Paperless Trade:Implementation Experience and the way

ahead

Experience of the World Bank

Hamid AlaviMiddle East and North Africa Region, World Bank

UN/CEFACT Executive Forum

Geneva , 20-21st June 2005

June 2005 2

Overview .1.

How does the World Bank view Trade Facilitation and what it is doing in this filed?

Why are the simplification and automation of trade transactions important?• Efficiency and competitiveness• Security concerns

Guiding principles for the application of ICT• Simplify processes• Simplify documentation• Re-engineer processes (codes and standards)• Automate • Customs is only one of many agencies involved in trade transactions

Implementation approach

Lessons learned

Implementation lessons from the application of information technology to facilitate trade and smooth out supply chains

Presentation Purpose

June 2005 3

Overview of World Bank Activities

Expanding Country Policy Dialogue

Supporting the Doha Round

Established Trade Department including Trade Logistics Group

Bringing together Trade Policy, Infrastructure and Customs/Border Management teams

Stepping up trade – related operations

Global Facilitation Partnership for Trade & Transport

Trade and Transport Facilitation Audits

Trade Facilitation Seminars

Better coordination with donors & international organizations

Research, analysis and advocacy

Customs Modernization Handbook

Trade facilitation is increasingly important in Bank policy support and operations

Quick Background

June 2005 4

Overview .1.

How does the World Bank view Trade Facilitation and what it is doing in this filed?

Why are the simplification and automation of trade transactions important?• Efficiency and competitiveness• Security concerns

Guiding principles for the application of ICT• Simplify processes• Simplify documentation• Re-engineer processes (codes and standards)• Automate • Customs is only one of many agencies involved in trade transactions

Implementation approach

Lessons learned

Implementation lessons from the application of information technology to facilitate trade and smooth out supply chains

Presentation Purpose

June 2005 5

Efficiency : 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.

June 2005 6

Efficiency gains from streamlining and simplifying trade processes

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.

June 2005 7

Efficiency gains from streamlining and simplifying trade processes

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 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

June 2005 8

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

June 2005 9

Overview .1.

How does the World Bank view Trade Facilitation and what it is doing in this filed?

Why are the simplification and automation of trade transactions important?• Efficiency and competitiveness• Security concerns

Guiding principles for the application of ICT• Simplify processes• Simplify documentation• Re-engineer processes (codes and standards)• Automate • Customs is only one of many agencies involved in trade transactions

Implementation approach

Lessons learned

Implementation lessons from the application of information technology to facilitate trade and smooth out supply chains

Presentation Purpose

June 2005 10

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.

1111

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

•Invoice•Packing List•Declaration•Delivery Note

Storage

Air, Sea, LandInternational

TransportCustoms Port

Pay TaxesClear CustomsRelease Goods

Ship’sDocuments

•CertificatesOf Origin

•Licenses•Certificates•Government Approvals

Chamber ofCommerce

ForeignChambersCommerce

OverseasEmbassies

Post/Courier

•“LegalInvoices”

DOMESTICSUPPLY CHAIN

Raw MaterialsPackagingTransportStorage

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

•Payments•Remittance Advice

IMPORTER

MANUFACTURER

EXPORTERFOREIGNBUYER

IMPORT

•Licenses•Certificates•Government Approvals

•Certificates Of Origin•Form A•EUR.1

GovernmentDepartments

FinanceMinistry

Port

•Invoice•Packing List•Declaration•Delivery Note

Customs

“InformalProcesses”

Pay TaxesClear CustomsRelease to Port

InformalProcesses

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

Port Customs

MANUFACTURING/ VALUE ADD EXPORT

ReceiveGoods

Bank

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

PayBank

L.O.C.Packing ListInvoice LOC Courier

LOC Approval

ShippingDocuments

Book/Confirm Transport

/Dues

/Dues

June 2005 12

Different ways to use ICT for TF

Systems built around different agencies• Ports • Customs

– long term difficulties in technology areas such as flexibility, interoperability, international standards, volume, ongoing support and support costs.

Single windows

Customs

Customs Brokers

CargoHandling

Port Authority

Traders

Ministry ofCommerce

Freight Forwarders

Shipping Agents

Banks

EDI Server

Figure B

CustomsCustoms

Customs Brokers

CargoHandling

Port Authority

Traders

Ministry ofCommerce

Freight Forwarders

Shipping Agents

Banks

EDI Server

Figure B

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

June 2005 13

Paperless Trade reduces Time and Increases Efficiency and Security- Examples

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.

Advanced information sharing in all cases has contributed to security requirements

…

14

Processing of TCE

2 - 3 D

1 D

0 Goods Arrival

Validation, Amendments, Data Capture of Manifest

2 D

Deliver Manifest hardcopy to Customs and STAM

1/4 D

Goods discharged from vessel

STAM submits hardcopy report of unloaded cargo discrepancies to ship agent

2 - 4D

Shiping Agent reconciles discrepancies regarding cargo unloaded

2 - 5 D

1/2 D 1 -2 D

Shipping Agent delivers final manifest to Customs and STAM

Importer / Broker prepares customs declaration.and delivers to Customs

2 - 3 D Importer / Broker picks up processed declaration.

1 D

Payment of customs duty, storage charges and port dues

0 - 2 D

Confirmation of goods landed byShipping Agent and issue of delivery note

Goods removed from port area

1/4 D 15 mins

Prior to Trade Facilitation Initiative

1 2 3 15 10 5

After Trade Facilitation Initiative

Days

Figure C

June 2005 15

Overview .1.

How does the World Bank view Trade Facilitation and what it is doing in this filed?

Why are the simplification and automation of trade transactions important?• Efficiency and competitiveness• Security concerns

Guiding principles for the application of ICT• Simplify processes• Simplify documentation• Re-engineer processes (codes and standards)• Automate • Customs is only one of many agencies involved in trade transactions

Implementation approach

Lessons learned

Implementation lessons from the application of information technology to facilitate trade and smooth out supply chains

Presentation Purpose

June 2005 16

Design Approach

It is more than simply applying information technology to trade processes. It requires a comprehensive approach and commitment at all levels

Simplify trade documents and eliminate duplicationSAD

Simplify trade documents and eliminate duplicationSAD

Reengineer back-officesReengineer back-offices

Automate/Single Window

Automate/Single Window

Streamline and simplify trade transaction processesStreamline and simplify trade transaction processes

Codes and standardsCustoms only one among manyPhased approach/demonstration effectSupporting and implementing structure

Steering committees and working groups (cross agency) to design components and draw up action plans

June 2005 17

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

June 2005 18

Implementation 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

June 2005 19

Overview .1.

How does the World Bank view Trade Facilitation and what it is doing in this filed?

Why are the simplification and automation of trade transactions important?• Efficiency and competitiveness• Security concerns

Guiding principles for the application of ICT• Simplify processes• Simplify documentation• Re-engineer processes (codes and standards)• Automate • Customs is only one of many agencies involved in trade transactions

Implementation approach

Lessons learned

Implementation lessons from the application of information technology to facilitate trade and smooth out supply chains

Presentation Purpose

June 2005 20

Success Factors

There is potential dramatic improvements in efficiency and security that can be made in trade clearing process when administrative and political commitment joins forces with advances in

information technology

Relevance To firms

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.