Agricultural Trade Facilitation : An Overview and Regional ... · Comprehensive Trade Costs...
Transcript of Agricultural Trade Facilitation : An Overview and Regional ... · Comprehensive Trade Costs...
Agricultural Trade Facilitation : An Overview and Regional Experience
Khan Salehin Trade and Investment Division, ESCAPHotel Namgay Heritage, 16 June 2014
OUTLINE
Agriculture trade in Asia-PacificWhat is Trade Facilitation for Agriculture and Food
Products?Main challenges for facilitating trade in agro-food
products Findings from Business Process Analysis (BPA) studies
in South and Southeast Asia
Agriculture trade in Asia Pacific
Agriculture accounts for a quarter of the gross domestic product (GDP) of Asia-Pacific’s developing countries and employs about 60% of the region’s working population (ESCAP 2008).
Improving agricultural productivity could pull 218 million people out of poverty in this region (ESCAP 2008).
It can bring investment opportunities for the private sector, and be a driver for boosting agriculture related industries.
The World Bank estimates that GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture.
Agricultural Trade in Asia-Pacific
Source: FAO 2009
Source: FAO 2009
0
50
100
Nep
alLa
o PD
RM
yanm
arCa
mbo
dia
Bhut
anVi
et N
amAf
ghan
istan
Chin
aIn
dia
Bang
lade
shPa
kist
anSr
i Lan
kaTh
aila
ndIn
done
siaPh
ilipp
ines Ira
nM
ongo
liaKa
zakh
stan
Mal
aysia
New
Zea
land
Rep.
of K
orea
Aust
ralia
Japa
n
Perc
enta
ge 2
006
Agricultural Population as Share of Total Population in Selected Asia-Pacific Countries
0102030405060
Aust
ralia
Bang
lade
shCa
mbo
dia
Chin
aIn
dia
Indo
nesia
Japa
nKa
zakh
stan
Kore
a, R
epLa
o PD
RM
alay
siaM
ongo
liaM
yanm
arN
epal
New
Zea
land
Paki
stan
Phili
ppin
esSr
i Lan
kaTh
aila
ndVi
etna
m
Perc
enta
ge 2
007
Contribution of Agriculture to GDP in Selected Asia-Pacific Countries
34%
Bhutan’s agriculture shareof GDP is around 20 percent
4
Key Drivers of Agricultural Trade
Agricultural Trade
Growth
Change in Dietary
Practices
Population Growth
Increased Disposable
IncomeChange in
Commodity Prices
Other Factors (export policy,
capacity etc.)
Trade Facilitation
What is Trade Facilitation?– Any measure that reduce barriers to the movement of
goods between buyers and sellers throughout the international supply chains (ESCAP 2010)
– Simply any measure that facilitate and simplify movement of goods and information along the supply chains
- i.e. TF reduces time, cost and complexity of trade transactions
What is agricultural trade facilitation?- Trade facilitation of agricultural products - For example, facilitating development of product
standards; improving certification procedures, improving storage facilities, reducing paperwork for agro trade or implementation of e-traceability
Comprehensive Trade Costs (excluding tariff) for Agricultural Goods with Japan (2000-2005, 2006-2011)
0
100
200
300
400
500
600
700
800
Rep.
of K
orea
Uni
ted S
tates
Thail
and
Viet
nam
Chin
a
New
Zea
land
Aus
tralia
Phili
ppin
es
Indo
nesia
Uni
ted K
ingd
om
Ger
man
y
Mala
ysia
Sri L
anka
Indi
a
Russ
ian F
eder
ation
Fran
ce
Turk
ey Fiji
Mald
ives
Iran
(Islam
ic Re
p. o
f)
Paki
stan
Nep
al
Bang
lades
h
Lao
PDR
Cam
bodi
a
Tarif
f-equ
ivale
nt tr
ade c
osts
(per
cent
) Agriculture (2000-2005)
Agriculture (2006-2011)
Manufacturing (2006-2011)
Source: ESCAP-World Bank Trade Cost Database, updated August 2013
Benefits of Trade Facilitation
GDP gains from 25% reduction in time to export/Import, GMS and China
Source: Strutt, Stone, and Minor (2008) simulations
9
Why Facilitating Agricultural Trade is Crucial?Long Term Impact of Agricultural Trade Facilitation :
- Poverty Reduction and Food Security- Improves overall environment for agro-trade (domestic too)
- Opportunity for integration of smallholders into agri supply chains - Upgrading of small farmers in terms of production practices or capacities
Trade Facilitation Measures Applied in Agricultural Supply
Chains/Sectors
Improved Trade Policies, Efficient Trade Processes
Reduced Transaction Cost, Improved Trading
Environment
Improved Trade Competitiveness
Greater integration of MSMEs including
ProducersGreater Income for Poor
Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74
What is so unique about it?
Perishability – time and temperature sensitive
Product and Process Standards, Technical Regulation (SPS, private standards)
Logistics (warehousing) and infrastructure – special requirements
Financing is difficult
Cost of trading is higher than manufactured goods
Trade Facilitation for Agro food Products
There are significant constraints to Trade Facilitation in agriculture which eventually impact trade competitiveness.
These constraints can be divided into four main categories:
Trade Procedures
Product Standards
Trade Logistics
Trade Finance
Trade Facilitation for Agro-food Goods: Challenges
11
Trade Procedures: A Generic Agricultural Product Supply Chain Structure
Consumer
ExporterWholesalersProducer
Import Agent
Tran
spor
t
Regulatory Agencies
ImporterRetailers
Bank
Export Customs
Import Customs
Source: Sirimanne 2011
Building 2
Information,documents, procedures
Information, documents, procedures
Information, documents, procedures
Information, documents, procedures
12
Product Standards
Ensuring product standards for international trade ofagricultural products is a complex topic and Itencompasses:Institutions.Infrastructure.Logistics.Administrative Issues.
Standard
“A document established by consensus and approved by a
recognized body that provides for common and repeated use, rules, guidelines, or characteristics for
activities or their results, aimed at the achievements of the optimum
degree of order in a given context.” ISO (2004)
13
Trade Logistics
Poor Trade Related Infrastructure and Transportation SystemInfrastructure
and Transportation
Border ProceduresServices
Agro-products Export From Export ToTransport & Handling Cost
(% of transaction cost)
Frozen Shrimp Bangladesh Japan 29
Cotton Yarn India Bangladesh 31
Hydrogenated Veg. Oil Nepal India 80
Tea Sri Lanka Japan 22
Transport and Handling Cost as percentage of transaction cost in South Asia
Source: Business Process Analysis Studies ESCAP 2010-11
Share of Transport Costs as percentage of transaction cost in Central Asia
Export Import
Kazakhstan 10% 8%
Kyrgyzstan 13% 10%
Tajikistan 14% 10%
Uzbekistan 12% 8%
Source: ADB 2006
14
Spoilage during Post-harvest Handling: Absence of warehousing facility,inappropriate goods vehicles or trucks, long distance from nearby railways orinland waterways stations and so on.
FAO (1994): Total loss of agro-products during storage and transport could be as high as 16%.
World Bank in India shows that the lack of adequate storage and marketing infrastructure can be as high as 20-40 % of the total production (ESCAP 2009).
IFC estimated the wastage caused by poor transportation and logistics system at $13 billion per year there (2010).
Thai fresh produce exports of fruits and vegetables, producers and exporters lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor storage.
Trade Logistics (contd.)
15
Reasons for not increasing lending in this sector
Trade Finance
’financing of imports and
exports’’
Risk of spoilage
Poor storage facilities Price volatility Weather
conditionsSeasonality of
productionVaried quality
of products
Inability of producers to meet the big
collateral guarantees
Stringent terms of trade
Lenders’ Lack of Understanding
Knowledge Gap of SMEs/producers
is
It is the most difficult bottleneck to overcome for agricultural trade
Trade Finance
16
Business Process Analysis (BPA) of Agro products in South and
Southeast Asia
Why conduct a Business Process Analysis?
18
Business Process Analysis is a practical study to understand attributes of business processes,
and their relationships
Who involved
Proceduresand Documents
required
Related Rulesand Regulations
Some quantitative
indicators
Business Process Analysis (BPA) Studies for Five Countries in South and Southeast Asia
Bangladesh Business (Trade) Process Analysis (BPA) for Export of Jute Bags to India and Import of Wheat from India
Cambodia BPA for Export of Maize and Cassava to China
Lao PDR BPA for Export of Maize to Thailand and Import of Animal Feed from Thailand
Myanmar BPA for Export of Mango and Rice to China, Import of Palm Oil from Malaysia
Nepal BPA for Export of Cardamom to India and Import of Rice from India
Available at: http://unnext.unescap.org/pub/bpa-cam.pdf
Export country and product
Destination No. of days
No. of actors involved
No. of processes
No & type of documents required
Cost ($)
Cambodia –Maize
China 20 15 13 22 1250-1360
Lao PDR -Maize
Thailand 16 11 8 21 735
Myanmar –Rice
West Africa 19-23 20 10 >25 425
Bangladesh-Jute bag
India 10 15 12 24 -
Nepal -Cardamom
India 15 11 9 14 1213
Source: ESCAP BPA Study Reports 2013-14, available at:http://unnext.unescap.org/tools/business_process.asp
Key Findings: Business Process Analysis Studies
Findings: Key problems
Additional Time: The first and obvious bottleneck is the additional time needed to complete the trade transaction. Obtaining SPS or Quarantine certificate can take from 1 day to 5 days in the countries studied. This may or may not include the time required for fumigation, which is usually another day or two. The exporters need to wait for completion of this process before moving to the next process for export.
Additional Cost: The direct cost for these processes is usually not very high, hovering around USD 10-50. However, the indirect cost of delays and spoilage of perishable products caused by the complexity of such processes can be very costly. Nevertheless, direct cost can be very costly in some instances. For example, fumigation certificate can cost up to USD 700 in Cambodia for maize export. It can range from USD 10 to USD 700 depending on the trading partner.
Additional paperwork: All additional processes require additional documents. Department of agriculture or testing laboratories are usually one of the least integrated entities with so called trade agencies (e.g. department of trade, customs). So, there is less coordination between these agencies too. This situation can create confusions over what documentation is required for a particular export or import process. If the process of laboratory tests fails, the entire process needs to restart.
Obtaining Sanitary and Phyto-sanitary Certificate for export of agro-food products
Bangladesh Cambodia Lao PDR Myanmar Nepal Trading Partner and Export Products
India, Jute Bags
China, Maize
Thailand, Maize
West Africa, Rice
India, Cardamom
Number of Days Required
4 2-5 2 2 1
Documents Required
(i) Proforma invoice
(ii) packing list, iii) oil content
certificate, iv) Certificate of
Origin (COO)
(i) Phyto sanitary certificate application
(ii) Commercial invoice
(iii) Packing lists (iv) Release
container, (v) Fumigation
certificate
(i) Phytosanitary application form
(ii) Packing list, (iii) Export license (iv) Customs
certification (v) Business license
from Vientiane Capital Agriculture Department
(vi) Commercial contract among importer and exporter
(vii) Pro-forma invoice
(i) Shipping instructions
(ii) National Registration Card
(iii) Sealed case file from Customs head office -
? Export Declaration
? Export License
? Invoice ? Packing list
(i) Letter from Customs to Food Quarantine Office
(ii) Commercial Invoice
(iii) Packing List (iv) Customs
Declaration Form
(v) Sample
Stakeholders Involved
• Exporter (or representative)
• Department of Agricultural Extension (DAE)
• Clearing and Forwarding (C&F) Agent
• Exporter • Ministry of
Agriculture Forestry and Fisheries (General Directorate of Agriculture)
• Exporter or representative
• Vientiane Capital Agriculture Division -Agriculture Quarantine Section
• Exporter • Ministry of
agriculture
• Exporter • Clearing agent • Food Quarantine
Office • Customs Office
Direct Costs
USD 10 $730 or $58 (Fumigation 28 Fumigation/ CCIC 700 Inspection 30)
More than USD 300 USD 5
BPA Outputs: Use Case Diagram of Rice Import from India to Nepal
Importer
Exporter Bank
Exporter
Bank
Broker
Importer Bank
1.1 Conclude trade term
1.Buy
2.1 Advance payment
2.Pay
2.2Balance Payment
3. Ship
•Buy
2. Pay
3.1 Obtain Inspect entry permit
3.3 Appoint clearing Agent and handoverdocument
3.2 Prepare and collect required document
3.4 Arrange transportation
3.5 Obtain Food Quarantine Certificate
3.6 ObtainRelease order
3.7 Customs Clearance at importer Border
Couriercompany
CHA
Transport Company
CustomsBank
FoodQuarantine office
Importer customs office
Plant Quarantine Office
Process: Obtaining Food Quarantine CertificateCHA/Clearing Agent Food Quarantine Office Customs
3.5.1 Applies for letter to Food Quarantine Office
3.5.5 Receive document and sample
3.5.6 Examine the sample
3.5.7 Issue Quarantine Certificate
3.5.8 Receive Quarantine Certificate
Customs Letter
Commercial/ Export invoice
Packing list
Customs Declaration Form
Filled in prescribed application
3.5.4 Submits documents with sample and fee
3.5.2 Issue letter toFood Quarantine Office
3.5.3 Receive letter to Food Quarantine Office
Documents Required for Import of Rice from IndiaS.N Type No of
documentHow document is
to submittedWhere to submit
1 Application 3 Manual Bank, Plant Quarantine Office
2 Pro forma Invoice 2 Manual Bank, Plant Quarantine Office
3 Firm/Company registration certificate
5 Manual Bank, Plant Quarantine Office Importer Customs
4 PAN/VAT certificate 5 Manual Bank, Plant Quarantine Office Importer Customs
5 Purchase order 1 Manual Bank6 Customs letter 1 Manual Food Quarantine Office7 Commercial/Export
Invoice4 Manual Food Quarantine
Office, Plant Quarantine Office, Importer Customs and Bank
8 Packing List 2 Manual Food Quarantine Office and Importer Customs.
9 Customs Declaration Form
3 Electronically/Manual
Importer Customs, Bank and Food Quarantine Office
10 Foreign Exchange Declaration Form
3 Manual Bank and Importer Customs
11 Appointment letter to CHA
1 Manual Importer Border Customs
12 Food Quarantine Certificate
1 Manual Importer Customs
13 Release order letter 1 Manual Importer Customs14 Evidence of payment 1 Manual Importer CustomsTotal 33
Cost of Importing Rice
Activity NPR USD
1. Conclude trade term 50 0.6
2. Receive Pro forma invoice and send purchase order 100 1.2
3.Obtain entry permit (fee) 200 2.4
4. Freight from exporter's factory to importer's warehouse
-Exporter factory to importer boarder- Importer boarder to Kathmandu
74460.035360.039100.0
908.0431.2474.0
5. Load / unload 6120 (18 per quintal)
74.6
6. Broker commission 1700 (Rs. 10 per quintal)
20.7
7. Fund transfer cost 1500 18.3
8. Document collection and preparation 300 3.7
9. Clearing agent fee 400 4.9
10. Obtain Food Quarantine certificate (fee) 400 4.9
11.Import service charge 500 6.1
11. Other cost (cost incurred in different check points, Customs entry yard charge, district entry, currier cost etc.)
3000 36.6
Total 88730.0 1082.1
Time-Procedure Chart: Export of Maize from Lao to Thailand
Export Procedures No of Days Proposed reduction of days
1. Concluded export (buying) contract and trade terms 2 2
2. Phytosanitary certification 2 2
3. Fumigation certification 2 2
4. Arrange transportation (trucks) 4 0 - at same time of step 2
5. Provide Customs declaration for export of goods 2 1
6. Prepare Maize certificate of origin 2 0- Together with step 3
7. Establish payment guarantee 2 2
8. Claim the payment for goods 1 1
Total number of days for completing one export transaction 17 days 10 days
Rice Export Policy: Enhancing trade facilitation, reducing informal fees and eliminating check points
Measure 1: “MEF/General Department of Customs and Excise (GDCE), MAFF and MoC/General Department of CAMCONTROL and relevant agencies shall: develop
a specific strategy to identify and streamline export processing procedures including inspection, documentation requirements, fees and time required to process export applications; define clear and publicly transparent division of
responsibilities among export regulating ministries/agencies; consider milled rice export as a top priority in order to reduce to a minimum informal payments and time required to export by extending “special treatment” similar to the garment
sector.”
TF Measures by Cambodia
Measure 2: Implement a single-stop service for export processing:
MEF/GDCE, MAFF and MoC/ CAMCONTROL and relevant agencies
shall set up a Single Stop Service for export processing and issuing
certificates for SPS, fumigation, grading and quality, quantity and weight,
and customs declaration.
Measures by Cambodia (Contd.)
Recommendations – Export (1)
Country Processes RecommendationsN
epal
–Ex
port
of
Card
amom
High transport cost due to road condition and syndicate system
•Enforce Competition Promotion and Market Protection Act effectively
Burden of levy of export fee by DDC (local authorities)
•Remove export fee in conformity with the policy of making export tax free
Customs related offices are scattered •Locate all Customs related offices within Customs premises
Customs do not accept electronic copies of documents except Customs Declaration Form
• Accept electronic copies of all documents by the Customs•Develop system of electronic submission of documents
Mya
nmar
–Ex
port
of
Rice
Make advance payment - Introduce e-banking to facilitate payment- Reduce administrative requirements in payment procedures e.g.• Eliminate unnecessary forms (application letter,
export letter with bank seal)• Reduce process steps• Eliminate hard copies
Arrange pre-inspection •Eliminate this process step unless buyer requests a tested sample
Recommendations – Export (2)Country Processes Recommendations
Cam
bodi
a-Ex
port
of M
aize
/Cas
sava
Apply for Phytosanitary Certificate Reduce activity 2.2 apply for PhytosanitaryCertificate from 5-day to 3-day.
Apply for Certificate of Origin (COO) Reduce activity 2.7 apply for Certificate of Origin from 2-day to 1-day.
All container goes through rigorous security check and scanning at the Port of entry.
Customs should use risks based assessment coupled with exporter and freight forwarder profile for selective scanning. Waive mandatory scanning for export.
Lao
PDR
–Ex
port
of
Mai
ze
Issuance of Certificate of origin (COO) can be processed after or simultaneously with the phytosanitaryand fumigation certification process.
The process of application and issuance of COO should be initiated simultaneously with the application for Phytosanitary and/or fumigation certification.
Submission of documents in processes. Automation of overall export system is very essential. It will reduce the time taken to travel from one place to another for submission of documents.
Bang
lade
sh-
Expo
rt o
f Ju
te B
ags Obtaining SAPTA certificate Submission of Export Registration Certificate
(ERC) should be removed.Obtaining Phytosanitary certificate Submission of Certificate of Origin (COO) should
be droppedObtaining both COO and SAPTA certificates
One of them should be dropped as both serves the same purpose (showing country of origin)
Recommendations – Import (1)Country Processes Recommendations
Nep
al –
Impo
rt o
f An
imal
Fee
dElectronic copies of documents except Customs Declaration Form are not accepted by the Customs
Accept electronic copies of all documents by the CustomsDevelop electronic submission system of documents
Customs related offices are scattered In selected surveyed Customs points, related offices particularly Plant Quarantine Office and Food Quarantine Offices were found to be located outside of the Customs area. If these offices are located within Customs premises it can save time and document.
Lao
PDR
–Im
port
of A
nim
al F
eed
Inspection of the importer's site by VCFD, VCTD and other concerns
The accompanying by the Vientiane Capital Trade Division during the site visit should be dropped and the brief of importer/farm's site visit by VCLFD should be shared instead for acknowledgement; in this way, the site visit will be shorter and efficient
Inspection of all the consignments by Customs and Quarantine officers at the border checkpoint are conducted separately.
It can be organized at one time. The report of inspection can be simplified into one single set of reports that will consist of the following main finding: customs declaration, goods inspection, certification of products in terms of quarantine rule and technical procedures
Recommendations – Import (2)Country Processes Recommendations
Bang
lade
sh-
Impo
rt o
f W
heat
Issuance of QuarantineCertificate
Currently a copy of the IRC is required is obtaining a quarantine certificate. This is redundant information in issuing quarantine certificate and hence needs to be removed.
Opening Letter of Credit (L/C)
Currently hard copy of the L/C details and IRC are required in opening L/C. The process can be simplified if scanned copies of the details are accepted by the banks.
BPA Study Reports 2013-14, available at:http://unnext.unescap.org/tools/business_process.asp
Publication
“Facilitating Agricultural Trade in Asia and the
Pacific”-
Overview, TF issues, Good practices
Available at:
http://www.unescap.org/publications/detail.asp?id=1480
THANK YOU!
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