Paperless trade facilitation for SMEs

Paperless trade facilitation for SMEs Mark GOH Prepared for UNNExT workshop on paperless trade facilitation for SMEs 2-3 Feb 2015, Bangkok, UN Conference Centre Paperless trade facilitation 1

Agenda Overview Key issues in TF in Asia SMEs and their challenges Priority bottlenecks ICT as the response ICT applications Pros Cons Paperless trade facilitation 2

Issues in TF What would the world be like without TF? Cost, time, cross/ mutual recognition of products, services, cash-to-cash cycle times How should policy look at these issues Deal with them directly Let the business community deal with it (MNCs) Adopt PPP approach Are they important to warrant attention Economic development, GDP, Paperless trade facilitation 3

Duval s presentation (2012)

Duval s presentation (2012) 18.75 4.75/23.5= 20% preparing for physical transport; 80% - preparing for trade - cf Pareto s Law

Duval s presentation (2012) 1. Time non value added, 2. time is cost and loss in cash conversion, 3. cost translates to lost competitiveness 18.75 4.75/23.5= 20% physical transport; 80% - preparing for trade - cf Pareto s Law

Trade Facilitation (TF) in Asia and the Pacific On average, it still takes 30 days to move goods from factory to deck-of-ship at the nearest seaport South Asia: 30 days, 6 days South-East Asia: 20 days, 4 days Developed economies: 10 days, 2 days? Improvements in TF could bring $250 billion in additional trade for Asia and the Pacific

So where is the paper? look at key International Paper Forms Key International paper forms Negotiable Bill of Lading Insurance Certificate Consular Invoice Import/Export Licences Letter of Credit Cargo Declarations Certificates of Origin, Phytosanitary UNeDOCs recommends a single data modelling approach for: Paper documents (>70% paper) Electronic documents which are simply equivalent to paper documents Structured electronic documents UN/EDIFACT, Cargoimp, VDA, XML etc. Process driven mini messages, e.g. Web/Service Orientated etransactions UNeDocs: Holistic Information Framework for Single Window

WTO s perspective of Trade Transaction GOODS S INFORMATION B Is it really that simple??? PAYMENT Paperless trade facilitation 10

GOODS GOODS GOODS S INFORMATION B S INFORMATION B S INFORMATION B Ctry A PAYMENT Ctry B PAYMENT PAYMENT GOODS GOODS Ctry D S INFORMATION B S INFORMATION B Ctry C PAYMENT PAYMENT Paperless trade facilitation 11

GOODS GOODS GOODS S INFORMATION B S INFORMATION B S INFORMATION B Ctry A PAYMENT Ctry B PAYMENT PAYMENT GOODS GOODS Ctry D S INFORMATION B S INFORMATION B Ctry C PAYMENT PAYMENT High degree of convolution, challenge in recognition harmonized system, Customs open hand in interpretation, longer than desired delays at borders, opportunities for informal facilitation, affects cashflow Paperless trade facilitation 12

Importer s Bank Importer Line of Credit Proforma Invoice Purchase Order Shipping & Funding Detail Marine Insurance Company Purchase Exportation Importation Confirmed Line of Credit Fund Transfer Proforma Invoice Exporter s Bank LC Confirmation Exporter Original B/L, Invoice, PO, Packing List Letter of Instruction Invoice, PO Shipping & funding detail Vessel Booking Request Vessel Booking Confirmation Bill of Lading Rated Bill of Lading Freight Forwarder / NVOCC AES Data exchange in International Trade Dock Receipt Dock receipt Pick-up & Delivery Order Customs (Export) Export Terminal Operator Dock receipt Bill of lading, Documentation Inland Carrier Export Declaration Export Declaration Ocean Carrier Importer Notice Manifest Vessel Manifest Port Release/Approval Arrival Notice Demurrage guarantee & payment Release/Hold Notice Customs House Broker Cargo Status Customs ( Import ) Converted Vessel Manifest Import Docs Import Terminal Operator Cargo Status Pick-up & Delivery Order Inland Carrier 20 actors; > 200 data elements; Manual procedures; Multiple data systems; > 30 documents or messages. Qn: Where should policy intervene? Paperless trade facilitation 13

Who are the stakeholders in TF? Many different ministries and executive agencies Ministry of Transport, Ministry of Finance, Ministry of Trade, Ministry of Health, Customs, Bureau of Standards, Veterinary services, Laboratories Private sector Commercial banks Freight forwarders, Importers-exporters Customs Brokers Shippers (MNCs & SMEs) Paperless trade facilitation 14

INTERNATIONAL TRADE TRANSACTION PROCESS BUY SHIP PAY Prepare For Export Export Transport Prepare For Import Import INVOLVES Commercial Procedures Transport Procedures Regulatory Procudures Financial Procedures Establish Contract Order Goods Advise On Delivery Request Payment Establish Transport Contract Collect,Transport and Deliver Goods Provide Waybills, Goods Receipts Status reports Obtain Import/Export Licences etc Provide Customs Declarations Provide Cargo Declaration Apply Trade Security Procedures Clear Goods for Export/Import Provide Credit Rating Provide Insurance Provide Credit Execute Payment Issue Statements Paperless trade facilitation 15 Qn: steps in each block, cost involved, expertise needed, transaction security especially $

We want to address the what, where, how, and why, when(?) of TF for SMEs Paperless trade facilitation 16

What should be objective of TF from policy makers perspective Paperless trade facilitation 17

What should be objective of TF from policy makers perspective Nurture trade environment, regional or global that is predictable (in terms cost and time at the borders), secure (no concerns for shippers on transport and claims) cost efficient (open book, completely transparent and visible to users) Paperless trade facilitation 18

How to achieve trade facilitation Simplification, Standardisation & Systemisation (Harmonization) of trade documents, procedures, practices Improving cross border logistics services Improving infrastructure (transport: intermodal & connectivity) Qn: how does each one speak to the SME?? Paperless trade facilitation 19

TRADE FACILITATION Simplification Systemisation Standardisation Steps to remove all unnecessary elements and duplications in formalities, processes and procedures Align national procedures, operations & documentation with international practices, conventions & standards. Process to develop internationally agreed formats for practices & procedures, documents & information. SME Too many steps in process, not enough manpower, time consuming, lacking language and technical knowledge Not well informed of national procedures, lacks access to platform to update and operate seamlessly No knowledge of good provider to provide cost effective solution, lack of capability & capacity building (expertise & tech) 5M s Paperless trade facilitation 21

Rec:19 Mode of Transport Rec:16 UN/Locode ISO Country Code Rec: 17 Payment Terms Rec:9 Currency Code Rec: 28 Means of Transport Rec: 21 Package Codes Rec:20 Units of Measurement Commodity Code Paperless trade facilitation 22

Look at framework for implementation Paperless trade facilitation 23

Focus of Trade Facilitation Provisions based on TAs (Bin and Misovicova, 2008)

Step by Step Implementation Based on International Standards Cross Border Data Exchange National Data Harmonization Document Simplification and Standardization Single Window UNTDED, Core Component Library, UN LOCODE and code lists, UNeDocs, Rec 34 UN Layout Key, Master Document, Rec 33, 34,35 UNeDocs + WCO DM = CBRDM UNTDED, TF Toolkit and Forms Repository Process Analysis and Simplification Business/Political Process - Collaboration Between Trader and Government (UN/CEFACT Rec. 4, Rec. 18), UN/CEFACT International Supply Chain Reference model, Unified Modeling Methodology (UMM), Global Facilitation Partnership for Trade and Transport (GFP) Audit Methodology Paperless trade facilitation 25

Where do we begin Advanced stages (E-docs, Automated processing, Pre-arrival processing) IATA e-freight case Take a phased approach Clearly identify issues with SMEs that are predominantly involved in export market Paperless trade facilitation 26

Concerns of SMEs Understanding technical regulations & standards Fees and protocol for using platform Assurance of security in trade (payment) and transit (T&L) Assurance of predictability - SMEs want predictability as it reduces need for inventory Transparency in release and clearance of goods, of laws and regulations Assurance in ICT and ecommerce Paperless trade facilitation 27

Bottlenecks Paperless trade facilitation 28

Priority bottlenecks Bottleneck Priority to SME Good practice 1 Processing/ clearance delays at BCPs *** Bangladesh 72 hrs (1999) -> 3 hrs (2009) 2 Lack of transit and transport agreement *** Green lane 3 Compliance with SPS * Philippines 4 Technical barriers to trade ** Thailand 5 Weak logistics systems ** Thailand 6 Poor infrastructure ** Laos 7 High admin fees, storage & handling costs *** Singapore 8 Limited IT usage *** Korea 9 Lack of accreditation facilities * Singapore 10 Excessive documentation *** IATA (efreight) 11 Lack of cooperation and coordination among trade supporting organisations *** Virtual 1-stop shop Paperless trade facilitation 29

Other SME TF Bottlenecks... Limited information about overseas markets and marketing consumers goods Additional market entry barriers Lack of attention behind and between borders Absence of comprehensive Aid for Trade Agenda Barriers to the international markets of goods and procedures at and around the borders Skilled human resources and technology Cost of trading remains high-prevents potential exporters competing in the global and regional markets Paperless trade facilitation 30

Trade Facilitation Bottlenecks Among the 39 Measures some of the provisions have partially been addressed but some provisions are very difficult to implement eg Detention, Test Procedures, Pre arrival processing, Establish and publication of average release time, Border agency cooperation, Use of international standards, Single window, Customs cooperation - these need more time. Issues of Advance Ruling, Risk management are similarly important but require time Paperless trade facilitation 31

Summary Imperatives for successful TF framework: strong political will; clear strategic plan; close co-operation with business community; well-funded and long-term technical assistance program based on partnership & trust Paperless trade facilitation 32