Trade Facilitation Role of Modern Technology

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Trade FacilitationRole of Modern Technology

• Hamid Alavi
• Regional Trade Facilitation Coordinator
• Middle East and North Africa Region, World Bank
• Prepared for
• E-Government BBL
• October 14, 2004

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What is Trade Facilitation?

• Facilitating market access
• Quality standards and lowering technical barriers
• Market access schemes
• Access to export finance and insurance
• Lowering transaction costs through
• Improved transport and trade logistics
• Enhanced information flows

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Lowering Transactions Costs

• Reduced transport costs
• Transparent and harmonized regulations
• Improved ports facilities and procedures
• Efficient and transparent customs procedures
• Simplified trade document processing and
  clearance processes

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Time is a Trade Barrier

• Trade occurs in physical space and moving goods
  requires time.
• Trade logistics costs are as important as tariffs
• Each day saved is equivalent to 0.5 tariff
  (Hummels)
• 7 of value of world trade is cost of
  administration of trade logistics (UNCTAD)
• Time becomes even more important in multi-stage
  production (global supply chain)
• of vertical specialization in trade (use of
  imported inputs for exports) has grown 30 in the
  past 20 yrs and accts for half of overall trade
  growth.
• Willingness to pay to save time
• Share of airfreight in US grew from 7 in 65 to
  30 in 98
• Airfreight 7 times as expensive as ocean shipping.

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Time is a Trade Barrier

• Imagine if the contents of a ship can be
  processed in half a day instead of a day
• Infrastructure capacity effectively doubled
• Twice the cargo
• Twice the of ships
• Twice the number of containers
• Increased harbor duties, excise and revenue
• Considerably lower cost to traders
• even more benefits
• These efficiencies offer wider attraction to
  trading partners
• Efficiency in vessel turnaround attracts new
  trading, market center, distribution business.

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Time is a Trade Barrier

• A wide-body jet can carry fresh produce from
  supplier in one hemisphere to the buyer in the
  other hemisphere on the same or next day.
• BUT it can take 10 days (in Yemen) to
• Process orders
• Obtain customs and TC approvals
• Book and schedule transport and distribution
• Obtain payment approvals
• Complete the transaction
• This means removing 10 days from the selling
  season, revenue that cannot be replaced

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Time is a Trade Barrier What Gains?

• Port efficiency improvements (from 75th to 25th
  percentile) could reduce transport costs for a
  country as much as shortening it distance from
  its trading partners by 9,000 km (IDB 2000)
• 100 million could be saved each year through the
  application of ICT (UNCTAD)
• Singapore gained 1 of GDP
• Tunisia case

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Trade transaction is a complex process

• Many documents
• Many players
• A typical trade transaction can take as many as
  150 different documents to complete
• Raw material and component supplier
• Manufacturer/assembler
• Customs agents/brokers
• Customs authorities
• Government authorities- export promotion/approval/
  stat.
• Local transport and warehousing companies
• Container handlers
• Port and harbor authorities
• Shippers (sea, air, road, rail, canal, )
• Bank and insurance companies
• Each have own set of paper forms and interactions
  with other organizations (incl. counterparts in
  importing countries) Take a look .!!

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Pay Taxes Clear Customs Release Goods
IMPORT
MANUFACTURING/ VALUE ADD
EXPORT
/Dues

Air, Sea, Land International Transport
DOMESTIC SUPPLY CHAIN
Storage
Customs
Port
Raw Materials Packaging Transport Storage

• Port Processes
• Internal Transport
• Storage
• Container Handling
• Loading

Ships Documents
Informal Processes
IMPORTER

• Manifest
• Bills of Lading
• Sea/AW Bill
• Container Plans

• Quotations
• P.O.s
• Delivery Notes
• Con. Notes
• Invoices
• Statements

• Invoice
• Packing List
• Declaration
• Delivery Note

• Payments
• Remittance
• Advice

Book/Confirm Transport
Shipping Documents
Pay Taxes Clear Customs Release to Port
/Dues
Foreign Chambers Commerce

• Certificates
• Of Origin

MANUFACTURER
Port
Port
Customs
Customs

• P.O.
• Contract Terms
• Delivery Instructions
• L.O.C.

Informal Processes

• Invoice
• Packing List
• Declaration
• Delivery Note

Receive Goods
Overseas Embassies

• Legal
• Invoices

EXPORTER
FOREIGN BUYER
Post/ Courier

• Certificates
• Of Origin
• Form A
• EUR.1

Chamber of Commerce
Finance Ministry
Pay
Bank
Bank

• Licenses
• Certificates
• Government
• Approvals

• Licenses
• Certificates
• Government
• Approvals

Government Departments
L.O.C. Packing List Invoice
LOC Approval
LOC Courier
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Role of ICT in Trade Facilitation

• Automated Processing
• Standard processing of declarations and other
  governmental applications
• Enhance risk management
• Efficient flow of information
• Automated routing / sharing

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ICT reduces Time and Increases Efficiency -
Exapmles

• Mauritius Trade Net has reduced average clearance
  times of goods from 4 hours to 15 minutes
• Tunisie Trade Net (TTN) has reduced processing
  times of trade documents from max of 18 to 7 (3.5
  days in cases not requiring technical controls).
• Time savings in Singapore (STN) translate into 1
  of GDP per year.

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Different ways to use ICT for TF

• Systems built around different agencies
• Ports
• Customs
• Single windows

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Single Window

• A facility providing standardized information and
  documents with a single body to fulfill
  requirements for import, export and transit
  regulations and clearance.
• Expedite and simplify information flows between
  trading community and the government

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Models of Single Window

• Single Authority (Swedish Single Window)
• Receives information, disseminates to relevant
  authorities, coordinates controls to prevent
  undue hindrance in logistics chain.
• In Sweden case, the customs performs selected
  tasks on behalf of other government agencies.

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Models of Single Window

• Single automated system for the collection and
  dissemination of information
• Integrated system data is processed through the
  system (Mauritius)
• Interfaced system data is sent to the agency for
  processing (Tunisia)
• Combination of the above

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Models of Single Window

• Automated information transactions system
  (Singapore, Tunisia)
• Trader can submit electronic declarations to
  various authorities for processing and approval
  in one single application.
• Approval transmitted electronically from
  authorities to the traders computer.
• Fees, taxes and duties are computed automatically
  and deducted from the traders bank account

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TUNISIE TRADENET Services

• Formation
• Assistance Technique
• Ingénierie informatique

• Intermédiation documentaire électronique
• Titre de Commerce Extérieur
• Document de Contrôle
• Technique (AMC/APE)
• Déclaration en Détail des
• Marchandise
• Paiement électronique des
• droits et taxes douaniers

• EDIFACT
• Messagerie X400
• Web

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E-Government and Trade FacilitationThe
Application of ICT to Trade Document Flows in
Tunisia

• Hamid Alavi
• Middle East and North Africa Region, World Bank
• Prepared for
• January , 2004

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Before TTN
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After TTN
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Activities Before TradeNet After TradeNet
Electronic Transmission Common Electronic
document System-assisted Semi-Automated 3
days 15 minutes
Physical delivery Separate Documents for
different govt. bodies Individuals Manual 8
days 2 days
Present documents Codification Verification
Import clearance time Declaration processing
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Steps

• Simplification / elimination of procedures
• Standardization of information that responds to
  needs
• of different operators
• Single Administrative Document
• Facilitating exchange of information
• - Common and intelligent network

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Implementation Approach

• Phased Approach
• Complexity
• Quick wins to secure confidence
• International Standards (UN EDIFACT, etc.)
• International information exchange requires
  standards
• Pilot users
• Surveys / evaluation / fine tune
• Implementing body

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Software / System Requirements

• Sector specific software
• Declarants / Freight forwarders (Declaration)
• Shipping agents (manifest sea / air)
• Customs
• EDI server

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Issues

• Trade Processes - Chain effect
• As good as weakest link in the chain
• Benefits only visible when everything works
• Complex
• Many details that must fit together
• Resistance to change
• Organizational
• Shift from paper to electronic processes
• Prepare to manage project risks
• -Multiple activities / issues to address
• Inter-institutional dependencies

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Success Factors

• There is potential dramatic improvements that can
  be made in trade clearing process when
  administrative and political commitment joins
  forces with advances in information technology.
• But there is much more involved than simply
  applying information technology to trade
  documents.

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Success Factors

• Commitment at the highest level of government
• Cooperation among private sector operators and
  various government stakeholders at all stages of
  the process
• adoption of a regulatory framework that allowed
  for electronic processing and signature
• simplification of customs requirements
• extension of electronic processing to all import
  and export administration and other agencies
  involved in trade transactions
• adoption of internationally recognized standards
  and codes in order to ensure a common language
  among different users and in different countries
• aligning the relative costs of processing paper
  documentation and on-line processing.

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Questions ?
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Players in the Trade Value Chain

• Importer/Exporter
• Trade Professionals
• Customs Broker
• Freight Forwarder
• Shipping Agent
• Container Terminal
• Ports and Harbours
• Storage
• Transport
• Shippers

• Customs
• Revenue
• Technical Controls
• PIAs
• Cert. of Origin
• PSI
• Legal Invoices
• Banks
• Insurers
• etc.

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