Bert C. Cunningham Director of Customs

1. Latest Developments in the Applications of Trade Facilitation:Information and Communications Technologies Bert C. Cunningham Director of Customs

2. Why is Trade Facilitation Important? • Over past decade, world trade has grown twice as fast as national GDP. • Those countries able to create an environment conducive to efficient and effective trade, attract the most foreign investment, growth and development. • Reforming Customs and implementing trade facilitation measures, are just as important objectives as reducing tariffs and liberalizing trade.

3. Why Customs Reform & Trade Facilitation Makes Sense/Cents! • Trade transaction costs average 10-15% of the total value of world trade • Customs compliance costs represent 5-7 % • Reducing trade transaction costs by even 1-2% can have a huge positive impact on world trade and economic growth

4. Factors driving need to reform • Though customs duties are being phased-out, border formalities becoming increasingly complex due to requirements of: - Regional and bilateral trade agreements - WTO and EU membership accession - Additional border security requirements following 9/11

5. Pivotal Role of Customs • Customs must maintain a balance between competing objectives of Trade Facilitation and Enforcement. • Customs must control commercial fraud, counterfeit goods, drugs, weapons, terrorists, etc. while also facilitating honest traders/legitimate trade.

6. Public Sector Customs Immigration Police Coast Guard Health Agriculture Fisheries Commerce and Industry Private Sector Customs Brokers Freight Forwarders Air/Port Authority Cargo Handlers Carriers (airlines, shipping lines, road haulers, railways) Warehouse operators Commercial Banks Trade Facilitation must involve all parties in the supply chain

7. Trade Facilitation requires private/public sector consultation and collaboration • National trade facilitation committee, headed by a very senior politician or official, is required to champion plan for overall reform program and to resolve inevitable ‘turf battles’. • Sub-committees and working groups needed to implement projects/reforms in each sector

8. Guiding Principles of Successful Reform • Political will, commitment and ownership of change, public/private partnership; • Accurate needs analysis, with solutions tailor-made to each country; • Adequate financial and human resources to implement reforms; • Supporting legal framework modernized to support reforms;

9. Guiding Principles of Successful Reform • Transparency and predictability to promote voluntary compliance; • Maintaining balance between facilitation and control objectives by implementing risk management techniques, using non-intrusive inspection techniques and moving to post-clearance audit controls; • Redressing human resource weaknesses, including integrity/corruption;

10. Guiding Principles of Successful Reform • Keeping documentary/data requirements to an absolute minimum, and applying internationally recommended forms and electronic messages; • Re-engineering, simplifying and streamlining clearance procedures, systems and controls; and, • Making maximum use of information and telecommunications technologies.

11. Guiding Principles of Successful Reform • Success will only be achieved if a ‘Holistic Approach’ is taken to customs and trade facilitation reforms. • ITC alone is not the solution, but can be a catalyst for change.

12. Role of ITC in Trade Facilitation • ‘Community-based ITC systems, whereby data (EDI messages) as opposed to paper are exchanged between all parties in the trade transaction, can significantly reduce paper work, cargo dwell time and transaction costs for both traders and authorities.

13. Trade Community Network Free Zone Customs Ship Companies Import Permits Banks Airlines Customs Brokers EDI Govnt. Agencies Forwarders Bonded Warehouse Traders

14. Trade Community Network Trade Net Server Customs Server Air/Port Customs Officers checking declarations Declarants Preparing entries Banks (EFT) Freight Stations VAT, Income Tax, Min. of Finance National Statistical Office. Shipping Agents Airlines (Manifests) Other Agency Import/Export Permits,Licenses abd certificates (Agriculture, Fisheries, Health) Customs Officers inspecting cargo at freight stations

15. Information Flow Manifest (CUSCAR) CUSRES Manifest MNS VAN Import Permits (CUSDEC) Selectivity Declarations(CUSDEC) Compliance CMS Server CUSRES Bank Debit A/C Customs HQ Cash Office Release Notification CUSRES Freight Stations Community Network MNS (VAN)

16. Mauritius Example: Customs Management System Front-end users: 53 Customs offices 68 Customs Brokers 63 Clearing/Forwarding Agents 19 Shipping Agents 13 Commercial Banks 10 Gov’t Agencies 24 Freight Stations 77 export-oriented companies Full EDI System • 100% air/sea manifests (CUSCAR) • 100% import/export customs declarations (CUSDEC) • Electronic Payment(EFT) • 100% Electronic Import/Export Permits • 100% EUR1 certificates of origin • 100% Electronic Release Notification (CUSRES)

17. Pre-Arrival Processing of Trade Data to expedite clearance of cargo upon arrival • Carriers transmit EDIFACT CUSCAR messages to Customs to meet international security reqts. • Suppliers/exporters transmit invoice data to brokers/declarants to allow customs declaration to be prepared in advance of cargo arrival. • Declarants/brokers apply on-line to authorities to import licenses and other permits/certificates. • Declarants/brokers file/validate their customs declaration prior to goods arrival (Note: Customs will withhold channel decision pending actual arrival of goods).

18. ITC can facilitate customs clearance formalities • On-line submission of manifests by carriers • On-line preparation/filing of customs import/export declarations by declarants • On-line notification of risk management channel by Customs • On-line messaging to cargo handlers to move cargo/containers for scanning/inspection. • On-line recording of inspection findings • On-line customs clearance/delivery authorization • On-line payment of customs duties/taxes.

19. Customs law, regulations, SOP manuals, official orders and instructions are posted on Customs web-site and broadcast over community system Tariff rulings database posted on web-site (posting of national and international classification rulings) Advance tariff ruling system (on-line submission of goods details to Customs and issuance of binding ruling prior to arrival) Integrated Tariff on Customs web-site listing rates of duty/tax and licensing/permit requirements. ITC can promote transparency and voluntary compliance

20. One-Stop-Shop/Single Window for other Agencies Reqts On-line application and approval of: - Import/Export licenses • Permits/certificates required by Agriculture, Health, Pharmaceutical, Fishery, Standards authorities e.g. Phytosanitary certificates.

21. One-Stop-Shop/Single Window for other Agencies Reqts. • On-line scheduling of cargo inspections and laboratory testing by other agencies. • Laboratory located near air/port to facilitate other agency testing/reduce clearance times. • Inspectors of other agencies physically located in same office as Customs inspectors. • Extended hours of service. • Other agencies control own selection criteria, and are able to place/remove ‘holds’ on consignments, as opposed to relying on Customs to do so.

22. “Single Window” Cargo Inspection Office at New Container Terminal, Port Louis, Mauritius

23. Mauritius Example: Single Window for Exporters • Dedicated counter service for processing export customs declarations and issuance of certificates of origin; extended hours of service offered. • On-line application and processing of export certificates of origin e.g. new e-EUR1 application in Mauritius (on-line application by exporter; printing and issuance of EUR1 on special security form by Customs; EUR1 data posted on Mauritius Customs web-site to allow EU Customs to immediately verify authenticity of EUR1).

24. Red Validated Yellow Declarations Green Risk Management in Trade Facilitation Customs System DEL I VE R Y X-Ray Images Specific Selection Criteria Random Selection

25. Integrate X-Ray Images into Risk Management and ITC systems • Images taken of cargo scanned are transmitted to Customs officers reviewing declaration data, drug units, etc. to assist in making decision whether or not to un-stuff and inspect cargo. • Scanners can significantly reduce rates of cargo inspection rates and inspection times when carg0 inspection is necessary (allows Customs to focus inspection on a particular box or area requiring inspection).

26. Non-intrusive inspection technology reduces cargo inspection rates/costs and dwell times

27. WHITE CHANNEL: Other Agency Clearance Required • Special clearance stream for those customs declarations cleared by Customs, but still have other agency requirements to be met (Final clearance to be given by the another agency after issuance of permit, inspection/testing). • Transparency and Accountability - Ensures other agencies, as opposed to Customs, are held accountable for any cargo clearance delay related to their requirements/controls.

28. BLUE CHANNEL:FAST TRACK cargo clearance for Authorized Economic Operators Reward low risk, compliant traders able to meet: • National Customs compliance audit requirements; and • WCO Framework of Standards related to supply chain security requirements AEO’s receive expedited import clearance, as well as expedited clearance of their exports by the receiving Customs service (requires mutual recognition of AEO certification by both Customs services).

29. Authorized Economic Operator • Must apply for and pass customs compliance audit (have history of compliance with Customs; have proper/auditable record keeping systems; • Must meet WCO Framework of Standards security reqts e.g. CCTV cameras at loading docks; use ISO approved container seals; employee integrity screening program; etc.

30. Framework of Standards • Complete manifest/export data and export cargo at port 24 hours prior to vessel loading (4 hours prior to air cargo loading); • Export data must be transmitted to receiving Customs service for security processing and where required a message returned indicating any cargo which must be X-Ray scanned and results sent prior to export. • AEO’s to receive expedited import clearance by Customs authority in receiving country.

31. FAST TRACK CARGOInitiative in Mauritius • AEO’s allowed paperless declaration • Must pay electronically • Subjected to low rate of cargo inspection • Any cargo inspection performed at importer’s premises • Customs control exercised through periodic post-clearance audits • A right, not privilege (may be revoked)

32. Linkages between customs/trade and air/port cargo logistics systems • On-line tracking of containers; notification of flight and vessel arrivals/departures; e-payment of port and handling fees; booking of air/sea freight, road haulers and ground transport.

33. Linkages between customs/trade and air/port cargo logistics systems • Electronic exchange of export manifest and declaration data between air/port of export and import to comply with WCO Framework of Standards advance manifest requirements.

34. Some Closing Thoughts • Customs is the pivot agency around which trade facilitation must be spear-headed. Unless Customs is operating efficiently and effectively, it is almost impossible to implement effective trade facilitation.

35. Some Closing Thoughts • Only a comprehensive reform and modernization of Customs, which includes stakeholders and other affected agencies, will produce any major trade facilitation results.

36. Some Closing Thoughts • ITC alone will not facilitate trade. A holistic approach to reform is required, including: upgrading infrastructure, modernizing the legal framework, streamlining procedures and controls, and redressing human resource constraints, especially tackling corruption.

37. Some Closing Thoughts • Building capacity is the key ingredient to effective customs reform and trade facilitation.

38. Some Closing Thoughts • Without adequate and sustained funding for capacity building and infrastructure upgrades, trade facilitation implementations will fail.

39. Some Closing Thoughts • There must be closer cooperation and collaboration among the WTO, WCO and the various multi-lateral and bilateral institutions in order to adequately financing or provide technical assistance for trade facilitation initiatives.

40. Some Closing Thoughts • There must be tangible political support and and visible commitment to actually implement customs trade facilitation reforms and tackling underlying corruption, otherwise efforts will fail.

41. Some Closing Thoughts WTO Articles proposed under Doha Round to promote trade facilitation may be too limited in scope to have any major impact on facilitating trade.