Poverty and Development Division
last updated : 20 December 1999
TRADE FACILITATION THROUGH ELECTRONIC COMMERCE
Trade facilitation is defined as a systematic approach to improving the efficiency and effectiveness of procedures, documentation and data exchange used in international trade transactions. Significant benefits can be achieved when the principles of trade facilitation and promotion are combined with electronic commerce, especially those that are Internet-enabled, to make international trade simpler, safer and more efficient. This is because trade facilitation and electronic commerce aim both to reduce costs and to increase competitiveness. Of course, facilitation must be balanced with control. Trade facilitation is supposed to make it easier for legitimate commerce to move across national boundaries without compromising the ability of governments to stop illegitimate commerce. The effective use of ICT, combined with harmonized and standardized procedures, is seen as the foundation for seamless global trade.
A concerted multilateral effort to simplify trade procedures through a framework that integrates, but also builds upon electronic commerce technologies, as well as best practices and standards available elsewhere, can bring important trade benefits for the countries of the region. Experience demonstrates that trade facilitation through electronic commerce is not an issue involving the exchange of gains and concessions, but one in which all gain: governments in terms of better controls, higher revenue intakes and more efficient administration; and traders, both large and small, in terms of reduced costs and delays, and thus more competitive import and export conditions. Such benefits can accrue, in particular, to developing countries and provide new trading opportunities for SMEs, but to realize these benefits requires cooperation at the regional and international level in order to develop the harmonized solutions necessary for traders to carry out international transactions in the most effective manner.
A series of proposals covering import, export and customs procedures that could be developed into a framework of action are outlined below.7
Introduction of automated customs clearance. The commercial and administrative advantages of automated, ICT-based interfaces between traders and administrations are well understood. Although employed by a growing number of countries (including many countries applying the ASYCUDA and ACIS (cargo tracking) systems developed and supplied by UNCTAD), ICT-based customs clearance has not yet been universally adopted (see table V.1).8 Box V.2 outlines the progress in this area for selected developing countries which are among the more advanced ones in the region.
Pre-arrival processing, post-clearance controls and audit. The administrations of member countries are increasingly introducing different forms of green channel rapid clearance procedures relying on pre-filed entries, that is, the pre-arrival processing of information (increasingly provided by electronic message), and clearance of goods based on supply of limited commercial information followed by post-clearance reconciliation; and alternatives to transaction-based interventions based on the auditing of companies or acceptance of periodic declarations for revenue or statistical purposes, including permission to retain documents at company premises without systematic presentation to customs or other bodies. It is difficult, for example, to justify systematic border checks of each consignment simply for the purpose of compiling trade statistics. Air freight often needs speedy clearance if the extra costs of such transport are not to be negated by delayed clearance. There would be merit in elaborating provisions that could progressively promote the wider introduction of these modern concepts and guide their development in a trade-enhancing and equitable manner.9
Authorized traders. The notion of authorized traders has no internationally accepted definition. However, some WTO member administrations are already developing this concept as a means of providing privileged import and export clearance facilities for certain companies. The benefits for such companies are the important links created between compliance, facilitation and simplification: compliant and efficient traders are rewarded with cheaper, simplified procedures. Benefits to government include better targeting and risk assessment, better use of limited resources and, as a result, higher levels of compliance. Whatever measures are introduced should allow companies of all sizes, including SMEs, to meet the criteria for authorized trader status. Also, the criteria used for granting such status should be broadly compatible amongst member governments so as to maximize the potential for companies to obtain overseas authorized status on the basis of a domestic authorization.
One stop clearance. Lack of coordination of different agencies concerned with import and export, and the resulting requirement of subjecting cargoes to multiple checks at different times and in different places, has been cited by traders as a major concern. The use of ICT-based information exchange between traders and government and between government agencies makes it more feasible to introduce some rationalization into the procedural aspects of such controls. In terms of coordinating the provision of information to different government agencies, pending the globally accepted formatting and use of electronic messaging, there will still probably be a need for the submission of import and export data in paper form.
Regional acceptance of the concept and design of the "single administrative document", based on the United Nations aligned document system, currently used by over 60 countries and the standard tool used by UNCTAD in its ASYCUDA programme to streamline customs procedures in developing countries, would be a significant harmonization measure. Integration into the single administrative document of elements of the World Customs Organization standard for a "single goods document" would also be a useful measure to ensure a product with global acceptability. Through this, national administrations would ensure, over time, a level of coordination and delegation of controls to customs authorities to enable all verifications (for example, health and safety data and certification, sanctions control, intellectual property rights verification, import licence checks, export subsidy verification) to be done once only.
Trade and transport interests would benefit in terms of reduced delay and reduced cost from a one-stop procedure, and they could organize compliance and cooperation much more efficiently. The use of a single interface with the administration would also make it easier for traders to align their computer networks with that of the receiving agency. Administrations would benefit through the optimal use of their customs personnel and databases, and from the reduction of fraud with better coordinated information between agencies.10 In some countries, this concept has been taken one step further and "one-stop clearance" has been achieved through the introduction of EDI in regulatory bodies dealing with international trade. An excellent example is the automation of textile quota and export garments system of the Philippines.
Remote filing and simplified clearance procedures. International traders have called for the introduction by individual administrations of systems permitting the filing of customs and other documents at a location different from the port of export or arrival of the goods. This benefits companies that can operate a centralized administrative facility. The possibility to have goods cleared (for export or import purposes) at inland premises rather than at the port of export or entry is another trade facilitation mechanism. Such systems are already in place in certain countries of the region. There are obvious cost and time savings for companies, especially for container and trailer transport cargo, when clearance can be effected at the point of loading or unloading rather than by separate opening or unloading at the port. One of the benefits to administrations of such systems is that pressure on port infrastructure is relieved.11
The seamless integrated transaction. The establishment of a reduced and harmonized data set is a precondition for the successful introduction of EDI-based communication between traders and government agencies. Automation of import and export data is of limited value if it simply computerizes excessive or bureaucratic requirements. In addition, an internationally agreed data set permits the establishment, over time, of integrated transactions between exporting and importing administrations, that is, arrangements where data collected at the point of export form the basis of the data set collected subsequently at the point of import. The seamless integrated transaction enables a single submission by the trader of data at the export point, bringing considerable cost and time savings. By enabling easy comparison of export and import data, it also permits far more effective governmental control over illegal activities such as systematic under-invoicing, which robs countries of legitimate revenue, especially developing countries whose tariffs tend to be higher. The seamless integrated transaction depends not only on common data sets but also on compatible EDI systems (trader-government and government-government), criteria for traders' participation, and a high level of mutual confidence between import and export administrations. This is probably easier to establish bilaterally, at least initially.12 It would seem advantageous that seamless integrated transactions should be progressively introduced at the regional level.13
Clearance times. A basic problem for international trade is delay in obtaining regulatory clearances, particularly in the absence of computerized procedures and where physical, transaction-based clearance remains the norm. In certain WTO agreements, this type of problem has been tackled by setting a normative time limit for administrative action: an import licensing agreement is a key example.14 Within the framework of regional trade facilitation, a similar solution could be considered: setting as a norm an absolute time limit for routine customs and other regulatory clearances, with suitable flexibility being provided both for exceptional circumstances and for goods that fall outside the scope of a routine clearance procedure. These would need to be defined. Electronic commerce technologies certainly help in realizing such goals. One of the best examples of a successful pilot in the region in this regard is the sectoral electronic commerce implementation for the automobile industry in India.15
Transparency. The transparency of import and export procedures, especially at the level of regulations and customs' administrative guidelines, is a major concern for international trade and one which disproportionately affects SMEs, which have fewer resources to obtain the requisite information. A single comprehensive database needs to be created that is accessible on the Internet, assembling all relevant laws, rules and procedures for importing and exporting. The foundation of this already exists in the WTO database for tariffs and in databases being developed by and within the regional groupings and, of course, within national trade databases. It will be necessary to evaluate the most efficient means of ensuring maximum transparency and availability to traders, especially SMEs, by exploiting existing national and international sources, avoiding duplication, and to the extent that more information is needed, ensuring that sufficiently detailed and comprehensive transparency requirements are established.
7 For more details, see the EU informal discussion paper dated 1 December 1998 to the WTO Council on Trade in Goods, on trade facilitation and border enforcement of intellectual property rights. Available at <http://europa.eu.int/comm/dg01/faci2.pdf> (3 February 1999).
8 ESCAP has assisted some of the customs administrations in the region in creating awareness of the issues relating to the introduction of electronic commerce in general and EDI in particular so as to facilitate international trade, as well as reengineering issues that need to be tackled before electronic commerce is introduced. In the conduct of the awareness programmes, the ESCAP training module on EDI, both for management and for technical personnel, has been used.
9 One regional economic cooperation activity undertaken by ESCAP was the modelling of trade transactions. India, Malaysia, the Philippines and Sri Lanka participated in this initiative.
10 ESCAP has provided Cambodia, Myanmar and Viet Nam with assistance in simplifying and redesigning their trade procedures and documents based on the United Nations aligned document system. This is to help these counties to maximize their benefits from integration into ASEAN. (See the papers by Do Thuy Lan, "Trade facilitation needs and the role of electronic commerce" and by Nguyen Cong Nong, "Report of Viet Nam customs" presented at the Seminar on Enhancing Integration of New Members into the ASEAN Process through Economic Cooperation and Trade Facilitation, Bangkok, 28 and 29 September 1998.)
11 ESCAP has introduced TraDESTM (trade documentation software) for countries that are in the early stage of trade facilitation and electronic commerce. Incorporating many of the trade facilitation recommendations, TraDESTM offers the best way to promote standards among the trading community. It also introduces them to electronic commerce, since these standard aligned documents can not only be printed, but also be sent by fax and e-mail (see the paper by T.S.A. de Silva, "Trade documentation alignment and development of trade documentation software of ESCAP for Sri Lanka: Sri Lanka trade facilitation programme" (SREC(10)/INF.1), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998).
12 Customs administrations in EU and the United States are currently developing a bilateral prototype operation of this nature, with significant business support. For details, see Eamonn Sheehy, "Global customs interaction" in Electronic Commerce Initiatives of ESCAP: Inter-networking through Electronic Commerce to Facilitate Intra-regional Trade in Asia, Studies in Trade and Investment No. 23 (ST/ESCAP/1721).
13 An attempt was made in the region through a collaborative effort of ESCAP and ASEB. Called the inter-networking project, it aimed to link the customs administrations in select countries that had implemented EDI with the end goal of ensuring that the export declaration would be the basis for the import declaration. Technical issues were understood and resolved.
14 The concept of drastic reduction in transaction time has been promoted by ESCAP as an important goal for the regulatory authorities dealing with international trade. See "Case studies on the introduction of electronic commerce to facilitate trade" (E/ESCAP/SREC(10)/1), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998.
15 See the paper by T.K. Pandey and S. Srinivasan, "Sectoral electronic commerce implementation for an automobile industry in India" (SREC(10)/INF.3), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998.
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