Trade Logistics and Facilitation

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Roland Robertson
5 years ago
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1 Trade Logistics and Facilitation Customs and Border Management: New insights on an old problem Gerard McLinden International Trade Department

2 Typical perspectives My goods were stuck in Customs for 3 weeks They are inefficient, poorly managed, lacking in competence, oblivious to the needs of clients, unwilling to accept foreign documents, resistant to change and unwilling to give up power We need a Single Window system like Singapore We need to sack everyone in Customs and start over This is pretty simple stuff - why is it so difficult to fix?

3 The Trade Transaction GOODS S INFORMATION B PAYMENT

But its not so simple The import/export/transit process is complex It involves many players, with different objectives, incentives, competence and constituencies Private sector far from homogeneous

4 But its not so simple The import/export/transit process is complex It involves many players, with different objectives, incentives, competence and constituencies Private sector far from homogeneous not always the good guys Lack of genuine political will and commitment to make tough decisions that affect local constituencies that benefit from the status quo No lack of good ideas But which ones make sense?

5 A simplified map of the international trade process Air, Sea, Land International Transport Ship s Documents Manifest Bills of Lading Sea/AW Bill Container Plans Pay Taxes Clear Customs Release Goods Customs Port Invoice Packing List Declaration Delivery Note Storage IMPORTER DOMESTIC SUPPLY CHAIN Quotations P.O.s Delivery Notes Con. Notes Invoices Statements Raw Materials Packaging Transport Storage Payments Remittance Advice Port Processes Internal Transport Storage Container Handling Loading Book/Confirm Transport Pay Taxes Clear Customs Release to Port Shipping Documents Foreign Chambers Commerce Overseas Embassies Post/ Courier Certificates Of Origin Legal Invoices Licenses Certificates Government Approvals P.O. Contract Terms Delivery Instructions L.O.C. Bank L.O.C. Packing List Invoice Finance Ministry MANUFACTURER EXPORTER Chamber of Commerce Pay Government Departments & PIAs Customs LOC Approval LOC Courier Invoice Packing List Declaration Delivery Note Certificates Of Origin Form A EUR.1 Licenses Certificates Government Approvals Port Port Receive Goods Customs FOREIGN BUYER Bank

6 Revenue Generation Duties; Taxes; Fees Finance, Commerce Transport Health, Agriculture, Industry Interior Military Entry Controls Intellectual Property Prohibited Transactions Health and Safety Environmental Protection Health and Safety Entry Controls International Security Dumping; Industry protection Patent; Trademark; Copyright Drugs, narcotics; Pornography; Money laundering; Fraud Vehicle safety; road taxes Insect/pest control; Toxic wastes; Production processes; Manufacturing emissions; Endangered species Food; Consumer goods; Animal disease; Plant disease; Generic safety Immigration Anti-terrorism; Gun controls; Arm trafficking; Weapons of mass destruction

7 Resent research suggests Customs only responsible for one third of clearance delays Customs typically have: Risk management IT systems in place Private sector consultation mechanisms in place Understanding of the trade facilitation agenda Some performance metrics WCO blueprints and guidelines

8 What traders think Percentage of LPI respondents indicating the quality and competence of customs and other border agencies is high or very high, region averages 70% 60% Customs Other border agencies 50% 40% 30% 20% 10% 0% Logistics friendly Consistent performers Partial performers Logistics unfriendly

9 What traders think Percentage of LPI respondents claiming improvement in Customs and other border agencies since % 60% Customs agencies Other border agencies 50% 40% 30% 20% 10% 0% OECD East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East & North Africa South Asia Sub- Saharan Africa

10 The obvious conclusion is that focusing on Customs reform alone will not produce significantly improved border management performance Time for a new and more comprehensive approach to border management reform

11 No shortage of great solutions Integrated Border Management Coordinated Border management Single Window Systems Port Community Systems One Stop Border Posts ICT enabled Collaborative Border Management

12 But all based on similar themes Current Practice Focus on Agency requirements Control focus High levels of Physical inspection Focus on the goods Focus on identifying non-compliance One size fits all Limited use of ICT Adversarial relationship with trade Competition between agencies Limited incentives for compliance Limited cooperation with neighbors Limited operational statistics Future Practice Focus on trade supply chain Facilitation/control balance Intervention by exception Focus on information Compliance/non-compliance balance Flexible solutions for different clients Extensive use of ICT Constructive partnership with trade Collaborate border management Strong incentives for compliance Extensive cross border cooperation Clear measures of performance

13 The key question for reformers is: What level of ambition is realistic?

Depends on Clear understanding and agreement on the problems and reform priorities Degree of political will and commitment Clear Vision of the future state shared

14 Depends on Clear understanding and agreement on the problems and reform priorities Degree of political will and commitment Clear Vision of the future state shared by all key stakeholders Availability of resources Local capacity (public and private) Empowered counterparts to work with Realistic assessment of challenges and risks

a shared vision for the future Business process identification and mapping Reengineering to simplify and reduce

15 What Works in practice? Start with sound diagnosis and problem identification leading to agreement on priorities for reform Development of a shared vision for the future Business process identification and mapping Reengineering to simplify and reduce duplication Trade Information Website Single inspection policy Joint risk profiles (intelligence sharing) One time submission of documentary requirements Leading to development of an (ICT enabled) Single Window

16 One example of a Vision Implementation of a paperless trading environment in which 100% of all required import, export and transit documents are able to be prepared, submitted, processed and cleared electronically and appropriate duties, fees and taxes calculated and paid electronically; Government agencies share information and have rationalized their individual requirements and processes to eliminate duplication, redundancy and overlapping mandates;

17 One example of a Vision A trade information website is established to provide a single gateway to all information necessary to comply with import, export and transit requirements; The same website provides a user friendly gateway to complete the electronic submission and processing of regulatory requirements; Traders are informed of their rights and obligations and are able to challenge decisions through administrative and legal means;

18 One example of a Vision Adoption by all of a comprehensive risk management and compliance improvement philosophy leading to targeting of high risk shipments and reduced need for intrusive and time consuming routine physical inspection of cargo; Genuine incentives are provided for traders that play by the rules; There is real cooperation between government agencies and the private sector;

One example of a Vision One fee implemented to replace the range of different fees collected by regulatory authorities income distributed fairly to cover costs and finance maintenance of facilities

19 One example of a Vision One fee implemented to replace the range of different fees collected by regulatory authorities income distributed fairly to cover costs and finance maintenance of facilities and infrastructure; and Organizational structures and merit based HRM practices are implemented to emphasize value added activities and ensure officials are well trained and appropriately paid border officials are respected and are proud of their role.

20 Barriers identified Personal and organizational rivalries, competition for influence and conflicts of interest between agencies; Inadequate remuneration and incentives to engage in reform; Limited access to external assistance when required; Lack of experience in alternative regulatory environments; Lack of an effective regulatory framework governing the behavior of customs brokers and other intermediaries;

21 Barriers identified Resistance to change brought about by removal of existing unofficial incentives; Frequent leadership changes leading to a lack of willingness to support the long term effort needed to achieve meaningful improvement; Limited IT use and capacity in non-customs agencies; and Political interference in staff recruitment, selection and promotion merit not a factor in promotion.

22 Where to go for help?

23 Where to go for help?

Where to go for help? Gerard McLinden (E) gmclinden@worldbank.

24 Where to go for help? Gerard McLinden (E) Toni Matsudaira (E/F) Enrique Fanta (E/F/S) Tom Doyle (E/F)

Gerard McLinden Kees Van Der Meer World Bank

Lao PDR Trade Development Facility Risk Management Workshop 28 January 2011 Gerard McLinden Kees Van Der Meer Overview Context Aims of border management Di Drivers for change A changing paradigm International