Trade facilitation as a key to unlocking trade potential

along OBOR

Tengfei Wang

Economic Affairs Officer

Trade, Investment and Innovation Division

UNESCAP

wangt@un.org

GIZ-ESCAP Workshop on promoting economic

diversification of the Landlocked Developing Countries

and the One Belt One Road Policy: Assisting sustainable

development, Bangkok, 14 May 2016

Agenda

1. Why Trade Facilitation important for OBOR?

2. How to address trade facilitation along

OBOR - A holistic approach covering at-the-border and behind-

the-border matters

- Business Process Analysis for simplification of trade

procedures

- Trade facilitation monitoring at Macro-level

3. What should be done to advance trade

facilitation along OBOR?

2

What is trade facilitation?

There is no universal definition but trade facilitation is

often referred to as the “plumbing of international trade” .

“The (WTO) Trade Facilitation Agreement contains

provisions for expediting the movement, release and

clearance of goods, including goods in transit. It also sets

out measures for effective cooperation between customs

and other appropriate authorities on trade facilitation and

customs compliance issues.”

United Nations Centre for Trade Facilitation and

Electronic Business (UN/CEFACT): The simplification,

standardization and harmonization of procedures and

associated information flows required to move goods

from seller to buyer and to make payments. 3

Mandates for ESCAP to promote trade

facilitation along OBOR

Vienna Programme of Action for

Landlocked Developing Countries for

the Decade 2014-2024

Priority 1: Fundamental transit policy

issues

Priority 2: Infrastructure development and

maintenance

(a) Transport infrastructure

(b) Energy and information and

communications technology

infrastructure

Priority 3: International trade and trade

facilitation

(a) International trade

(b) Trade facilitation

Priority 4: Regional integration and

cooperation

Priority 5: Structural economic

transformation

Priority 6: Means of implementation

Letter of intent between ESCAP and

China on promotion regional

connectivity and the Belt and Road

Initiative

• Article 9 lists “trade facilitation” as a

prioritized areas

• Article 11 emphasizes “cross-

border paperless trade and

transport facilitation”

Why Trade Facilitation important for OBOR?

- from the State Council of China

5

Why Trade Facilitation important for OBOR?

6

IV.

Cooperation Priorities

Policy coordination

Facilities connectivity

Unimpeded trade

Financial integration

People-to-people bond

Some keywords:

trade facilitation, customs

cooperation, WTO Trade

Facilitation Agreement, “single-

window”, information exchange,

investment…

Why Trade Facilitation important for OBOR? “Extraordinary claims require extraordinary evidence” - Carl Sagan

7

Trade facilitation makes trade cheaper

and faster

Implementation of the WTO TFA –

narrow trade facilitation - is expected to

reduce global trade costs by 11% to 15%

(OECD, 2014; based on ESCAP-World

Bank Trade Cost Database).

0%

100%

200%

300%

400%

0% 20% 40% 60% 80% 100%

Tra

de c

ost

s (e

xcl

udin

g

tari

ff)

Trade facilitation implementation (%)

Strong correlation between trade facilitation and trade costs

Trade facilitation generates new trade and employment

Peterson Institute estimates that trade facilitation reforms will expand global trade by as much

as $ 1 trillion annually and generate 21 million jobs.

ESCAP studies reveal that the potential export gains from cross-border paperless trade could

be $250 billion annually.

However, barriers for trade facilitation along OBOR remain

A study jointly carried out by ESCAP and Islamic Development Bank provides empirical

evidence that countries along OBOR corridors still face complex trade procedures. For

instance, it typically takes 35 days to export fabrics from China to Kyrgyzstan involving over 20

trade procedures and over 20 actors.

Trade facilitation and trade diversification

8

Export diversification

Export diversification vs.

trade costs

Documents related to Export of Rice in Thailand (from purchase order until the cargo container leaving the sea port)

21. Master Sea Cargo Manifest(17)

22. House Sea Cargo Manifest (37)

23. Export Declaration (114)

24. Good Transition Control List (27)

25. Application for Permission to Export Rice (KP. 2) (24)

26. Sales Report (KP 3) (21)

27. Application for the Collection of the Permit for the

Export of Rice (A. 3) (35)

28. Permit for the Export of Rice (A. 4) (35)

29. Application for Certificate of Standards of Product (MS.

13/1) (44)

30. Certificate of Analysis (17)

31. Certificate of Product Standards (MS. 24/1) (45)

32. Certificate of Fumigation (21)

33. Application for Phytosanitary Certificate (PQ. 9) (29)

34. Phytosanitary Certificate (33)

35. Application for Certificate of Origin (42)

36. Certificate of Origin (38)

1. Proforma Invoice (35)

2. Purchase Order (39)

3. Commercial Invoice (51)

4. Application for Letter of Credit (24)

5. Letter of Credit (32)

6. Packing List (25)

7. Cargo Insurance Application Form (20)

8. Cover Note (23)

9. Insurance Policy (24)

10. Booking Request Form – Border Crossing (25)

11. Booking Confirmation – Border Crossing (30)

12. Booking Request Form – Inland Transport (16)

13. Booking Confirmation – Inland Transport (18)

14. Bill of Lading (42)

15. Empty Container Movement Request (TKT 305) (20)

16. Request for Port Entry (TKT 308.2) (27)

17. Equipment Interchange Report (EIR) (24)

18. Container Loading List (28)

19. Container List Message (32)

20. Outward Container List (34) * Number in parenthesis is the no. of data elements

36 Documents involving 15 parties, and more than 1,140 data elements to be filled in

Regulatory Docs

Transport Docs

Buy/Pay Docs

UN/CEFACT Buy-Ship-Pay Model

10

Buy Ship Pay

Supplier – Intermediary – Authorities – Customer

Prepare for export

Export Transport Prepare for

import Import

Commercial

Procedures

Transport Procedures Regulatory

Procedures

Financial Procedures

Establish

contract

Order goods

Advise on

delivery

Request payment

Establish transport

contract

Collect, transport

and deliver goods

Provide waybill, gods

receipt and status

reports

Obtain export/import

licenses, etc.

Provide customs declaration

Provide cargo declaration

Apply trade security

procedures

Clear goods for

import/export

Provide credit rating

Provide insurance

Provide credit

Execute payment

Issue statements

Source: UN/CEFACT Recommendation No. 18

UN/CEFACT: the United Nations Centre for Trade Facilitation and Electronic Business

1.1) Conclude

Sales Contract

2.1) Make Advance

Payment

3.1) Obtain Export License

3.5) Terminal Procedure and

Customs Exam at Port

Exporter (or

representative)

Importer

Exporter’s

bank

Importer’s

bank

ICD

SAD

Ministry of Commerce

(Directorate of Trade)

Customs

broker

3) Ship

3.8) Prepare Shipping Documents

1) Buy

2) Pay

Use Case Diagram of Rice Export

Customs

department

Ministry of Finance

(Revenue Department)

Feeder line &/or

Box operator

3.7) Arrange Port Clearance

for Vessel Departure

3.4) Declare CusDec 2

3.2) Arrange Shipping (maritime)

3.3) Arrange Pre-Inspection

And Fumigation

3.6) Arrange Berthing of Vessel

Private

Bank

Transporter

UMFCCI

DMA

MPA

Port Customs

Ship

3rd party

inspector

MCB

UNNExT Business

Process Analysis

Guide for the

Simplification of

Trade Procedures

Customs department

(at port)

Exporter (or representative)

3.5.1Request

examination

of goods

3.5) Terminal Procedure

and Customs Exam

at Port

Exporter (or

representative)

3rd party

inspector

3.5.19 Transport container

to the container terminal

Found Incorrect

3rd party inspector

Port terminal

3.5) Terminal Procedure and Customs Exam at Port

Found correct

3.5.10 Register case file

3.5.12 Arrange X-ray of

cargo (random selection)

3.5.2 Receive

documents

3.5.11 Check Export

License & duty

3.5.15 Fumigate

the container(s)

after Customs

Examination

3.5.1 Request

for fumigation

3.5.2 Receive

the request for

fumigation

Port terminal

3.5.1 Request

for delivery of

loaded container

Transporter

3.5.2

Transporter delivers

loaded container

to terminal

3.5.3 Issue security card

3.5.1 Prepare for

security card Customs

department

SAD Transporter

3.5.6 Receive terminal charges

3.5.16 Sealed container

3.5.13 Assign Customs

exam group (Group A to J)

3.5.14

Examination of

goods

Shipping

Instructions

3.5.21 Load the cargo

onto the vessel

3.5.5 Make payment Terminal charges;

(lift on/lift off; cargo inspection & labor fees)

National

Registration Card

3.5.7 Prepare to obtain

gate pass for container

Paid challen 103 challen

Equipment interchange receipt

Shipping instructions (Copy)

3.5.8

Review documents and

issue gate pass

3.5.9 Weigh container

at export container yard

3.5.17 Prepare documents for

terminal operation procedure

103 challen

3.5.18

Verify documents and

Customs seal

3.5.2 Review

documents

3.5.4 Complete challen as in shipping

instructions for terminal charges

Sealed case file from

Customs headoffice

(ED, EL, Invoice,

Packing List) (Original)

Shipping

Agency

Department

(SAD)

3.5.20

Prepare cargo

loading list

based

on mate

receipt

3.5.15 Case file is sent back

to the Customs department

13

1 2 3 4 5 6 7 8 9 10 11

Day

Process

30

20

10

0

5

25

15

35

14 days

3 days

2 days

1 day

3 days

4 days

1 day

1

2

4

3

5 6 7 8

9

10

11

1 day

1 day

1. Buy - Conclude sales contract and trade terms

2. Have product sampled and technically examined

3. Arrange transport

4. Prepare export permit

5. Apply for cargo insurance

6. Prepare and submit customs declaration

7. Stuff container and transfer it to port of departure

8. Clear goods through customs

9. Handle container at terminal and stow it on vessel

10. Prepare documents required by importer as listed in L/C

11. Pay - Claim payment of goods

Trade Facilitation: at-the-border, behind-the-border and beyond-the-border issues

e-Single Window and paperless trading

National Data Harmonization

BPA: the first step to be taken before introducing other trade facilitation measures

Document Simplification & Standardization

Cross Border Data Exchange

Business Process Analysis for Trade Facilitation 1

6

5

3

2

4

Process Simplification and Harmonization

There is no one-size-fits-all solution. It is imperative to

apply BPA for analysis of the uniqueness of

each trade process and procedure…

Completed studies in selected LLDCs in Central Asia

BPA studies were

carried out for selected

products along specific

corridors

From China to

Kyrgyzstan;

from Kyrgyzstan to

Kazakhstan; and

from Kazakhstan to

Azerbaijan

15

A typical export process from China to Kyrgyzstan

16

Similar studies in South Asia including LLDCs

17

Inception Workshop in Bangkok 2013 National workshop in Phuentsholing Bhutan 2014

National Workshop in Dhulikhel Nepal 2014 National Workshop in Dhaka Bangladesh 2014

TF Monitoring at Macro-level

18

50

100

150

200

250

300

350

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

Ad

-va

lore

m t

rad

e co

sts

(per

cen

t)

LDCs

LLDCs

SIDs

LDCs, LLDCs, SIDs

Asia-Pacific

East Asia-3

ESCAP-World Bank Trade Costs Database

0%10%20%30%40%50%60%70%80%90%

100%

ESCAP-led joint United Nations regional

Commissions survey on TF and paperless

trade implementation

Legislative

•Enabling paperless trade (Res. 68/3)

•Regional Arrangement

on cross-border

paperless trade

facilitation (Res. 70/6)

Framework Agreement on Facilitation of Cross-

border Paperless Trade in Asia and the Pacific

The second meeting of the Interim Intergovernmental Steering Group on Cross-Border Paperless Trade Facilitation held in Bangkok on 23-25 March 2016, with the participation of 31 ESCAP member States, finalized the text of the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific

Trade procedures along the selected OBOR

corridors are analyzed by country teams

Database and study

report to support

evidence-based policy

making A mapping of trade

procedures and bottlenecks

is available, along with

baseline data to monitor

future progress..

Action plans Action plans are

available for trade

facilitation and

paperless trade

implementation in

OBOR

Capacity building Government officials and

business representatives in

the participating countries

have increased capacity to

develop and implement

appropriate trade

facilitation measures .

Proposed activities/projects (1): Mapping and analysis of trade

procedures along selected OBOR corridors

A pilot project to electronically exchange selected trade data and

documents across border is implemented among interested OBOR countries

Analytical report A report highlighting the

lessons learned from the

pilot exchanges and

describing the relevant

technical and legal models

is made available to other

OBOR countries and the

Parties to the new

Framework Agreement.

Model for cross-

border electronic

exchange of selected

trade-related data A preferred model for

cross-border electronic

exchange of selected

trade-related data and

documents among the

selected OBOR countries

has been identified,

including list of technical

and legal requirements to

be harmonized.

Proposed activities/projects (2): Pilot cross-border electronic

exchange of trade-related data among OBOR countries

BPA studies were

carried out for selected

products along specific

corridors

From China to

Kyrgyzstan;

from Kyrgyzstan to

Kazakhstan; and

from Kazakhstan to

Azerbaijan

22

A journey of a thousand miles begins

with a single step: Trade Facilitation

Trade

Logistics

Investment

Poverty

reduction

employment

Inclusive

development

SDGs