1

TT rr aaddee ffaaccii ll ii ttaattiioonn iinn tthhee LL aaoo PP eeooppllee’’ ss DDeemmooccrr aattiicc RR eeppuubbll iicc:: AA nn

aannaallyyssiiss ooff ttiimmee,, ccoossttss aanndd ddooccuummeennttss rr eeqquuii rr eedd ffoorr ggaarr mmeennttss aanndd ccooffffeeee eexxppoorr ttss tthhrr oouugghh TT hhaaii llaanndd aanndd VV iieett NN aamm

By Piya Wongpit and Bounthone Soukavong *

* Piya Wongpit and Bounthone Soukavong is a Lecturer and, at the Faculty of Economics and Business Management, Department of Commerce, National University of Laos (NUOL), the Lao People’s Democratic Republic. The authors are grateful to Yann Duval of the Economic and Social Commission for Asia and the Pacific for his guidance and constructive comments as well as comments from anonymous referees and participants to the ARTNeT Research Team Meeting on Improving Regional Trade Procedures, 4 October 2010 in Kuala Lumpur are gratefully acknowledged. This work was carried out with the aid of a grant from the WTO and is part of an ARTNeT Trade Facilitation Study on Improving Regional Trade Procedures and Process. The support of the United Nations Economic and Social Commission for Asia and the Pacific is gratefully acknowledged. The opinion figures and estimates are the responsibility of the authors and should not be considered as reflecting the views or carrying the approval of the United Nations, ARTNeT and NUL. Any errors are the responsibility of the authors, who can be contacted at yasahoy@hotmail.com and bounthone@yahoo.com

The Asia-Pacific Research and Training Network on Trade (ARTNeT) is aimed at building regional trade policy and facilitation research capacity in developing countries. The ARTNeT Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about trade issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. ARTNeT working papers are available online at www.artnetontrade.org. All material in the working papers may be freely quoted or reprinted, but acknowledgment is requested, together with a copy of the publication containing the quotation or reprint. The use of the working papers for any commercial purpose, including resale, is prohibited.

ARTNeT Greater Mekong Subregion (GMS) Initiative Discussion Paper Series, No. 9, September 2011

2

Contents

Introduction ................................................................................................................... 3 A. Literature review ...................................................................................................... 4 B. Analytical framework and methodology ................................................................ 5 C. Analysis of trade procedures for garment exports by the Lao People’s Democratic

Republic ..................................................................................................................... 7 1. Overview of the garment industry .......................................................................... 7 2. Export documentation ............................................................................................ 8 3. Procedure for garment exports from Vientiane ...................................................... 9 4. Procedure for garment exports from Savannakhet province ................................ 16 5. Discussion and recommendations ........................................................................ 17

D. Analysis of trade procedures for coffee exports by the Lao People’s Democratic Republic ................................................................................................................... 18 1. Overview of the Lao coffee industry .................................................................... 18 2. Procedure for coffee exports from Champasak province ..................................... 18 3. Procedure for coffee exports from Savannakhet province ................................... 23 4. Discussion and recommendations ........................................................................ 23

F. Conclusion ............................................................................................................... 25 References .................................................................................................................... 26

Annexes

1. Export procedures for garments………………………………………………...….27 2. Procedures for coffee exports………………………………………………..…….35 3. General information about trade and trade routes in the Lao People’s Democratic Republic………………………………………………………………45 4. Lao People’s Democratic Republic export route map……………………………..46 5. Trade facilitation at border checkpoints: Questionnaire…….…………………… 47

3

Introduction

The world trade environment is changing. The competitive advantage of a country in international trade is derived from economy of scale and economy of speed. Efficient import and export procedures are required by trading partners. Trade facilitation, defined by the World Trade Organization (WTO) (2009) as “the simplification and harmonization of international trade procedures” that are “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”.

In its Doing Business Report 2010, the World Bank (2010) noted that the Lao People’s Democratic Republic was still ranked among the worst performers in terms of ease of trading across borders. Its overall logistics performance – according to the Logistics Performance Index 2010 – also raises concerns, particularly as other neighboring countries such as China and Thailand, appear to have made much progress in the area of trade facilitation and logistics in recent years. However, the indicators only provide a general and imprecise picture of the trade facilitation performance and issues faced by Lao People’s Democratic Republic, especially in terms of trade procedures since these are likely to vary widely, depending on the goods being exported or the route followed. Therefore, the objective of the present study was to document and provide a more detailed understanding of the current export procedures faced by Lao People’s Democratic Republic exporters, including procedures at the border checkpoints and in transit through Thailand or Viet Nam. Furthermore, the study quantified the time and costs that traders face in complying with these procedures as well as to the Government in enforcing them. Differences in compliance costs for these procedures based on the size of a firm or trader’s business were investigated, and practical recommendations on improving procedures were identified on the basis of the findings.

The study investigated the export procedures involved in the garment and coffee industries. The study considered in detail the export procedures for (a) garments from the Lao capital, Vientiane, to Laem Chabang seaport in Thailand via the Nong Khai border crossing, and (b) coffee from Champasak to Laem Chabang seaport in Thailand via the Vangtao border crossing. The differences in procedures along these two major routes compared with those along the Savannakhet to Laem Chabang seaport via the Mukdahan border crossing (for garments), and the Savannakhet to Danang seaport route via the Dansavanh border crossing (for coffee) are discussed here. For each industry, information was gathered on trade procedures faced by several medium and large-sized garment (three) and coffee (five) companies in order to verify whether or not the procedures varied from company to company in terms of documentation, time and costs.

4

A. Literature review

The main problem faced in trade facilitation by the Lao People’s Democratic Republic, a land-locked country, is a trade logistics and supply chain. Arnold (2003) studied logistics development and trade facilitation in the Lao People’s Democratic Republic. He estimated road transport costs for imports and exports of 10 provinces via Thailand and found that the lowest transport cost was for Vientiane. He also used flow charts to illustrate the supply chain of wood furniture, paper, garments, processed foods and coffee. In addition, Arnold estimated the average time, cost, distance and required documentation for exporting these products, and found that exporting wood furniture was the most complicated process, and involved a great deal of time and costs.

Banomyong (2001) estimated and compared the cost of exporting garments through five

routes, including via Danang (Viet Nam), Bangkok (Thailand), Laem Chabang (Thailand), Lad Krabang (Thailand) and Port Klang (Malaysia). The results indicated that the best route for Laotian traders exporting to Europe was via Port Klang in Malaysia. He found that the average cost per single container via that route was US$ 2,467.50 while the average transit time was 27 days. Although the cost per container via Port Klang was the lowest compared to other routes, Lao companies were found to favour the route via Laem Chabang due to the reliability and safety of cargo. Comparing the transportation cost per container of Lao products to the Laem Chabang seaport is higher than the cost per container of neighboring countries (table1). As it is rather difficult for Lao exporters to reduce transportation costs, since the distance from factory to seaport is fixed, reducing fees, customs charges and unnecessary expenses can compensate for the high cost of transportation for Lao products. Table 1. Comparison of costs and time involved in import and export procedures Descriptions Cambodia Lao PDR Viet Nam Thailand Trading across borders (ranking) 122 165 67 10 Documentation for exports (number) 11 9 6 4 Time for exporting (days) 22 50 24 14 Cost of exporting (US dollars per container)

732 1 860 734 625

Documentation for imports (number) 11 10 8 3 Time for importing 30 50 23 13 Cost of importing (US dollars per container)

872 2 030 901 795

Source: World Bank, 2010.

Another problem with trade facilitation is customs documentation. The trade procedures of the Lao People’s Democratic Republic require a number of applications. The World Bank (2010) presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies. The World Bank (2010) reviewed 43 economies in order to verify data and interview respondents. In the case of the Lao People’s Democratic Republic, the export procedure required nine documents while the import procedure required 10 documents (table 1). The World Bank (2010) also showed that the Lao People’s Democratic Republic took the longest time among the Association of Southeast Asian Nations (ASEAN) members in processing exports and imports. If all documents are well-prepared, a cargo can be cleared within half a day. The main source of delay involved the time needed for

5

granting import and export licenses. Normally, it takes about two weeks to get an import license and four to seven days for an export license to be issued (Sirisamphanh, 2007).

Khemdeth (2006) developed charts of trade procedures in an initial attempt to understand them. He identified the documents required as part of the import, export and transit trade procedures. Imports and exports of goods are classified into prohibited goods (e.g., guns, bullets and all types of explosive goods) and products that require permission based on notification No. 1376, Ministry of Industry and Commerce. The export procedure varies significantly depending on the type of products. Two documents and one step are involved in the export procedure for general goods while five documents and three steps are involved for the export procedure of prohibited goods. More documents and steps are involved in the import procedure. Imports of general goods involve three documents and two steps while imports of prohibited goods involve five documents and three steps. The transit trade procedure is more complicated as it involves six documents and two steps.

While earlier studies provided significant information on trade facilitation, they generally lacked details. For example, the trade procedure is often not disaggregated into sub-processes, and the time and costs associated with completing these sub-processes are not estimated. In other cases (e.g., World Bank, 2010), trade procedures are broken down but a range of time and cost estimates is not available across products even though procedures vary greatly depending on a product. Finally, no internationally-accepted methodology or process-modeling techniques have been used. The present study, therefore, attempted to address the limitations of these previous studies by breaking down the export procedure into important sub-processes/steps, and by looking at specific products and routes. This approach enabled the formulation of specific recommendations on trade policy and procedures for trade facilitation in the Lao People’s Democratic Republic.

B. Analytical framework and methodology

The present study covers export procedures starting from the time that an exporter and importer sign a contract to when goods are loaded on to a ship at a seaport. Figures 1(a) to 1(c) show the export procedure is divided into three main steps, which are again divided into sub-steps or processes. For steps two you can see example of the diagrams in the annex figure 5 for coffee export via Vang Tao border checkpoint.

Figure 1(a). Time and cost analysis flow chart of garments and coffee exports Step I Step II Step III

Before shipping At the border Arrival at seaport

6

Figure 1(b). Step I – export procedure between factory and border Figure 1.2 Step II the export procedure at border checkpoint.

Figure 1(c). Step III – arrival at seaport

The first step covers the process prior to shipping, comprising the preparation of all documentation before delivery of the products to customs at the border checkpoint. The study investigated required documentation, time and costs involved in preparing documents and export application forms, including the process for accepting an order, obtaining an export permit, arranging transportation and other relevant processes.

Moving to border

Lao Shipping

Thai Shipping

Submit all documents and declaration

Thai Customs and other agencies

Lao Customs and other agencies

Receipt of order

Exporter/representative

Others

Obtained export permit

Transport company Government agencies

Transportation arrangements

Collecting all documents

Moving truck to border

Submit all documents and declaration

Change container or truck

Moving truck to seaport

Moving truck to Laem Chabang

Thai shipping

Ship

Arranging transport of container to

Thai seaport authority Inland container depot at Laem Chabang

Submit all documents and declaration

Container reaches ship

Issued bill of lading

7

Step II concerns the procedure at border checkpoints, including the declaration for

clearing goods through Lao customs inspectors and for Thai customs inspection, and an immigration declaration. This is very important because exporters have to unload their goods and wait for customs inspection. For example, Lao exporters or transport companies must deal with both Lao and Thai customers directly. If their trucks cannot meet transit standards or agreements, they will have to change to Thai transport company trucks. Alternatively, Lao exporters can directly reserve containers with Thai transport companies, thus avoiding the need to change trucks. The study observed each process first-hand and export companies were interviewed.

Step III is transportation from the border checkpoint to the seaport. Again, the data on the

time and costs involved were collected first-hand. For example, in obtaining an export permit, the time and fees involved were recorded.

As mentioned above, the present study focused on the procedures for garment and coffee

products (see annexes 1 and 2). The analytical framework and methodology adopted in the study were based on the ESCAP/ECE Business Process Analysis Guide, 2010, including the Buy-Ship-Pay model (ESCAP, 2001) for international trade transactions. Importantly, the Unified Modelling Language (UML) was introduced to systematically map each sub-process of the export procedure. This standard methodology was used in the study to draw both case and activity diagrams for the garment and coffee industries, allowing for possible comparisons with other country studies that also use UML, which comprises a set of standard graphical notations for business process modeling. UML is internationally accepted and widely used, not only among business communities but also in information technology and software development.1

In the course of the study, four border checkpoints were visited (see annexes 3 and 4): Vientiane-Nong Khai (Route No. R1), Savannakhet-Mukdahan (Route No. R2), Champasak-Ubonratchathani (Route No. R3), and Dansavanh-Lao Bao (Route No. R4) to check times and costs, involved in completing document procedures and other requirements before shipping goods as well as both national and provincial arrangements. Interviews were also conducted with local authorities, particularly customs officials, as well as exporting companies. Interview guidelines and a questionnaire (annex 5) were prepared based on the objectives of the study.

C. Analysis of trade procedures for garment exports by the Lao People’s Democratic Republic

This section begins with a brief overview of the situation of the garment industry in Lao

People’s Democratic Republic. The required documentation and export procedures for garment exports from Vientiane as well as Savannakhet province are then discussed and recommendations are presented.

1. Overview of the garment industry

The garment industry is the most important subsector of the country’s manufacturing sector as it ranks first in total manufacturing production, and second in the value of exports. Furthermore, it employs more than 27,000 workers and earns more than US$ 140 million per 1 For further details see the Business Process Analysis Guide, Trade and Investment Division, ESCAP. Available at www.unescap.org/tid/publication/tipub2558.asp.

8

annum in foreign exchange. In 2008, there were 58 export companies including foreign-owned companies (FDI), Lao-owned companies and joint venture companies. Most foreign direct investment (FDI) into the Lao People’s Democratic Republic is from Thailand followed by Taiwan, Republic of Korea, Japan, the Netherlands and France, respectively.

According to the Garment Association, the majority of garment companies

(approximately 80 per cent) are focusing on cutting, making and trimming (CMT) and are almost all subcontractors, e.g., Thai garment factories receive orders from customers in other countries and outsource them to Lao garment factories because of limited production capacity or higher labor costs in Thailand. A Thai garment factory will send raw materials, including fabric, buttons etc., to the Lao companies for CMT. The final products are then sent back to the Thai garment factory, where they are prepared for export. Most of the Lao garment companies are medium-sized with no more than 100 employees, and are located in Vientiane.

2. Export documentation

Lao garment exporters have to prepare documentation for all stages of the export process, i.e., documents for receiving an order, prior to sending products to border check points as well as documents for the border check points and for transit haulage. Those documents include:

)a( Purchase contract. This contract is an agreement between the buyer and seller of the products. The details of the contract must include the amount of the product, the price per unit, shipping date, payment conditions and the signatures of the two parties.

(b) Invoice. An invoice or bill is a commercial document issued by sellers to buyers, indicating the products or services, quantities and agreed prices for the products or services provided by the seller. An invoice also indicates that the buyer must pay the seller according to the payment terms

(c) Packing list. This is a shipping document that accompanies packages, usually placed inside an attached shipping pouch or the package itself. It commonly includes itemized details of the package contents. It serves to inform all parties, including transport agencies, government authorities and customers, about the contents of the package. It helps them deal with the package accordingly.

(d) Customs declaration form. The declaration form is an administrative document for use in all customs transactions – imports, exports or transit. The declaration form has three segments. The first section (boxes No.1-23) is for general information on the importer, exporter and declarant as well as transportation and transaction details. The second section (boxes No.24-42) is for details on the item(s) declared, including amount of duties and taxes payable or exempted. The third section is a summary of Payment and Responsibility of Declaration Section (Customs Section, 2010).

(e) Temporary declaration form. This document is for use in all custom transactions; (imports, exports or transit). This form is a temporary declaration for the warehouse authorities, detailing the amount, weight, type and price of imported or exported products. The document serves as a guarantee that an importer or exporter will receive the same amount of products when moving a shipment from the warehouse.

(f) Bill of Lading. This document is issued by a carrier to a shipper, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified.

9

(g) Certificate of Origin. This document is used in international trade. It traditionally states the country where the goods have been produced, not the country from where the goods have been shipped.

(h) Confirmation of remittance transfer. This document is issued by a bank in an exporter’s home country to confirm that the exporter has received payment from the importer. The document is attached to the customs declaration form for submission to customs. The main content of the confirmation of remittance transfer includes the amount of money that an exporter has received from an importer.

(i) Request letter for custom inspection. The letter is issued either by the exporter or by the importer. This letter is attached with a custom declaration form on submission to customs. The purpose of the letter is to request the custom authorities to inspect the cargo with regard to amount, value and weight of the products being exported or imported.

(j) Raw material clearance. A clearance for raw materials is issued by customs. The document shows details of raw material inputs. It is used to ensure that Lao garment factories use imported raw materials for the purpose of producing goods for export only.

3. Procedure for garment exports from Vientiane

The procedure for garment exports mainly concerns the receipt of orders, imports of raw

materials, transportation, customs declaration and transit haulage. (a) Receipt of orders

As noted in the previous section, the majority of the garment companies in the Lao People’s Democratic Republic are focusing on CMT. Therefore, these companies rely on orders from Thai producers or agency companies in Thailand. The latter operate their business in accordance with the marketing requirements of garment and textile companies. The steps involved in placing orders are (see figure 1 in annex 1):

(a) The agency company/Thai producer sends order details which include a designed and a term of trade plus a sample to Lao's producer;

(b) Exporter/Lao producer develops a sample design, quotes a price and prepares a bill of materials (BOM) and sends them to the Thai producer;

(c) The agency company/Thai producer verifies the BOM and confirms the intent to purchase;

(d) Both parties sign contract and determine the shipping date; (e) The agency company/Thai producer then sends raw materials (fabric, yarn and

accessories) to the Lao producer through the Nongkhai-Vientiane border checkpoint. The procedure for preparing raw materials and transporting to the border crossing point

takes about two days. (b) Import of raw materials When the raw materials arrive at the Vientiane border checkpoint, they are unloaded and stored at the Thanaleng Warehouse State Enterprise (TWSE) for customs inspection. The Lao producer/representative has to prepare the applications, including a custom declaration form,

10

invoice, packing list and bill of lading (figure 2 of annex 1). The procedures for importing raw materials are:

(a) The Lao producer/representative has to physically check the quantity of raw materials at warehouse to ensure that the amounts match the details on the packing list, and submits the bill of lading to TWSE for verification;

(b) The producer/representative then enters the import information on a temporary declaration form and submits it to TWSE for verification;

(c) The producer/representative submits the documents, including a customs declaration form, temporary declaration form, and invoice and packing list, to the Customs Section. A customs officer checks the documents and enters the export data into a database. If all the documents are correct, they are then sent to the head of the Customs Section for confirmation. If the documents are not correct, the producer/representative has to re-submit them.

(d) The Lao producer/representative pays a temporary-storage fee to TWSE. In the case of garments, customs officers must inspect the raw materials in detail. Therefore, the raw materials have to be unloaded and kept temporarily in the TWSE warehouse;

(e) The producer/representative submits a request to have a custom inspection to custom officers;

(f) A customs officer physically checks the imported products to ensure that they match the information given in the documents, and then gives approval;

(g) The producer/representative loads the raw materials onto a truck for transportation to his/her warehouse.

Table 2 summarizes the garment import procedures by purpose, authority, application

documents, relevant authorities’ responsibilities, time required and expense. The estimation of documents, time and expenses are based on one container load. Producers/representatives must submit application documents to two authorities, involving at least five documents, each time. Total time taken to prepare documents is between 75 and 115 minutes, excluding travelling between offices and on the assumption that there will be no other obstacles or delays, such as queuing. In practice, this procedure takes two days for transporting raw materials from Bangkok to the Nongkhai-Vientiane border checkpoint plus one additional day from the border checkpoint to arrival at the factory warehouse. Direct expenses incurred in preparing or submitting documents are Kip 110,000.2

Total expenses are based on exporters’ receipts. “Informal” payments to facilitate faster processing amount to around five times the payment based on the receipt.

Table 2. Procedure of import of raw materials Activity/purpose List of documents Authority

Authority’s

responsibility Time

(minutes) Expense

(Kip) Physical check and submit document

Bill of lading Warehouse, TWSE

Check and approval

3-5 No fee

Declare import data Temporary declaration form

Warehouse, TWSE

Collect import data

5-10 No fee

2 During the period of this study, the exchange rate was US$ 1 = Kip 8,500.

11

Submit documents to custom office

Custom declaration form Invoice Packing list Temporary declaration form

K1 and K2 office and customs

Check application, input import data into database and approval

10-20 100 000 Kip (Service fee)

Pay temporary storage fee

Temporary declaration (with approval by head of Customs Section)

TWSE Collect storage fee

3-5 10 000

Request customs inspection

Request letter Customs declaration form (with approved by head of Customs Section)

Head of customs

Assign customs officers to physically inspect goods

3-5 No fee

Customs inspection Customs declaration form (assigned by head of Customs Section)

Customs Physical inspection and approval, customs declaration form

10-30 No fee

Move the product to truck and transport to producer’s warehouse

Temporary declaration (with approved by head of Customs Section)

Workers, TWSE

Move the imported product to truck

90-120 No fee

Total Bill of lading Custom declaration form Invoice Packing list Temporary declaration form

Customs and TWSE

120-195 110 000 Kip

(c) Customs declaration at the border checkpoint

The producer/representative prepares the necessary documents, including invoice, packing list, purchase order, custom declaration form, raw materials clearance, transport permit and confirmation of remittent transfer, for customs clearance before the truck arrives at the Nongkhai-Vientiane border checkpoint. The procedures for transportation and customs declaration are detailed below (see annex 1).

(i) Getting confirmation of remittent transfer at the bank

The Lao producer/representative submits the documents and pays the service fee to the

bank. The bank officer verifies the application and issues the confirmation of remittance transfer if documents are correct.

(ii) Vientiane border checkpoint (Lao side)

The Lao producer/representative declares to Industry Management Unit, Customs Section at the Vientiane border checkpoint by submitting all documents and obtaining export approval as goods arrive at the warehouse. Custom officer checks the documents and input visa number if

12

documents are correct and then send documents to the K1 Unit for checking documents and inputting data into a database and the K2 Unit for re-entering data as verification. The producer/representative then requests a customs inspection by submitting all documents and letter of request letter to the head of the Customs Section, for approval of the custom declaration form. The cargo is physically inspected and approved by customs officers if the quantities match the data in the documents.

Next, the producer/representative submits a personal passport and international transport permit to immigration. This is the final step in the procedure at the Vientiane checkpoint but the producer/representative must have all necessary documents ready for presentation at the Nongkhai border checkpoint.

(iii) Nongkhai border checkpoint (Thai side)

When the truck arrives at the Nong Khai border checkpoint, the Lao producer/representative

submits a personal passport and international transport permit to the Thai immigration office, and then transfers all documents, including a bill of lading, invoice and packing list, to the Thai forwarder/producer (see figure 5 in annex 1).

The Thai forwarding agent/producer submits all applications to the Thai customs office for

physical inspection. A Thai customs officer physical checks the cargo during the transfer from the Lao transport to the Thai transport. Thai truck/forwarder takes two sets of photos when transferring the cargo.

Table 3 summarizes the garment export procedures at the Vientiane-Nongkhai border checkpoint by purpose, authority, application documents, relevant authorities’ responsibilities, time required and expenses. Before arriving at the Vientiane border checkpoint, the Lao producer/representative will have to pay a Kip 5,000 fee and supposedly spend 5-10 minutes on getting confirmation of the remittance transfer to avoid queuing. In practice, it takes about 30 minutes to get the letter.

At the Vientiane border checkpoint the Lao exporter must submit 10 documents at the

Vientiane border checkpoint. Total time for preparing the documents is 40-80 minutes, excluding travelling between offices and assuming that there are no other obstacles or delays, such as queuing. Direct expenses incurred in preparing and/or submitting documents amount to Kip 105,000.

At the Nongkhai border checkpoint the process takes about 40-80 minutes, excluding time travelling between offices assuming that there are no other obstacles or delays, such as queuing. No direct fees are incurred in this procedure.

Ten export documents involving six authorities are required. Total time taken to complete the three steps is 115-210 minutes, excluding travelling between offices, excluding any obstacles or delays. In practice, the procedure takes about half of a day to complete if all the documents are correct. Total direct expenses amount to about Kip 155,000 based on the receipts of the Lao producer/representative. However, when faster processing is required, additional payments will be necessary.

13

Table 3. Export procedures

At the bank Activity/purpose List of documents Authority

Authority’s

responsibility Time

(minutes) Expense

(Kip) Submit document and pay service fee

Purchase order Invoice Packing list

Bank Verify application

5-10 5,000

Issue a confirmation of remittent transfer

Bank Approval

At the Vientiane border checkpoint Submit documents Custom declaration form

Purchase order Invoice Packing list Confirmation of remittent transfer Raw material clearance

Industry unit Customs Section

Approval 5-10 No fee

Input export data into data base

Custom declaration form Purchase order Invoice Packing list Confirmation of remittent transfer Raw material clearance Customs declaration form

Company

Input export data into data base and verify

15-20

100 000 (service

fee)

Request customs inspection

Purchase order Invoice Packing list Confirmation of remittent transfer Raw material clearance Request letter for inspection

Company Approval and assign custom officer

5-10 No fee

14

(d) Transit haulage and shipment

After receiving documents, the Thai forwarder transports the cargo to Laem Chabang. The truck is required to transit at Lard Krabang for product classification. When the truck arrives at the Inland Container Depot (ICD) in Lard Krabang, the Thai forwarder transfers all the

Physical inspection Custom declaration form

Purchase order Invoice Packing list Confirmation of remittent transfer Raw material clearance Request letter for inspection

Custom officer, Customs Section

Physical check and approval

10-30 No fee

Declare personal passport and International transport permit

Personal passport International transport permit

Immigration office

Input data and approve

5-10

No fee

Total

Custom declaration form Request letter for inspection Purchase order Invoice Packing list Confirmation of remittent transfer Raw material clearance Personal passport International transport permit

Bank Customs Section Immigration office

40-80

105 000

At the Nongkhai border checkpoint

Lao producer declare documents

Personal passport International transport permit

Thai immigration Approval 5-10 No fee

Thai producer/ representative submits documents to Thai Customs Section

Bill of lading Invoice Packing list

Thai Customs Section

Custom inspection

5-10

No fee

Loading product from Lao truck onto Thai truck/forwarder

Two sets of photographs

Representative of Thai company

Physical check of amount of product

30-60

No fee

Total Personal passport International transport permit Bill of lading Invoice Packing list Two sets of photos

Thai immigration Thai customs

40-80

No fee

15

documents to shipping company. The next part of the procedure (figures 6 and 7 in annex 1) involves:

(a) Submission by the shipping company of a shipment booking with an invoice, packing list and bill of lading attached to Thailand International Freight Forwarder Association (TIFFA), which verifies documents that the documents are correct;

(b) Unloading the container at the Laem Chabang warehouse; (c) Recording of the data by the ICD Information Office, which then issues a new packing

list; (d) Payment by the shipping company for transporting the container from the warehouse

to the ship; Moving the container to Laem Chabang seaport depends on the shipment schedule. The

procedure for moving the cargo (figure 7 in annex 1) includes: (a) Submission by the shipping company of the documents, including the shipment

booking and new packing list, to the Inland Coordination Unit at Laem Chabang seaport;

(b) Verification of the documents by an officer on the ship loading of the container onboard;

(c) Recording the information and issuance of a new bill of lading by the shipping company;

(d) Sending the documents from the shipping company to the Lao producer.

Transportation from Nong Khai to Lard Krabang takes about 12 hours, while from Lard Krabang to Laem Chabang seaport it is two hours. In practice, it takes one and a half days until the container is loaded on to the ship. For the example, if the truck departs from Nongkhai at 8.00 p.m., the container will be on the ship by between 11.00 a.m. and 12.00 a.m. The total cost of transportation from Nong Khai to Laem Chabang seaport is between Baht 30,000 and Baht 40,000.3

(e) Certificate of Origin

The shipping company sends the documents to the Lao producer when the container has been loaded onboard the ship. The Lao producer then submits them to the Division of Import and Export, Ministry of Industry and Commerce of Lao People’s Democratic Republic for issuance of a Certificate of Origin (CoO) (Form A) (figure 8 in annex 1). If the documentation is correct, the CoO will be issued. The Lao producer/representative has to spend Kip 50,000 for the service fee. Although getting a CoO supposedly takes 30-40 minutes, in practice it takes about four hours. The Lao producer/representative sends the CoO by mail, and the Thai customer receives it within three days.

Figure 2 summarizes the procedures for garment exports, from receiving an order until the

issuance of a CoO. The vertical axis shows the time required for completing each procedure for one container of garment exports, based on interviews with garment exporters regarding documentation, custom inspections, queuing and transportation. The horizontal axis identifies each procedure. The time required to produce garments is not included.

3 During the period of this study, the exchange rate was US$ 1 = Baht 33..

16

Figure 2. Procedure times for exporting garments fro Lao People’s Democratic Republic

4. Procedure for garment exports from Savannakhet province

This section provides a comparison of the differences in the export procedures for garments from Savannakhet province and Vientiane. Although, in general, the procedures in two provinces are not much different, there are some minor differences in the sub-procedures:

(a) In Savannakhet province, all import and export procedures are conducted at the Savannakhet-Mukdahan Second Mekong Bridge, while in Vientiane the customs declaration must be submitted to the Customs Section, which is about two minutes from the Vientiane-Nongkhai Mekong Bridge;

(b) In Savannakhet, the Customs Section is responsible for the warehouse whereas in Vientiane the responsibility lies with a state-owned enterprise. However, the storage fee is the same at both locations;

(c) There is a scanner in the warehouse at the Savannakhet border checkpoint and some containers are randomly selected for scanning. This helps simplify and speed up the custom inspection;

(d) Import and export times are shorter at the Savannakhet border checkpoint because of the lower rate of trade flow. It can take just three hours to complete the procedure at the Savannakhet border checkpoint, while at least five hours are required to complete the procedure at the Vientiane border checkpoint;

Notes: A. Receiving order (one day). B. Import of raw materials (three days). C. Export procedure at the Nongkhai-Vientiane border checkpoint (one day). D. Transportation from border to seaport and loading the container on to the ship (one and a half days). E. Getting the Certificate of Origin (half a day).

Time (days)

Procedures

1

A B C D E

Receiving orders

Imports of raw materials

Obtaining Certificate of Origin

2

3

4

5 Nong Khai-Vientiane border checkpoint

Transit haulage 6

7

17

(e) Exporters in Savannakhet province have to send their documents to the Ministry of Industry and Commerce in Vientiane to apply for a CoO. It takes about three days for issuance of the CoO;

(f) According to the interviews, the export procedure at the Savannakhet border checkpoint requires higher “informal” payments than at the Vientiane border checkpoint.

5. Discussion and recommendations

From the previous section, several issues can be identified for discussion. More than 10

documents are involved in the export and import procedures; however, some of those documents are unnecessary. For the example, exporters and importers have to report the amount, value and weight of their products in the temporary declaration form. However, this information is already shown in the invoice, packing list and customs declaration form. Confirmation of remittance transfer is also unnecessary in the procedure for exports. The customs office requires this document to be attached to a customs declaration form in order to guarantee that the exporter has received money from the customer as well as to check the actual value of the exported products. Again, that information is already shown in the invoice.

With regard to the raw material import procedure, raw materials are unloaded from the

transportation and stored in the warehouse, which is an unnecessary procedure. Customs officers can carry out a physical inspection of the truck or check with a scanner. Exporters and importers have to submit the same documents to several offices, a step that could be omitted with the introduction of a single window service for imports and exports. For the example, a Lao producer/representative would need to submit all documents and pay a service fee only once. Following verification of all the documents, a physical inspection could be made. This would reduce the procedure from seven steps to just two or three steps.

A Lao producer/representative has to unload the products for transfer to the Thai transport

at the Thai border checkpoint. This procedure could be avoided if the Lao transport was allowed to continue through to the Thai seaport. However, this change would face some difficulty as Lao vehicles are driven on the right side of the road, whereas in Thailand vehicles are driven on the left side.

Recently, Lao garment companies have tended to use Thai trucks for transporting garment

exports right from the factory. The transportation cost per container in such cases is around Baht 40,000. While this method is more expensive than using Lao transportation to the border, it saves time. In terms of required documentation, the procedures are the same. The Lao producer/representative provides the driver of the Thai vehicle with all the required documents; however, the cargo does not have to be unloaded at the border for transfer to Thai transportation.

18

D. Analysis of trade procedures for coffee exports by the Lao People’s Democratic Republic

This section begins with a brief overview of the situation of the coffee industry in the Lao

People’s Democratic Republic, and then explains the procedures for coffee exports from Champasak and Savannakhet provinces.

1. Overview of the Lao coffee industry

Lao coffee is one of the country’s most successful agriculture products in terms of output and exports. In 2007, the production of Lao coffee beans totalled 33,200 metric tons from 44,990 hectares. According to the Food and Agriculture Organization of the United Nations (FAO), approximately 60 per cent of Lao-grown coffee was exported between 2000 and 2007. In 2007, exports of Lao coffee totalled US$ 29 million, which represented a share of some 3 per cent of the country’s total exports in that year. The main export market for Lao coffee is in Europe, with Belgium, France, Germany, the Netherlands and Poland comprising the major destinations. Lao Coffee Association statistics indicate that some 18 major coffee export companies are operating in the Lao People’s Democratic Republic, all located in Champasak province.

2. Procedure for coffee exports from Champasak province The procedures for Lao coffee exports involve more documents and processing than the

procedures for Lao garment exports. (a) Receiving orders

The coffee export companies usually receive orders from customers base on customer

visits (Udomsab Co., Ltd.) or from information posted on the Internet (Dao Hueng Co., Ltd.). In both cases, new customers want to check coffee bean samples for quality and to negotiate price and terms of trade. After having completed the first-time contract, the export process will be faster for subsequent contracts as the importers can send orders and finalize contracts directly without visiting to check samples. The procedure for completing an order (figure 1 of annex 2) is as follows:

(a) The customer contacts the producer via telephone or the Internet and arranges a date for a visit by the producer’s factory;

(b) Following the factory visit, the customer sends order details, including a contract and terms of trade;

(c) The producer then sends a quotation to the customer and negotiates the price via telephone or the Internet;

(d) Both parties sign a contract if they agree on the terms of trade, and a letter of credit (L/C) is opened (figure 3 of annex 2).

(b) Getting permission from relevant agencies

This procedure is initiated after the exporter has received the L/C and prepared the product according to the requirements of each customer. Around two days before the shipment, the exporter has to prepare documents such as the bill of lading, invoice, packing list etc. This procedure (figure 2 of annex 2) entails:

19

(a) Submission by the exporter/representative of the documents to the relevant agencies for verification;

(b) Provision of a sample of the shipment by the exporter/representative for physical examination by the Technology Section and Agriculture Section, which will issue a certificate if the sample meets the required standard;

(c) Collection by the Tax Section of profit tax based on the size of the export shipment; (d) Collection of a fee and export data by the Lao Coffee Association; (e) Issuance of a CoO by the Trade Section; (f) Collection by the exporter/representative of all documentation required for the

shipment of the order to the customer. The exporter has to prepare all necessary documents. Figure 2 of annex 2 lists the relevant

agencies from which exporters have to get stamps and signatures, as well as a phytosanitary certificate from the Agriculture and Forestry Department, (figure 3 of annex 2). If the documents are correct, Agriculture and Forestry Department officials will collect a sample at the factory or warehouse for examination at their laboratory. If the test result is approved, a phytosanitary certificate will be issued to the exporter. If the result is not approved, a letter of rejection will be sent to the exporter, showing the test result and the reason for refusing approval to export. This process takes at least three hours, depending on the size of the queue and available time. Exporters have to pay a certificate fee of about Kip 3,000 per metric ton plus “informal expenses”.

The payment process is the final step for the exporter prior to shipment. This step involves

the banks of both the exporter and the importer. A price quotation and a letter of request must be prepared by the importer for submission to the importer’s bank, which will then contact the exporter’s bank with a request for the necessary documents (commercial invoice, packing list, phytosanitary certificate, bill of lading and CoO) from the exporter as soon as possible. If all the documents are correct, the importer’s bank can transfer payment to the exporter’s bank. The complete process should take no more than three working days.

(c) Transportation and export procedures at the Lao-Thai border checkpoint

After collecting all the required documents, the exporter has to prepare a transportation and customs declaration application. The Thai transport collects the container and takes it to the Vangtao-Chongmek border checkpoint (figure 3 in annex 2) where the exporter/representative:

(a) The bill of lading is submitted to the traffic police who will then check the weight and collect the transportation fee. If the truck is overloaded, the traffic police are authorized to fine the exporter/representative;

(b) The customs declaration is submitted to the Customs Section and of the CoO to the Agriculture Section. If these documents are in order, approval will be granted;

(c) A request is submitted to the head of the Customs Section for physical inspection; (d) All the documentation is then handed over to the Thai transportation company, which

will take responsibility for transporting the container to the Bangkok seaport. At the Thai border checkpoint, Thai customs officers will recheck the documentation to make sure the shipment is ready for transit to the third country.

(d) Transportation and export procedures at the Lao-Vietnamese border checkpoint

20

Exporters can also export their coffee from Viet Nam’s Danang seaport via the Dansavanh-Lao Bao border checkpoint.4

After clearing all the documentation with the relevant agencies, orders can be transported from the factory to Savannakhet and the Dansavanh-Lao Bao border checkpoint. This process takes between 5 and 6 hours. (Figure 6 of annex 2 shows the process on the Lao side of the border, which is the same as at the Vangtao-Chongmek border checkpoint.) After the Lao custom officers have inspected the shipment, the documentation has to be submitted to the Vietnamese customs for verification and inspection of the shipment. The container transport can then travel on to Danang seaport.

Table 4 and figure 3.1 summarize the necessary documentation as well as the time and costs involved in exporting coffee from the Lao People’s Democratic Republic. Coffee exporters must submit application documents to five authorities, involving at least four documents each time. Total time required for preparing documents is 265 minutes. Exporters can send the documents to all the relevant agencies at the same time. This procedure will take half a day to one day to complete if all the documentation is correct. Direct expenses5

4 Although all customers are in China and some European countries, they prefer to send their products via Thailand rather than Viet Nam.

involved in preparing/submitting the documents total Kip 510,000, plus the Lao Coffee Association fee and profit tax.

5 Total expenses calculated from exporters’ receipts.

21

Table 4. Summary of time and costs involved in exporting coffee from the Lao People’s Democratic Republic

Activity/purpose List of documents Authority

Authority’s responsibility

Time (minutes)

Cost (Kip)

Apply for certificate of origin

Purchase order Invoice Packing list Request letter (To Trade Section)

Trade Section Check application and issue the certificate of origin if correct

60 100,000

Apply for phytosanitary certificate

Purchase order Invoice Packing list Request letter (to Agriculture Section)

Agriculture Section

Check application, 10 200,000 Physical examination 60 Issue of phytosanitary certificate if the result of physical examination coincides with the application

10

Apply for certificate of Quality Control

Purchase order Invoice Packing list Request letter (to Technology Section)

Technology Section

Check application 10 200,000 Physical examination 60 Issue the certificate of quality control if the result of physical examination is coincide to the application

10

Pay profit tax Purchase order Invoice Packing list Request letter (to Tax Section)

Tax Section Check application and collect profit tax

30 10,000 plus 5% of export value x 35%

Inform an export and pay fee

Purchase order Invoice Packing list

Lao Coffee Association

Record export information and collect fee

15 Quantity of export in kg x Kip 15

Total Purchase order Invoice Packing list Request letter (to Trade Section); Request letter (to Agriculture Section) Request letter (to Technology Section) Request letter (to Tax Section)

Trade Section Agriculture

Section Technology

Section Tax Section Lao Coffee

Association

265 510,000 plus export quantity in kg x Kip 15 plus 5% of export value x 35 %

22

Figure 3.1 Procedures and timing for exporting coffee from the Lao PDR ( Lao-Thai border checkpoint)

Figure 3.2 Procedures and timing for exporting coffee from the Lao PDR (Lao-Viet Nam border checkpoint)

Notes: A. Receiving order (one day). B. Getting permission from relevant agencies (three day) C. Transportation (half day) D. Export procedures at the Lao-Thai border checkpoint (half day)

Time (days)

Procedures

1

A B C

Receiving orders

Getting permission from relevant agencies

2

3

4

5 Transportation

D

Export procedure at the border checkpoint

Time (days)

Procedures

1

A B C

Receiving orders

Getting permission from relevant agencies

2

3

4

5 Transportation

D

Export procedure at the border checkpoint

Notes: A. Receiving order (one day). B. Getting permission from relevant agencies (three day) C. Transportation (one day) D. Export procedures at the Lao-Viet Nam border checkpoint (half day)

23

3. Procedure for coffee exports from Savannakhet province (Dansavanh-Lao Bao checkpoint)

Coffee plantations can only be cultivated in the southern region (Champasak

province) of the Lao People’s Democratic Republic, where the climate is suitable. Exporters therefore face high costs for transportation from factory to seaport. When exporting coffee to European countries, they can select one of two seaports (Laem Chabang or Danang). This section provides a brief explanation of coffee exports from Pakse city, via Savannakhet and the Dansavanh-Lao Bao border checkpoint, to Danang seaport. Normally, the coffee export procedures in Pakse and Savannakhet do not differ much, but the variations in some parts of the process are identified below:

(a) Savannakhet province is in the centre of the Lao People’s Democratic Republic and is connected with Thailand and Viet Nam via Highway No. 9. Export companies (e.g., Dao Heuang Group) have to transport coffee from Pakse to Savannakhet (about 215 km) and directly to the Dansavanh-Lao Bao border checkpoint;

(b) This route involves more than 450 km of driving from the factory to the border checkpoint, while exports from Pakse to Vang Tao is about 40 km only;

(c) On the way from Pakse to Dansavanh border, drivers have to stop many times at police weighting stations. According to an interview with the head of the Dao Heuang Company branch in Savannakhet, drivers cannot delivery products to their destination on time because of the delays caused by having to stop for so many weight checks. Moreover, they have to pay additional fees and “informal” payments;

(d) Lao trucks cannot enter Thailand, while they can transport goods to Danang seaport directly with good cooperation from Vietnamese custom officers;

(e) After completing the same export procedures at the Dansavanh-Lao Bao border checkpoint as those at the Vang Tao-Chongmek checkpoint (Pakse), the trucks head for Danang seaport – a distance of about 263 km, which may take 5-6 hours to cover.

(f) The shipping company has to prepare all necessary documentation at Pakse before its trucks can leave for Danang via the Dansavanh-Lao Bao checkpoint.

4.Discussion and recommendations

In this section we have some points to discuss in order to be cleared and more understand on procedures of coffee export from Lao PDR. Exporters have to deal at least 8 agencies in whole process of export that they have to prepare or submit more than 13 documents. Some of those documents should merge and deal with the same agency. For example, phytosanitary and quality control certificates should be cooperate be collecting sample at factory at the same time and government should set up only one service agency that they can issue both certificates at the same office. Thus, exporters can save their time and cost, it can increase their export competition.

Like the same as other kid of goods export, exporter has to unload the products for

transfer to the Thai transport at the Thai border checkpoint. This procedure could be avoided if the Lao transport was allowed to continue through to the Thai seaport as crass border transportation agreements, but in practice, it seem some difficulty and inconvenience that

24

Lao trucks are driven on the right side of the road, whereas in Thailand vehicles are driven on the left side. Moreover, exporters have to face with high cost of transportation from border to seaport without other option transportation modes. However, coffee exporters prefer export their product via Laem Chabang seaport rather than Da Nang seaport because of more standard and relievable from import, even through Da Nang route is cheaper and faster than via Bangkok seaport.

At border checkpoint, exporters have to waste their time to submit all documents and

wait for concerning official inspection. In this procedure exporters or representatives have wait for custom officials recheck their documents again. In fact all documents are correct, but they just waste the time in order to get informal fees from exporters. Moreover, there are unnecessary inspector processes such as officials from line ministries. They don’t need to recheck all certificates again. Lao government should remove all kind of inefficient process to increase competition and volume of exports.

E. Comparison of trade procedures for garment and coffee exports

This section compares Doing Business (DB) indicators with the results of this study.

Trade procedure is broken down into sub-procedures in the study, making it possible to; observe the timing, documentation and costs involved in each sub-procedure. The overall time required for exporting garments and coffee is seven days and six days, respectively, while according to the DB indicators it is 50 days. The main reason for the differences in export times is that this study only estimated the time from samples of garments and coffee products while the DB estimates are based on an average time for a wide range of products. It is likely that the DB study included export procedures for wood and wood products, which require a much long period.

With regard to the documentation necessary for garment and coffee exports, the

present study found that 19 and 12 documents were required, respectively, while the DB results show only nine documents are needed. The documents shown in table 5 are not repeatedly included in each procedure. One of the reasons why the number of documents in this study is higher than that listed by the DB study is because the procedures for receiving an order and importing raw materials have been included by the authors.

The cost estimates given in both this study and the DB study are based on a single

20-foot container. However, this study found that cost of exporting garments and coffee is lower than the cost estimated by DB. In any case, such costs vary from product to product; the costs involved in exporting heavy products – e.g., wood products – are much higher than for garments and coffee.

Table 5. Comparison of trade procedures Procedure

Garments Coffee Doing business Time (Days)

Doc. (No.)

Cost (USD)

Time (Days)

Doc. (No.)

Cost* (USD)

Time (Days)

Doc. (No.)

Cost (USD)

Receiving order 1 3 5 1 3 5 - - - Import of raw materials

3

5

12.94

-

-

-

-

-

-

Transportation and customs clearance

1

10

18.23

0.3

9

10

-

-

-

25

at border Transit haulage 1.5 3 909 0.5 2 66.46 - - - Getting a CoO 0.5 1 5.88 0.5 3 0.5 - - - Total 7 19 951 3 17 82 50 9 1 860 Source: Authors’ calculations for garments and coffee; World Band for doing business. Note: Exchange rate US$ 1 = Kip 8,200. Cost per metric ton.

F. Conclusion Because the Lao People’s Democratic Republic is landlocked, export shipments need

to be transported via neighboring countries, either to Laem Chabang seaport in Thailand or Danang seaport in Viet Nam. As a result, exporters are faced with the high cost of transportation and lengthy procedures. In this study, the authors have focused on trade facilitation for garment and coffee exports from the Lao People’s Democratic Republic by using UML figures to explain the export procedures for each product based on interviews with exporters.

This study found that both garments and coffee have low competitiveness in terms of high transportation costs because Lao trucks are not permitted to freely enter Thailand; although the two countries have transit agreements, these agreements have yet to be implemented. Moreover, Lao exporters have to waste considerable time at the border with Thailand due to inspection of shipments as well as the documentation process. Both garment and coffee exports take 6-7 days; however, the number of documents that exporters need to prepare prior to exporting garments and coffee is different because the latter is an agricultural product that also requires phytosanitary and quality control certificates.

When comparing this study with the DB study (table 5), it is clear that there are

major differences in the figures given for transportation costs and other fees incurred during the export procedures for both products. However, both studies found the problems faced by exporting companies to be same, especially with regard to documentation procedures. Approval of some documents is delayed because heads of department or other officials authorized to sign are in meetings or otherwise unavailable. Moreover, exporters have to provide “informal” payments that create misunderstanding among foreign investors. This may have an adverse long-term effect on investment policies. Therefore, in order to increase export competitiveness and support the export business, the Government of the Lao People’s Democratic Republic needs to solve these problems, particular at the border checkpoints, by improving customs procedures to ensure greater efficiency and by seeking less costly methods of transportation.

26

References

Arnold, J. (2003). “Logistics development and trade facilitation in Lao PDR”. World Bank, Washington, D.C.

Banomyong, R. (2001). “Multimodal transport: The case of Laotian garment exporters,” International Journal of Physical Distribution and Logistics, vol. 31, No 9; pp.663-668.

ESCAP (2001). “Facilitation measures related to international trade procedures, Recommendation No. 18”, ECE/TRADE/271. United Nations, New York and Bangkok.

Khemdeth, S. (2006). “Report of the Regional Expert Group Meeting on Trade and Transport Facilitation for Export Competitiveness”. Available at www.unescap.org/tid/projects/egmtf_s3Khemdeth.pdf (accessed 12 September 2009).

Ministry of Industry and Commerce (2009). “Statistics of imports and exports, 2007-2008. Available at www.moic.gov.la/statistic.asp (accessed 18 September 2009). Vientiane.

Sirisamphanh V. (2007). “Creating efficiency for trade in the Asian subregion: The case of the Lao PDR”, paper presented at ESCAP Expert Group Meeting, 03/08/200. Available at www.unescap.org/tid/projects/protrade_vorachith.pdf (accessed 12 September 2009).

World Bank (2010). Doing Business Report 2010: East Asia and the Pacific. Available at www.doingbusiness.org/Documents/RegionalReports/DB10_East_Asia_Pacific.pdf (accessed 10 September 2010). Washington, D.C.

World Trade Organization (2009). Glossary definition of trade facilitation. Available at www.wto.org/english/tratop_e/tradfa_e/tradfa_intro_e.htm (accessed 22 September 2009).

27

Annexes

Annex 1. Export procedures for garments

Annex figure 1. Procedure for receiving orders

Agency company/ Thai producer

Sending orders Details

Brand and design

Terms of trade

Exporter/Lao producer

Price quote and preparing BOM

Not acceptable

Acceptable

Signed contract

Verify BOM

Cancel

Confirm the intent to purchase

Getting order

Agency/company

Exporter/Lao producer

Purchase contract

28

Annex figure 2. Import procedure for raw materials at the Lao border checkpoint

Import materials

Producer/Representative

TWSE

Customs Section Producer/representative

Physical check and submit documents

Bill of lading

Thanaleng Warehouse State Enterprise (TWSE)

Verify and approve

Correct

Check documents and input data into

data base

Declare import data

Confirm customs declaration

Temporary declaration form Verify and approve

Submit documents

Customs Section

Incorrect

Pay temporary storage fee

Collect the fee

Request customs inspection

Physically inspect and approve

Temporary declaration form

Invoice

Packing list

Customs declaration form

Shift raw material to truck

Request letter

29

Annex figure 3. Getting confirmation of remittence transfer

Submit documents and pay service fee

Producer/representative

Purchase order

Invoice

Packing list

Bank

Verify documents

Issuance of the confirmation of

remittent transfer

Correct

Incorrect

Bank

Request a Confirmation of remittent transfer

Producer/Representative

30

Annex figure 4. Export procedures at the Lao border checkpoint

Export procedure at Lao border checkpoint

Producer/Representative Custom Section

Producer/representative

Incorrect

Request custom inspection

Custom declaration form (Bor 13B)

Verify declaration form and input data

into database

Submit documents

Custom Section

Invoice

Packing list

Correct

Verify and assign customs officers

Physical inspection, verify submitted forms

Purchase order

Confirmation of remittance transfer

Raw materials clearance

Industry Management Unit

K1 and K2 Unit

Declare documents

Immigration Office

Verify declaration

Correct

Incorrect

Check and input

visa number

Request letter

Personal passport

International transport permit

31

Annex figure 5. Export procedures at the Thai border checkpoint

Thai producer/representative

Submit documents

Lao producer/representative

Personal passport

Transportation permit

Thai producer/representative

Verify

Transfer documents

Thai Immigration

Bill of lading

Invoice

Packing list

Submit documents for physical inspection

Thai Customs Section

Physical check when transferring

shipment from Lao truck to Thai truck

Bill of lading

Invoice

Packing list

Thai Immigration

Export procedure at Thai border checkpoint

Lao producer/Representative

Thai Customs Section

32

Figure 6. Transit haulage

Submit documents

Shipping company

Shipment Booking

TIFFA

Bill of lading

Invoice

Packing list

Finance

Collect service fee

Packing list

Information

Transit haulage

Shipping company

Information

Verify documents

Load container into warehouse

Record data and issue new packing

list

Pay service fee

TIFFA

Finance

33

Annex figure 7. Export procedures at Laem Chabang seaport

Shipping company Seaport office

Export procedure at Laem Chabang seaport

Shipping company

New packing list

Shipment booking

Laem Chabang seaport

Verify documents

Load container on ship

Inland coordination unit

Verify document

Bill of lading

Ship

Send documents

New packing list

New bill of lading

Declare documents

Issue new documents

34

Annex figure 8. Getting Certificate of Origin

MOIC

Getting Certificate of Origin

Producer/representative

Submit documents and pay service fee

Producer/representative

Proposal

Invoice

Customs declaration

MOIC

Verify submitted form

Issuance of CoO

Correct

Incorrect

Cost statement and working process for

export products

35

Annex 2. Procedures for coffee exports

Annex figure 1. Receiving orders

Contact and appoint company visit

Order details

Send order details

Not acceptable

Acceptable

Quote price

Company visit

Cancel

Make decision

Customers

Exporter/producer

Quotation

Confirm the intent to purchase

Make purchase contract Sign contract

Customers

Exporter/ producer

Receiving an order

36

Annex figure 2. Getting permission from relevant agencies

Agriculture and Forestry Department

Getting certificates

Producer/representative

Trade Section

Technology Section

Tax Section

Lao Coffee Association

37

Submit application

Producer/representative

Invoice

Packing list

Technology Section

Verify submitted information

Verify submitted Information

Agriculture Section

Record export information

Trade Section

Request letter

Tax Department

Verify submitted information

Verify submitted information

Collect sample

Issue the certificate of

origin

Collect sample

Examine physical condition

Collect document for export of coffee

Examine physical condition

Issuance of phytosanitary

certificate

Issuance of quality control

certificate

Correct

Incorrect

Purchase order

Lao Coffee Association

Verify submitted information

Collect tax base on amount of export

Incorrect

Correct Correct

Incorrect

Summary of main relevant agencies dealing with coffee exports

38

Annex figure 3. Payment process (opening letter of credit)

Payment process

Importer/customer

Export bank

Import bank

Producer/representative

39

Preparing documents

Producer/representative

Phytosanitary certificate

Bill of lading

Customer

Verify submitted documents

Import bank Export bank

CoO (Form A)

Preparing application for opening letter of credit

Issuance of letter of credit

Invoice and packing list

Incorrect

Correct

Request letter of credit

Price quotation

Letter of credit Collecting and Informing L/C

Verify submitted Documents

Sending documents

Incorrect

Correct

Verify submitted documents

Incorrect

Correct

Rechecked documents

Transferring payments

Asking payments

Correct

Incorrect

Collecting documents

Making payments

Confirming payments Receiving payments

40

Annex figure 4. Phytosanitary certificate

Exporter

Agriculture and Forestry Department

Preparing documents

Exporter/producer

Agricultural and Forestry Department

Getting phytosanitary certificate

Packing list Verifying submitted

information

Phytosanitary certificate

Certificate issued

Commercial invoice

Request application form

Lao Coffee Association certificate

Collect sample at factory

Incorrect

Correct

Record result of examination

Unapproved

Approved

Collect certificate

41

Annex figure 5. Export procedures at Vangtao (Lao People’s Democratic Republic) border checkpoint

Export procedure at Vangtao border

checkpoint Producer/representative

Traffic police

Customs Section

Agriculture Section

42

Submit application

Bill of lading Check the weight and

collect

Correct

Incorrect

Verify certificate

Submit application

Collect fee

Exporter/producer

Temporary declaration

Verify submitted form

Customs

Input export data into database

Invoice

Packing list

Bill of lading

Phytosanitary Certificate

Agriculture Section Traffic police

Correct

Purchase contract

Request customs inspection

Request letter Assign officers to carry out

Physical check

Transfer documents to transportation

Customs Section

Incorrect

Correct Incorrect

43

Annex figure 6. Export procedures at Dansavanh-Lao Bao border checkpoint

Export procedure at Lao-Vietnamese border

checkpoint Producer/representative

Traffic police

Customs Section

Agriculture Section

44

Submit application

Bill of lading Check the weight

and collect transportation fee

Correct

Incorrect

Verify certificate

Submit application

Collect the fee

Exporter/producer

Temporary declaration

Verify submitted form

Custom declaration

Input export data into data base

Invoice

Packing list

Bill of lading

Phytosanitary certificate

Relevant agencies Traffic police

Correct

Purchase contract

Request customs inspection

Request letter Assign officers to carry out inspection

Lao Customs Section

Incorrect

Vietnamese Customs Section

Verify all submitted documents

Incorrect

Physical check

Signed and stamped

Move to Danang Seaport

Incorrect

Correct

45

Annex 3. General information about trade and trade routes in the Lao People’s Democratic Republic

The Lao People’s Democratic Republic is a landlocked country surrounded by five

nations: Cambodia, China, Myanmar, Thailand and Viet Nam. Adequate transportation and trade facilities play a vital role in the country’s economic development and an efficient transportation system can increase the country’s trade competitiveness. Development of trade in the Lao People’s Democratic Republic is essential to encouraging economic growth. Lao exports in fiscal year 2007/08 reached US$ 1,307 million, some 41 per cent higher than in fiscal year 2006/07. The main products exported included minerals, garments, electricity, wood and wood products, and coffee. The country’s imports rose 48.94 per cent in fiscal year 2007/08 to more than US$ 1,364 million, generating a trade deficit of some US$ 57 million (Ministry of Industry and Commerce, 2009). The three Lao provinces of Vientiane and Savannakhet and Champasak play a very important role in trade as well as the national economy. The capital, Vientiane, is the most important location for investors in businesses and logistics.

About 90 per cent of Lao products exported to Europe and the United States transit

through Nong Khai, Thailand, to Bangkok’s Laem Chabang seaport (see export route map, annex 4). Exports of Lao products through Vientiane and Nong Khai amounted to US$ 201 million in 2008.

Exports from Savannakhet province, the second major trading centre, rose from US$

146.59 million in 2007 to US$ 685.97 million in 2008, while imports also increased from US$ 38 million to US$ 124 million during the same period.6

Savannakhet province links the EWEC through the Second Mekong Bridge and Highway No.9. There are two major export routes from Savannakhet province. The first route runs to the Savannakhet-Mukdahan (Thailand) border checkpoint and ends at Laem Chabang seaport. The second route runs to the Dansavanh-Lao Bao (Viet Nam) checkpoint and ends at Danang seaport (annex 4).

Champasak province has huge deficit with its trading partner, Ubonratchathani province in Thailand. Champasak-Ubonratchathani border trade increased from US$ 113.28 million in 2007 to US$ 163.11 million in 2008. The main route for exports from of Champasak province runs to the Champasak-Ubonratchathani checkpoint and ends at Laem Chabang seaport. The road from Champasak to Danang seaport is not well developed; therefore, companies rarely transport export shipments via this route.

6 Savannakhet-Mukdahan border trade increased from US$ 310,580,000 in 2007 to US$ 685,970,000 in 2008.

46

Annex 4. Lao People’s Democratic Republic export route map

Danang

Vientiane-Nongkhai border checkpoint

Mukdahan-Savannakhet border checkpoint

Champasak-Ubonratchathani border checkpoint

Laem Chabang

Dansavanh-Lao Bao border checkpoint

R 1

R 2

R 3

R 4

47

Annex 5. Trade facilitation at border checkpoints

Questionnaire

This voluntary survey is collecting data from businesses to assess the extent to which trade is facilitated, and to identify further ways of facilitating trade four border checkpoint of Lao People’s Democratic Republic. This survey consists of five sections. Please do your best to answer all questions. Individual answers will remain confidential. Your responses will be summarized with those of other respondents to form overall results (in percentages or averages). Section A. Identification of respondents Name of respondent: __________________________________ Position: ____________________________________________ Name of company: ____________________________________________________ Main business activity: _________________________________________________ Respondent resident: ___________________________________________________ Date of response: ______________________________________________________ Section B. Company profiles 1. How would you describe your business operations?

Agriculture Manufacturing Services, please specify ___________________________ Other(s) (please specify) __________________________

2. Is your business: Lao-owned company 100% Lao partnership company Foreign partnership company (foreign share = %)

Foreign-owned company (country ) State-owned company (State share = %)

Other(s) (please specify) ___________________________ 3. Registered capital: ______________________ 4. Number of staff: _______________ 5. How would you categorize your company size? Large-scale Medium-scale Small-scale Section C. Import and export and transit procedure 1. Does your company

Export only – give the main products or inputs______________________ Import only – give the main products or inputs ______________________ Import and export – give the main products or inputs___________________ Import for export – give the main products or inputs are___________________

2. How often do you import, export or do transit trade in a month? How much?

48

Import___________ times, value ______________________ US$ per month Export___________ times, value ______________________ US$ per month

Transit___________ times, value ______________________ US$ per month

3. What is your main source of information on import and export procedures? There is no information on import and export procedure available Government Newspapers, television, radio Real experience Other – please specify __________________ 4. Please explain the pre-export procedures in details? How many government agencies (ministry, department, division etc.) must you submit documents to in the process of exporting? How many documents and how much expense (fees, tax, customs duty etc.) are required in the process of exporting? How long does each procedure take?

Step 1:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 2:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 3:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 4:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 5:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ 5. Please explain the export procedure at border checkpoints? How many government agencies (ministry, department, division etc.) must you submit documents to in the process of exporting? How many documents and how much expense (fees, tax, customs duty etc.) are required in the process of exporting? How long does each procedure take?

49

Lao border checkpoint Step 1:_____________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 2:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 3:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 4:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 5:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________

Thai border checkpoint Step 1:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 2:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 3:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 4:______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Step 5:_______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________

50

____________________________________________________________________ 11. How long does it take to clear imports and exports at border checkpoints? Lao border checkpoint__________ Thai border checkpoint ____________ 12. What are the main problems experienced when importing and exporting? Please specify: ________________________ _________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ 13. Are you satisfied with the general trade facilitation requirements? Yes No 14. Do you have any other comments and suggestions for improving trade facilitation? ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________