1. Trade Facilitation Role of Modern Technology Trade Facilitation Role 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

2. What is Trade Facilitation? Facilitating market access Facilitating market access –Quality standards and lowering technical barriers –Market access schemes Access to export finance and insurance Access to export finance and insurance Lowering transaction costs through Lowering transaction costs through –Improved transport and trade logistics –Enhanced information flows 1

3. Lowering Transactions Costs Reduced transport costs Reduced transport costs Transparent and harmonized regulations Transparent and harmonized regulations Improved ports facilities and procedures Improved ports facilities and procedures Efficient and transparent customs procedures Efficient and transparent customs procedures Simplified trade document processing and clearance processes Simplified trade document processing and clearance processes

4. 4 Time is a Trade Barrier Trade occurs in physical space and moving goods requires time. Trade occurs in physical space and moving goods requires time. Trade logistics costs are as important as tariffs 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) 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: 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.

5. 5 Time is a Trade Barrier Imagine if the contents of a ship can be processed in half a day instead of a day … 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.

6. 6 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. 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 : 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 This means removing 10 days from the selling season, revenue that cannot be replaced

7. 7 Time is a Trade Barrier: What Gains? Port efficiency improvements (from 75 th to 25 th percentile) could reduce transport costs for a country as much as shortening it distance from its trading partners by 9,000 km (IDB 2000) Port efficiency improvements (from 75 th to 25 th 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) $100 million could be saved each year through the application of ICT (UNCTAD) Singapore gained 1% of GDP Singapore gained 1% of GDP Tunisia case Tunisia case

8. 8 Trade transaction is a complex process Many documents Many documentsdocuments Many players Many playersplayers –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 ….!! Each have own set of paper forms and interactions with other organizations (incl. counterparts in importing countries)… Take a look ….!! Take a look Take a look

9. 9 Manifest Bills of Lading Sea/AW Bill Container Plans Invoice Packing List Declaration Delivery Note Storage Air, Sea, Land International Transport Customs Port Pay Taxes Clear Customs Release Goods Ship’s Documents Certificates Of Origin Licenses Certificates Government Approvals Chamber of Commerce Foreign Chambers Commerce Overseas Embassies Post/ Courier “Legal Invoices” DOMESTIC SUPPLY CHAIN Raw Materials Packaging Transport Storage Quotations P.O.s Delivery Notes Con. Notes Invoices Statements Payments Remittance Advice IMPORTER MANUFACTURER EXPORTER FOREIGN BUYER IMPORT Licenses Certificates Government Approvals Certificates Of Origin Form A EUR.1 Government Departments Finance Ministry Port Invoice Packing List Declaration Delivery Note Customs “Informal Processes” Pay Taxes Clear Customs Release to Port Informal Processes Port Processes Internal Transport Storage Container Handling Loading PortCustoms MANUFACTURING/ VALUE ADDEXPORT Receive Goods Bank P.O. Contract Terms Delivery Instructions L.O.C. Pay Bank L.O.C. Packing List Invoice LOC Courier LOC Approval Shipping Documents Book/Confirm Transport /Dues

10. 10 Role of ICT in Trade Facilitation Automated Processing Automated Processing –Standard processing of declarations and other governmental applications –Enhance risk management Efficient flow of information Efficient flow of information –Automated routing / sharing

11. 11 ICT reduces Time and Increases Efficiency - Exapmles Mauritius Trade Net has reduced average clearance times of goods from 4 hours to 15 minutes 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). 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).TTN Time savings in Singapore (STN) translate into 1% of GDP per year. Time savings in Singapore (STN) translate into 1% of GDP per year.

12. 12 Different ways to use ICT for TF Systems built around different agencies Systems built around different agencies –Ports –Customs Single windows Single windows Single windows Single windows

13. 13 “Single Window” A facility providing standardized information and documents with a single body to fulfill requirements for import, export and transit regulations and clearance. 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 Expedite and simplify information flows between trading community and the government

14. 14 Models of “Single Window” Single Authority ( Swedish 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.

15. 15 Models of “Single Window” Single automated system for the collection and dissemination of information Single automated system for the collection and dissemination of information –Integrated system: data is processed through the system (Mauritius) Integrated systemIntegrated system –Interfaced system: data is sent to the agency for processing (Tunisia) Interfaced systemInterfaced system –Combination of the above

16. 16

17. 17

18. 18 Models of “Single Window” Automated information transactions system ( Singapore, Tunisia ) Automated information transactions system ( Singapore, Tunisia ) Singapore –Trader can submit electronic declarations to various authorities for processing and approval in one single application. –Approval transmitted electronically from authorities to the trader’s computer. –Fees, taxes and duties are computed automatically and deducted from the trader’s bank account

19. 19

20. 20 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 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 Formation Assistance Technique Ingénierie informatique Formation Assistance Technique Ingénierie informatique EDIFACT Messagerie X400 Web EDIFACT Messagerie X400 Web TUNISIE TRADENET Services

21. E-Government and Trade Facilitation The Application of ICT to Trade Document Flows in Tunisia Hamid Alavi Middle East and North Africa Region, World Bank Prepared for Prepared for January, 2004

22. Before TTN 1

23. After TTN 1

24. 24 Activities Before TradeNet After TradeNet Present documents Codification Verification Import clearance time Declaration processing Physical delivery Separate Documents for different govt. bodies Individuals Manual 8 days 2 days Electronic Transmission Common Electronic document System-assisted Semi-Automated 3 days 15 minutes

25. 25Steps 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

26. 26 Implementation Approach Phased Approach Phased Approach –Complexity –Quick wins to secure confidence International Standards (UN EDIFACT, etc.) International Standards (UN EDIFACT, etc.) –International information exchange requires standards Pilot users Pilot users –Surveys / evaluation / fine –tune Implementing body Implementing body

27. 27 Software / System Requirements Sector specific software Sector specific software –Declarants / Freight forwarders (Declaration) –Shipping agents (manifest – sea / air) –Customs –EDI server

28. 28 Issues Trade Processes - Chain effect Trade Processes - Chain effect –As good as weakest link in the chain –Benefits only visible when everything works Complex Complex –Many details that must fit together Resistance to change Resistance to change –Organizational –Shift from paper to electronic processes Prepare to manage project risks Prepare to manage project risks -Multiple activities / issues to address Inter-institutional dependencies

29. 29 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. 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. But there is much more involved than simply applying information technology to trade documents.

30. 30 Success Factors Commitment at the highest level of government Commitment at the highest level of government Cooperation among private sector operators and various government stakeholders at all stages of the process Cooperation among private sector operators and various government stakeholders at all stages of the process Cooperation adoption of a regulatory framework that allowed for electronic processing and signature adoption of a regulatory framework that allowed for electronic processing and signature simplification of customs requirements simplification of customs requirements extension of electronic processing to all import and export administration and other agencies involved in trade transactions 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 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. aligning the relative costs of processing paper documentation and on-line processing.

31. Questions ?

32. 32 Players in the Trade Value Chain  Importer/Exporter  Trade Professionals Customs Broker Customs Broker Freight Forwarder Freight Forwarder Shipping Agent Shipping Agent  Container Terminal  Ports and Harbours  Storage  Transport  Shippers  Customs  Revenue  Technical Controls PIAs PIAs Cert. of Origin Cert. of Origin PSI PSI “Legal Invoices” “Legal Invoices”  Banks  Insurers  etc.