GMS countries are moving in the direction of: adoption of the HS code based on the WCO, resulting that first six digits for HS code comes to be common among ASEAN/GMS countries standardization of declaration forms introduction of a system for duty payment by declaration 6 introduction of EDI declaration Other shared initiatives are the introduction of risk management for boosting the speed of EDI clearance and the preferential treatment system which allows fast and easy customs processing for preferred importers/exporters. However, despite these attempts toward uniformity, the level of customs procedures is not uniform and there are wide gaps in the level of customs services in this region. Consequently, there is a large gap between the announcement by the customs (administrative) authorities that the customs system is being simplified based on global standards and the actual experience of users of the system. Logistics companies remain insistent that customs operations have not been substantially simplified and that customs operations still rely on illegal, under-the-table maneuvers. Thus, this chapter will review the overall export-import customs process, preferential treatment system, and the AEO system, from the users perspective for the countries of Thailand, Vietnam, Cambodia, and Laos. 6 The system for duty payment by declaration is a system which recognizes the value declared by the importers/exporters as the taxable value, in principle. Thailand, Vietnam, Cambodia, and Laos recognize the transaction value stated by the declarers as the taxable value. For example, previously Thai customs offices had their own values and those were given preference over transaction values. Cambodia also gave preference to its own values based on assessments at inspection prior to shipment by the designated inspection body in the exporting country. 19

24 Section 2 Thailand Thailand has tried the EDI customs clearance system several times in the past, but it reverted to manual declarations again when the computer system was down. However, starting around 2008, EDI customs clearance finally was fully realized, and cargo consigners and logistics companies are likely to satisfy with the performance for significantly reducing the time necessary for customs clearance. 1. Export Customs procedure Declaration data is able to send to customs stations by the EDI customs clearance system. When customs accepts the declaration, the declaration number is sent back to the declarer. The EDI system is referred to as E-Paperless, but according to customs brokers, it is not paperless and it is usually necessary to submit documents. However, the main purpose of document checks by customs is to compare the documents with the EDI declaration; it does not require much time 7, and when customs brokers receive the declaration number back from customs, export permission is deemed to have been basically received. However, although the time required is short if there are no problems, there are delays during busy times due to limitations on the capacity of communications circuits. The customs clearance process is summarized as follows (Fig. 3-1). 1Receipt on cargo information from customer 2Data input into EDI system 3Data sent to customer for customer s approval (e-signature) It is necessary to send the declared information to the exporter to receive a signature. An electronic signature system is used. 4Declaration to customs by EDI 5Registration number acquired from customs 6Documents taken to customs by customer 7Export permit issued after check of documents and EDI declaration 8Transport of cargo to airport or port 9Export 7 Please refer to the study on the time required in Chapter5. 20

25 Fig. 3-1: Export Customs in Thailand Source: Prepared by Nittsu Research Institute and Consulting, Inc. 2. Import Customs procedure Like exports, import customs utilize EDI, but in many cases, the process is not completely paperless and document checks are conducted. However, EDI can also be used for duty payment (E-payment). The customs clearance process is summarized as follows (Fig. 3-2). 1Receipt on cargo information from customer 2Data input into EDI system 3Data sent to customer for customer s approval (e-signature) 4Declaration to customs by EDI 5Registration number acquired from customs 6Documents taken to customs by customer 7Check of documents and EDI declaration 8E-payment (duty payment) 9Import permit 10Cargo release 21

26 Fig. 3-2: Import Customs in Thailand Source: Prepared by Nittsu Research Institute and Consulting, Inc. 3. Preferential System Currently, Thailand has two preferential systems, one called the gold card scheme for preferred importers and exporters, and another called the registered customs broker system for preferred customs brokers. This system resembles the fast-lane system in that those who qualify for the benefits of either system can clear customs in a shorter period of time due to simplified customs clearance processing through the green line. In recent years, because customs clearance time has been reduced by the progress of EDI customs clearance, there is less benefit from the time reduction received under the green line which is available to those in either preferential system. For this reason, considering the maintenance required by these systems and the risk of penalties in case of an accident, more companies are choosing to use EDI customs clearance on a regular basis. (1) Gold Card Scheme Businesses which meet the following qualifications and which have been approved by Thai Customs as preferred importers/exporters qualify for the benefits below. 22

27 1Qualifications Is a corporation with 5 million baht (approximately 14 million yen 8 ) or more in registered capital funds Has conducted import or export operations for at least three years Is a member of at least one of the following bodies:federation of Thai Industry, Board of Trade of Thailand, Thai Chamber of Commerce, Thai National Shipper s Council, and other similar bodies that can vouch for the financial soundness of the applicant company Has not violated the customs law or related laws for three years prior to the application date 2Main Benefits When importing -May use the Green Line for import customs clearance -May destroy the manifest after customs clearance -Exempted from cargo inspection (except for cases of random inspections) When exporting -May use the Green Line for export customs clearance -Exempted from cargo inspection (except for cases of random inspection) Others -Immediate approval of customs refund claims 3Responsibilities Must maintain a bank-guaranteed reserve fund of 2 million baht maximum as a security deposit (maximum 1 million baht in the case of members of the Customs Tax Transparency Partnership Project) Must retain original application documents and related documents for a minimum of five years of vouchers and documents, etc. Must allow entry of customs staff into the workplace and related areas and must allow inspection of vouchers and documents, etc. 4Cancellation of permit Permits will be cancelled in the event of a guilty verdict concerning serious violations of the customs law or related laws or regulations 8 Conversion rate: 1 baht = approxmately 2.7 yen (effective rate as of January 2011). 23

28 (2) Registered Customs broker system Whereas the Gold Card Scheme is primarily a system for consigners and consignees, the Registered Customs broker system is a similar system for customs brokers. (1)Application qualifications All of the following qualifications must be fulfilled. Is a customs broker approved by Thai Customs Is a corporation with 1 million baht (approximately 2.7 million yen) or more in registered capital funds Remains a member of the forwarding association for three years or more after receiving approval from customs Has not violated customs law or related laws or regulations for three years prior to the application date; however, this excludes infractions that are deemed light by customs Has not been punished in the past by customs for allowing customs broker license to lapse Is able to do EDI customs clearance processing and paperless customs clearance processing Employs at least one personnel who has attended a training course offered by Thai Customs Must maintain a bank-guaranteed reserve fund of over 2 million baht and under 10 million baht (maximum 1 million baht in the case of companies with a Gold Card who are also members of the Customs Tax Transparency Partnership Project) 2Benefits When importing -May use the Green Line for import customs clearance. Product value assessment and tax calculation will be carried out after customs clearance. -Reduced import customs fees (half of usual fees) When exporting -May use the Green Line for export customs clearance. Product value assessment and tax calculation will be carried out after customs clearance. -May load containers on ships without customs officials physical inspection. Sample inspection may also be exempted as long as there are no particular stipulations for inspection in other laws. Other -Immediate approval of claims for customs tax rebates and tax compensation 24

29 3Responsibilities Must maintain a bank-guaranteed reserve fund of 2 million baht maximum as a security deposit (maximum 1 million baht in the case of members of the Customs Tax Transparency Partnership Project) Must retain original application documents and related documents for a minimum of five years Must allow entry of customs staff into the workplace and related areas and must allow inspection of vouchers and documents, etc. 4Cancellation of permit Permits will be cancelled in the event of a guilty verdict concerning serious violations of the customs law or related laws or regulations 4. AEO System A pilot project for the AEO system began in 2008, and in November 2011, two consigners 9 approved. Henceforth, the scope of eligible customs brokers and transporters will be enlarged. were Section 3 Vietnam Vietnamese Customs decided to introduce an electronic customs clearance system in 2005; as the first stage, it was introduced on a trial basis for large importers and exporters, and points for improvement were pinpointed. In the second stage in 2007, the system s utility was improved and it was made widely available. Software for EDI declarations is on the market, and so anyone can prepare declarations if they buy the software (number are assigned to importers and exporters, and the numbers are used to identify importers and exporters for data input and transmission purposes). Together with putting EDI customs clearance into operation, customs authorities are endeavoring to modernize their operations and introduce various measures based on international standards. The main efforts are as follow: Acceleration of customs processing by EDI declaration system Introduction of effective screening standards along with risk management Securing of transparency (building of an administrative system that properly enforces the tax law and has a high degree of transparency) Reduction of the time required for customs clearance Introduction of AEO system In September 2010, electronic customs became possible in 13 administrative districts, and 67% 9 They are large Japanese manufacturers which have a significant impact on Thailand s economic activities, and the approval is extremely limited. Consequently, the system has not reached the level where its spread can be felt among consigner companies. 25

30 of all applications were sent electronically. 10 Consequently, there are many cases where manual processing is still the norm, depending on the district. Furthermore, although it is referred to as an electronic application, this only means that the data is sent electronically, and document submission is still required. Because permits are also paper-based, importers and exporters do not yet feel the benefits of EDI customs clearance. 1. Export Customs procedure The export customs clearance process is shown in Fig However, the EDI portion consists of the portion from the sending of the data to the acquisition of a registration number, and document check is actually required. Moreover, the documents must be originals and have the company chop, and the time required for that should be added to the time necessary for customs clearance. Unlike in Japan, the registered customs 11 permit is necessary for primary customs clearance. A 2-stage process is required to confirm the content of primary customs clearance by the exporting customs offices (seaport, airport, or land border). This feature is same in import customs clearance. Fig. 3-3: Export Customs procedure Source: Prepared by Nittsu Research Institute and Consulting, Inc. 10 January-November 2008 data from the website of the General Department of Vietnam Customs. 11 In Vietnam, import and export must be conducted through the customs station with jurisdiction over the location of the importer/exporter. Such custom stations are referred to hereinafter as registered customs or registered customs station 26

31 1Obtain documents and cargo 2Export declaration to registered customs station (EDI) 3Document check by the registered customs station (and cargo check if necessary) 4Customs permit 5When cargo is transported to the airport, seaport, or border export point, the customs station at the airport, seaport, or border reconfirms the export customs clearance permit issued by the registered customs station. 6 Export is possible once permit is obtained 2. Import Customs procedure For import customs clearance as well, the registered customs station carries out the processing. The results are taken to the importing seaport, airport, or border checkpoint, where a second check is conducted and bonded transport to the registered customs station is possible. Moreover, there are differences depending on the status of the consigner; an export processing companies can immediately receive cargo with the above type of permit, but consumer goods and cargo for distribution within Vietnam must undergo multilayer inspections for import customs clearance in which the actual good are inspected again after shipment to the public bonded area with jurisdiction over the customs clearance, and so there is a high risk that time will be required. However, the declaration to the registered customs station may be made before the cargo arrives, and so the permit may be obtained before the cargo actually arrives. If the advance preparation goes smoothly, the freight may be picked up quickly after arrival. EDI customs clearance at the registered customs station also stops with acquisition of the registration number, and the original documents must be presented. Meanwhile, a characteristic of Vietnam s import customs clearance with regard to customs tax payment is that deferred payment is allowed. The deferment period varies depending on the cargo content; in the case of cargo with no commercial value, advance payment is made, and for cargo with commercial value, payment is made with 30 days (may be extended 275 days for cargo that is re-exported and 360 days for cargo for consignment processing trade). The import process is summarized in Fig

32 Fig. 3-4: Import Customs procedure Source: Prepared by Nittsu Research Institute and Consulting, Inc. 1Acquisition of documents (The declaration may be initiated once the documents are acquired, even before the cargo arrives.) 2Import declaration submitted to the registered customs station (EDI is in an uptrend.) 3Document check by the registered customs station 4Acquisition of permit 5The original documents from 4 is presented after the cargo arrives to the customs station at the airport, seaport, and border import point at which the cargo arrived. The registered customs station requests bonded transportation to the location of the importer under its jurisdiction. 6Following the arrival of the cargo, the registered customs office will check it. In the case of export processing areas or parts/materials for export, it is possible to pick up the cargo with the permit in 4. However, in the case of consumer goods or goods for domestic consumption, a second screening is necessary, including inspection of the goods. 7Once the permit is acquired, the cargo may be picked up 28

33 3. Preferential Treatment System In accordance with the regulation DECISION1952/QD-TCHQ issued by the General Department of Vietnam Customs on December 19, 2005, the General Department of Vietnam Customs began issuing Priority Cards to importers and exporters as of January 1, Companies that were issued cards will receive certain benefits, including exemption of samples of specified goods from inspections and an extension of duty payment. due date. The conditions for acquiring a Priority Card are: Has never been charged with smuggling or tax evasion Has never been late by 90 days or more with a duty payment Has been charged a fine fewer than 2 times in the past However in reality, if a company does not possess a Priority Card but does have a good record, it receives preferential treatment such as payment deferrals and reduced cargo inspections. Currently, the possession of a card does not alter customs processing. Because the system itself exists in name only, the General Department of Vietnam Customs is reviewing the system s operating method AEO System Preparations are underway for the introduction of the Trusted-Trader Program, which meets the requirements of an AEO system. An effort is being made to provide qualified importers and exporters with swift customs processing, reduction of inspection expenses, and improved service. In order to do this, Importers/exporters should have a strict compliance system, transparent accounting system, in addition, declarations also should be made through an electronic customs clearance system. Initially, the plan is to launch a test pilot program with the participation of selected companies. Already, the discussion committee has held and the kick-off meeting has been held JETRO Trade and Investment Facilitation Assistance Project (demonstration project), FY2009, Report on Demonstration Project on Assistance for Building an ASEAN Single Window for Promotion of Imports and Exports and Trade Facilitation in East Asia and the ASEAN Region. 13 According to a JICA expert dispatched to Vietnam Customs. 29

34 Section 4 Laos The Laotian customs system is essentially be reformed so as to meet international standards, including WCO, just like the systems in other ASEAN countries. The import license system which was a matter of concern for many years was abolished, 14 and the HS code and the system for duty payment by declaration were adopted. However, when it comes to the actual operations, there are still many aspects that are not user-friendly. Just looking at the basic hours of operation of custom stations, the major border checkpoints of Vientiane and Savannakhet operate from 6 a.m. (or 8 a.m. in some cases) to 8 p.m. (or 10 p.m.). These are the hours for people, and for cargo activity, the following tend to apply in Laos, greatly hindering customs clearance: 15 The start time in the morning is 1 to 2 hours later than the above time Lunchtime is 1 to 2 hours long, and during that time, inspections stop. Activity stops at 4 or 5 p.m. Compared to Vietnam and Thailand, standardization of the customs clearance process is lagging behind in Laos, and the methods are not unified nationwide. There are differences in the customs clearance procedures used at each border checkpoint. EDI declarations have not been adopted either, and so declarations are handled manually. For EDI declarations, it has just been decided to run tests for the introduction of ASYCUDA. Table 3-1 shows the results of ADB s study on the typical import/export process and the time and cost required in Vientiane, Laos. According this study, simplification of the export process is progressing, but the import process still seems to require time. Moreover, in both import and export, it is apparent that document preparation requires more time. A major cause of delays results from the fact that the declarers must present documents that are perfect and free from errors for swift customs clearance 14 A license was required for many items prior to import, and acquisition of a license often required months. A license is still required for certain items, but basically licenses are said to have been abolished. 15 This trend exists in Vietnam as well. 30

35 Table 3-1: Time and Cost Involved in Customs Procedures in Laos Export Procedures Time Cost ( $ ) Document Preparation 1 day Customs clearance and technical control half day Port and terminal handling Inland transport and handling 2 hours Import Procedures Time Cost ( $ ) Document preparation 1. By temporary procedure( 1 day ) 2. By normal procedure( days ) Customs clearance and technical control 1 hour Port & terminal handling 2-4 hours Inland transport and handling 2 hours Source: ADB Country Assessment Report (Lao PDR) RETA 6450: Enhancing Transport and Trade Facilitation in the GMS-Development of National and Regional Logistics Plans Looking the import/export process in Vientiane, which handles the largest volume of international cargo, as shown below, one can gain a general overview of customs clearance in Japan. 1. Export Customs Clearance For exports, customs clearance at the exporters plant or site is possible in Vientiane, so cargo loading for container/vehicle is available after export clearacne. However, at Savannakhet and Pakse, this practice is only allowed to preferred companies as preferential treatment, and it is not applied nationwide. Fig. 2-5 is a flowchart of the process. Fig. 3-5: Export Customs Clearance in Laos Source: Prepared by Nittsu Research Institute and Consulting, Inc. 31

36 1Apply to customs for clearance on one s own facilities 2When the freight is ready, the customs official travels to the facilities for the customs inspection 3Permit is issued 4The freight for which the permit has been issued is loaded into vehicles, sealed by customs, and transported to the border 5Customs authorities check the documents at the border. Quarantine and immigration checks are conducted. 2. Import Customs Clearance The main border-crossing points in Laos are Vientiane (Friendship Bridge and Tha Naleng Terminal), Pakse, Huay Sai, Luang Prabang, Savannakhet, and Lao Bao, but because of differences in the development of border facilities, customs procedrues are not uniform. Here, we examine the case of Vientiane, but the same is true of Huay Sai and Pakse, where border-crossing facilities have reached a certain level. The main feature is the obligation to unload all taxable cargo at the terminal warehouse owned by the customs. Import customs clearance is started for the cargo that is unloaded. The customs clearance screening is conducted using documents rather than EDI, and if there are no problems, screening is complete in three to four hours. 16 However, for this to happen, the documents must be in perfect order, and document preparation requires time and effort (Table 3-1). Consequently, advance negotiations with customs authorities are necessary on a regular basis, and the speed of customs clearance of one s goods depends on whether or not one has connections with customs authorities. The process is summarized in Fig as following: 1Present export documents at the border. Complete the driver s immigration and quarantine, and cross the border. 2Arrival at the customs control terminal. All cargo is unloaded. 3After confirmation of the quantity, the cargo is registered by customs 4A (manual) declaration and document check 5After document check, a request for cargo inspection is made to a customs official. Cargo inspection is carried out. 6Import permit after duty payment. Storage fees, etc., are calculated 7When the time comes to cargo release, the weight is checked, storage fees are paid, and the 16 World Bank, Lao PDR Customs and Trade Facilitation Project: Consultancy Service for Import and Export Process Mapping in Lao PDR, March

37 cargo is picked up Fig. 3-6: Import Customs Clearance in Laos. 3. Preferential Treatment System Facilitation of export procedure is progressing, but importers face the heavy obligation of unloading their entire cargo at the customs control terminal. Currently, there is a trend toward abolishing this obligation for preferred importers. As a result, it has become possible for some publicly-owned companies and foreign-owned companies to move cargo directly to their own facilities and to complete customs processing there, without unloading it at the customs control terminal. This measure has led to unprecedented cost reduction, thereby increasing the incentive to introduce the system. However, conversely speaking, this measure amounts only to application of foreign countries standards, and it would not be called a preferential measure in foreign countries. This is the level of the preferential system in Laos, and so the country is not yet at the stage of considering the AEO system. 33

38 Section 5 Cambodia Recently, Cambodia has been promoting the rapid adoption of global standards. Declarations base on the HS code are allowed, and the declaration forms meet the standard specifications of ASEAN. Up to 2009, pre-shipment inspection (PSI) in the country of origin was necessary for import customs clearance, and more weight was given to the inspection value than the declared value in duty assessment; however, this system has been abolished. As a result, the transaction value has been adopted as the duty calculation value. Progress is also visible in efforts to increase the efficiency of customs clearance by launching usage of EDI customs clearance (ASYCUDA) at some customs stations. Fig. 3-7 :EDI Customs system in Cambodia ASYCUDA screen At the air cargo terminal (2010.Nov) However, a 2-layer process is necessary for customs clearance in Cambodia, the primary customs clearance at Phnom Penh main office and customs clearance where the cargo is located. This increases not only the cost but also the time required. Currently, usage of ASYCUDA electronic customs clearance has started, but the only computerized part is the declaration process to the customs station where the cargo is located, and the import/export screening for the primary customs clearance which takes place first is not computerized. Actually, if the issuance of permits, which is part of the primary customs clearance, were handled electronically, then it would not be necessary to submit a declaration to the customs station where the cargo is located (or only a minimal cargo inspection would be necessary). However, the system has not yet attained that level. 34

39 1. Import and Export Customs Clearance For export customs clearance in Cambodia, first of all, a permit from the primary customs office in Phnom Penh is required. The permit is necessary to submit a declaration to the customs station where the cargo is located. Also, as a unique feature of Cambodia s system not seen in other countries, cargo must be inspected by CAMCONTROL (an agency in the Ministry of Commerce that conducts quality inspections). All documents submitted for document screening must be originals (with company chop and signatures). For import customs clearance as well, a declaration must be submitted to Phnom Penh main customs office, and this is where the amount of duty, etc., is decided. The permit from main office is used to submit to local customs station at the point of cargo entry, and this is where the duty is paid and the final permit for importation is issued. The import/export process is summarized in Fig. 3-8, with emphasis on the two-stage screening process. Fig. 3-8: Import and Export Customs procedure in Cambodia 35

40 Looking in more detail at the import pattern on a land route, the process for imports from Thailand is as follows. 1Cambodia acquires cargo data from Thailand 2A declaration is submitted to the main customs office in Phnom Penh. The amount of duty is determined, and importer obtains the primary customs permit. 3The cargo which has been approved for export from Thailand is checked at the border (can be verified by the documents and the EDI screen). Following completion of this, the cargo is transported into Cambodia. 4In Cambodia, a customs check is performed based on the documents in 2 above, and following duty payment, the cargo is approved for import. 5The cargo is released to the importer. The two-layer customs clearance system involving the main customs office in Phnom Penh and the customs station at the border imposes a heavy burden on users. At the border, it is necessary to present the original documents issued by the main customs office in Phnom Penh. In addition, because the actual payment of duty is done at the border and the banking system is under-developed, cargo owners are likely to ask border agent to pay duty in cash,. This involves the high financial risk for importers and agent. In addition to the customs station at the border, there is CAMCONTROL and an immigration office, each of which require certain procedures. Moreover, there are checkpoints along the road where inspections are conducted by customs officials and economic police. 2. Preferential System Currently, no particular preferential system is discernable. Introduction of AEO system is a topic for the future. 36

41 Section 6 Conclusion This chapter has presented an overview of the customs clearance system from the users perspective in four GMS countries. Each country is attempting to build a customs clearance system that satisfies international standards. In particular, effort is being made to introduce the EDI customs clearance system, which it is believed will significantly contribute to greater speed and transparency. The existence of a preferential system for preferred companies was confirmed in Vietnam, Cambodia, and Laos, but the AEO system is still just at the level of a pilot project. However, the case study of Thailand showed that, in the event that EDI customs clearance boosts the speed and simplicity of customs clearance, the benefits felt from the preferential system are diluted, and this has significant implications when it comes to consideration of introduction of an AEO system and a fast lane system. This phenomenon is certainly not limited to Thailand and can also be observed in the EU and Japan. If the customs clearance service of a country becomes adequately swift, then the benefit of time reduction by using the AEO system is diluted. 17 Furthermore, because it is not realistic to full up containers with only AEO importers and exporters at the event of consolidation service, adopting only import/export AEO system will be insufficient for developing international cross border transportation Even in Vietnam and Thailand where efforts are being made to adopt the AEO system, because there is a trend toward expanding the target from cargo owners to customs brokers, it is worth studying feasibility of AEO system and fast lane system for logistics providers who handles cross border transportation. This trend is consistent with the trend in ASEAN toward planning for the creation of a preferred transporters certification system by Importers and exporters in the EU and Japan who use the AEO system do so not for the simplification of customs clearance operations but rather to boost their status as corporations, and they look forward to benefits in the future of AEO reciprocal certification. 37

42 Chapter 4 Development Process of East-West Economic Corridor 18 Section 1 East-West Economic Corridor 1. Purpose Fig. 4-1: East-West Corridor Hanoi Vonh Savannakhet (Lao border) Dong Ha Khon Kaen Mukdahan (Thai border) Densavanh (Lao border) Lao Bao (VN border) Bangkok Japan s ODA played a major role in the increase in interest in this route. Since the improvement of National Road 9 of Laos as a four-lane road (2005) and the completion of a bridge over the Mekong River connecting Mukdahan and Savannakhet (December 2006), this overland route has attracted increasing attention. The ADB also contributed to facilitating cross-border transportation in this region and the border facilities have been expanded and upgraded. Then, Japanese transportation companies embarked on the development of this route and started providing services around The biggest feature of this route is the considerable lead time reduction effect. By using this route, the time required for door-to-door transportation that takes two weeks via the sea rout is expected to be reduced to about four days. 18 The East-West Corridor refers to a route which starts at Bangkok, crosses the border at Mukdahan and enters Laos at Savannakhet, continues along Laos National Highway 9, crosses the border at Densavanh and enters Vietnam at Lao Bao, and goes up north along Vietnam National Highway 1 to Hanoi. 38

43 However, even though the hard infrastructure has been established, transit procedure in Laos is still necessary. Given the usual import/export customs clearance which seems problematic for the importers/exporters, how to ensure rapidity and transparency of the border-crossing procedure was a major issue to be addressed in opening the route. Today, some logistics companies come to provide services on a weekly fix date service, though the volume is far from sufficient. As interest is high among shippers and logistics companies feeling the potential of this route, there is a strong desire for the increase frequency of services. Therefore, further improvement in services is expected with the support of various measures including the introduction of fast lane system and this is the reason why we chose this route as the subject of case study. In this chapter, we will look back over the course of development to date in order to clearly define the issues to be addressed and describe the current situation concerning the Southern Economic Corridor for the purpose of comparative study. 2. Transit procedure at the time the route opened Until around 2007, most efforts of route development by Japanese logistics companies were focused on how to improve transparency and expedite the transit procedure in Laos. Up to the first half of 2007, permit for transit transportation had to be obtained from the Customs Head Office in Vientiane, which took time, and it was understood that the original permit was required at the border. Because no reliable courier service was available in Laos in transporting original documents to the border, they had to rely on hand-carrying using long-distance coach. Around that time, the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure and Transport conducted Demonstration Driving Experiment to Develop A Land Route in Mekong Region (October 2007). According to the result shown in Fig. 4-2, transportation itself took four days but, prior to that, a four-day period was required to obtain permit for transit transportation and therefore the transit procedure was felt to be a heavy burden. 39

44 Fig. 4-2: Transportation Schedule via East-West Corridor() Source: Summary of Partnership on International Logistics Competitiveness MLIT, METI, February Border facilities at the time the route opened At the Mukdahan/Savannakhet border and the Densavanh/Lao Bao border, it was planned as a pilot case of the cross-border revitalization project by ADB to realize single-stop/single-window customs inspection and, as the first step, introduction of one-stop import/export customs clearance system was scheduled for Until around 2007, import documents were actually inspected at the former customs house located along the river, which was used for traditional transportation by river, and were double-checked at the border facilities on the both sides of the bridge. In this way, vehicles were required to stop four times in total. 40

45 Fig. 4-3: Border-Crossing Facilities and Traffic Line as of 2007 Mekong river Thailand Up stream Laos 2Border check point (Mukdahan) 3Border check point (Savannakhet) Down stream 3Mukdahan former customs office 4Savannakhet former customs office Transshipment Blue line :Targeted cargo flow Green line:cargo flow at around 2007 Brown line:cargo flow when river transportation was conducted 4. Transportation time at the time the route opened ASEAN Logistic Map 2008 prepared by JETRO based on the results of the driving experiments in October 2007 shows the actual driving time and the customs clearance time as summarized in Table 4-1. According to this, the time required for eastbound transportation on the Laos side was quite satisfactory if the preparation for transit has been completed in advance on the Laos side. Although it is understandable that it took more than one hour at Mukdahan where X-ray inspection is conducted, a long time was required to cross the border at Lao Bao. The performance for westbound transportation was inferior to eastbound transportation. Considering the very small volume of transportation at that time, this is presumed to be due to the lack of experience of customs officers. 41

46 Table 4-1: Transportation Time Measurement Result in ASEAN Logistics Map Source: JETRO ASEAN Logistics Network Map Current situation The simplification of the transit procedure mentioned in 1of Section 2 in Chapter 4 was realized by imposing strict requirements for logistics companies 19. To be specific, a facilitated procedure has been realized in the following steps: the original permit was issued at Vientiane main office and was required to deliver to border for customs inspection border-crossing is permitted if a copy of permit is transferred from Vientiane transit procedure starts at the border customs house. Around 2009, the inspection at the former customs house in Mukdahan was abolished with the development of EDI transit system in Thailand and the border facilities in Savannakhet were designated CCA in As a result, the traffic line drawn in green in Fig. 4-3 has shifted to the traffic line in blue. Around 2009, as logistics companies accumulate experiences, some started consolidated 19 A kind of fast lane system is applied for customs brokers. Lao customs allowed customs brokers to deal with transit procedures as far as they have sufficient finance background as like capital strength 42

47 service instead of the chartered service and they now provide consolidation services on a weekly basis (Fig. 4-4). The lead time is calculated as around four days, which is little difference among service providers. In addition, westbound shipment is handled in some cases, which was hardly found in Fig East-West Corridor Services Services of Sumitomo Corporation Services of Nippon Express These companies transload containers at Savannakhet as a common practice. This is because the traffic rules of Thailand require vehicles to be driven on the different side of the road from that required in Vietnam and Laos and therefore it is safer for Vietnamese vehicles than for Thai vehicles to be driven in Laos. In addition, it is a hard choice for transportation companies to have Thai drivers drive along the heavily congested National Road 1 of Vietnam for twenty hours in each direction under the different traffic rules. 43

48 CBTA Agreement is intended to realize door-to-door transportation across borders with one vehicle. However, the Agreement designates specific border crossing points and routes. Of the East-West Corridor route, Vietnam s National Road 1 is not covered by the Agreement (Fig. 4-5). Even though it was reported in 2010 that 1200 trucks were licensed to drive through three countries of Vietnam, Thailand and Laos (400 trucks for each country) on June 11, 2010 under the Greater Mekong Sub-regional Cross Border Transport Agreement (GMS-CBTA) and that Japanese transportation companies also obtained license, the scope of application is limited to the route between Khon Kaen in Thailand and Da Nang in Vietnam. Therefore, the Agreement does not have any influence on the services between Hanoi and Bangkok and the practice of transloading has been continuing even today. Those trucks licensed under CBTA Agreement are supposed to be given a preferential treatment allowing them to drive on the CBTA Fast Lane. However, since there is no lane dedicated for that purpose, little difference is found compared to transportation between two countries in practice. Fig CBTA-Designated Routes Vietnamese national road No.1 is excluded from CBTA agreement 44

49 6. Issues to be addressed concerning East-West Economic Corridor The ASEAN Logistics Network Map 2008 by JETRO points out that among the issues concerning the East-West Economic Corridor, the issues of cost and the quality of transportation are more serious than the procedural/institutional issues. Issues of particular mention include that the consolidated service has not been offered, that trucks cannot drive at night, and that the cost is high because vehicles return unloaded. For shipper companies in Thailand, the fact that the cost of land transportation between Thailand and Malaysia is comparable to the cost of sea transportation on a door-to-door basis is considered significant as a successful experience (in addition, the time for transportation is reduced from fourteen days to three days by using the overland route). Under the present situation where the cost of overland transportation is not less than twice the cost of sea transportation, high transport cost is the biggest factor for customers to hesitate to use the corridor route. For transportation companies, the issue of unloaded return trip is not what they can solve by their management efforts and it is difficult to find a drastic cost reduction measure. If the transportation services were available three shipments a week, customers would enjoy the benefit of frequency. However, the current services that are provided only once a week do not have any advantage and cannot cover the disadvantage in cost. On the part of transportation companies, if they increase the frequency of services for a little volume of cargo, they would face the risk of falling into the red. In order to stimulate transportation via the East-West Economic Corridor, it is important that the two policies for the route promotion, i.e. improving the cost effect and rapidity by institutional reform and increasing the frequency of transportation services while preventing transportation companies from falling into the red, are carried out in a mutually complementary manner. 45

50 Cost reduction effect Table 4-2: Issues Concerning East-West Corridor Presented in ASEAN Logistics Private Sector Network Map -Acquisition of new shippers -Cooperation among logistics companies -Information sharing and cooperation among shippers Public Sector -Nurturing of transportation companies -Promotion of consolidated shipping Reduction in the time required Improvement of the quality of transportation -Development of transloading facilities -Improvement of transportation packaging -Safe driving activities -Establishment of a prior declaration system -Immediate application of the GMS/CBTA rules -Promotion of road improvement -Road maintenance -Traffic safety Issue -Empty return trip -Improvement of transit customs procedure -Man-vehicle separation in road traffic -Establishment and improvement of legal systems and customs clearance procedure -Slow driving requirement in industrial parks -Assurance of transport quality such as vibration, temperature, humidity, etc. Improvement Status -Establishment and improvement of container transloading facilities, transit customs procedure, legal systems and customs clearance procedure are now underway for GMS/CBTA designated route. Improvement is expected near future. -Man-vehicle separation is expected particularly with the progress of the road construction plan in Vietnam. -The issue of empty return trip is difficult to solve in long-distance transportation between Bangkok and Hanoi. Cost reduction is expected through joint operation on trunk roads delivery by private companies responding to the actual demand up to a midway point. -Improvement of the quality of transportation is expected for the future including the development of logistics personnel. 46

51 Section 2 Southern Economic Corridor The Southern Economic Corridor is a route connecting Bangkok, Phnom Penh and Ho Chi Minh. It crosses the border at Aranyaprathet (Thailand)/Poipet, continues along National Road 5 of Cambodia to Phnom Penh via Sispone and Kampon, then takes the National Road 1 and cross the border at Bavet and enters Vietnam at Moc Bai, and takes the National Road 22 of Vietnam to Ho Chi Minh. Fig. 4-6: Southern Corridor Route Bangkok Poipet (Cam border) Aranyaprathet (Thai border) Sisophone National road No.5 kampong Phnom Penh Moc Bai (VN border) National road No.1 Neak loueng National road Bavet (Cam border) HCM This route also began to attract attention when the road infrastructure was improved with the aid of Japan and ADB. On this route, the effect of lead time reduction is limited because the transportation distance is short therefore it has not gained so much attention as the East-West Economic Corridor until now. In addition, the transit country Cambodia is not so active in opening up the market as Laos 20 and foreign transportation companies were slow in entering.. 20 Although CBTA rules were supposed to license 500 vehicles initially to transport between two countries, Cambodia licensed only 60 vehicles, far fewer than other countries, and was not active in promoting cross-border 47

52 However, as the study on the Southern Economic Corridor by the Ministry of Economy, Trade and Industry began in 2008, route development is likely to start following that on the East-West Economic Corridor. In fact, there are increasing factors contributing to the increase in attention on the Southern Economic Corridor such as the increased attractiveness of Cambodia as a hinterland of Ho Chi Minh driven by rapid economic growth of Vietnam, the decision by a Japanese major bearing manufacturer to establish a plant (December 2010), and the start of service of Cai Mep-Thi Vai Port. For the Southern Economic Corridor, the Ministerial Ordinance No. 508 was issued in 2008, enabling bonded transportation between borders. With this, land transportation from Thailand to Vietnam via Cambodia is defined as a form of international transit transportation and a procedure is established to transport cargo from Poipet to Bavet in bond without import procedure (without paying taxes such as customs duty, etc.). However, as there is no bonded area in Cambodia, temporary storage in transit is not possible. In practical terms, there are two major issues as follows 21 : Transloading is required two times Under the CBTA Agreement, door-to-door international transportation by one truck is possible on this route. However, under the present situation where deregulation is slow in Cambodia, it is difficult for foreign vehicles to operate in Cambodia. Consequently, cargo must be transported by a Thai vehicle in Thailand, by a Cambodian vehicle in Cambodia, and by a Vietnamese vehicle in Vietnam and therefore transloading is required two times. Permit from the Customs Head Office in Phnom Penh is required for bonded transportation The same system as that used to be applied in Laos described in Fig. 4-2 still applies and a permit for bonded transportation must be applied for and obtained from the Customs Head Office in Phnom Penh prior to transportation. Carriers are not allowed to cross the border without presenting the original permit at the border customs house. The basic flow under the present transit flow from Thailand to Vietnam via Cambodia is as follows (this flow is the same for the opposite route). 1The exporter in Thailand prepares export documents and sends them to the agent in Cambodia and the importer in Vietnam, who respectively prepare for transit and import customs clearance. 2The agent in Cambodia applies for bonded customs clearance at the Customs Head Office in Phnom Penh. transportation. Actual registration of vehicles was received only for bus and no registration of truck had been made until The inconvenience of Southern Economic Corridor is significant compared to the East-West Corridor on which transloading is needed only one time and the transit through Laos is allowed by applying for at the border without presenting original permit from the Customs Head Office. The advantage of the Southern Economic Corridor over the East-West Economic Corridor is that there is less danger in night driving. 48

53 3After export customs clearance (EDI) in Thailand, the cargo is transported to the border 4Crossing the Thai border (inspection of export permit between document and EDI data) 5Crossing the Cambodian border by presenting the original permit from the Customs Head Office. 6Transloading 7Transit in bond through Cambodia 8Transloading at the Cambodian border and exit permit 9Crossing the Vietnamese border by present the import document (the original permit from the registered customs house in Vietnam should be presented at the border customs) 10Driving in Vietnam to the importers to finalize import customs procedure under the registered custom s control area Now, however, one of local logistics companies of Cambodia is announced that it can succeed in exempting from the procedure at the Customs Head office by obtaining a special license. As of October 2010, it is regarded that no other company gets such treatment and the above-mentioned company also says it is the only license. In Laos, no domestic company participates in actual transportation as part of international cross-border transportation services and there was relatively little resistance against liberalization of the transit portion in the country. While in Cambodia, domestic transportation companies that have a willingness to protect the domestic market tend to strongly oppose the market liberalization and foreign companies have not entered transit transportation services. At this point, it in unforeseeable which direction the special license will develop in the future. Foreign logistics companies start to pay attention to this licensed company and are moving towards putting up providing the Southern Economic Corridor service by consigning transportation portion to this company. This company says that they already operate services on a commercial basis in the schedule shown in Table 4-3. According to this schedule, two days are expected to be required for transportation According to the result of the driving experiment on this route conducted by Mitsui & Co., Ltd. at the end of 2010 as part of project of the Ministry of Economy, Trade and Industry, the shortest possible driving time is 19.5 hours. This project also seems to have chosen this company as the actual operator. 49

54 Table 4-3. Schedule of Services on the Southern Corridor by the Company with Special License Day 1 Day 2 Time Detail Time Detail 7:45 Truck arrival at Moc Bai border 9:00 Apply to Poi Pet customs clearance 8:00 Apply for export at Moc Bai customs 10:00 Thai truck's permit for Cambodia entry 8:45 Export permit from Moc Bai customs 11:00 Truck arrival at truck terminal for transloading 9:00 Apply for import to Bavet customs 11:00 Transloading 9:30 Import t permit from Bavet customs 12:00 Export permit from Poi Pet customs 9:35 Transloading launch at border ICD 12:15 Border crossing 9:45 Transloaidng 12:15 Import application for Aranyaprathet customs 10:50 Svay Rieng (Lunch) 14:00 Import permit 13:45 Arrival at Mekong River 14:00 Depart from Aranyaprathet 14:15 Crossing Mewkong river by ferry boat 19:00 Arrival at Bangkok 15:10 Phnom Penh city arrival 16:30 Phnom Penh city departure 18:00 Kampong Channang city(dinner) 19:00 Departure from Kampong Channang city 22:00 Battanbang 23:30 Sisphon 1:30 Poi Pet border arrival Source: Promotion material of the company 50

55 Chapter 5 Fact-Finding Survey on East-West Economic Corridor Section 1 Purpose Based on the review in Chapter 4, an on-site survey was conducted to assess the actual situation of the East-West Economic Corridor and identify levels of improvement. The survey results on the procedure and the time required for transportation on the East-West Economic Corridor indicate that improving the following two issues would have a considerable effect: 1Shortening the cut-off time for submitting documents 2Reducing the time taken at the border Issue 1 depends on the system of customs clearance and bonded transportation procedure in Vietnam and 2 is greatly affected by the border crossing practice. In this chapter, first, it focuses on analyzing survey result that led to the above presented conclusion. Then, it aims on clarifying Vietnamese customs clearance process from the document preparation stage in detail. Thirdly, it highlights to identify actual transit situation at Savannakhet and Mukdahant. Finally, it is reviewed the customs process in Thailand, where major problems have been solved in contrast to the situation in Vietnam. Section 2 Procedure 1. Eastbound service The procedure on this route (from Thailand to Vietnam) is as follows (Fig. 5-1). 1The customs broker in Thailand obtains a customs declaration number through the Customs EDI system. 2Based on the obtained customs declaration number, electronically transmit the declaration data to the border customs. 3Truck dispatch for the border with the cargo and necessary export documents. 4Transmit the export information to the customs brokers in Laos and Vietnam, currently by facsimile or PDF. 5Inspection of the cargo, documents and declaration data against each other and customs clearance at the border customs. 6The customs broker in Laos prepares the transit documents. 7Transit procedure at the Savannakhet customs (manual). Following transloading at ICD in Savannakhet, transport the cargo in bond in Laos. 8Transit procedure at the Densavanh customs (manual). When completed, cross the border. 9The customs broker in Vietnam makes an import declaration at the customs at which the importer is registered and obtains a permit (partially computerized), and sends the original permit issued by the registered customs and the exemption permit of inspection at the border customs to Lao Bao. 51

56 10Wait for the vehicle to cross the border and present the original documents of 9 at the Lao Bao customs. Obtain a permit for bonded transportation to Hanoi (manual). 11Inspection of the cargo at the registered customs. After completion, the importer receives the cargo. Fig. 5-1: Procedural Flow of Eastbound Service 2. Westbound service The procedure for transporting cargo from Hanoi to Vietnam is as follows (Fig. 5-2). 1The customs broker clears the customs for export at the registered customs (partially computerized). 2After obtaining a customs permit,)sends on consignment the original export permit to the driver of the vehicle on which the cargo is exported. Make sure that the documents will 52

57 arrive at the border by the time the cargo arrives. 3Transmit the export information to the customs brokers in Laos and Vietnam, currently by facsimile or PDF. 4Undergo inspection of cargo and documents at the border customs (Lao Bao) and cross the border. 5The customs broker in Laos prepares transit documents. 6Transit procedure at the Densavanh customs (manual). Transport the cargo in bond in Laos. 7After transloading cargo at the transloading facilities in Savannakhet, complete the transit procedures at the Savannakhet customs (manual) and cross the border. 8As the import customs clearance (EDI) in Thailand has been completed based on the data received in 3, the import permit information is forwarded to the Mukdahan customs by EDI. 9Import confirmation at the Mukdahan customs (EDI). 10Transport to Bangkok. Fig. 5-2: Procedural Flow of Eastbound Service 53

58 54

59 Section 3 Service time line On the East-West Economic Corridor at present, two vehicles exchange cargoes at Savannakhet. A Vietnamese vehicle transfers the cargo from Hanoi bound for Thailand to a Thai vehicle and receives the cargo bound for Vietnam. A Thai vehicle transfers the cargo bound for Vietnam to the Vietnamese vehicle, receives the cargo bound for Thailand and transports it back to Bangkok. The time taken for this process is shown in Fig Fig. 5-3: Current Transportation Time Remark 1) Densavanh to Savannakhet 2) Savannakhet to Denavanh 3) Densavanh to Savannakhet 55

60 (1)Eastbound service (Bangkok-Savannakhet) The cut-off day for submitting documents is two days prior to departure, counting backwards from the day of the import procedure in Vietnam. In Vietnam, an application for a customs permit is made on the assumption that document preparation takes one day and customs clearance takes one day. In addition, as the original of this permit must be presented at Lao Bao, it needs to be obtained permission with enough time allowance. The export customs clearance procedure in Thailand has been expedited by the introduction of EDI and the process from document preparation to issuance of the permit takes only one day. Transportation from Bangkok to Mukdahan takes about 10 hours. The driver aims to pass through Mukdahan in the morning immediately after the customs opens (the customs are supposed to open at 8:00 a.m. but usually open at 9:00 a.m.). It takes about 30 minutes to cross the border at Mukdahan. It is also confirmed that the border crossing at Densavanh takes about 30 minutes even though the procedure is conducted manually. As a result, the vehicle can arrive at Savannakhet transshipment site by 11:00 in order to exchange cargo with the vehicle from Vietnam. (2)Eastbound service (Savannakhet-Hanoi) After exchanging cargoes with the vehicle used in (3) below for the return trip, the driver: - stays in transshipment site to take a rest and leaves early in the morning, or - leaves and takes a rest in Densavanh. In either case, the vehicle arrives at Densavanh until 8:00 the next morning and completes the procedures to pass through. In an actual measurement, the border crossing at Densavanh took one hour and the border crossing at Lao Bao took one hour; it took longer than at other points probably because it was a Sunday and the license had not been obtained for some of the cargo and therefore there was a slight trouble with customs clearance at Lao Bao. Even so, since the Lao Bao customs deal with not only transit but also import customs clearance, more time may be required than at the Laos customs that only engages in transit procedure. After driving through Vietnam for 20 hours, the vehicle reached Hanoi early in the morning. (3)Westbound service (Hanoi-Savannakhet) The cut-off day for submitting documents is two days prior to departure to allow for preparations for export customs clearance. The documents are sent to Laos and Thailand. The time for transportation from Hanoi to Laos is assumed to be 20 hours. The vehicle arrives at Lao Bao in advance so that it can pass through the Lao Bao customs immediately 56

61 after it opens. The border-crossing procedure takes about 30 minutes both at Lao Bao and Densavanh. The time required from Densavanh to Savannakhet is about 4 hours. The vehicle arrived around 1:00 p.m. (4)Westbound service (Savannakhet-Bangkok) After exchanging cargoes with the vehicle used in 1 above for the return trip, the vehicle passed through Savannakhet and Mukdahan in the evening. It arrived at Mukdahan late but overtime customs procedure was available when customs broker asked for. It took 30 minutes respectively. After a 10-hour drive including break time, the vehicle reached Bangkok the next morning. Section 4 Customs Clearance in Vietnam Figure 5-4 shows the process and time taken for the whole procedure from document preparation observed at a customs broker s office. For export, only one item was declared and so it should have been easy to prepare the documents. Nevertheless, it took a very long time for the document preparation, reply by EDI, customs inspection, etc. For import, the same as for export, a simple procedure for four items with the same statistical code took a long time. However, flexible handling was observed when it was found while preparing the documents that the import license was pending and had not been obtained. In this case, an import customs permit was not granted but bonded transportation from Lao Bao to Hanoi was permitted. In this survey, the number of samples was small: only one case of declaration was observed closely in order to follow the progress over time in detail. Still, the result proves that the customs clearance procedure takes a long time. In addition, for cross-border transportation, the originals of the above-mentioned documents must be sent to the border customs. The lengthy customs clearance procedure and the requirement to submit original documents to the border customs lie behind the requirement to submit documents two days before departure for transportation on the East-West Economic Corridor. Transportation companies strongly want the time required to be shortened by EDI transmission to the border customs. 57

62 Fig. 5-4: Survey of Time Taken for Customs Clearance in Vietnam Regarding customs clearance in Vietnam, the following points should be noted: An interactive system has been introduced whereby a reply is shown in the customs reply column when the declaration is accepted by EDI and, by watching it, the broker can see the status of processing of the declaration (see Fig. 5-6). Since there is no guideline concerning the time for reply, it is not known when a reply will be made. Therefore they have to make an inquiry and then consider what to do. Original documents must be submitted along with EDI. The form for EDI declaration is not the same as that of the paper declaration and therefore the information on the manual declaration form needs to be entered again (wasted time). The declaration documents must bear the original signature and company chop of the shipper/consignee. The time to obtain them needs to be taken into account. Preparation of customs declaration documents requires a lot of work. In Japan, items that classified as the same statistical code are allowed to be added up as one item and only the total amount needs to be written. In Vietnam, data must be entered for each item on the invoice (one line for one item) even though they classifies as the same statistical code. Moreover, the item name must be entered in Vietnamese and the name of each product registered at the customs must exactly match the registered product name (Fig. 5-6). The declaration language must be in Vietnamese. However, most invoices are written in English and what is written in English must exactly match that in Vietnamese. It takes much effort to think of suitable Vietnamese translations. 58

63 Fig. 5-5: EDI Customs Clearance in Vietnam 59

64 Fig. 5-6: Customs Declaration EDI Customs Declaration A customs declaration number is sent back when the declaration is accepted. The status of inspection is shown in the reply column. The difference in the form incurs needless work of entering the same information twice. Written Declaration 60

65 Section 5 Transit An on-site survey was conducted this time between Savannakhet and Mukdahan. In Savannakhet, facilities have been expanded and improved with the completion of CCA. Also, with the introduction of EDI declaration at Mukdahan, the time and work required for border crossing have been reduced. As a result, a vehicle from Thailand which has crossed the border can exchange its cargo with the cargo from Vietnam at the transloading facility in Laos and re-enter Thailand on the same day Customs clearance procedure The transit procedure is completed in a short time, though still manually. In Laos, there are only a few (two or three) major forwarders dealing with international logistics service. Their strong connection with customs can succeed in realizing the smooth and prompt transit procedures. This is regarded as a sort of AEO or fast lane system for logistics providers. One problem is the office hours of the customs. The customs in question opens from 8:00 to 22:00 for persons only. For cargo, it opens at 9:00, takes a lunch break, and closes early in the evening. These irregular office hours cause a problem for cargo transportation. Even so, major improvements have been made in recent years as follows: Overtime customs operation, which was hardly ever available, has become available if requested on the previous day. Passage on Saturday and Sunday has become possible if requested on Friday. As a result, Time is saved by enabling a vehicle from Thailand to re-enter Thailand from Laos on the same day if it applies overtime operation to border customs, and A weekend service is available in which cargo sent on Friday arrives on Sunday so that the customers can receive the cargo from Thailand or Vietnam at the beginning of the week. Transportation by vehicle from Vietnam needs to be improved. A vehicle that departs Lao Bao early in the morning and enters Laos would be able to re-enter Vietnam (without staying overnight in Laos) if the customs stayed open till 8:00 or 9:00 p.m. Therefore, even without 24-hour customs, just a few hours extension of office hours would greatly reduce the time required for transportation. 23 See Fig

66 Fig. 5-7: Laos s Transit Documents On the left is the declaration in ASEAN s standard form (manually prepared and submitted). On the right is a certificate of seal check by the border customs, which is used by the exit border customs to recheck if the container was opened. 62

67 Fig. 5-8: Container Scan Report At present, container scanner devices are installed in Mukdahan and in a suburb of Savannakhet in Laos, one for each. Scanning is carried out for random inspections without exemption provisions. It is planned to be introduced in Lao Bao in the near future. Negotiations are now underway between transportation companies and the customs to exempt a container which has already undergone a container inspection in one place from inspections at other places. 63

68 2. Border Facilities With the completion of CCA in Savannakhet, a one-stop service has been introduced. As there is a bonded warehouse and crane, it is possible to store or transload the cargo. Transportation companies tend to use the transloading facilities operated by a private company in Savannakhet due to the cost. Fig: 5-9. Savannakhet border facility Section 6 Customs Clearance in Thailand It was confirmed that the customs clearance procedure in Thailand is quite different from that in Vietnam and has been considerably simplified. With the introduction of EDI customs clearance, though not completely paperless, the time required for document preparation and customs inspections has been reduced, and customs brokers, importers and exporters are more satisfied. The details are as follows. Customs declaration is made by EDI and the declaration number is sent back in a very short time (about 10 minutes). However, permits are not yet paperless and documents still need to be submitted in many cases. Document inspection is done by checking the data of the EDI declaration against documents, which is supposed to take about 30 minutes. However, like in Vietnam, it is not allowed to integrate commodities in customs declaration 64

69 even though same HS code is classified. Thus, each line of the invoice must be declared For export, combined declaration is now allowed. As the products of Japanese companies are more sophisticated, products are tend to classify as more detailed categories and consequently the input work should naturally increase. However, thanks to efforts to save work including the introduction of a master entry system of customs clearance data, document preparation does not take so long. In Japan, transmission by NACCS to the customs is possible with the signature of a registered customs specialist(license holder). In Thailand, a declaration is sent to customs after the e-signature of the shipper is obtained. In order to enhance the quality of declaration, customs brokers establish a process by which the checker checks the documents before requesting the shipper s signature. Fig. 5-10: Customs Declaration form in Thailand Declaration Screen (Export) Declaration is accepted immediately when the data are transmitted, and the status or judgment of customs inspection is entered in the customs reply column, so that the declarer can see the progress of the procedure. 65

70 Fig EDI System in Thailand Input Screen (Export) The screen for inputting the contents of the cargo. A master entry system is introduced. Fig Time Required for Customs Clearance Processing of declaration documents in an uncomplicated case takes about 5 minutes for a few items and minutes for many items, both for import and export. Examination by the customs then takes minutes. A customs permit will be granted, at the latest, within one day after the documents are obtained. 66

71 Chapter 6 Problems and Solutions for Introducing the Fast Lane System In this chapter, problems are identified based on the results presented in Chapter 4 and Chapter 5, and solutions are suggested in Section 2. The need for a fast lane system for transport companies is clarified in Section 3 in order to suggest the solutions, and the requirements for adopting fast lane system for transport companies are stated in Section 4. Section 1 Summary of Problems of the East-West Corridor Route Based on the results of the on-site survey mentioned in Chapter 4, there are two major bottlenecks to reducing the time required for transportation services on the East-West Economic Corridor. Customs clearance in Vietnam takes a long time (not only import/export customs clearance but also document processing for border crossing). Vehicles from Vietnam cannot reenter Vietnam on the same day and the driver must stay all night in Laos waiting for the border to open in the morning. As background reasons for these bottlenecks, this section summarizes the problems of the East-West Economic Corridor in Thailand, Laos, and Vietnam. (1) Thailand With the progress of EDI customs clearance in Thailand, import/export customs clearance can be completed within a day and data can be sent to the border by EDI, so there is no problem in terms of time. The time required to pass through Mukdahan has been reduced to 30 minutes provided there is no problem (if X-ray inspection is required, it takes another hour). With the facilitated overtime operation of the Mukdahan customs, vehicles from Thailand can enter Laos and return across the border on the same day (see Fig. 5-3). (2) Laos Although the transit procedure in Laos is done manually, it is possible to cross the border in 30 minutes under normal conditions (from stopping the vehicle at the border customs, to obtaining a permit and leaving; the customs inspection itself takes just over ten minutes). Therefore, no transportation company finds any problem in the time taken for customs inspection. In Laos, only a few brokers are allowed to handle the transit procedure and they have a status like fast lane system in their relationship with the customs, which ensures rapid processing. However, although the operation hours of the border customs are prescribed by regulations, actual operation hours are shorter. The customs are not open at night and therefore even if a vehicle 67

72 from Vietnam enters Laos early in the morning, it cannot leave there on the same day and the driver must stay for the night in Laos and leave for Vietnam the next morning. In the survey, the departure procedure at Densavanh took one hour. As the border crossing procedure at Lao Bao also takes a long time, unless the time for this part is reduced, it prevents vehicles from Vietnam entering and leaving Laos on the same day. The hardware aspects of border facilities in Densavanh and Savannakhet have been improved. In Savannakhet, in particular, a CCA has been completed. With respect to the road infrastructure, it is a four-hour drive between in Densavanh and Savannakhet transloading facilities, as measured in the survey. There is a lot of heavy-duty vehicle traffic on National Road No. 9 of Laos probably for exporting copper from the copper mine nearby and the road is severely damaged. Many cracks developed within three years after the road was opened, slowing down the traffic speed. The road is now being rehabilitated and JICA has decided to provide support. At present, sections totaling about 60 km have problems, accounting for just under 30% of the total length, according to the interview survey. Fig National Road No.9 The point 60km away from Savannakhet Road is under repair 68

73 (3) Vietnam Import/export customs clearance in Vietnam currently has bigger problems than in Thailand. Customs clearance for importing to Vietnam requires two days, so the items to be declared (documents and cargo) must be determined two days before departure. Even though worldwide, the deadline for export cargo tends to be set earlier for security reasons, setting the cut-off two days before departure is too early. Although EDI has been introduced to customs clearance in Vietnam as mentioned in Section 4 of Chapter 5, document inspection is still burdensome. Another problem is the requirement to present the original import permit for border crossing. There has been a request to use EDI for sending documents. Today, the Lao Bao customs also can see the data of the Hanoi customs 24. The border crossing procedure in Lao Bao tends to take longer than in Thailand or Laos, typically about one hour. In the survey conducted this time, it took about the same time as the procedure in Densavanh. The interview survey revealed that the Lao Bao customs not only checks the bonded cargo but also deals with import customs declarations and therefore it tends to take longer. Regarding transportation in Vietnam, vehicles cannot drive quickly on National Highway No. 1, because it is not a motorway but a community road used also by motorbikes and bicycles. Therefore, the transportation time between Lao Bao and Hanoi inevitably takes around 20 hours. The road surface is not good, and the jolting and vibration cannot be ignored. Table 6-1 shows the average driving speed in Laos, Thailand and Vietnam measured in the East-West Economic Corridor transportation experiment conducted in These data indicate that the transportation conditions are worse in Vietnam than in Thailand and Laos. Table 6-1. Average Transportation Speed on East-West Corridor (October 2007) Portion Average Sped Diving distance In Thailand 51 km/hour 640 km In Lao 53 km/hour 240 km In Vietnam 34 km/hour 670 km to Hanoi (Ref: Tokyo-Osaka) 76 km/hour 570 km Source: Summary of Partnership on International Logistics Competitiveness, February 2008, MLIT, MITI 24 According to the study group which conducted an on-site survey in December 2010 for JICA s Survey on improvement of customs procedures for trade facilitation in the Mekong region. 69

74 Section 2 Improvement Measures If we assume that the road transportation time itself will not be significantly reduced due to the reason that road condition remains unchanged in the short/medium period, then: simplification of the customs procedure in Vietnam (import/export customs clearance and bonded transit procedure) and re-entry of vehicles from Vietnam back into Vietnam within the same day (including inspection at the border within 30 minutes) would significantly reduce the total lead time as shown in Table 6-2. The lead time would be reduced by 1.6 days for eastbound and 1 day for westbound (reductions of 42% and 35%), and the total time required would be 57 hours and 44.5 hours, respectively. Table 6-2. Effect of Improvement on East-West Economic Corridor Export from Thailand to Vietnam Export from Vietnam to Thailand Current Fast lane Start(Document cut-off) A 1st day 08:00 1st day 08:00 Finish(Arrical at Hanoi) B 5th day 06:30 3rd day 15:00 Required time A - B 94.5hrs 57.0hrs Start(Document cut-off) A 1st day 08:00 1st day 08:00 Finish(Arrival at abangkok) B 4th day 04:30 3rd day 04:30 Required time A - B 68.5hrs 44.5hrs Time reduction effect 39.5hrs 24.0hrs The improved operation schedule is shown in Fig. 6-2, which includes the effect of the fast lane system at the border customs which reduces the time required for border crossing to 30 minutes. According to Fig. 6-2, if a vehicle from Vietnam is scheduled to leave Vietnam from Lao Bao at 8:00 in the morning so that it can re-enter on the same day, then the departure of the Thai vehicle and the Vietnamese vehicle can be extended by one day. This is very attractive for import/export companies. 70

75 Fig Improvement of Time Schedule on East-West Corridor Reference(Current schedule:re-fig:5-3) Remark 1) Densavanh to Savannakhet 2) Savannakhet to Denavanh 3) Densavanh to Savannakhet 71

76 1. Time reduction in customs clearance procedure in Vietnam (1) Import/export customs clearance The introduction of EDI customs clearance for import/export procedures in Vietnam will greatly reduce the time required for transportation, which is currently twice that in Thailand. If it could be reduced to the same time with Thai, the procedure would take one day less, and so the cut-off time in Thailand would also be extended in line with that in Vietnam. It would then be possible to delay the departure of cargo from Thailand so that it can cross the border in the afternoon. Although EDI declaration has started for import/export customs clearance in Vietnam, it is not perfectly paperless and it still takes a long time to prepare the customs documents and carry out the customs inspection. Therefore, it would be beneficial to introduce the fast lane system based on the AEO system for importers/exporters. However, it is expected that; if various customs procedure improvement projects that are in progress (or planned) including further improvement of EDI declaration, the fast lane system would not reduce the customs clearance time by as much, in the case of consolidated cargo, it is unlikely that all shippers are AEOs authorized to use the fast lane system (the same tendency as observed in the EU); these non-aeo shippers would hinder rapid services and so there would be practically no benefit to transportation services. Thus, the fast lane system based on the AEO system for importers/exporters will have only a short-term effect on the East-West Corridor, and no effect on co-loading. (2) Bonded transportation procedure Import/export customs clearance in Vietnam requires a two-stage inspection: at the registered customs office, and customs at the point of cargo entry/departure. For transportation on the East-West Economic Corridor, the original import/export permit obtained in Hanoi must be presented at the Lao Bao customs, and many have pointed out that this procedure needs EDI. However, more sophisticated measures may be possible. First, bonded transportation from the Vietnamese border to the registered customs is included in the import/export declaration at the registered customs office. Import/export customs clearance naturally takes some work and time in order to decide whether to permit import/export. However, bonded transportation is merely transportation for the purpose of import/export customs clearance and the inspection should be simple This is proved by the simple transit procedure in Laos. In Japan, normal import/export customs clearance is based on a licensing system, while bonded transportation is based on an approval system; the procedure is simpler for bonded transportation than for import/export customs clearance. 72

77 One suggestion is to simplify the bonded customs clearance application procedure by introducing the fast lane system for transportation companies and shifting from the current system [obtaining an import permit from the registered customs office in Hanoi] (the destination customs permit to accept the cargo) forwarding to the border customs [permit for transportation to the destination] to the Japanese system [obtaining a permit for transportation at the place of departure] [the destination customs check for cargo arrival]. This would eliminate one step of the procedure, and simplify and speed up the procedure. It has long been known that the procedure for bonded transportation in ASEAN is inefficient and problematic, and a simplification project called ACTS (ASEAN customs transit system) Project has been launched. To date, studies on technical factors including the introduction of IT have been conducted by various parties, and at the end of 2010 they decided on a pilot project on the north-south route through Singapore, Malaysia and Thailand. Therefore, simplification of the bonded transportation procedure on the East-West EconomicCorridor is consistent with this direction and is likely to be approved by ASEAN and GMS countries. Moreover, since MJ-CI action plan.also proposes the feasibility study for developing bonded transport system, this is strong incentive for improving East-West Economic Corridor bonded transport system 73

78 Fig Concept of Improving the Bonded Transportation System Hanoi resistered customs Lao Bao custom s 3 Hanoi registered customs 1 Hanoi logistics company 2 1Paper-based import declaration at Hanoi registered customs 2Delivery original permit to Lao Bao customs 3Release to Hanoi CURRENT Hanoi resistered customs Lao Bao customs 3 Hanoi registered customs 1 Hanoi logistics company 2 1,2 procedures are transformed into EDI-basis IMPROVE DESIRABLE IMPROVE Lao Bao customs 3 Hanoi registered customs 1 Hanoi logistics company 2 1Lao Bao customs can allow only bonded transport by EDI 2Hanoi registered customs can receive EDI-based import declaration 74

79 2. Re-crossing the border by a Vietnamese vehicle on the same day (1) Customs office hours A vehicle from Thailand can cross the border into Laos and return to Thailand on the same day, but a vehicle from Vietnam currently cannot, because the Vietnamese vehicle must travel further than a Thai vehicle. If the Vietnamese vehicle could reenter Vietnam on the same day, the transportation time would be significantly reduced, but it depends largely on the operation hours of the customs. This is the main reason for the demand for 24-hour border customs open. However, the customs does not need to be open 24 hours. As shown in Fig. 6-2, it would be sufficient to extend the operation hours to around 9:00 p.m. Even though users naturally want 24-hour border customs, in fact other customs houses at various border crossings in ASEAN where traffic is far heavier than on this route do not open 24 hours 26. On this route, flexible provision of overtime customs clearance services would be far more effective because the volume of cargo transported is not large enough to cover the cost of keeping the customs open 24 hours. However, if X-ray inspections are conducted at the Lao Bao customs in the future, entry into Laos will be delayed by another hour and the operation hours at night would need to be extended accordingly. It is crucial that the fast lane system guarantees reenter the border on the same day even if an X-ray inspection is conducted. (2) Mechanization It is necessary to analyze whether the cargo volume is worth extending the customs operation hours and how the personnel cost of overtime should be borne. Moreover, MJ-CI action plan suggest that border crossing be implemented within 5minutes. In this context, the operation depending on human based operation seems difficult to achieve this target. Thus, a mechanized system is worth considering. Although border crossing by RFID is being planned and experiments are being conducted, there may be an easier way. One example is the Card System adopted by the Chinese side at the border (Langson) on the route connecting China (Nanning) and Vietnam (Hanoi), as described as Fig In this system, the export information and the vehicle s information are entered into a card at the relevant customs (in most cases the Logistic Zone in Ping Xiang). When this card is inserted in the card reader at the border post, the gate opens and the vehicle can pass through (the card is collected). 26 At the Singapore/Malaysia border, for example, the customs in Malaysia does not open at night, even though the customs in Singapore is open 24 hours. Also, transportation vehicles between Bangkok and Kuala Lumpur basically cannot cross the border at night. 75

80 This is a much simpler system and would require little investment; it is worth considering as an option for simplifying the border crossing procedure. Fig Card System at the Langson Border CHINA Customs 通関 Border logistics zone Border check point VIETNAM 2Bonded 1Export transport declaration Registered customs 通 3Border pass permit Transshipment site 4Card reader Border Border customs China Vietnam Advanced import declaration 6Delivery to Hanoi 5Transhippment and bonded transport permit Permit Submission of import declaration Procedure in China 1Export declaration at inland customs where exporters are located 2Bonded transportation to border 3Acquiring border pass permit at Ping Xian customs in Pin Xian logistics zone. Instead of permit document, drivers can received the Card input the cargo and vehicle information 4Drivers forward to border, Insert the card into card reader located at border check point. Card is collected and border gate will open. Border pass comes to be possible 76

81 Section 3 Introduction of Fast Lane System for Transportation Companies In Thailand, Vietnam, Laos and Cambodia, as mentioned in Chapter 3, there are various preferential systems for excellent companies except those in Cambodia. However, the AEO system has only just been introduced in Thailand and Vietnam, where it is available to importers and exporters only. The AEO system was designed to boost security after the 9/11 attacks in the U.S. to provide a simplified customs fast lane for companies with high security standards. However, looking at the situation of the AEO system in the U.S., Japan, and the EU, there are few complaint about ordinary import/export the procedures ranging from declaration to permit receipt as well as actual time required fro customs procedure. As the result of it, few companies feel the advantage of the AEO system in terms of customs inspection (and yet they apply for AEO mainly because they want the status as an AEO and expect that expansion of the mutual authentication system in the future will bring more benefits; they do not currently expect faster customs procedures,). If paperless customs clearance by EDI is achieved as intended, importers/exporters will not benefit from the fast lane system in terms of faster customs clearance. In cases where rapid transparent customs clearance is currently not ensured, such as in Vietnam, Laos and Cambodia, the fast lane system would immediately provide the advantage of faster customs clearance. However, since these countries are also planning to introduce EDI customs clearance with a risk management system, the advantage of faster customs clearance will diminish in the medium and long term 27. On the other hand, for transportation companies, simplification of border crossings and bonded transportation through the fast lane system would be advantageous for cross-border transportation that requires customs procedures. This is because the border crossing and bonded transportation procedures rely on the liability and status of the transportation company, not the importer/exporter, as evidenced by the fact that a bill of lading issued by the transportation company (master truck B/L) is required. As discussed in the previous section, if the fast lane system for transportation companies improves the bonded transportation procedure and reduces the time required for border crossing, transportation companies can remarkably shorten the lead time. ASEAN also plans to create an excellent company system by 2016, and the introduction of the fast lane system for transportation companies is consistent with the purpose of this plan. 27 See Chapter 3, Section 2 3. Preferential system of Thailand 77

82 Section 4 Conditions for Authorizing Fast Lane System to Transportation Companies When the customs grants fast lane authorization to transportation companies, it will require the ability to manage the whole supply chain to ensure security, including tracing of cargo, as well risk management and financial capacity to respond in the event of emergency and unexpected happenings Companies therefore need to meet the following requirements. (1) Electronic application The ability to process customs declarations and inspection procedures by EDI is necessary. In particular, applications for bonded transportation in Vietnam need to be forwarded electronically from Hanoi to Lao Bao by EDI. In other countries, too, the ability to submit electronic applications is a prerequisite for AEO status. (2) Ensuring security In order for customs to grant fast lane authorization to a transportation company, the transportation company must be able to ensure the safety and security of transportation in compliance with laws and regulations. In GMS and ASEAN, it has been agreed to simplify the procedure for cross-border transportation and to allow transit cargo to cross the border after confirming its safety basically by checking the documents and the seal. Naturally, strict compliance by importers/exporters and transportation companies is essential, but no evaluation system has been conducted for their compliance scale. In this regard, GPS, which provides integrated cargo control from departure to arrival, seems to be a crucial condition for the introduction of the fast lane system. Although the use of GPS is expanding in Thailand, Vietnam and Laos have been slow to introduce it and real-time locating is not yet possible. As there are no specific regulations concerning the reception of GPS satellite waves, satellite waves can be received in any country. On the other hand, mobile terminals (positioning devices) to send data to the control center are subject to the regulations of each country similar to the Radio Act, and a license is needed to use them. Consequently, in order to transmit radio waves in all three countries, type approval must be obtained in each country (in this case, the SIM card for the mobile terminal needs to be replaced in each country).otherwise, transmission by international roaming is possible, though the international roaming charges would be high. In order to use this service on a commercial basis, packet communication charges for international roaming should be kept low and a roaming agreement should be signed among 78

83 telecommunication carriers of each country. A project to introduce GPS for this purpose needs to be implemented. In addition, it is necessary to establish risk management measures to cope with unpredictable issues during transportation or problems in customs procedures. This, too, requires not only efforts by private companies but also cooperation with the customs of the transit country. At present, there is no scheme for unloading, keeping and inspecting cargo in transit that is found to be suspicious in the customs procedure, and reloading it after reissuing a permit. In terms of facilities, cargo storage under the customs control has become possible with the expansion of CCA. Currently, due to the lack of such a scheme, it is not clear how to respond if the cargo needs to be unloaded. To avoid this, all necessary procedures must be completed in advance, which places a heavy burden on advance preparations. In view of this situation, a system such as the fast lane system to absolutely guaranteed for passing the borders. If the following improvements were made, it would greatly enhance the transparency of this route. Fig Response to the Risk in Passing Uncertain for emergency procedures Difficulty on taking actions for emergency Current negative Cycle Complete preparation is required Excess attention for avoiding emergency Clarity for emergency procedures Easy on taking actions for emergency Future positive Cycle Easy recovery actions Low workforce for preparation procedures 79

84 If these improvements were made, it would enable the following for consolidated cargo: a shipment with a procedural problem would be temporarily stored in the customs warehouse until the inspection is complete and, after the problem is solved, it would be delivered later in the next cargo or a separately arranged truck, other shipments with no problem would be transported to the destination on schedule, leaving only the shipment with the problem. This would avoid all vehicles having to stop even though only a part of the cargo has a problem. Taking these risk reduction measures will effectively promote transportation on this route and is strongly desirable for the customs for risk management. (3)Financial measures Even with the security measures mentioned in (2), it is impossible to completely eliminate unforeseen events such as accidents or deviation from customs rules, in which case financial settlement will eventually be necessary. Therefore, financial preparation by a bond system would be effective. In view of the premium rates for standard cargo insurance in Japan, the bond rates could be equivalent to the general customs duty x 0.2% 2% (lower for excellent companies). These rates would be borne by the shippers by way of a bond fee and, if the Card System were adopted, the shippers would also bear the cost of maintaining the system. It is not unusual in Europe and the U.S., though unfamiliar in Japan, for bond fees to be collected for customs clearance procedure. Transportation companies can use the fast lane by contributing to the bond fund and provide rapid services. It would also be beneficial for shippers in that the bond fee will be clearly visible, enhancing the transparency of the value of the fast lane service. This idea of establishing a bond system is consistent with the policy of GMS and is expected to be acceptable to those concerned According to Article 10 of Annex 6 of the GMS Agreement, the operator of transit cargo transportation (declarer) is liable for unpaid taxes or other public charges and cargo damage during transportation. This is a heavy burden for the operator. Therefore, it is decided to establish an issuing/guaranteeing organization which guarantees the loss. 80

85 Chapter 7 Project and Road Map A program is to be designed to expand the fast lane system described in Chapter 6 as Task 1 Fast Lane System for Transportation Companies and two other tasks to improve it, the three tasks would be as follows: Task 1 Fast lane system for logistics providers Task 2 Support for East-West Economic Corridor Business Task 3 Other Related Programs Time table is summarized in Fig.7-1. Section 1 Task 1 Task 1 is designed to solve the demand of the customs for introducing fast lane system based on the AEO system for transportation companies referred to in Chapter 5, and consists of (1)an electronic application system, (2)creation of a security system, and (3)creation of a bond system. Item (2) is further divided into two programs for commercialization of the GPS system and enactment of emergency measures for border crossing. Additional measures that would be effective are: (4) simplification of bonded transit procedure in Vietnam, (5) establishment of procedure for one-day round trip across the border, and (6) a card system for border crossing. (1)Electronic application system An electronic customs clearance system is planned and progressed, and it will need to be expanded. Although ASEAN already determined to develop ASEAN Single Window Plan and National Single Window System, the progress is not sufficient as like Vietnam and Laos. Considering the East-West Economic Corridor, procedures for bonded transportation and certificates of origin also need to be computerized. Since AEO qualification is allowed only for business entities that enable to conduct electric application between public authorities in EU, Japan and USA, it is reasonable for ASEAN to adopt similar practice for fast lane system. (2)-1.GPS system One of the critical requirements for introducing a fast lane for transportation companies is total management of supply chains. The most realistic means for this is management by GPS. To enable the GPS system practical, it is necessary to examine the area of the packet-switched network (or alternative SMS transmission) in Laos and to reduce communication charges by 81

86 reaching an agreement on international packet communication charges among telecommunications carriers in Thailand, Laos and Vietnam. To achieve this, the area to be covered by the packet-switched network along East-West Economic Corridor will need to be studied. (2)-2. Enactment for emergency measures The procedure for unloading, temporary storage and reloading of transit cargo will be clearly defined in the event that customs inspection is necessary, using the CCA of the border facilities that are being constructed. In addition, the requirements and procedures will be clearly decided between logistics companies and the customs to ensure prompt re-transportation of cargo when no problem is found. (3)Creation of a bond system Bond system is not only important to finance the compensation for trouble/ accident resulting from fast lane system, but also necessary to cover operating cost for fast lane system including maintenance and innovation. In order to do this, the size of the fund (assuming the accident rate and bond rate), organization, and the conditions for the actual operator, etc. will be taken it into account. (4)Simplification of bonded transit procedure in Vietnam The requirement and necessary procedures for simplifying the bonded transit procedure in Vietnam as shown in Fig. 6-3 will be decided by the customs and logistics companies. (5)Establishment of procedure for one-day round trip across the border It is important for logistics providers to clarify the conditions for re-entry the Vietnam/Laos border within the same day. Additionally, feasibility of custom s overtime operation and its cost will be studied for guaranteeing one-day round trip across the border. (6)Consideration of a card system If the study in 5 shows that alternative would be effective in order to avoid human-based operation, the introduction of a card system as described in Fig. 6-4 will be considered. In that case, the present situation in Lang Son will be studied and the equipment requirements, installation cost, operation cost and maintenance cost will be determined, and then the usage fee will be estimated. 82

87 Section 2 Task 2 Even though Task 1 can speed up traffic on the East-West Economic Corridor, it will not directly increase the traffic volume. As stated in Chapters 3 and 4, transportation procedure has already been simplified to some extent. Although logistics companies recognize the potential of this route, there has not been the expected shift away from sea cargo. As a result, companies cannot make a profit because of the small volume of cargo, cannot reduce the cost because of the empty return trip, and cannot gain support from customers. Thus, they are trapped in a vicious circle. It was previously pointed out in 2008 that the cost obstacles are larger than the institutional obstacles 29. It is therefore impossible to increase the profit and reduce the cost only by the efforts of individual companies. In order to activate East-West Economic corridor in spite of a little return cargo volume, logistics companies need to collaborate and increase the number of services while sharing the cost or deficit. Some logistics companies have already begun to consider co-loading. If they were to operate three services a week, for example, they would be able to meet the demand for JIT delivery by automobile manufacturers in Thailand. Therefore, to make this route profitable in about three years, measures are needed such as sharing or compensating for the initial deficit, reducing relevant taxes, and subsidizing the promotion cost. As the quality of services of each company such as the transportation route and time schedule is similar, it should be easy to resolve differences and reach an agreement. The following measures are suggested: Formation of a transportation consortium Consideration of a cost/profit sharing system Development of an operation plan including the facilities to use, route, schedule, etc. Development of a plan to promote activities Monitoring the progress of fast lane system Activation in services on this route would also benefit Laos. If services are operated three times a week, it would be possible to invest in Lao transportation companies to encourage them to acquire additional equipment such as trucks and chassis, and to shift from the current container transloading system to the system of changing the head. Currently on this route, Vietnamese chassis are not allowed to enter Thailand. Thai chassis are not allowed to enter Vietnam. Lao chassis are allowed to enter both countries. 29 See Chapter 4 Section 1, 6. Issues to be addressed concerning the East-West Corridor as shown in the ASEAN Logistics Network Map 83

88 Therefore, it is common knowledge that the best way is to transport a Lao chassis and to change the tractor head in Vietnam and Thailand. However, given the small volume of cargo, it is difficult to make the necessary investment 30. The Lao regulations provide that Lao chassis need to reenter Laos within 90 days, which is no problem considering the lead time of transportation on the East-West Economic Corridor. It would undoubtedly result in cost advantage. If this system provides more business opportunities to Lao logistics companies, it would increase the possibility of Lao involvement in this transportation. This is effective to avoid remaining Laos as transit country which cargoes pass through. Also, an increase in transportation services from this region to Thailand and Vietnam would increase the development potential of Central Laos. Savannakhet is now working to establish a free zone by inviting foreign capital. Improved access to Bangkok and Vietnam would help attract foreign capital. In particular, operation of three-times-a-week transportation services on the East-West Economic Corridor would help Laos take advantage of being a land linked country that keeps regional bonded stock and provides goods under the JIT system. By creating facilities in Densavanh, it may be possible to develop the business of consolidated loading of two cargoes for Da Nang and Hanoi. 30 A Japanese logistics company set up a local subsidiary in Savannakhet to implement this method, but it has not been realized yet. 84

89 Section 3 Task 3 Task 3 consists of other programs not included in Task 1 and Task 2, particularly those that Japan is good at and can participate in. (1)Road infrastructure The road infrastructure is adequate in Thailand, but not in Vietnam and Laos. The rehabilitate of National Road 9 in Lao will help promote East-West Economic Corridor. Further improvements are desirable to make it possible to drive at night (such as by installing cat s eyes or reflective plates). The condition is serious on National Road 1 of Vietnam. Although efforts at rehabilitation, etc. have been made and the construction of an expressway is planned, dramatic reforms are not expected at present. (2)Customs clearance system The expansion of EDI customs clearance was discussed in Chapter 2. Support from each donor including risk management is expected. As of the end of February 2011, JICA is now evaluating the project to date to improve the customs clearance procedure in Thailand and is likely to conclude that Thailand is already able to make improvements by itself. In fact, it is becoming easier to obtain customs permits in Thailand by using the EDI customs clearance system. For customs brokers, however, much data entry work is still needed in preparing a declaration, and the situation is even worse in Vietnam. Japan is adopting customs license holder system that limits only qualified personnel who makes it possible to conduct customs declaration. Needless to say, the purpose of this system is to keep high quality of declaration. This system makes it possible to conduct customs declaration under the name of customs license holder instead of the name of shipper/consignee. It seems effective to introduce similar system in ASEAN areas 31 In addition, Japanese customs allows to integrate items of the same HS code when declaration, which can save time for paper working for customs brokers. If this system and know-how can be transferred, it would be effective. Specifically, the following matters should be considered: Introduction of the customs license holder system Transfer of the program to train customs license holder system HRD to customs officer(the know-how for customs officers to make judgments cargo details from the single HS code combining some kind of commodities) 31 Although it is recognized Thailand has customs license holder system, sign of shipper/consignee is required instead of license holder s sign. This indicates that customs license holder system is not necessarily functioned as Japan. 85

90 Table 7-1. Program and time table 86