ict guidelines for ttf - aminer summary ... viii. best practices of trade and transport facilitation...

Guidelines on ICT Application for Trade and Transport Facilitation

for Landlocked Countries in the Asian and Pacific Region

ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

ii

ESCAP is the regional development arm of the United Nations and serves as the main economic and social development centre for the United Nations in Asia and the Pacific. Its mandate is to foster cooperation between its 53 members and 9 associate members. ESCAP provides the strategic link between global and country-level programmes and issues. It supports Governments of the region in consolidating regional positions and advocates regional approaches to meeting the region’s unique socio-economic challenges in a globalizing world. The ESCAP office is located in Bangkok, Thailand. Please visit our website at <www.unescap.org> for further information.

Opinions expressed in signed articles are those of the author’s and do not necessarily reflect the views of the United Nations Secretariat. All material in the publication may be freely quoted or reprinted, but acknowledgement is requested, together with a copy of the publication containing the quotation or reprint. The use of this publication for any commercial purpose, including resale, is prohibited unless permission is first obtained from the Secretary of the Publications Board, the United Nations, New York. Requests for permission should state the purpose and their extent of reproduction.

iii

Preface

According to the 2005 United Nations Development Programme (UNDP) Human Development Report entitled “International cooperation at a crossroads: aid, trade and security in an unequal world”, the value of world exports has doubled to 9 trillion US dollars in 2003. Exports account for more than one quarter of world income. Particularly noteworthy is the export growth among developing countries: it doubled the share to account for one quarter of global manufactured exports in 2003. This trend presents both optimism as well as pessimism. It depicts a global trend of increased interdependence and possibly better distribution of global income. In some countries, the earned export income is leveraged to acquire new technologies to generate further growth, productivity and employment and maintain global competitiveness. The report also points out a trend of only a few developing countries, mainly in East Asia, benefiting from expanding export and leaving the rest of the countries behind. New technologies have created the conditions for increased trade. Decreased costs for information and communication technology (ICT) have opened up new opportunities to facilitate trade and transport, especially for landlocked developing countries (LLDCs) which face more challenges than other developing countries in general, due to geographical remoteness to markets and high cost associated with transportation. This document, “Guidelines on ICT Application for Trade and Transport Facilitation for Landlocked Countries in the Asian and Pacific Region,” was prepared within the project entitled “Institutional Capacity Building for Facilitation of International Trade and Transport in the Landlocked and Transit Countries”1 funded by the Royal Government of the Netherlands and implemented by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). This project aims to achieve the following through this project:

1. The enhancement of national capacity in establishing effective coordination and cooperation among all stakeholders in trade and transport facilitation through the establishment or strengthening of national trade/transport facilitation committees;

2. The development of guidelines on legal frameworks to assist countries in harmonizing conflicting agreements;

3. The development of the guidelines on the establishment of inter-operable ICT systems to assist countries in simplifying and streamlining border crossing formalities and procedures with standards set by relevant international organizations;

4. The application of the ESCAP Trade Facilitation Framework and cost/time-distance model to assist countries in identifying, assessing and reducing bottlenecks in international trade and transport; and

5. The comprehensive national plans of action for the six participating landlocked countries, including all elements of the project. The activities will be implemented in cooperation with the relevant organizations, such as United Nations Economic Commission for Europe (UNECE), United Nations Conference on Trade and Development (UNCTAD), World Customs Organization (WCO), United Nations Commission on International Trade Law (UNCITRAL), etc. in a complement manner.

1 <www.unescap.org/tid/itt/index.asp>

iv

The target beneficiaries of the project were identified as Government agencies dealing with transport, trade, ICT, Customs, immigration, traffic management, health/veterinary/ botanical/product quality control, and national trade/transport facilitation committees, chambers of commerce, importers/exporters, brokers, insurance, freight forwarders, transport companies, and import/export banks. The Guidelines intend to address challenges and opportunities LLDCs in the region face in promoting trade and transport and guide the introduction and implementation of electronic Single Window systems for trade and transport facilitation. The document was prepared by Mr. Paul Kimberley (consultant), edited by Mr. Kim Atkinson (consultant), and finalized by the Information, Communication and Space Technology Division (ICSTD) of ESCAP.

v

TABLE of CONTENTS Page Preface ........................................................................................................................... iii Abbreviations ................................................................................................................ vi EXECUTIVE SUMMARY .......................................................................................... 1 PART ONE: Background I. INTRODUCTION ............................................................................................. 3 A. Scope of ICT facilitation ........................................................................ 3 B. Methodological approach ....................................................................... 3 II. CHALLENGES IN DEVELOPING TRADE AND TRANSPORT .................. 6 A. Building relations with transit neighbours ............................................. 6 B. Challenge or opportunity of landlocked developing countries .............. 7 1. Administrative procedures ......................................................... 8 2. Major constraints in border processing ...................................... 9 3. Infrastructural development for rail and road transit ................. 10 PART TWO: GUIDELINES ON ICT APPLICATIONS FOR TRADE AND TRANSPORT FACILITATION III. ICT IN TRADE AND TRANSPORT FACILITATION ................................... 11 A. How ICT can facilitate trade and transport? .......................................... 11 B. Driving forces of ICT integration in trade ............................................. 13 1. Technological advances ............................................................. 13 2. E-commerce development ......................................................... 14 3. Economic pressure for WTO accession ..................................... 15 C. Regional and national stakeholders ....................................................... 16 D. Policy perspectives ................................................................................. 17 IV. THE BUILDING BLOCKS OF AN AUTOMATED TRADE AND TRANSPORT FACILITATION REGIME ................................................................... 18 A. Fundamental building blocks ................................................................. 18 B. Trading partner communications ........................................................... 21 C. The role of the electronic “Single Window” .......................................... 23 D. Types of data exchanged in the trade process ........................................ 24 E. Automating internal processes ............................................................... 26 F. ICT audit for trade and transport facilitation .......................................... 28 V. GUIDELINES TO ICT APPLICATIONS IN TRADE AND TRANSPORT FACILITATION 29 A. Overview ................................................................................................. 29 B. Phase I: Preparation ................................................................................ 30 1. Deciding on institutional arrangements ...................................... 30 2. Mapping of stakeholders, potential partners, and sources of influence .................................................................... 31

vi

3. Researching “Best Practice” ....................................................... 33 4. Assessing awareness among key stakeholders ........................... 33 5. Assessing of e-readiness ............................................................. 33 6. Mapping transaction processes and documents .......................... 35 a. Typical responsibilities of importers .............................. 36 b. Typical responsibilities of exporters ............................... 37 c. Documents used in processing import ............................ 39 d. Documents used in processing export ............................ 40 7. Examining legal and regulatory framework ............................... 41 8. Consulting stakeholders ............................................................. 42 C. Phase II: Planning ................................................................................... 42 1. Creating a vision ......................................................................... 42 2. Reengineering the process .......................................................... 42 3. Gauging the gap to be closed: Gap Analysis .............................. 45 4. Developing the plan .................................................................... 45 5. Determining the risk analysis ..................................................... 47 D. Phase III: implementation ....................................................................... 47 1. System design and specifications ............................................... 47 2. Bidding and selection of contractor ............................................ 53 3. Preparation of contract ............................................................... 54 4. Project implementation ............................................................... 54 E. Phase IV: Monitoring and evaluation ..................................................... 55 VI. OVERVIEW OF COUNTRY SITUATIONS .................................................... 58 A. Kazakhstan .............................................................................................. 58 B. Kyrgyz Republic ..................................................................................... 59 C. Lao People’s Democratic Republic ........................................................ 59 D. Mongolia ................................................................................................. 59 E. Tajikistan ................................................................................................ 60 F. Uzbekistan .............................................................................................. 61 VII. KEY INITIATIVES ............................................................................................ 62 VIII. BEST PRACTICES OF TRADE AND TRANSPORT FACILITATION USING ICT ..................................................................................................................... 64 A. Best practice vision ................................................................................. 64 B. Clusters of TTF automation .................................................................... 65 1. Supply chains and trade professionals ........................................ 66 2. Customs automation ................................................................... 66 3. Automated PIA ........................................................................... 67 4. Port community systems ............................................................. 67 5. Airports ....................................................................................... 69 6. River ports .................................................................................. 69 7. Border crossings and landlocked countries ................................ 69 8. Inland (dry) ports ........................................................................ 70 9. Dangerous goods ......................................................................... 70 10. Extended customs services: cooperative international systems .. 70 11. Intelligent transport systems (ITS) ............................................. 71 C. Current examples of best practice .......................................................... 72 D. Best practice TTF model ........................................................................ 74

vii

E. Case of Singapore ................................................................................... 76 F. Representative LLDC TTF practice and model ...................................... 80 G. Impact of processes on costs ................................................................... 82 H. LLDC TTF practices: comments ............................................................ 82 REFERENCES ............................................................................................................... 83 ANNEX Annex I Country Reviews .................................................................................... 91 A. Kazakhstan ................................................................................. 91 B. Kyrgyzstan ................................................................................. 95 C. Lao People’s Democratic Republic ........................................... 100 D. Mongolia .................................................................................... 105 E. Tajikistan ................................................................................... 112 F. Uzbekistan ................................................................................. 115 Annex II Examples of global supply chain initiatives .......................................... 119 Annex III ICT applications in trade and transport facilitation: Legal issues ......... 123 Annex IV ASYCUDA and global customs automation ......................................... 137

viii

ABBREVIATION

ADB Asian Development Bank ADSL Asymmetric Digital Subscriber Line AFER Agency for Foreign Economic Relations AFTA ASEAN Free Trade Area AHTN ASEAN Harmonized Tariff Nomenclature ANFK Association of National Freight Forwarders of Kazakhstan APEC Asia-Pacific Economic Cooperation APDIP Asia Pacific Development Information Programme ASEAN Association of Southeast Asian Nations ASN Advanced Shipping Notice ASYCUDA Automated SYstem for CUstoms DAta ATA Carnet Admission Temporaire/Temporary Admission book of tickets AusAID Australia Agency for International Development AWB Airway Bill BOL Bill Of Lading B2A Business-to-Administration B2B Business-to-Business B2C Business-to-Consumer CA Certificate Authority CAIS Customs Automated Information System CAR Central Asian Region CCA Customs Control Agency of Kazakhstan CEFTA Central European Free Trade Agreement CEO Chief Executive Officer CEPT Common Effective Preferential Tariff (AFTA) CIDA Canadian International Development Agency CIF Costs, Insurance, Freight CIS Commonwealth of Independent States CMR Convention relative au contrat de transport international de Marchandises

par route. Transport document issued for shipment of goods by road (truck waybill/ road consignment note).

Con Note Consignment note COO Certificate of Origin DB2 DBMS Database 2 [IBM] Data Base Management System DFID Department for International Development (United Kingdom) DNC Direct Numerical Control DTN Data Transmission Network DGPS Differential Global Positioning System ebXML Electronic Business using eXtensible Markup Language ECE Economic Commission for Europe, United Nations ECR Efficient Consumer Response EDI Electronic Data Interchange

ix

EDIFACT Electronic Data Interchange for Administration, Commerce and Transport EEU European Economic Union EFT Electronic Fund Transfer EOI Expression Of Interest ERP Enterprise Resource Planning ESCM Electronic Supply Chain Management ESCAP Economic and Social Commission for Asia and the Pacific FIATA Fédération Internationale des Associations de Transistaries et Assimilées

(International Federation of Freight Forwarders Associations) FOB Free-On-Board FTA Free Trade Agreements GAMAS Mongolian Automated System for Customs Information Management GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GPS Global Positioning System GRT Gross Register Tonnage GSP General System of Preferences HR Human Resources HS Harmonized System IATA International Air Transport Association ICC International Chamber of Commerce ICCC International Council for Computer Communication ICT Information and Communication Technology ID Identity Card IFCBA International Federation of Customs Brokers Associations IFFC International Freight Forwarding Centre IMF International Monetary Fund IPR Intellectual Property Rights ISO International Organization for Standardization ISP Internet Service Provider IT Information Technology ITC International Trade Centre ITU International Telecommunication Union JICA Japanese International Cooperation Agency JIT Just In Time LAN Local Area Network LDC Least Developed Countries LIFFA Lao International Freight Forwarders Association LLDC Landlocked Developing Countries LOC Line Of Credit MDNS Managed Data Network Services MENA Middle East and North Africa

x

MFN Most Favoured Nation MOL Ministry of Labour MRO Maintenance, Repair and Operations NAFTA North American Free Trade Association NC Numerical Control NCV No Commercial Value NCTS New Computerised Transit System NGO Non-Government Organization NTB Non-Tariff Barriers to trade OCC Office of Customs Control OECD Organization for Economic Cooperation and Development PABX Private Automatic Branch eXchange PIA Permit Issuing Authority PIU Project Implementation Unit PKI Public Key Infrastructure PSI Pre-Shipment Inspection P&L Profit and Loss PO Purchase Order POD Proof of Delivery QA Quality Assurance QR Quick Response Q Quarter- or Quartile-1, 2, 3, etc. RFID Radio Frequency Identification RFT Request for Tender RTFCCP Regional Trade Facilitation and Customs Cooperation Programme SAARC South Asian Association for Regional Cooperation SAD Single Administrative Document SANCRT Sanitation Certificate SIC Standard Industry Classification SITA Société Internationale de Télécommunications Aéronautique SME Small and Medium-sized Enterprise SMS Short Message Service SOE State-Owned Enterprise SGS Société Générale de Surveillance (French for "Inspection General

Society") SPS Sanitary and Phytosanitary SQL Structured Query Language SWIFT Society for Worldwide Interbank Financial Telecommunication TAIS The Automated Information System TDED Trade Data Elements Directory, United Nations TD1 Cargo customs declaration (form) THC Terminal Handling Charges TIN Taxpayer Identification Number

xi

TIR Transport Internationaux Routiers (International Road Transport) TIRExB TIR Executive Board TLD Top-Level Domain TOR Terms of Reference TRACECA Transport Corridor Europe-Caucasus-Asia TTF Trade and Transport Facilitation TV Television UAIS Universal Automatic Identification System UN/CEFACT United Nations Trade Facilitation and Electronic Business UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNECE United Nations Economic Commission for Europe UNeDocs United Nations Electronic Trade Documents UN/EDIFACT United Nations Directories for Electronic Data Interchange for

Administration, Commerce and Transport UNLK United Nations Layout Key USAID United States Agency for International Development VAN Value-Added Network VAT Value Added Tax VOIP Voice over Internet Protocol VPN Virtual Private Network WAN Wide Area Network WCO World Customs Organization WTO World Trade Organization W3C World Wide Web Consortium XML Extensible Markup Language

1

EXECUTIVE SUMMARY

The ESCAP initiated the project entitled “Institutional Capacity Building for Facilitation of International Trade and Transport in the Landlocked and Transit Countries”2 with a view to addressing special needs of landlocked countries in Asia in facilitating trade and transit. These guidelines intend to assist member States in the introduction and establishment of an inter-operable trade and transit facilitation system enhanced by information and communication technology (ICT).

The guidelines were prepared with the aim to assist the following countries:

• Kazakhstan • Kyrgyzstan • Lao People’s Democratic Republic • Mongolia • Tajikistan • Uzbekistan

These landlocked countries face a number of challenges in facilitating trade and transport as a means to facilitate socio-economic development. In addition to the geographical challenges and distance from ports, the study found that poorly coordinated rules, regulations, and formalities; variable coordination among Customs and other government agencies; transport, transit and Customs charges; complicated trade document requirements; lack of transparency; and limited regional cooperation, are some of the major challenges in promoting trade and transport. For these and other landlocked countries, the rail and road transit and border crossing are also critical issues to address.

The Guidelines also examined how ICT can help address these challenges. There are three driving forces at the international, regional, and national levels which accelerate the introduction of ICT to trade and transport facilitation: technological advance, e-commerce development and World Trade Organization (WTO) accession. This was followed by some selected good examples of how some countries are using ICT to promote trade and transport.

The ultimate vision for best practice in ICT applications for trade and transport facilitation is:

Your export is my import: your import is my export. We should harmonise and simplify our rules and automate our systems so that trade process automation should be seamless and ultimately invisible.

Principles among the measures to achieve this desired state are:

• All Customs’ declarations are submitted electronically, from declarants’ own computers;

• All Permit Issuing Authority (PIA) approvals are stored and approved electronically through the Electronic Single Window, which gives access to all participants in the trade and transport process;

• Risk management and selectivity-by Customs and PIA-selects an optimum (a small percentage of total consignments) number of physical inspections;

2 <www.unescap.org/tid/itt/index.asp>

2

• Those inspections to take place before the goods leave the exporters premises, and imports are inspected on a post entry audit basis; and

• All trade process administration is conducted electronically and takes place off the critical path of trade, leading to transparent, competitive trade administration and no unnecessary additional costs, even for the most geographically disadvantaged country.

There are many steps and stages to go through before a country can reach this ambitious state. However, as some small and relatively disadvantaged countries are beginning to show, the goal is not out of reach, and with the right help, need not be extravagantly expensive. Countries can now leapfrog technologies and build systems based on other countries’ experience, investment-and mistakes.

The Guidelines provide step-by-step guide of the recommend activities to ICT implementation in trade and transport facilitation, divided in four phases:

1. Preparation, 2. Planning, 3. Implementation, and 4. Monitoring and Evaluation.

The guidelines also provided some instruments to assist the planning, implementation, and monitoring of activities.

3

I. INTRODUCTION

Electronic clearance systems can help Governments in rationalizing and streamlining their procedures and documentation for international trade and transport, saving time and money, and generating additional economic opportunities. The guidelines presented in this document have been developed to assist ESCAP member States in establishing interoperable electronic systems to facilitate trade and transit of their exports and imports.

The vision for such interoperable systems is to connect all participants in the trade and transport activities so that information can flow among them seamlessly, with no need for the kinds of manual interventions that result in extra time and financial costs under existing systems in each country. Such a vision is possible because of advances in information and communication technology (ICT).

The focus in preparing the present set of guidelines has been the special needs of landlocked developing countries (LLDCs) in the ESCAP region — countries with developing economies and without direct access to the sea and a maritime port. Six countries in particular are targeted to benefit initially from this project: Kazakhstan, Kyrgyzstan, the Lao People’s Democratic Republic, Mongolia, Tajikistan, and Uzbekistan.

The guidelines provide a step-by-step means of implementing ICT applications as well as tools for monitoring progress. The goal is to create an enabling environment for facilitating trade and transit of LLDCs and their neighbours.

A. Scope of ICT facilitation

While the guidelines chiefly concern use of ICT in facilitating trade and transport, the project has bordered on a range of activity that encompasses different aspects of trade and transport and technologies for modernizing processes therein. They include such specialized areas as supply chain management, customs modernization, and e-business.

The subject matter of this project has an implication of the policy context as well: the economic arena of trade and transport activity that is governed by policy set at local, national, regional and global levels. The different areas of activity are commonly affected by regulatory policies and agreements, quotas and tariff regimes, and other forms of economic policy.

Infrastructural capacities also impinge on trade and transit issues: transport systems, administrative processing, organizational systems and institutions, and the human resources involved at every stage.

The main elements in the supply side that are or should be involved in the ICT network for trade and transit include those listed in Box 1. The popular concept of trade and transport facilitation (TTF) might feature customs, permit issuing authorities (PIA) and the private sector as the main stakeholders. The practical reality, however, encompasses a much broader and more detailed range of participants, as the list reveals.

B. Methodological approach

Since trade is a holistic, end-to-end process, no single element should be isolated from consideration together with all the other elements in the process. The various topics listed earlier should be examined in their relation with each other in order to compose a realistic

4

perspective for ICT development and to produce useful guidelines. Local conditions must define the setting for interoperable systems design. No “one-size-fits-all” solution exists for trade and transit issues.

Box 1: Supply-side elements in trade and transport facilitation (TTF)

Main elements in the supply cycle that are involved in TTF are: • The supply chain; • Trade professionals, e.g., customs brokers, freight forwarders, shipping agents,

and the integrated logistics professionals, among others; • Storage and warehousing organizations; • Transport and transport logistics organizations for:

o Road, o Rail, and o Air;

• Maritime and waterway carriage; • Courier and messenger companies; • Postal organizations; • Ports and harbours, maritime, and waterways; • Airports; • Port tenants and operations, such as:

o Container-handling companies, o Bulk handlers (oil, gas, grain and foodstuffs, chemicals, liquids), o General cargo handlers, o Port services, such as licensing, bunkering, maintenance, terminal, and berth

operations, o Maritime operations, such as tugs, navigation, pilots, safety and security

systems, o Passenger services, o Hazardous-cargo operations and emergency response systems, o Stevedores, and o Local authorities;

• Border control processes and control systems of goods and the means of carriage, such as rolling stock, trucks and trailers, and their crews;

• International trade services such as: o Banking, o Insurance, and o The intermediary professions and trades.

TTF has been prominent on the international agenda for at least a decade. The

references illustrate the depth and extent of experience and published materials on the topic — around 200 sources have been selected for the primary research for this study. The source of most of those materials, interestingly, is the public sector agencies, such as the World Bank, International Monetary Fund (IMF), Asian Development Bank (ADB), the European Union, and bi- and multilateral donor organizations. Much of their material is acknowledged to have come from the private sector. Nonetheless, the relative paucity of materials at industry levels, and the virtual absence of sources from the private sector, poses a nagging question.

5

The publications tend to focus on the needs and activities of customs. Of course, improvement would not be possible without customs modernization and adoption of ICT-based “best practices” and standards. But without the full integration of the private sector and the other key stakeholders, customs can succeed only in limited ways.

How can we explain the publication vacuum and apparent lack of private-sector “buy-in”? TTF cannot exist without the private sector. Its uptake of ICTs and processes is essential: to themselves, to their industry and supply chains, and to their national economies. Entry to modern supply chains is all but barred to those not capable of ICT-based trading. Private sector and public sector partnerships in such trading enterprises have proven their economic value. Private sector engagement is thus vital to any successful plan for national TTF, as the present study demonstrates.

6

II. CHALLENGES IN DEVELOPING TRADE AND TRANSPORT

A. Building relations with transit neighbours

Distance alone does not fully explain LLDCs trade problems. For example, many inland regions of China, India, and the Russian Federation are farther from a maritime port than many landlocked countries yet have developed their overseas trading links to greater extents. The challenge for LLDCs lies in transit infrastructure — the physical infrastructure available for transiting traded goods, plus the administrative, commercial, and legal systems for permitting passage of traded goods across borders. Transit factors can inhibit economic development and are a serious inhibitor to TTF.

Since LLDCs can neither ship their exports nor receive imports directly from a maritime port, their trading success requires the cooperation of their neighbours. Hence they depend crucially on cross-border:

• Physical infrastructure, • Administrative, commercial and legal systems, • Political relationships, and • Civil state (peace and stability).

Neighbours have mutual problems. Their proximity and shared history may have marked their relations with fear and mistrust. The application of local agreements may sometimes militate against trade. Lack of shared culture and trustful relations may have created significant administrative barriers to trade and transit.

Box 2: Transit agreements

Transit is a concession system aimed at facilitating trade within a given customs territory, or between separate customs territories. It permits the temporary suspension of customs duties and other taxes payable on goods originating from and/or destined for a third country in transit across the territory of a defined customs area. Such an excise suspension remains in force until the goods exit the customs territory or are transferred to another customs regime, or their duties and taxes are paid, thereby enabling the goods to enter free circulation.

Transit regimes require that identifiable persons be responsible for the suspended taxes, duty, and excise during transit. The identifiable entity — an individual or firm — may be required to provide customs with guarantees for financial liability and for risk management. The risks involve goods being sold on the black market, for example. Numerous financial guarantee systems exist, depending on the territories concerned.

Dependence also means that weak transit infrastructure in neighbouring countries might reduce economic returns on infrastructural investments for an LLDC, including TTF. By the same token, its own weak domestic infrastructure will not enable an LLDC to take advantage of reliable transit infrastructure of a neighbouring maritime country, as it has been the case between Lao People’s Democratic Republic and Thailand (Faye et al. 2004).

7

Beyond the direct costs of transit, the documentation and procedures related to international transit are additional burdens for a trader that may additionally engender delays and variability in time, with adverse impacts on delivery schedules. Delays are mostly caused by lack of coordination between the LLDC and transit countries. In order to address such challenges, the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), for example, have introduced common licenses and third-party insurance guarantees to reduce transit costs (Faye et al. 2004).

Contemporary commentators talk of “land-linked” and not landlocked countries, highlighting the opportunities for regional trade and shared opportunities for international trade. In practice, the opportunities are genuine, having the potential for a less complex combination of administrative procedures than many multiborder countries with both maritime and terrestrial borders. If landlocked countries can overcome the “trust barrier”, implement Transport Internationaux Routiers (TIR; see explanation in Box 3) Conventions and observe bilateral transit agreements, as well as adopt ICT “best practices,” they may actually discover that they have competitive advantages, not disadvantages.

Borders are currently the main barriers to trade in LLDC. If the challenge of applying ICT to border crossing processes is met, being landlocked may in future seem to pose a challenge rather than impose a destiny (ESCAP, June 2005).

Box 3: Customs transit - Transport Internationaux Routiers (TIR — International Road Transport)

The TIR Convention includes an international system of guarantees and universal border crossing controls. The current Convention came into force in 1975 and includes some 32,000 transport companies in over 64 countries of Europe, Central Asia, and the Middle East that allow transport operators to cross their borders without undue costs and administrative overheads. More than 2.3 million TIR transactions are implemented each year.

Before TIR came into effect, national customs authorities would levy their own taxes, duties, and excise on goods in transit or they would require a guarantee. They would also physically inspect goods at a border crossing and expect compliance in completing national border-crossing documentation, including customs and transport forms and driver and vehicle certification. Naturally, informal payments would speed completion of formalities.

The TIR Convention of 1975 provides for an internationally recognized customs documentary regime, a TIR Carnet, an internationally recognized system of financial guarantees and a harmonized system (HS) of physical inspections, normally just an external inspection. The TIR customs transit system is supervised by the TIR Executive Board (TIRExB) and secretariat, located in UNECE, in Geneva, Switzerland. The TIRExB supervise and coordinate efforts to combat misuse of the TIR system by organized crime, smugglers, and other threats.

Source:http://europa.eu.int/comm/taxation_customs/customs/procedural_aspects/transit/tir/index_en.htm

B. Challenges and opportunities

Challenges and opportunities characterize the prospects of LLDCs for improving their trans-border trade with ICT development in the rail and road transit sector. The main

8

challenges can be identified within the areas of administrative procedures, border processing issues and problems, and physical infrastructure.

1. Administrative procedures

The Transport Corridor Europe-Caucasus-Asia (TRACECA) project analyzed typical problems that landlocked countries face in processing transit trade, with regard to documentation and inspections, apart from problems with transport infrastructure and sheer distance. TRACECA (see chapter VII) divides administrative controls over cross-border trade into five separate but related categories that are presented in the accompanying box.

Box 4: Transport Corridor Europe–Caucasus–Asia (TRACECA) administrative controls

“Pre” formalities • Transport/vehicle registration, license, permits • Processing, product certification • Registration of contracts • Contracts and document translations • Banking and insurance requirements

Official agencies responsible for documentation, inspections

• Customs • Financial police • Ministry of foreign affairs • Ministry of transport • Tax administrators • Environmental authorities

Inspections of transport operators for required documentation

• Passport • Visa • Individual circulation permit • Rest-period check • Individual quarantine

Inspection of goods/cargo for required documentation

• Customs declaration • Commercial contract • Certificate of origin (COO) • Sanitary/phytosanitary (SPS) certificate • Radioactivity certificate • Import/export licenses • TIR, ATA carnet (Admission temporaire/Temporary admission book of

coupons) • Transport documentation, CMR (Convention relative au contrat de transport

international de marchandises par route) • Physical controls (nomenclature, quality, quantity, weight, certification, value,

9

among others) • Quarantine

Vehicle inspection requirements

• Fuel taxation/tax-exemption • Vehicle insurance • Ecology, pollution emission inspection • Quarantine • Radiation • Vehicle tax • Road charge • Special permit • Weight, dimensions • Vehicle certificate • Roadworthiness • Transport statistics • Transport-worthiness of dangerous goods • Transport/vehicle nationality quota • Transit fees

The causes of such multiple, duplicative administrative controls may be attributed to:

• Absence of coordinated regional approach to facilitate trade and transport; • Absence of uniform procedures at border crossings; • Absence of transparency in the required procedures, processes and documentation; • Absence of cross-border cooperation in risk management, compliance controls,

due diligence, border controls, and post-entry controls; and • Independent activities of border authorities.

Possible consequences of such an administrative control situation include:

• Loss of some goods during cross-border processing; • Unpredictable deliveries and receipt of goods; • Loss or unpredictable receipt of some taxes and duties; • Wastage in utilisation of transport resources and official resources; and • Wastage of time by all concerned.

2. Major constraints in border processing

Significant problems with transiting borders exist for all of the six selected LLDCs. Typically, they include:

• Forged or fraudulent TIR stamps and seals; • Informal payments and lack of transparency when customs officials “escort” a

convoy through border crossings; • The perceived need for escorts in future customs regimes; • An ineffective, costly system of guarantees and insurance (associated with a pre-

TIR national transit system);

10

• An excessively complicated system of guarantees for consignors; and • Delays and costs associated with arrival at a border post without guarantees.

A fully implemented local variant of the TIR system, the New Computerised Transit System (NCTS), should help solve such problems in some countries; however, there are significant local suspicions regarding actual implementation. Several countries have already begun to automate TIR procedures through development of “eTIR,” in which advance information on each TIR shipment is exchanged electronically between authorities via SafeTIR, an electronic control system for TIR Carnets (Liang and Lazaro 2006).

3. Infrastructural development for rail and road transit

In principle, trade between two neighbouring countries by road, rail or waterways is no different in administrative terms than maritime or air freight. All have outgoing and incoming transit controls and customs. However, as the ADB and others have long advocated, land trade and transport could be controlled through a single administrative “window” which serves both countries’ interests.

However, because of the scale of investment needed for construction and maintenance purposes, rail and road operations pose a particular series of constraints in LLDCs. They include availability of:

• Suitable routes, frequency of service, freight depots and holding areas, and multimodal facilities;

• Suitable capacity and efficient prime movers, and appropriate rolling stock, containers and loading facilities;

• Maintenance system and operations, gauge and transit/crossover points; • Freight holding areas for border-crossing inspections and control; and • Road standards and border-crossing compliance processes.

In the immediate future, road transport facilities should be upgraded to the level of International Organization for Standardization (ISO) standards. The principal challenges of road transport include:

• Inadequate road standards and facilities; • Lack of a proper environment for modern logistics operations; • Prohibitive costs of transport and transit; and • Lack of guarantee and variable access to the European–Central Asia and Asian

corridors to all States.

11

III. ICT IN TRADE AND TRANSPORT FACILITATION

A. How ICT can facilitate trade and transport?

ICT can clearly help accelerate progress in current initiatives to simplify trade and transport, in conjunction with harmonization of customs systems and documentation. ICT is especially effective in applying the concepts of pre-clearing goods before they actually arrive at a customs post, of pre-clearing vehicles and drivers and of risk management and selectivity processes. Harmonization of customs risk-management systems, of valuation processes and of databases should enhance LLDC cross-border trade by road or rail.

Documents, Goods and Vehicle

Depart Exporter

ArriveBorder Crossing

GoodsAnd

VehicleInspection

DocumentInspection

Time

Distance

OnwardsJourney

T1 T2 T3 T4

Elapsed Time to Goods Release, Present System

T1

Goods andVehicle

SubmitElectronic

Declarations.Pre Clearance.

Selectivity

Minimal Inspection,TIR and Post Entry

Audit

Time

OnwardsJourney

T2 T3 T4

Time SavingsCost Savings

Elapsed Time to Goods Release, ICT Single

Window System

Distance

Depart Exporter

Figure 1: Impact of electronic TTF at an LLDC border crossing

TTF procedures are usually not supported by automation. The result is handwritten documentation, dependence on signatures and on cash, unreliable and incomplete statistics, slow and variable clearances and transit times, fraud and corrupt practices, unreliable risk management and multiple errors — altogether, an unreliable system.

Today’s substitute for this system is an internationally agreed trading regime and the use of ICT for seamless process approvals. ICT is the engine which permits exchange of the information, so that trade flows in a timely manner, with the absolute minimum of administrative impediments, and a reducing number of physical impediments. That is the fundamental rationale behind the World Trade Organization (WTO), and a specific reason behind the articles V, VIII and X of the General Agreement on Trade and Tariffs (GATT). Those articles refer to import and export tariffs and duties, to non-tariff barriers to trade and to trade approval and clearance processes. They constitute the WTO regulations that most directly affect ICT application to international trade administration and documentation.

12

Therefore, at the same time as a country tackles reform of its trade regime, it needs to learn as much as possible about the role of ICT in the modern trading world. Figure 2 illustrates some of the key activities necessary in preparation of the first stage of electronic TTF: automating the customs process. Customs comes first because every customs authority in the world has its unique customs and taxation laws and a complete range of local trade approvals, licenses, visas and certificates that control private sector trade.

PrivateSector

PublicSector:

Ministries

PermitIssuing

Authorities

Customs and

Excise

Amend/Create Legislation•Customs Laws•Taxation and Audit•Banking, Payment Instruments•Signatures, Security•Evidence, Documents•eCommerce•Departmental Regulations•Departmental Work Practices•Etc.

•Lobby•Submissions•Consult•Cooperate

•Advise•Cooperate•Lead as Required

•Advise•Cooperate•Lead as Required

Design Electronic Trade Facilitation System•Establish Coordinating Authority•Align Documentation (UNLK)•Adopt UNCEFACT/EU SAD•Adopt WCO Data Model•Design Customs Automation•Design Automated PIA Processes•Educate and Prepare:

Customs DepartmentPeak Industry BodiesTraders/Supply ChainTrade ProfessionalsPIAsTransport and Logistics Operators

•Initiate Single Window Preparations

•Participate•Lead as Necessary



Figure 2: Electronic TTF - preparation of customs automation

Rail transport systems normally control their own telecommunications systems because of signaling requirements and associated legislation. Such regulations and the availability of communications technology make track and trace systems convenient for rail freight. ICT could be used in helping neighbouring countries with timetable synchronization, rolling stock availability and shared capacity planning. In addition, the automation of administration to a rail TIR system and the automating of customs and border processes could help LLDCs improve their practices. The time and costs associated with transit trade could be reduced by applying pre-clearance principles to customs and control documentation and the use of risk management and selectivity principles for physical inspections.

ICT is clearly the key to improvement but, to be successful, it requires reengineering of processes; new administrative, regulatory and legal infrastructures; training and organizational adjustments, attitudinal change, and hardware and software upgrades. ICT in itself can be valuable in manufacturing and service industry and trading commodity, as many countries have discovered.

The adoption of ICT for administrative and business efficiencies is becoming universal. Even the most WTO-compliant countries and the global trading regime cannot

13

hope to yield trading benefits without planning for ICT in the value-added, manufacturing and the service industries. A modern customs operation is simply not feasible without ICT-automated trade clearance. The persistent use of paper, cash, handwritten signatures, and chops/seals is the enemy of efficiency. So, political and economic planning for a national trade regime must begin with appreciation of and planning for the role of ICT.

B. Driving forces of ICT integration in trade

Across the globe, three factors have been forcing decision and policy makers as well as all the stakeholders to seriously consider ICT applications in TTF and, more specifically, the establishment of an automated “Single Window” system (see chapter IV and V) as the guiding concept. They are:

• Technological advances, • E-commerce development, and • WTO accession and integration into the networked global economy.

Figure 3: Driving forces for facilitating trade and transport using ICT

The use of ICT in TTF in LLDCs or other countries has evolved because of two interlocking, parallel streams of events: competition and trade policies.

1. Technological advances

Competitive pressures are generated in the private sector from technological advances, particularly with regard to responses of domestic supply chains to global supply chains and their requirements, such as Just in Time (JIT) manufacturing systems, Efficient Consumer Response (ECR) and Quick Response (QR) initiatives. They tend to require rapid turnaround of increasingly larger numbers of smaller consignments (always tending to reduce in size but increase in volume), together with integrated ICT systems. JIT systems require

14

the right quantity of goods or commodity to the right quality standard, at the right place at the right time. Transport, shipping and customs clearance processes, whether by sea, air or land, must be completed within the required cycle times; otherwise, increased safety and buffer stocks are necessary, leading to higher costs and reduced competitive positioning at factory, industry, and national levels. Hence individual firms adapt to the requirements of global supply chains by adopting the latest ICT techniques and demanding efficient transport and trade document processing systems.

Annex II illustrates a few examples of supply-chain initiatives and how technological advances have revolutionized the industry and the way business is conducted. At the same time, the costs associated with hardware and software necessary to undertake and manage JIT, ECR, and QR have been constantly decreasing, while the availability, range, and quality of products have been improving. This means that the barriers companies in developing countries previously faced have been lowered and new market opportunities have emerged, provided that the companies are equipped with the right systems, applications, know-how, and human resources and placed in an efficient and transparent trade environment. This also means that the creation of such an environment will determine the competitiveness of one’s economy in the regional and global context.

2. E-commerce development

Competitive pressures also originate from the increasing influence of e-commerce in the global economy. The share of e-commerce in gross domestic product has increased in recent years, replacing conventional modes of business and trade in a number of industries.

E-commerce connects buyers and sellers mainly through the Internet. It encompasses such activities as product designing, marketing, cataloguing, negotiation, purchasing, customer service, and analysis on the network. It has become a popular tool for communicating with potential buyers and sellers beyond national borders, owing to its cost-effectiveness and timeliness. E-commerce facilitates business-to-business (B2B), business-to-administration (B2A) and business-to-consumer (B2C) transactions, through use of ICT.

According to UNCTAD (2005), the value of online transactions has been increasing in major markets, such as the United States and the European Union. E-commerce transactions between enterprises (B2B) represented 93 per cent of all e-commerce transactions and accounted for 16.28 per cent of all transactions between enterprises in the United States in 2002. That was translated into growth of 6.1 per cent for B2B and 1.9 per cent for B2C transactions. In Europe, the total Internet e-commerce sales in 2001, including Internet sales and electronic data interchange, amounted to USD 430 billion.

According to another UNCTAD report (2004), e-commerce is most prominent in manufacturing shipments, wholesale trade and, to a lesser extent, online sale in the United States. In 2003, e-commerce sales accounted for 21.2 per cent of total manufacturing sales, with 10.4 per cent growth from 2002.

E-commerce presents an unparalleled opportunity for developing countries. It lowers the entry point to emerging global and regional markets and creates business opportunities. However, an effective, efficient and predictable trade and transport system, together with an enabling legal and regulatory environment, is a prerequisite to successful e-commerce development, as has often been remarked (Katsuno 1999 and 2001). The creation of such an environment gives a country a competitive edge. TTF lies at the heart of such an enabling environment.

15

3. Economic pressure for WTO accession

Also exerting pressure for adoption of ICT, although at a much slower rate, are international agreements. They include regional free trade agreements (FTA), international legal agreements (such as transport and road/rail agreements; e.g., TIR) and global trade agreements, such as WTO and its accession requirements. WTO membership confers many benefits; of particular interest are equal tariff and most-favoured nation (MFN) status with other WTO members, which comprise the vast majority of world trade.

WTO agreements contain a truly comprehensive set of conditions and agreements. Those most relevant to TTF include GATT items V (Freedom of Transit), VIII (Fees and Formalities Connected with Importation and Exportation), and X (Publication and Administration of Trade Regulations). They cover tariffs, non-tariff barriers to trade and the red tape involved in international trade. In those regards, WTO provides for specific requirements, aimed at creating a level playing field.

Pressure originates from various regional initiatives associated with global developments in facilitating trade and transport. In the case of Southeast Asia, ASEAN member States, including the Lao People’s Democratic Republic, have agreed to harmonize national Single Windows and establish the ASEAN Single Window.

Competitive pressures and WTO accession requirements are the most visible factors that eventually drive the adoption of “best practices” in TTF, inevitably involving best practices among ICT applications. ICT adoption does not automatically follow on from WTO accession, or plans to accede — competitive pressures alone may drive the adoption of ICT, but not often. A review of other factors, and those organizations that influence the adoption of WTO membership and/or ICT applications in trade and transport, can help in gaining an appreciation of why ICT applications are needed.

Figure 4 illustrates some of the major influences in the accession of WTO membership and the ultimate route to ICT applications adoption, for automating the administration of trade and transport.

The groundswell for change may manifest itself through WTO accession. However, many other influences are at work. The private sector usually influences the agenda, through peak industry bodies and chambers of commerce, and through such professional trade organizations as:

a) Freight forwarders, shipping agents, and customs brokers, as well as multimodal and integrated logistics operations, and through couriers and express messengers;

b) The banking, finance and insurance industries and major overseas trading communities, particularly buying organizations and retail/store representatives of major supply chains; and

c) Governments themselves are seldom ignorant of global trends but often resist change for a range of cultural, economic and political reasons. In time, however, the forces for change become almost irresistible, empowering political change. That starts with individual politicians and continues through departments, ministries, and when the time is right, senior councils of Government. Probably the most potent influences come through the intergovernmental financing and development agencies, whose funding helps create the right climate and work programmes for change.

16

Other influences include regional trade groupings and FTA partners, the media — local and international, including television and the Web — and specialist think tanks, consulting firms and independent advisors. The combination of aid, technical assistance, advice and influence is ultimately very hard to resist.

Figure 4: Trade and transport facilitation - WTO accession, time and resources

C. Regional and national stakeholders

To be successful in TTF, all participants in the complete information cycle of import and export activity need to be able to exchange electronic information on their trade and transport among each other. Thus the main participants need to automate their trade and transport related processes. The participants include:

• The supply chain, or the importer of raw materials who then transforms and adds value to products before exporting them;

• The transport and logistics companies that carry, store, pack, and deliver the imported and exported goods and materials;

• Permit issuing and approval agencies including ministries of trade, economy, labour, industry, health, agriculture, taxation, and treasury (often included in e-government plans);

• NGOs such as chambers of commerce, especially where they are also concerned with issuing COOs, visas and other essential documents;

• Trade professionals such as customs brokers, freight forwarders, shipping agents, and integrated logistics operators;

• Customs and inspection agencies, including pre-shipment inspection (PSI) outsourcers, scanning contractors and inspection operations of certifying ministries;

• Ports, harbours, airports, road borders, and transit points; and

Internal Influencers

Private Sector•Peak Industry Bodies•Chamber of Commerce•Overseas Trading Community•Trade and Transport Industries•Banking Community

External Influencers

Public Sector•Cabinet•Treasury•Trade, Economy•Commerce, Industry•Customs•Finance, Taxation•External Affairs

Foreign Influencers•Regional Groupings•Treaty Partners•UN, WTO, ASEAN, FTA•WCO, IMF, UN Agencies•World Bank, EU, ADB, etc.•Donor, Aid Community•Media

Awareness;Debate

Information Gathering;Preparation Observer Status, Compliance Building Accession Process Membership

Private Sector Public Sector

•Change Non Tariff Barriers to Trade (NTB)•Change Tariffs•Adopt GATT, WTO and UN Conventions•Amend Customs Laws and Regulations

Input Action

Aid and Technical Assistance

Lobbying, Submissions

17

• The private sector, particularly companies involved in global supply chains, are usually more advanced than government ministries and permit issuing authorities (PIA).

D. Policy perspectives

ICT for customs authorities is seldom subject to a Government’s regular ICT policies. Customs is often the primary revenue collection agency in a country (equal to or after telecommunications, and before income, company and value-added taxes). Customs agencies are usually self-funding, so they are often allowed to set or influence procurement priorities to their own benefit, to an extent more than other agencies are.

Early on in the process, e-government plans may notionally include customs and PIA but be unable to influence customs procurement or work plans at a practical level, without strong direction from the highest levels of the Government. That is not usually forthcoming in developing countries; such is the power and importance of customs in a developing economy.

A truly integrated Single Window TTF system should include various ministries and agencies participating in the process. If the system is not reflected in the national ICT policy and plan and regarded as a stand-alone initiative of the customs, integration and collaboration with other ministries or agencies might prove difficult, even though an e-government strategy might indicate a different set of technical standards and requirements. At the same time, ICT infrastructure and human resource requirements of TTF should be reflected in the national ICT strategy, because they require a much broader intervention from an ICT ministry or agency, together with authorities responsible for telecommunications infrastructure.

ICT infrastructure development, for instance, varies within the CAR countries (and Mongolian and Lao People’s Democratic Republic), but is invariably undeveloped. In general, existing ICT infrastructure may be insufficient for border-crossing and customs automation purposes, which require reliable and high-quality communication linkages with remote locations. Weak telecommunications links, hampered by mountainous terrain, does not help networks that have traditionally lacked investment and maintenance.

18

IV. THE BUILDING BLOCKS OF AN AUTOMATED TRADE AND TRANSPORT FACILITATION REGIME

A. Fundamental building blocks

ICT capabilities need to be understood from the very beginning of the planning process. The following sections concern only ICT issues: the way in which information is input, stored, retrieved, and transferred between the computers used in trade and transport transactions. Business process reengineering, legal and administrative issues are not taken into account.

Figure 5: Computer system and data hierarchy

A computational system, whether it is a stand-alone “client” computer or networked into a large community of other computers, has a standard, logical architecture. In figure 5 the two principal components of an enterprise computer system are shown at the base of the system: the operating system and the corporate database.

The operating system controls all hardware components, peripheral connections, software development tools (programming languages), a large collection of data, and programming utilities (for example, the routines that calculate and display time and date).

The corporate database is used by the major applications in an enterprise, such as financial management, debtors and creditors, and general ledger, in their main functions. The data are entered in the system only once and then shared between the main applications. Any maintenance operation, addition or amendment to those data needs to be done only once whereby all applications are automatically updated. Ideally the database communicates with others in the trading and transportation community.

The Supply Chain

Web, Email, External Networks

Network Management, Internal Networks

Office and Administration Systems

Operating SystemCorporate Data Base

Application Systems

ApplicationData Bases




19

As ICT installations evolve, an enterprise might need to add new applications that do not operate on the main database for some reason. The corporate database and the applications database may therefore not be able to exchange data automatically with each other. For example, an enterprise might decide to install a human resources (HR) management application that cannot operate on its database. It would have to develop programs to extract data from the two databases in order to share data between the general ledger and cash flow or banking operations.

Such is the current norm: an enterprise can be assumed to have a corporate database and a selection of subsidiary, application-specific databases. In each instance the enterprise must provide for data extraction and reformatting operations to enable data exchange. At the inter-enterprise level, trading partners may be assumed to face similar issues of data exchange, probably more complex than intra-enterprise issues.

In addition to specific applications, most users deploy office or administrative systems such as a word processor, spread sheets, local and temporary database applications, presentation software, contact management and the like. And then there are the enterprise e-mail and intranet/extranet applications, together with technical support needs such as network management and content management in addition to support of all other systems deployed in the enterprise.

Finally, there are the applications and development tools needed in information exchange with external users of the system (supply chain, trade and transport trading partners), including data editing, security, and reformatting before entry into in-house systems.

Box 5: Examples of computer systems and features that a typical medium-to-large-sized manufacturer might require as building blocks for business operations

Electronic supply chain management (ESCM) systems

• Interactive product design, tool design, quality assurance (QA) processes, product, parts planning and assembly drafting, and direct numerical control/numerical control (DNC/NC) programming (for numerical control of machine-tool automation programs);

• Order entry, sales order processing, invoicing, forecasting, and scheduling; • Procurement process (including imports), materials, consumables, quotation,

contract, purchase orders, and material replenishment; • Inventory control, inventory management, automated stock-taking and

reconciliation, and stock valuation (standard, actual, forecast pricing); • Manufacturing scheduling, material release, planning and tool release, labour

planning, capacity planning (forward to finite capacity, back to infinite capacity), production and batch control, production and batch documentation, test, inspection, QA, sampling, finishing, assembly, packaging, and dispatch processing (including export);

• Returns, repairs, scrap and returns reprocessing, and used packaging reprocessing; and

• Maintenance, repairs, operational and consumable systems.

20

Computer systems

• Training and documentation; • Data and systems back up; • Security systems and support; • Operating systems, programming languages, and utilities support; • Applications systems support; • Network management including local area networks (LAN), wide area networks

(WAN), Internet (general employee usage), Intranet (for internal use only, with firewall against external access and a hierarchy of passwords for differential access) and Extranet (for external use by registered and authorized trading partners, with firewall against external access and a hierarchy of passwords for differential access);

• External networks such as virtual private networks (VPN), managed data network services (MDNS), value-added networks (VAN), Internet service providers (ISP), and selected extranets;

• Web management, data, content, links, security, downloads and uploads, with internal Web policy oversight and enforcement;

• Enterprise e-mail including storage management, access management and password rotation, security, policy oversight and enforcement, and contact management; and

• Voice systems and management (private automatic branch exchange [PABX], voice-over Internet protocol [VOIP], systems billing and reporting, and input to General Ledger).

Financial and administrative systems

• Board reporting (board minutes and agenda, profit and loss [P&L], balance sheets, quarterly reporting, asset management, share register and movements, stock and share trading reports, governmental and statutory reports, routine compliance reports, and special reports);

• General Ledger, Accounts Payables and Receivables; • Payroll and human resources (HR) costs; • Banking and payments systems; • Audit, insurance, asset management, profit and expense forecasting and

reporting, budgetary control, product costing, and inventory valuation; and • Document management and archiving.

Sales management and supplier management systems

• Sales database management, contact management, mailing and communications, advertising and promotion, sales force management, commissions and incentives, and evaluations; and

• Supplier contract management, evaluation and negotiations, audits, pricing, cooperative advertising, incentives, delivery and quality management, and vendor managed inventory.

Import/export systems

• Documentation; • Transport, container and packaging management;

21

• Returns, repairs and packaging reprocessing management; • Customs brokers, freight forwarder, shipping agency, and logistics

liaison/management; • Booking and delivery management; • Consignment notes and delivery notes; • PIA approvals; • Customs declarations and customs/PIA documentation; and • Electronic data interchanges (EDI), Extensible Markup Language (XML), and

electronic transmissions and receipts.

B. Trading partner communications

In a trade and transport facilitation community, data are shared among the supply chain, PIA, trade professionals, transport and logistics organizations, and customs regarding import, export and transit transactions and overseas or foreign agencies and trading communities. Problems of exchanging data between databases are therefore multiplied exponentially.

A very wide variety of databases is currently installed around the world that differ in technology and design, as well as age, data extraction and reformatting tools, programming languages and natural languages. Hence, the United Nations Economic Commission for Europe (UNECE), with its Directories for Electronic Data Interchange for Administration, Commerce and Transport (UN/EDIFACT), and now the United Nations Centre for Trade Faciliation and Electronic Business (UN/CEFACT), have developed formatting standards for electronic data interchange for use in international trade. Customs utilizes the formats for the World Customs Organization (WCO) common database and for individual customs databases.

Although EDIFACT is recognized as the international standard, many national data standards, even industry standards, exist. EDIFACT is, in fact, an “open standard.” The rules (syntax and protocols) are clear and unambiguous, but it is possible to have specific implementations for particular industries or functions, or even special standards for specific applications. Further, standards are upgraded regularly so that different versions of standards may be in use within a single community, as may different transaction types (electronic data interchanges or EDI messages).

Other compliant technologies exist that can format part of the EDI message, such as Extensible Markup Language (XML) and electronic busines XML (ebXML), as well as some industry and community standards. They all, however, conform to EDIFACT specifications. Hence, although the variables might seem very confusing, in practice, providing they are EDIFACT-compliant, any of a wide range of variables is possible and permissible.

Box 6: Extensible Markup Language (XML)

XML is widely used for integrating messages exchanged between web pages. It is less important in EDI-based transactions since information is often transmitted as an electronic file, translated into a standard format. In electronic trade facilitation, XML is used for the same purpose, but each implementation is unique to its originator system, its host.

22

XML has migrated to use of EDIFACT standard data elements in order to represent trade data in the standard format, even though the source may have been a web page and not a database. This variant of XML for trade facilitation is known as electronic business XML (ebXML) and is based on UN/CEFACT and EDIFACT recommendations, with data extraction flexibility.

EDIFACT enables any computer with an EDI translator/mapper software product to send transactions and files in standard UN/EDIFACT formats and to receive and reformat EDI formatted data. Data may thus be extracted by internal systems before translation to EDI formats, and vice versa. That does not constitute a database exchange nor necessarily data exchange between databases. The latter has yet not become generally practicable, unless all systems in the community use an identical database which simply does not happen, although it might, in time, with the extraordinary adoption rates of Structured Query Language (SQL) database systems.

Box7: EDI Mappers

EDI Mappers are format translation programs. The same job may also be accomplished by specially written programs for a single organization’s own internal purposes known as “hard coding.” The most recent technique is XML, which enables individual users to combine the techniques of an EDI translator/mapper with the hard-coding technique. However, they all depend on international data standards defined by UN/CEFACT and EDIFACT. Private standards are not allowed in international trade, although they are common in supply chain management and Internet/Web trading (for example, in B2C transactions).

Although it is possible to transfer formatted data in transaction or file formats between trading partners, or to broadcast such files to a number of trading partners, the management of community communications is still problematic and capable of breakdown and data loss, as figure 6 illustrates.

Figure 6: Communications between TTF databases

Supply Chain

Data Base

Applications

Trade Professionals

Data Base

Applications

Transport/Logistics

Data Base

Applications

PIA

Data Base

Data Base

Ports/Harbours

Applications

Applications

Data Base

Applications

Customs

23

C. The electronic “Single Window”

Instead of a single database that connects all users in a community, the concept of the electronic “Single Window” was created to forge a single connection between all participants in the trading community so that they could, from a single point of entry, transmit and receive a specific data set whenever they wanted, in whatever quantity or extent, and in any data standard.

The Single Window serves as the unique face of customs to the outside world; the only way to access the customs clearance system. The Single Window is also the Government’s and the trading communities’ single interface with customs. The system is a single point of electronic contact for customs authorities and all other agencies and private-sector clients of the customs system.

Figure 7 illustrates the concept of the single-point connection. Although the concept aligns all trading partners’ databases so that they can automatically communicate with each other, technological diversity makes that proposition too complex to achieve at present. Far-reaching research projects are being conducted under the aegis of the World Wide Web Consortium (W3C) that will someday realize that goal (Berners-Lee 1999). The Single Window also has a number of other functions, according to its design parameters and functionality.

Such a connection would require access only by those who register and are authorized to use the community network. It should contain a database of message types and standards for each sender and recipient of messages.

Figure 7: The Electronic Single Window: connecting databases

TheElectronic Single

Window

Data Base Data Base Data Base

Data Base Data Base Data Base

Supply Chain Transport and Logistics Customs

Trade Professionals PIA Ports and

Harbours

Applications

Applications

Applications Applications

Applications Applications

24

It should also provide technical support to users around the clock, and optionally provide a range of relevant information such as a web site with access to current customs law, approvals necessary for import and export, HS codes and tariffs; and access to banks, insurance companies, shipping schedules, and trade professionals’ web sites.

While the Single Window remains essentially a concept, an example of a national Single Window has begun as in Singapore. Function-specific Single Windows exist in the United Kingdom, where the trading communities congregate around three port-centric Single Windows and data are aggregated in the customs system. Very few Single Windows are fully operational for all transactions, all industries or all messages and documents.

Single Windows may be specially built, for example, for PIA, for industry-oriented trade applications, for direct entry into customs or others. Such islands of technology might or might not be connected and interoperable. Indeed they might even not be specially built: they might be a virtual private network (VPN) or managed data network system (MDNS), using Internet or other data communication protocols by technology vendors such as value-added networks (VAN; for example, the Society for Worldwide Interbank Financial Telecommunication [SWIFT] for banking and Société Internationale de Télécommunications Aéronautique [SITA] for the aviation industry). They might be wholly or partly operated by an Internet service provider (ISP; Australia and many other countries have followed that route), by telecommunication vendors such as British Telecom or France Telecom. They might be jointly operated by a variety of public and/or private sector interests, representing the user community and the technology vendor, or by a range of other vehicles. There is no single model for the Single Window.

D. Types of data exchanged in the trade process

The types of trade and transport data to be shared and transmitted in the trade context are highly selective. The box 5 entitled “Examples of computer systems and features that a typical medium-to-large-sized manufacturer might require as building blocks for business operations” (see page 19) identifies some examples from manufacturing.

The manufacturing sector collects and uses vastly more information than is used in TTF. The difference is evidenced by the total of 230 data elements in the World Customs Database of which 50 to 60 are to be used in a sophisticated customs declaration or Single Administrative Document (SAD); in comparison with the ten-times-greater number of data elements that a manufacturer is likely to contain. The vast difference is partly explained by the variety of manufacturing and business applications in manufacturing and also by figure 8.

Figure 8 presents four categories of information involved in electronic exchanges:

1. “Pre-transaction” covers research, marketing, quotations, contracting, preparatory work, and planning. In general, such information is not conducive to planning, is often non-standard in format (it may be communicated by phone, simple messaging system [SMS], fax or e-mail), is usually non-repetitive, and rarely is generated at the level of intensity and timeliness that trade transactions demand.

2. “Transactions” are actually instructions or formatted information. They include such formatted messages as purchase orders and amendments, material release and scheduling, acknowledgement of receipt of goods or materials, advance delivery note,

25

acknowledgement of delivery, quantity and quality, invoice (or an automatic payment based on electronic receipt settlement; see annex II, “Supply chain initiatives that capitalized on ICT advances”). Such messages are transmitted and exchanged in vast quantities, using the same data except possibly for dates and quantities. They are ideal for conversion to electronic messaging and EDI types of messages.

Figure 8: Types of electronic information

3. “MRO transactions” are maintenance, repair, and operational transactions. They are irregular and generally associated with keeping premises and assets up to standard. MRO covers everything from office cleaning to electrical and works maintenance, together with all of the consumable materials required for the purpose.

4. “Post-transaction information” might include Government returns, bond or bonded warehouse reconciliations, bank statements, various statistics and production activity statements that are exchanged after the event. It also includes such information as post-entry audit reports. Again, like pre-transaction information exchange, it is irregular, largely unformatted and takes place off the critical path of trade and transport for import/export.

Box 8: Data dominate, documents “disappear”

In e-commerce, since all information is designed to be exchanged electronically, the concept of a “document” disappears. Electronic documents do not need dates to be inserted, the computer does that. Trading partner details, apart from an identifying account number, are already on every partner’s computer: contact details, addresses and the like. And information only needs to be entered once. For example, a “product description” once entered on an invoice or purchase order, is contained in a known field of data, or data element. The computers in the network retain that data element number and automatically and precisely copy the data in every duplicated field, thus eliminating transcription errors. Data are communicated in “messages” rather than “documents”; a message is composed from multiple electronic data sources, located and inserted electronically. Data fields (such as “date”) are referred to as data elements, since they contain information on location, multiple usages, and the data itself. The WCO data model is composed of UN/CEFACT data elements.

Pre-Transaction

PostTransaction

SupplyChain

Transactions

MROTransactions

The Demand/Supply Information Cycle

26

In the context of TTF, the following “documents” can be exchanged as electronic messages:

• Purchase orders • Sales contracts, for specific products • Pro forma invoices • Invoices • Packing lists • Bills of lading • PIA applications and approvals • Delivery notes • Manifests • Port/airport release and payment (credit card/debit card/charge card/stored-

value card, e-banking, electronic funds transfer [EFT], direct debit from a trader’s special deposit account)

• Consignment notes • Proof of delivery • SAD or customs declaration • SAD approvals and approval number • Notification of “red channel” inspection: documents, part consignment or full

consignment • Goods release • Electronic revenue payment (credit card/debit card/charge card/stored-value

card, e-banking, EFT, direct debit from a trader’s special deposit account) • Electronic signatures, possibly using smart card and public key infrastructure

(PKI) security

E. Automating internal processes

Figure 9 illustrates the stages of automation within an organization and between its trading partners (suppliers and clients as well as other stakeholders), with a focus on automating functions related to trade faciltiation. Figure 9 also permits assessment of challenges and benefits at each level of automation.

Level 1 essentially refers to a front-end to an enterprise’s Web-based systems. It is essentially an online substitute for a brochure or an advertising circular. It can only introduce a trading partner to the organization and a set of contact points.

At Level 2, a developer has created the web site to attract repeat visitors; it can be known as “sticky” site, implying that visitors to the site have a motive or an inducement to visit the site. The web site should enable the visitor to download information that has some value for him or her, such as tariffs, valuation criteria, banking and insurance information, transport schedules, among others. It should also enable the visitor to download and print SAD or customs declarations, COO application forms, and various PIA application forms.

At Level 3, trading partners should be able to enter data into the computer system online. The site would not offer interactivity and self-correcting capabilities, but would remove the need for personal visits and the time and costs of delivering paper forms. It could also deliver output from other trading partner files, depending on their level of integration with internal processes. So it would be possible to submit an SAD, completed PIA forms,

27

with credit card payment details, in order to obtain a fairly quick clearance; within, say, 4 hours.

Level 4 integrates systems even further. It enables users to complete electronic forms and have them automatically corrected for mistakes, autofills some data elements such as time and date and identifies data such as trader number, address, contacts, and contact numbers. It should also be internally integrated so that automatic approvals are issued online in a very short time. In some countries that can happen within a few seconds.

Note that EDI-formatted file transfer achieves exactly the same results for batches or large numbers of transactions. Data entry via Web-based forms is used for single transactions at a time.

Level 5 assumes that both the trader and, say, customs each have vertically integrated internal systems. Each partner’s computer system initiates a connection when it is necessary to exchange data and data sent/received is automatically entered into each trading partner’s database. That is often called “straight-through processing,” especially in the banking industry. This level has only just started to be realized in the most advanced countries, and then only for some types of import/export, for some traders and transport operators.

Figure 9: Automation process example for TTF systems

Together with all partners in the trade community having fully automated trade systems and databases that can communicate messages to international standards and formats, utilising Single Windows for communications and support, the outlines of the future emerge for automated information for TTF.

F. ICT audit for trade and transport facilitation

If figure 9 is extended to cover the separate groups in the TTF cycle, the state of preparedness in each of these groups could be assessed (figure 10).

Transactions

Web Site.Brochure-ware

Automate External Processes. Self Service

Automate Internal Processes. Interactive

Transactions

Sticky Site.Downloads

High Value

Low Value

BenefitsDisadvantages/Challenges

Level 5

Level 4

Level 3

Level 2

Level 1

28

• The supply chain in, for example, textiles and apparel, footwear, consumer electronics, manufacturing in vertical industries, banking, tourism or even TTF. Trade professionals could be audited separately: customs brokers, freight forwarders, shipping agents, and integrated logistics operators.

• Ports and harbours include container handling, bulk cargo handling, mixed and general cargo, berth management, transport and collection booking and accuracy/reliability, storage, location and retrieval, pick up and internal transport, container scanning and PSI, stevedoring, navigation, bunkering and licensing operations, billing efficiency and integration with other agencies, such as customs, inspection agencies and PIA.

• Transport and logistics companies could be audited for their ability to take bookings online, to acknowledge time and cargo instructions, to issue reliable electronic cost and collection forecasts, to issue electronic bills and to receive electronic payment. And then to make electronic bookings with the maritime or air port, confirm pickup and completeness of cargo against instructions, manifest and bill of lading, to complete formalities and to deliver on time.

• PIA automation should offer online registration, online filing (or lodgment) and forms completion, acknowledgement of receipt, electronic payment and signatures and online approvals. That should be true for the COO and all Government approvals for trade, such as sanitary and phytosanitary (SPS) and quarantine certificates for health, agriculture and pharmaceuticals; manufacturing, import/export approvals from ministries of labour (MOL), industry, economy and trade and the various other approvals needed from revenue and finance/treasury, not to mention the more esoteric approvals.

Figure 10: TTF ICT audit tool for various stakeholders

Measurements of progress could be made for volumes, percentages or proportions of applications handled online, for specific industries, for levels 1–5 of technological progress, for geographical locations, and so on. Any metrics proided could help national efforts in TTF.

Transactions

Web Site.Brochure-ware

Automate External Processes. Self Service

Automate Internal Processes. Interactive

Transactions

Sticky Site.Downloads

Level 5

Level 4

Level 3

Level 2

Level 1

Supply Chain

TradeProfess’ls

PortsHarbours

TransportLogistics PIA Customs

29

V. GUIDELINES ON ICT APPLICATIONS FOR TRADE AND TRANSPORT FACILITATION

A. Overview

Every aspect and each step of the transition from a paper-based, clerical national system of trade approvals processing to an automated, paperless trading system must be prepared for, and based on a unique set of local conditions, rules, business practices, and culture. Clearly that cannot happen overnight; even in the best examples the migration from paper to electronics has taken years. A range of preparatory stages can, if addressed in parallel rather than sequentially, help accelerate the migration.

There are four stages for national authorities and concerned stakeholders to follow as they begin to apply ICT in facilitating their trade and transport systems. The four stages are:

1. Preparation, 2. Planning, 3. Implementation, and 4. Monitoring and evaluation.

Figure 11: Project planning and implementation flow

The guidelines have been developed to assist the member States, especially less-developed countries, to begin planning and implementing ICT-led projects to facilitate trade and transport. They have been based on material from the ESCAP Trade Facilitation Framework: A guiding tool.

The guidelines recommend sets of activities that are conceived generally so that they may be adapted to suit specific conditions. The sets of activities are not mutually exclusive nor need be undertaken in the order presented. Project implementers might want to consider what they could undertake concurrently and what needs to be sequenced at each stage.

The guidelines also recommend a tool for monitoring progress at each stage. The scorecard breaks down the activities associated with each stage and is helpful in setting a timetable.

Time

Progress

Preparation

Planning

Implementation

Evaluation

30

B. Stage I: Preparation

The first stage focuses on assessing the current situation in order to determine what is available and possible for the next planning stage. Before systems can be analyzed for simplification or reengineered for automation, some fundamentals must be considered. The recommended activities include:

• Deciding on institutional arrangements; • Mapping stakeholders, potential partners and sources of influence; • Researching “best practices”; • Assessing awareness among key stakeholders; • Assessing e-readiness; • Mapping existing transaction processes and documents; • Examining existing legal and regulatory frameworks; and • Consulting stakeholders.

1. Deciding on institutional arrangements

Lead agency

One of the first decisions to be made is to nominate the lead agency for project management. To date, decisions have probably been based on corporate decision-making within the national trade facilitation committee or similar organization, perhaps complemented by technical assistance from aid-giving or development agencies, or external consulting firms. The committee itself is likely to be an inclusive organization, representing all of the stakeholders in the process of TTF. However, if external funding is to be applied to the procurement stage of the project, an individual at ministerial level must take the lead role. It is essential that a single, nominated agency or ministry takes overarching responsibility for the project. Financing agencies are unlikely to fund a consortium or group of ministries to do the job.

PIU

Once the lead role is decided, a project implementation unit (PIU or project management team) is appointed from the same pool as the trade facilitation committee but is likely to be a subset, reduced in membership and strengthened in technological expertise. The PIU should have a direct reporting line to the lead ministry, possibly through the trade facilitation committee, as well as a functional responsibility to its own ministry or entity.

The PIU is almost certain to have strong technical representation from the major stakeholders, including, for example:

• Lead agency, • Customs, • PIA, • Trade and transport professionals, • Peak industry bodies, • Major ICT professional organizations from public and private sectors, and • Observers from international development and/or aid agencies providing funding

and technical assistance.

31

The PIU terms of reference (TOR) are to be set by the trade facilitation committee and include:

• Overall objective, • Reporting lines, • Secretariat composition and duties, • Feedback and reporting responsibilities, • Organization and meeting timetable, and • Major project milestones.

PIU responsibilities represent a major commitment in time; they can be expected to take priority over other duties of individual members. The project is likely to last between around nine (9) months and two (2) years. Deputies and substitutes are permissible but they must have suitable seniority and technical expertise.

Perhaps the first responsibility for the PIU is to confirm budgets for the project, based on initial broad designs for technology and supporting technical assistance. The information is used in arranging for funding. Additional support may come in the form of external specialists from the development/financing agency. The documentation and specialized analytical work necessary to complete funding arrangements is normally undertaken by the financing agency, although they may require substantial input from the PIU.

Once that work is completed, the time frame and funding for the project are locked in. While awaiting funding approval, the PIU and the trade facilitation committee can usefully conduct awareness training and education among the trading community and stakeholder communities. Most importantly, they may refine and confirm ICT configurations, implementation, staffing and project management issues, as well as identify and recruit key staff.

Initial professional staff should ideally include a procurement specialist with experience of international funding/development agency procurement procedures. Procurement of the ICT infrastructure required in TTF will almost certainly be based on a two-stage procurement exercise, the international norm for major infrastructure projects which is described in more detail in the later sections (see page 53).

2. Mapping stakeholders, potential partners and sources of influence

The five main groups of participants in the trade process, including customs clearances (see figure 12) are:

• Supply chain (traders, or importers/exporters), especially its links with global supply lines;

• Transport and logistics operators, including road, rail, sea, waterway and air links and storage facilities, container parks and dry ports, harbours, and multimodal facilities;

• Trade professionals, including customs brokers, freight forwarders, shipping agents, global logistics brokers/operators, and express messengers/courier companies;

• PIA, such as ministries and inspection agencies, that issue certificates, licences, visas, and other permits; and chambers of commerce that issue COOs. PSI organizations may be considered in this category, as part of the customs process, or even as private-sector participants; and

32

• Customs and associated organizations such as PSI organizations and the operators of scanning equipment, where privatized.

Diagram 11: Players in the Trade Process: Push and Pull

Supply Chain

Import Export Permit Agencies

Customs

TransportAnd

Logistics

TransportAnd

Logistics

Customs

Permit Agencies

Supply Chain

Import ExportInternational Borders:Land, Sea or Air

Treaties/Global AgreementsPolicy and Regulatory EnvironmentBankingFinanceInsuranceTrade Professionals

Figure 12: Stakeholders in the trade process: push and pull

Some of the country reviews in Annex I highlight the limited participation of stakeholders in the planning and preparations for customs automation. Consultation with Government officials or representatives from the ICT community from an early stage should be beneficial.

The sources of influence and technical assistance are identified in an earlier part of the Guidelines, in the context of influencing the adoption of international treaties and accession to the WTO. Many of them also can play a key role in the adoption of ICT to facilitate automation of customs and trade, through to a Single Window and paperless trading. They can provide technical assistance and occasional funding to ensure that countries are well prepared for the transition. Generally a minister should be involved in requesting the help in the first place, enlisting such help as soon as possible and identifying the agencies operating in the country. They will range from the United Nations and its agencies, the World Bank, and other regional development and funding agencies.

Helpful external agencies include the World Bank, IMF, European Union, ADB, ASEAN, United States Agency for International Development (USAID), United Kingdom Department for International Development (DFID), AusAID, and several other Development Agencies and bilaterals, such as Japan International Cooperation Agency (JICA) and Canadian International Development Agency (CIDA). Their contributions could include:

• Input to a redrafted customs law or act; • Contributions to organizational change involving customs and PIA; • Recommendations on trade documentation and SAD design; • Process changes involving technical controls, standards, and COO;

33

• Border processes and border control issues; • Special issues of road and rail transit at border control posts; • Transit road and rail, possibly lake and river transit corridors; • Risk management techniques for customs and trade facilitation agencies; • Performance measurement and management issues; and • Redrafting of other acts and regulations previously mentioned, including:

o banking laws, o evidence acts, o taxation and audit laws, o e-commerce acts, and o electronic signature acts.

3. Researching “best practices”

Chapter VIII examines a selection of best practices in the automation of TTF processes and development of a Single Window in the case of Singapore. To obtain further information, a simple web search can provide abundant information on international best practices. Examples of less-developed countries with successful and sophisticated electronic systems are much harder to find. It is unlikely that there is a standard model in existence, but the building blocks of experience are all available. But it is important to learn the lessons of the pioneers over the last 20 to 30 years before entering the design and planning stage.

In the process, it is important to identify key features which might be applicable and should be taken into account in the planning and reengineering stage of the project. It could be a user-friendly interface, the scope of the covered transactions, networks, technologies behind the interface, interactive features, and speed. Based on these desirable features, an agreed vision and assessment on the current situation, a gap analysis is recommended to be undertaken, as expanded in the below section, so as to determine what needs to be done.

4. Assessing awareness among key stakeholders

Assessment should be conducted at two levels among key stakeholders. One is awareness of the needs for automated TTF. As the country reviews in chapter VI illustrate, most of the six countries involved in the project have begun automation processes, mostly in the areas of customs documentation and processing.

If not undertaken previously, it is imperative to organize consultations with stakeholders and potential end-users of the system to identify perceived problems, challenges, and opportunities from a wider context and longer-term vision. At the same time their level of understanding of what has been done and is being done in trade facilitation processes can also be assessed.

The second related activity is to organize a campaign to inform and educate business, social, and political leaders of the benefits to be gained from conforming to ICT best practices, and the work yet to be done, in TTF.

5. Assessing “e-readiness”

Readiness to adopt ICT-based TTF can be assessed with regard to:

a. Available infrastructure; b. Capacity of ICT private sector and concerned governmental agencies;

34

c. Institutional arrangements and decision making structures; d. ICT application usage by stakeholders and end users; e. Technologies and systems used in neighbouring and transit countries; f. Technologies which could possibly be used in the planned system; and g. Level of compliance with international standards and practices.

The focus of this assessment is the status quo, in terms of ICT infrastructure, capacity, content, and environment. It includes a series of audits of the national ICT infrastructure, covering HR skills, training and education facilities, sources of expertise, hardware, software and communications expertise, together with a national plan, to assess the readiness of a country to meet the system requirements for ICT-enabled TTF.

Some countries, including the Lao People’s Democratic Republic and Tajikistan, have limited telecommunications infrastructure, ICT expertise, and ICT application usage. That may limit their potential scope of implementing an electronic TTF system.

The most influential types of leaders — the opinion makers, the political leaders, the “champions” — should be identified. They could be encouraged to form a national committee or action group, or other appropriate mechanism, to help generate a favourable decision-making climate.

In order to ensure maximum usage of the automated system and smooth introduction into the environment, the initiative should also take into account the existing applications and systems widely used by the stakeholders as well as end users. The criteria for the assessment could include the type of operating systems and databases, languages used, mode of communications, level of compliance with internationally agreed and recommended data types and level of data exchange among concerned parties.

Particularly, this exercise should focus on what is needed to enable “interoperability” between the PIA and customs in terms of automated documentation processes. In practice, the leading participants in the supply chain already have what is needed or can easily acquire it. Smaller and less wealthy organizations may require external help, such as ICT/e-commerce service bureaux, operated by the industry or chambers of commerce, or by the private sector.

Trade professionals and transport operators are normally less prepared than their supply-chain clients: the people they usually deal with on the demand side, such as PIA, customs, border authorities and railways, are relatively slow to acquire new techniques. However, airlines and maritime shipping lines usually are among the early adopters of new technology. Ports and airports are usually partly automated, depending on the commodities and goods handled.

In many countries, PIAs are the least prepared of the entire trading community. They may use computers for word processing, e-mail and basic administration; whereas automation of approvals happens much later. An important disincentive is approvals and the required signatures are good sources of income, so there is seldom internal pressure for reform — until WTO comes along.

The customs service is in a similar situation. Computers and some network usage for statistics, word processing, Internet, training and basic administration tasks are likely to be the main ICT applications before customs reform, which usually comes via WTO membership. WCO is a great source of information, and of training, but it usually takes an external force, such as WTO accession, to create the real climate for change.

35

In assessing the compliance with international agreements and standards, the following should be taken into account:

• WCO data models for customs database design; • UN/CEFACT standards for electronic document/message design; • EDI standards for converting variable data on different computer systems to a

known, standard layout, so that every system can recognize and thereafter format that data for its own unique internal systems; the international standards are known as UN/EDIFACT standards and are maintained and developed by the UN/CEFACT agency;

• Translators or EDI mappers: software packages that automate the reformatting or translation process described above;

• Large organizations often use a dedicated server for translation of all types of messages to and from all trading partners. Other terms for such servers include EDI gateways, or message switches; and

• Another technique emerging from UNECE is known as UNeDocs, essentially a Web-based system that enables small-scale users of ICT in electronic trade facilitation to use Web techniques to enter trade messages/documents and clearance documents.

The SAD is the key type of message for trade facilitation. The prototype SAD replaces the traditional customs declaration with a United Nations-designed, key-based screen layout/paper document. It enables a declarant (the trader or trade professional who completes and submits a customs declaration, or SAD in the new customs regime) to submit all of the information needed to declare a consignment to customs electronically.

6. Mapping transaction processes and documents

This section presents a general description of customs functions and export and import processes in order to understand process and documentation needs from a wider perspective and how to simplify them within a “Single Window” framework. The team responsible for the assessment exercise should prepare a report that describes the existing processes and procedures to prepare for the planning and implementation stage. Discussion of documentation follows later in the section.

The main functions of a national customs organization are to:

• Collect and maximize revenue, payable to the taxation department through the treasury, the ministry of finance or the central (national) bank;

• Prevent smuggling of goods, of people and the conduct of illicit trade; • Harmonize and simplify customs processes so as to facilitate international trade;

and • Collect trade statistics so as to compile a database on which to base national

economic planning.

Most people think that trade facilitation is customs-centric, revolving solely around customs processes and, to a lesser extent, technical controls and PIA. In fact, customs handles approximately 5 to 10 per cent of the information needs of the end-to-end supply chain, including customs processes.

36

While this project focuses on the perceived major participants such as customs and PIA, with the private sector represented at peak industry level, it is useful to recall the true context and breadth of international trade. The trade of the land-locked economies in this study is not limited to bulk commodities, container cargoes and general cargo, air cargo and passenger-borne cargo — transit and trans-shipment such as bulk cargo breakdown are also important components.

Much of a nation’s trade bypasses conventional customs and PIA processes, such as:

• Cross-border pipelines carrying water, oil, gas, and chemicals; • Power cables for cross-border electricity transmission and for international

telecommunications; • International banking transactions; • International telecommunications, voice, image, Web and digital services; • International satellite-borne television and voice/data traffic; • International air services, transit or departing/arriving; • Postal and messenger services that often provide customs services in the form of

compliance and revenue collection; and • Internet-delivered goods and services, such as software and documentation, that

are nominally under customs control, but generally only in theory.

Of course, other agencies issue licenses and audit accounts for much of such trade, but the goods and services involved in cross-border transactions are not subject to normal customs control and surveillance. Most customs processes are aimed at physical consignments transported in bulk, in general cargo, in containers or by special-purpose carriers such as car carrier ships, rolling stock and road carriers. Hand-carried goods are usually controlled by customs at major sea, land, and air terminals and border crossings.

a. Typical responsibilities of importers

An abbreviated, step-by-step outline of the process of importing goods is given here.

i. After initial registration with the relevant control agency, a company may import or export goods subject to controls over goods according to factors such as Standard Industry Classification (SIC) codes and the Harmonized System (HS), and agreed valuation by customs and approvals by regulating ministries and agencies;

ii. Almost all imported goods are subject to duty and other taxes, with some exceptions related to medicines, fertilizers and agricultural products, pharmaceuticals and other commodities, depending on the country;

iii. To import goods, an importer first issues a purchase order to the seller in the exporting country;

iv. The seller/exporter subsequently issues a pro-forma invoice to the importer;

v. Under certain circumstances — for example, for goods with certain SIC codes or valued at greater than or equal to USD 5,000 — the importer sends the pro-forma invoice to the PSI contractor in the exporting country, who inspects and confirms the valuation of the goods, issues a “clean report of findings” and seals the container. There are well-established processes for non-compliance;

37

vi. On arrival of the goods, the importer applies to customs for an import permit or permission letter. To support the request, the importer normally provides such consignment details as: • Description of goods, • Quantity, • Port of arrival/unloading, and • Invoice number and date;

vii. The importer also normally provides: • Invoice, • Packing list, • Bill of lading (BOL), air waybill (AWB) or freight (road/rail) waybill, • Sales contract, • Insurance certificate or policy, and • SGS clean report of findings;

vii. Subject to satisfactory inspection of documents, customs issues the permission letter, signed and stamped by the appropriate customs official;

viii. The importer creates and presents to customs his declaration, accompanied by the original supporting documents presented at earlier stages of the process; and

ix. Customs then inspects and approves the goods and declaration, duties are paid and the importer (or his representative) proceeds to the port or border to collect the goods.

b. Typical responsibilities of exporters

i. When goods are ready to be exported, the exporter, customs authorities and trade professional concerned verify goods against documents and seal the container. No PSI is required unless requested by the foreign buyer;

ii. The exporter sends the goods to the port (border), together with a customs declaration, packing list and invoice. Customs and the appropriate control agencies check the goods at the port or border against the declaration. If all is well the exporter/freight-forwarder loads the goods on the vessel for transport to the target port-of-entry, or the other side of the border for road, rail and river or lake transport;

iii. Prior to shipment of the goods, the exporter/trade professional prepares the customs declaration, accompanied by:

• Export authorization documentation, • Sales contract, • Invoice, and • Packing list;

iv. At the port, customs and the control agencies validate cargo/containers against the customs declaration, following which they approve loading of the cargo/containers aboard the vessel/transport for the export voyage; and

v. The last instance of documentation is the COO. If the goods are sent via air cargo transport, especially when they qualify for a duty-free transaction, the COO must be presented before departure (by air). Otherwise, the exporter has

38

an amount of time equal to transport/transit time, so that the COO arrives at the same time or before the goods. Provided the COO reaches the consignee at the same time as or before arrival, the exporter is deemed to have complied with the terms of the appropriate trade agreement and is not financially penalized.

Granting a COO often requires submission of:

• Approved customs declaration, • Certified weight and quantity, • Temporary export authorization, • Sales contract, • Packing list, and • BOL.

Figure 13 represents two supply chains buying and selling goods to each other, before automation with ICT. While certain stages in documentation may no longer obtain, this figure serves as a general outline of a full supply-chain scenario of documents, information and processes. The figure does not specifically refer to landlocked border-crossing processes, but they may be inferred.

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

•Invoice•Packing List•Declaration•Delivery Note

Storage

Air, Sea, LandInternational

TransportCustoms Port

Pay TaxesClear CustomsRelease Goods

Ship’sDocuments

•CertificatesOf Origin

•Licenses•Certificates•Government

Approvals

Chamber ofCommerce

ForeignChambersCommerce

OverseasEmbassies

Post/Courier

•“LegalInvoices”

DOMESTICSUPPLY CHAIN

Raw MaterialsPackagingTransportStorage

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

•Payments•Remittance

Advice

IMPORTER

MANUFACTURER

EXPORTERFOREIGNBUYER

IMPORT

•Licenses•Certificates•Government

Approvals

•Certificates Of Origin

•Form A•EUR.1

GovernmentDepartments

FinanceMinistry

Port

•Invoice•Packing List•Declaration•Delivery Note

Customs

“InformalProcesses”

Pay TaxesClear CustomsRelease to Port

InformalProcesses

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

Port Customs

Diagram 12: Manufacturing/ Value Add Import/Export Cycle

EXPORT

ReceiveGoods

Bank

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

PayBank

L.O.C.Packing ListInvoice LOC Courier

LOC Approval

ShippingDocuments

Book/Confirm Transport

Figure 13: Manufacturing/Value Add Import/Export Cycle

39

c. Documents used in processing import

The following list of documents might typically be employed in processing imports by a less-developed country in the Asian and Pacific region that operates a paper-based, pre-WTO import/export system. It might be considered a rather extreme example, but it is not untypical of some of the countries under review.

• Import permit • Shipping arrival notice • BOL • Copy of BOL (for use where original is retained for another purpose) • Commercial invoice • Handling charge receipt • Letter of guarantee • Letter/power of attorney • (Shipping) release instruction • Trucking order • Consignment note • Waybill • Proof of delivery • Packing list • VAT/tax certificate • Insurance certificate • Customs import permit • PSI/permit authorization • Customs declaration • Customs document fee receipt • Import duty (tax) receipt • (Customs) inspection certificate • Customs release note • SPS certificate • Port/border office delivery list • Port/border entrance fee receipt • Cargo handling fee receipt • Port exit fee receipt

The list itself does not indicate the degree of complexity of processing imports, with the number of copies, number of original documents required at each step, multiple presentations of such documents at separate stages, number of signatures or payments involved. In one example in the region, 90 documents were required per import transaction, entailing up to 70 signatures and 12 separate cash payments.

In addition, a number of cargo or shipping documents are vital to the scheduling of goods collection and port resource planning. They include:

• BOL (negotiable) • BOL (non-negotiable) • Authority to process negotiated BOL • Bill of unlading (list and sequence) • Air waybill (air cargo)

40

• Waybill (road/rail cargo) • Shipping manifest • Bayplan

They are not necessarily used at any one time or in any single transaction, but they could be.

Another category of trade documents is required in completing the trade cycle, payment and funding instructions and instruments. They are used together with documents concerning shipping, arrival, value and complete shipment; for example:

• Consignment, container and comprehensive (goods) insurance • Letters of credit • On-account payment details • Other payment terms

d. Documents used in processing export

The following list of documents might typically be employed in the export process by a less-developed country in the Asian and Pacific region that operates a paper-based, pre-WTO import/export system. The list is not specific to any of the countries under review.

• Application letter • Customer contract • Invoice • Packing list • Inspection fee receipt • Inspection report • Original BOL • PSI inspection report • Draft export license • Draft COO • Draft commercial invoice • Temporary export application • Temporary export authorization • Copy BOL • Export license application • Export license • Export license fee receipt • Draft customs declaration • Declaration fee receipt • COO and commercial invoice application • COO • Commercial invoice • COO fee receipt • Consignment note • Proof of delivery • Waybill (road/rail) • Vessel space/carriage application • Cargo shipping documents

41

• Port entrance fee receipt • Cargo charge receipt • Approved customs declaration • Document fee receipt • Export duty receipt • Goods clearance certificate

The list does not include the number of copies, number of original documents required at each step, or multiple presentations of such documents at separate stages of the process. Nor does it include the number of signatures or payments involved. In one example, the total number of documents required was over 100 per transaction, plus up to 90 signatures and 17 separate cash payments.

7. Examining legal and regulatory frameworks

The WTO process requires a harmonized customs law and attendant regulations. Tariffs — as an example — may be detailed in a set of regulations referred to by the customs act, capable of being changed by a minister or director-general (titles of chief executives vary) of customs, without a whole-of-Government approval. (A comprehensive review of customs law in different countries is available at the WCO web site3)

But what else exists in terms of legislation and regulation which defines trade and transport processes and needs to be changed? The local banking act may need to be changed in order to legitimize the use of credit/debit cards, stored-value cards, EFT, direct debit, e-banking and other payment instruments for use in customs taxation, excise and duties. It may also be necessary to legalize electronic documents and messages — or change the definitions of documents — in several legal acts.

In addition to the legal issues associated with e-payment, several legal, legislative and regulatory changes might be necessitated by the operationalizing of electronic TTF systems. For instance, a contract concluded by electronic means should be recognized as a valid document provided that it meets all the requirements for validity; namely, offer, acceptance, intention to create legal relations, consideration and capacity of the parties. The UNCITRAL Model Law on e-commerce has a clause on “electronic equivalent” which is elaborated in annex III.

Recognition of electronic signatures is another concern. The term “electronic signature” refers to any method used to sign an electronic document. An electronic signature is associated with an electronic document that performs functions similar to a manual signature and is treated as having the same legal value as a written signature. It establishes authenticity, confirming for the recipient that the communication comes from whom it purports to come. Technology platforms, such as PKI is widely used to ensure the security services to users.

Several intergovernmental agencies and bodies led efforts to set international standards and guidelines, such as UNCITRAL, World Intellectual Property Organization (WIPO) and OECD, among others.

Of particular importance are, existing or planned ICT policies and plans that might specify any hardware, software or data type requirements or guidelines for office automation

3 <www.wcoomd.org/ie/index.html>

42

as part of the overall e-government initiative of a country. Some countries have plans to develop e-commerce which might also impact automation in TTF.

8. Consulting stakeholders

Trade facilitation is a community endeavour and must be managed by a user, not a technician. Community systems, by definition, involve many different parties. An automated trade system that will ultimately deploy a Single Window design involves all supply chains and their peak industry bodies, PIA and observer ministries, trade professionals, transport and logistics organizations and their peak industry bodies, as well as customs and other organizations. It may be organized through a national committee or through a variety of other project management models. Consensus among the concerned parties about what needs to be done, and how that should be done, is imperative from an early stage.

A stakeholder meeting or consultation should be organized to share findings and assessments among key stakeholders and potential end-users. The results should help in “visioning” and analyzing the gaps before the blueprint of the automated system is actually laid out.

C. Stage II: Planning

Based on the assessment conducted in the first stage, the agenda for the second stage is to develop the plan. Stage II activities include:

• Creating a vision, • Reengineering the process, • Gauging the gap to be closed: gap analysis, • Developing the plan, and • Determining the risks: risk analysis.

1. Creating a vision

After examining good examples and what could be possible, the PIU or any other appropriate entity could organize a consensus-building workshop or consultation on what would be (a) the vision of the new electronic TTF system and (b) the objectives of automating the processes. The objectives might extend from speeding up the entire process, to increasing transparency and accountability, saving costs, facilitating the WTO accession processes and improving data exchange with transit countries. In creating a vision for the project, the leadership should establish its scope and prioritize needs.

2. Reengineering the process

Redesigning processes prior to automation or change in automation has come to be known as business process reengineering, or simply reengineering. This reengineering exercise should take into account the key processes and documents to be automated and electronically processed, in what sequence. That should also help in planning the monitoring and evaluation of the project with selection of appropriate benchmarks and success indicators.

The reengineering stage involves the re-evaluation and redesign of systems, based on the potential role of ICT. Work on systems for customs, PIA, trade professionals, transport

43

and logistics operations, and the supply chain does not need to be done in sequence; it can be done in parallel.

A re-evaluation of processes, systems and documents can be beneficial, even for a country that is not planning for WTO accession or automation of its customs systems.

Once all of the data on current systems are available, analysis and redesign of processes could follow the basic principles outlined here:

a) Never automate present processes — that merely makes an unsatisfactory system faster;

b) Simplify processes by eliminating all but the most important steps in the process; c) Perform inessential tasks offline — where a step or a process can be moved from

the critical path of trade facilitation, it should be removed and performed off line, or asynchronously from key processes;

d) Eliminate paper from processes wherever possible and replace with ICT techniques — paper is the enemy of efficiency and transparency;

e) Eliminate signatures, stamps and chops/seals from the process — these instruments encourage face-to-face dealings, which lead to the potential to influence priority decisions and judgements in exchange for favours;

f) Eliminate personal interactions from processes, except in that much-reduced number of cases where the selectivity criteria determine that a meeting is necessary;

g) Redesign tasks to optimise the impact of ICT — reengineer with the idea in mind that ICT will perform all possible steps in the process;

h) Rules-based processes and risk management: where a step has formerly involved judgement and significant amounts of physical inspection, utilise computer-based risk management techniques. In this case the computer will choose transactions to inspect and will, in the case of customs, select channels (green, red, etc,) based on:

• Risk management profiles, as determined by the lead agency and consultation;

• The proportion of transactions that will be subjected to physical inspections under a risk management regime, e.g., 10 per cent of all consignments will be inspected; and

• A predetermined proportion of computer selected random checks. By following rules-based selectivity (risk management), not only will the time to complete a task be reduced but decisions will become — and be seen to be — consistent, transparent, and fair;

i) Speed up processes — wherever possible, either by simplifying, by removing part of the process or by the use of automation, reduce the time taken to perform a task;

j) Cost reductions: bear in mind that the object of the exercise is not just to simplify and to reduce time taken — it is also to reduce costs;

k) Reduce and keep on reducing — Reduce the number of steps in a task, reduce the number of participants in all tasks and reduce the number of (electronic and paper) documents necessary to complete a task. Continuously re-evaluate systems with this aim in mind;

44

l) Eliminate cash-and cash payments from the process: separate payment processes from the approval and clearance process. Introduce electronic means of payment including:

• Electronic Funds Transfer, • Credit and Debit Cards, and • Direct Debits;

m) Balance bank statements and audit trails against electronic credits and debits to ensure payments exactly balance against official fees; and

n) Subject audit trails and accounts to periodic external audit. If any imbalance is found and is the result of the imposition of informal taxes, a clear regime of disciplinary action and penalties should be applied.

Customs, by far the most complex system to automate, generally is the first to be automated. The other subsystems may be automated in parallel or overlap customs. Ultimately all systems are integrated through the medium of an electronic Single Window. Figure 14 illustrates the automation tasks for each of the major participating groups.

Diagram 13: Trade and Transport Facilitation: Implementing Electronic Trade Facilitation

Customs•Process Reengineering•Training and Testing•Statistics Module•Electronic SAD Processing•Electronic Manifest Receipt•Electronic PIA Approvals•Supporting Trade Documents•Risk Managem’t/Selectivity/Inspections•Electronic Valuations•On Line Approvals and Goods Release•Pre Arrival/Departure Clearances•Post Event Inspection and Audits•Electronic Payments/Drawback Systems•E-Signatures•Remote Electronic SAD Entry•Further Modules•Preparation for Single Window

Supply Chain•Reengineer Systems•Contracts•P.O.•Invoice•Price•Valuation•HS Codes•Certificate of Origin•Trade Approvals

Transport & Logistics•Reengineer Systems•Ports and Harbours•Airports•Dry Ports•Container Parks•Multimodal Depots•Rail/Borders•Road/Borders•Storage•Warehousing

PIAs•Reengineer Systems•Certificates of Origin•Certificates•Technical Controls•SPS•GPS/WTO/GATT/FTA•Risk Management•Electronic Payments•E-Signatures•On Line Approvals•Pre Arrival/Departure

Clearances•Post Event Inspection

and Audits

Trade Professionals•Complete SAD•Approvals Processes•Electronic Manifests•Waybills, etc.•Border Documents•Customs, Agency

Payments•Port, Border Payments•Transport Payments•Invoice/Bill Trader

GoodsRelease

SAD,ManifestTrade Documents

Payments

Physical GoodsMovement

Figure 14: Trade and Transport Facilitation: Implementing Electronic Trade

Facilitation

In addition to the reengineering procedures outlined above, a set of ICT rules for reengineering and automating processes has been formulated.

45

a) Apply standards — base all procurement and development on genuine, current and approved standards from international bodies such as United Nations agencies;

b) Minimize data entry — use data already on file or from a database. Avoid multiple submissions of data from different sources. It is an inefficient use of resources; multiple sources often conflict and cause problems in processing, hence induce delays and the need for exception handling which results in extra processing, time, and costs;

c) Use standard computer packages where possible — avoid maintenance costs and effort caused by supporting local code. Ensure that source code and original programme designs are always accessible;

d) Employ reusable code — avoid writing programmes when existing programmes can do the job;

e) Document all locally developed programs — keep a record of them and store the materials in a secure location;

f) Employ elegant designs, simple programs — produce a blueprint of how the system is to operate. Implement it in small and simple stages. Carefully manage the small steps in implementation; and

g) Have users design systems — do not let technical people design systems. The people who are going to use the system must play the key role in the overall design, and acceptance criteria of the system. The appropriate role for technical people is to advise.

An intermediary may be useful in ensuring (a) balance and transparency between all parties concerned in systems specification and (b) adherence to the basic rules of re-engineering. A third party can also help to “de-personalize” disputes or disagreements over specific aspects of design, particularly when Government organizations are involved.

3. Gauging the gap to be closed: gap analysis

A gap analysis may be defined as a comparison between a desired and an actual state of affairs, measured in a quantitative and qualitative format. This stage in planning seeks to compare a country’s current status of electronic trade facilitation with best practices, vision, reengineering and redesign blueprints, and implementation of the recommended ICT applications, as described in the Guidelines.

The process of fulfilling a plan varies with every country in terms of timing, activities, priorities, and methods. Guidelines and metrics on progress are essential. However, guidelines are among the inputs to be considered and applied, and are not a mandatory set of steps that must be followed. Each country will find its own way to compliance with best practices. The road from WTO accession to fully automated trade processes is ultimately unavoidable, and wholly necessary and desirable.

At the end of the process, a blueprint of the reengineered process can be prepared on the basis of the guiding principles and gap analysis. It should also reflect the findings of the assessment conducted during Stage I. It should enable the making of a list of the steps to take in order to materialize the blueprint, starting from the current status.

4. Developing the plan

Some of the key activities in developing the plan are:

46

• Breaking down each component into sequenced actions; • Identifying governmental agencies and stakeholders associated with the actions; • Identifying needs for change in governmental structures and HR requirements in

operationalizing the project and automated system, including addressing training needs and recruiting new staff;

• Identifying needs for change in legal, legislative, policy, and regulatory frameworks;

• Mapping the roles and responsibilities of stakeholders; • Establishing a time frame for the completion of each component and the entire

project; • Establishing benchmarks and success indicators to enable the monitoring of the

progress; • Estimating required resources, including internal and external human and financial

resources; • Identifying the sources of inputs, partners, and various contributors; • Setting up a mechanism to manage the inputs and outputs; • Agreeing on a reporting and monitoring mechanism; and • Ensuring sustainability, including financial and technical sustainability (Who will

pay expenses after completion of the project and what are the expected operational costs? Who will be the custodian of the system as well as maintain and expand the system in the future?).

To take a simple example, customs might decide that its implementation priorities, in sequence, are:

• Statistics; • The import or the export community; • Data entry of customs declaration (or SAD) by declarants on customs premises

(often known as direct entry); • Remote entry of SAD using a customs service bureau; • Remote entry using a VPN; • Remote entry using the Internet; • Use of the Single Window network; • Risk management and selectivity, for a given percentage of low-risk declarants; • Service extension to selected borders, ports, and airports; • E-payments; and • E-signatures.

Each of these components could be further specified with objectives, activities and responsible and concerned agencies with a time frame.

The following figure might help plan the operationalization of the project after the above issues are addressed. After each agency is assigned activities and tasks, a similar diagram could be prepared with an overall view of who will do what and when, taking into account that technical installation of the system might be outsourced to a private vendor. That would also contribute to planning activities in parallel.

47

Diagram 15: Example of Phased, Overlapping Implementation Planning

Time

Phase 1 Phase 3 Phase 4 Phase 5Customs Phase 2

Phase 1 Phase 3 Phase 4 Phase 5Phase 2Trade Professionals

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5PIA

Phase 1 Phase 2 Phase 3 Phase 4

Phase 1 Phase 2 Phase 3 Phase 4

TransportOperators

ImportersExporters

Towards100%

ElectronicTransactions

5. Determining the risks: risk analysis

Potential risks should be anticipated at the planning stage that could affect project implementation. That would help the project staff and stakeholders to become aware of potential obstacles in the process and the needs for preparation to mitigate the risks.

At the end of this exercise a formal document, such as a project document, could be produced to guide the implementation process.

D. Stage III: Implementation

Implementation focuses on how the project is to achieve its objectives. Activities recommended for Stage III include:

• System design and specificationsk; • Bidding and selection of contractor; • Preparation of contract; and • Project implementation.

1. System design and specifications

Designs might differ dramatically according to a country’s economy or a project’s current status, budget and timescale, among other factors. Figure 16 shows a general view of a “Single Window” system.

The customs computer system should ideally be a well-known and thoroughly field-tested software package from a reliable source. Very few sources of such software have emerged until recently (see the UNCTAD web page on ASYCUDA at www.unctad.org4). Microsoft and the PSI companies are entering the field. Outsourcing of external valuation and of risk management modules has become a valid option. 4 <www.unctad.org/Templates/Page.asp?intItemID=3904&lang=1>

Figure 15: Example of Phased, Overlapping Implementation Planning

48

The option of developing a system from scratch must be considered with great caution. The risks of misinterpretation, delay or outright failure would far outweigh apparent cost savings.

Supply Chain•Trader•Importer•Exporter

Trade Professional•Customs Broker•Freight Forwarder•Shipping Agent

PIA•Commerce•Industry, Trade•Health, Ag.Fish•Security, Etc.

Transport/Logistics•Port, Harbour•Sea, Air•Road, Rail•Storage

ElectronicSingle Window•ICT Based•Connectivity•Messaging, Web•24x7x365•Support, Development•Security•Services

Diagram 14: Electronic Trade and Transport Facilitation; The Electronic Single Window

Customs•Paperless Processes•On Line Declaration of SAD•On Line Editing•On Line Approvals-Pre Arrival/Departure

•On Line Valuations•E-Payments•E-Signatures•On Line Risk Management•On Line Selectivity•On Line Statistics

ApprovalsSelectivity InspectionsDisputes

Goods Release

Paperless: <1 hour clearancePre Arrival/Departure:

-SAD Approvals -PIA and Border Formalities

Minimum Physical InspectionMost Inspections Pre Departure/

Post Arrival-On Trader’s SiteE-Bookings, E-Payments, E-SignaturesE-LOC, E-Insurance

Figure 16: Electronic Trade and Transport Facilitation: The Electronic Single Window

Single Window

The Single Window will connect and operate in conjunction with the customs system. It should preferably be a standard package; however, it is possible that:

• A standard package might not provide all of the specific functionality envisaged in the design;

• A standard package might be over-engineered and overpriced for much of the functionality needed; and

• A custom-built or modified package might be a better option.

49

PIA subsystems

Essentially online filing or “lodgement” systems, PIA subsystems also have a risk management component, possibly based on customs risk-management module. Specific functionality depends upon what controls are needed and the outcomes of the reengineering process. In practice, they are likely to be based on work-flow modules, widely available as standard tools.

An electronic COO system may be developed or outsourced, or an external system such as that of the International Chamber of Commerce may be adapted.

Regarding the security features of the system, electronic signatures and PKI are usually available through national telecommunication companies or through the local chamber of commerce on a commercial basis. However, in order for the electronic signature to be recognized as part of a legal document, appropriate legal and regulatory arrangements are needed.

E-banking may be subcontracted through local commercial banks. Customs and other concerned agencies may joint venture with credit/debit or stored-value cards with a local bank.

Private-sector systems

Such private-sector organizations as associations of supply chains, trade professionals and trade and transport organizations may be expected to obtain systems from the open market. A wide choice of ready-made systems is available.

Ports, border-crossing agencies and airports

Customs functions of those agencies and the PIA inspection and control functions are parts of systems discussed earlier. Some specialized cross-border control systems, such as pre-clearing of vehicles and rolling stock, of TIR rules compliance and of drivers themselves, may require specialized software. Risk management is also a valid function. Appropriate applications are being developed for the south-eastern European road and rail corridors and China, Russian Federation, and Central Asia, so software for the job — or valid specifications for local development — should soon emerge on the open market.

Customs system functionality

Immediate functional requirements could include the capacity to:

• Accept electronic declarations, based on the WCO-approved SAD; • Process SAD online, from electronic media and via bureau services, as necessary; • Interface and operate online with a trade facilitation community network (the

Single Window) using international standards for customs data and international standard computer languages and protocols; UN/EDIFACT, EDI and ebXML are examples of the required international standards;

• Accommodate selectivity based on customs-PIA-user selected rules and options; • Include red-channel and green-channel, full- or part-consignment inspection,

document-only inspection and random-selection options; • Accommodate user selection of risk management tables; customs software should

preferably have heuristic capabilities;

50

• Accept electronic payments, issue paper and electronic receipts, and account for revenue receipts and refunds;

• Transfer electronic payments of taxes and duties received on behalf of the excise/taxation department to the central or national bank, and notify the tax authorities and reconcile accounts electronically;

• Compile trade statistics automatically and publish them on a web site; or transfer the files or selected data sets electronically to authorized and interested parties;

• Accept electronic signatures using an approved (and realistically priced) PKI, and possibly electronic seals/stamps, if required; and

• Conduct online training and process prototyping facilities.

In addition, the customs functions could take into account the following considerations.

• The key principle of pre-clearance, which is to enable immediate collection and just-in-time delivery of goods, must be available through software functionality and reengineered customs practices;

• The same requirement holds for post-entry audit and inspection, which subject collection and delivery of goods to inspection and auditing through risk management selectivity;

• Even with full implementation of the SAD and a paperless customs system, there will be a (selectivity) need to deliver other trade documents for the purposes of:

o Full document inspection, o Part document, part goods inspection, and o Full goods and document inspection.

Customs software packages rarely acknowledge trader’s needs; they tend to focus inwards, solely on customs requirements. Customs systems (or terminals with access to the Single Window system) should therefore have the capacity to receive and display trade documents and cargo documents electronically as requested by selectivity process. That may be done by means of the customs-package native format, EDI or ebXML, or in UNeDocs format. Typical forms might include:

o BOL, o Commercial invoice, o Packing list, o VAT certificate, o PSI contractor “bill of clean findings”, o COO, and o SANCRT (Sanitation certificate).

In order to meet the above requirements, a standard software package should include:

• Operating systems for all servers and clients; • Database management system; • Network operating system; • Communications system and protocols; • Web-based and EDI-based software; • Systems development software; • Database interfaces; and

51

• Message-handling software.

Applications software should include:

• Cargo and manifest processing; • Declaration processing; • Bonds and warehousing; • Transit control; • Transaction valuation and price referencing; • Payment processing and revenue accounting; • Release notification; • Security/guarantee management; • Risk management and inspection; • Exemptions management; • Selectivity intelligence and audit support; • Trade statistics and management information; and • Data exchange and report writers.

Miscellaneous items, such as local language support, multiple currency support, help desk, international standards, file transfer, download and upload capacity from other systems, data conversion and e-commerce, could also be considered.

Single Window functionality

Single Window functionality should include:

• Electronic connectivity based on a range of options, including:

o Fibre optics, o Leased line, o Secure VPN, o Secure Internet (i.e., Extranet), o Secure wireless technology, and o Optional mobile phone or simple messaging system (SMS) for selected

messages;

• A central host/administration system and Web host, managing content and communications, system management, user registration and maintenance, billing and administration systems, electronic payment systems and selected additional functionality, possibly including:

o Links to relevant web sites, o Links to banks for electronic letters of credit or application processes, o Links to insurance companies for insurance services, o Access to all relevant Government web sites and to information regarding,

for example: • Trade facilitation and customs legislation, • Tariffs and the HS, • Valuation guides, • Customs and excise regulations and updates,

52

• Customs service agreement with the Single Window community,

• Logistics and transport timetables via road, rail, air sea, and river, and

• Training materials and reference sources; • Electronic provision of customs-formatted SAD; • Electronic provision of such United Nations-standard, formatted trade documents

(to specific national requirements) as the packing list, invoice and BOL; • Interfacing with customs to submit consignment SAD electronically to a format

agreed with customs at implementation stage; • Electronic submission of SAD before the goods have arrived or departed, for a

period to be set by customs and the trade facilitation committee; • Immediate electronic acknowledgement of submission of SAD and an interim

approval number, subject to customs final approval; • Electronic receipt of approved SAD; • Electronic payment of duties and taxes; • Switching of information to relevant agencies based on HS or similar codes,

indicating that a ministerial license, COO or otherwise is needed for the SAD in question;

• Electronic signing of SAD; • Electronic downloading of customs and PIA forms, and others as appropriate; • Electronic transmission of customs documents and cargo documents as requested

by selectivity processes via EDI, ebXML, UNeDocs or native customs-systems input format (and, optionally, paper); and

• Capacity to operate a service bureau for low-cost consignments or for occasional traders.

Standard software to set up the Single Window should include:

• Operating systems for all servers and clients; • Database management system; • Network operating system; • Communications system and protocols; • Web-based and EDI-based software; • Content management software; • Systems development software; • Database interfaces; and • Message switching and handling software.

Application software should include:

• User registration and management software; • SAD and trade document templates; • UNeDocs capability; • SME SAD declaration sub system; • EDI, ebXML and customs’ native format file transfer; • Electronic payment and audit software;

53

• Electronic signature and PKI management software; • Controlled release of SAD facilities; • Statistics and management software; • Electronic COO software; • Risk management software and table update and maintenance routines; • SAD bureau entry subsystem for small-to-medium enterprises; and • Data management and report writers.

The transition from a paper-based system to an electronic one will require a considerable period of adjustment. Therefore, a paper-handling capability must remain in the system, initially as an option and later as a back-up.

2. Bidding and selection of contractor

After process simplification, reengineering and redesign, initiating appropriate legislation and adoption of international standards to enable automated customs and electronic Single Window processes, the time has arrived for planning ICT implementation. Henceforth, the project must be in full public view: transparency is essential for successful uptake of ICT. Procurement for computer systems and associated services is likely to be subject to the rules, scrutiny and oversight of the implementing agency.

Procurement generally involves recruiting bids from qualified vendors and selecting the most favourable response for the job. The actual process may differ from one country to another, depending as well on the partner agencies in the project.

Two-Stage Bidding

A two-stage procurement exercise consists of writing and placing an advertisement to solicit expressions of interest (EOI) from qualified parties. The advertisement must appear in a national or international paper of record, and also in an official United Nations or European Union weekly contracts newsletter and web site. The advertisement must outline or describe the project, the funding agency details, specific contacts for responses (name, agency, postal address, electronic contacts), and closing dates for EOI. The format for an EOI is usually quite loosely specified but is aimed at eliciting qualifications, experience, resources, and availability. No pricing information is required, from buyer or seller, at this stage. After about six weeks all compliant EOI will have been received. A debriefing and question-and-answer exercise may take place with respondents.

The next task is to evaluate and rank responses, according to agreed criteria. Normally the implementing agency specifies the criteria. The PIU compiles the shortlist and a request for tender (RFT) is sent to each short-listed organization. This is the second stage in the procurement process.

It is important not to be too specific in spelling out technical requirements. Vendors are usually more experienced than members of the PIU and much more up to date on technological developments. Hence potential vendors should be encouraged to recommend their own designs, broadly based on terms of reference of the tasks to be performed, the size of the user base, implementation plans, and other key requirements.

This second stage might take six to eight weeks to complete. A significant and specialized effort is required of the potential vendors. The vendors, at least one or two of them, may become vital partners in the project so they should receive as much help as

54

possible in understanding local requirements, local business culture, local resources and HR skills, capabilities and other factors that may assist or impede the efforts of the potential technology supplier.

The technology may comprise hardware, operating and utility software, application software, maintenance, telecommunications and network facilities, software development, project management, facilities management, even equity sharing and/or shared operational responsibilities. The eventual choices depend on local conditions, available financing, political choices, and many other variables. There is no single, standard model.

The selection process

Procurement agency rules specify precisely how to evaluate proposals such as RFT responses. Technical responses and financial responses to the standard proposal format must be contained in separate, sealed envelopes. Normally the responses are officially received and recorded at a public ceremony. Thereafter the PIU meet formally to open and evaluate the technical responses. A formal system of technical evaluation results in a rating system on several technical and resource-based criteria. A vendor’s response must meet a minimum of 70 per cent to be included in the shortlist. The list is ranked simply on percentage points scored in the PIU evaluation.

After the technical evaluation, financial responses for short-listed respondents are opened in the same formal manner as the earlier ceremony. If the highest-ranked respondent has the lowest cost, or is equal to the lowest cost, the decision is a fait accompli. The selection is made for the PIU, unless special circumstances warrant otherwise. The best technical response may not be the cheapest. Procurement rules allow for such an event, which happens more often than not. But selection must be fully justified, transparent, and defensible against a possible vendor protest. Objections to a perfectly valid and compliant selection can arise on the flimsiest of grounds. They must be dealt with fairly and transparently, even if handling objections delays contract negotiations.

3. Preparation of contract

The full draft contract should be made available at the first (EOI) stage of the two-stage process. Any details, queries and requests for variances to the contract must be clarified and agreed as quickly as possible, subject to the outcome of the selection process. In that way, contracts can be exchanged and work started in the shortest possible time, often within 30 days of informing the winning bidder of the outcome of the selection process.

4. Project implementation

Well before contracts are agreed and exchanged, the trade facilitation committee and the PIU must agree on a detailed implementation plan. Usually the most practical solution, although logistically more complex, is to divide the project into a number of subprojects for implementation in parallel, as far as resources and priority tasks will allow, as discussed earlier. The roll-out, or public release, of the system should also be carefully planned.

Implementation should satisfy the needs for progress updates to stakeholders and end users as well as training of customs and PIA staff. It should also satisfy the human resource requirements in terms of maintaining, updating and expanding the system after the completion of the project. Some of the issues raised in the planning stage, such as legislative and regulatory frameworks, should be implemented after the required information is available.

55

In addition, the PIU, in consultation with customs, must decide who the initial declarants should be. The selection criteria could include:

• The best equipped and most technologically competent; • A selected industry, or a portion of a selected industry; and • A specific region, for example, a border-crossing trade community, or a customs

head-office user-community.

PIU and customs might also decide to concentrate on competent trade professionals before implementing traders and the transport community, or they might decide to implement PIA at border crossing, and so on.

The combinations and permutations are complex. Priorities should be agreed early on, so that (a) technology, communications, and human resources are available as and where needed, (b) training and testing can take place, and (c) the first stage (the pilot or prototype) may be a complete success. Frequent small steps, overlapping and parallel operations retain general interest and commitment at a high level.

Implementation must be subjected to measurable deadlines and benchmarks, such as:

• Number of electronic declarants; • Number of processed SAD per day/week; • Number of inspections per day/week; • Proportion of physical inspections per day/week; • Average time taken to clear goods for release to transporters; • Average time from declarant’s submission of SAD to release of imported goods;

and • Average time from declarant’s submission of SAD to release of exported goods.

Many different indicators can measure the impact and implementation progress of electronic Single Window. A small number of key indicators should be selected and measured, and published on a weekly or monthly basis.

Ultimately, the objective of implementation is to attain the vision of these guidelines: electronic submission of all declarations, and lodging and approval of all PIA approvals, through the Single Window. Risk management and selectivity determine the optimal numbers of physical inspections, which for exports can take place before the goods leave the exporters’ premises or contracted warehouse, and for imports can take place on a post-entry audit basis.

E. Stage IV: Monitoring and Evaluation

The final stage focuses on monitoring and evaluation of project implementation. As described earlier, a monitoring mechanism is established in the planning stage — who reports to whom and how frequently. In case of deviation from the plan or unexpected event, the trade facilitation committee, lead agency or other designated group should be able to advise PIU and the project implementers on an appropriate course of action, while securing necessary political and financial support to complete the project.

To facilitate monitoring, the scorecard presented here is recommended as a monitoring tool. It should be updated regularly to reflect emerging developments and

56

changes that become necessary. The content and time frame could be set by the project team in a flexible manner.

The scorecard encapsulates the four stages of the project and associated activities as follows:

Preparation

A1 Deciding on institutional arrangements A2 Mapping stakeholders, potential partners and sources of influence A3 Researching best practices A4 Assessing awareness among key stakeholders A5 Assessing e-readiness A6 Mapping transaction processes and documents A7 Examining legal and regulatory frameworks A8 Consulting stakeholders

Planning

B1 Creating a vision B2 Reengineering the process B3 Gauging the gap to be closed: gap analysis B4 Developing the plan B5 Determining the risks: risk analysis

Implementation

C1 System design and specifications C2 Bidding and selection of contractor C3 Preparation of contract C4 Project implementation Tasks are entered into the following table. Each task is further divided into sequenced

activities with responsible agencies. The activities are grouped into four quartiles to enable convenient monitoring of progress.

Compliance and Progress by Quartile Task No.

Task Q1 Q2 Q3 Q4

Preparation

A1 Institutional arrangements A2 Mapping stakeholders, potential

partners and sources of influence

A3 Researching best practices A4 Assessing awareness among key

stakeholders

A5 Assessing e-readiness A6 Mapping transaction processes

and documents

A7 Examining legal and regulatory frameworks

A8 Consulting stakeholders

57

Planning B1 Creating a vision B2 Reengineering the process B3 Gap analysis B4 Developing the plan B5 Risk analysis Implementation

C1 System design and specifications C2 Bidding and selection of

contractor

C3 Preparation of contract C4 Project implementation OVERALL ASSESSMENT

The results can be translated onto a time frame that accommodates coordination among different agencies involved in the process as well as among different activities undertaken concurrently.

Apr May Jun Jul Aug Sep Oct Nov A1 Q1 Q2 Q3 Q4 A2 Q1 Q2 Q3 A3 Q1 Q2 Q3 Q4 A4 A5 A6 A7 A8 …..

58

VI. OVERVIEW OF COUNTRY SITUATIONS

Although LLDCs face similar challenges across the region, each country addresses them differently. Some countries have initiated ICT-led facilitation systems, while others have just started the planning process. Some have both trade and transport systems in place and are preparing for upgrading and expansion, while others have focused on automation of certain aspects of customs functions. This section examines country-specific situations with special focus on what has been done and planned. A more detailed treatment of each country appears in annex I to this Guideline. Where information has been considered outdated, the dates of the figures used are quoted. Wherever possible such data will be updated as necessary.

The term “regional” in this report indicates the group of six countries under review. In practice, no significant regional work has taken place, principally because the Lao People’s Democratic Republic and Mongolia are parts of other geographical groupings abd have no borders in common and very little trade is conducted between them. On the other hand, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan have much in common, including shared borders, trading partners, and donor-aided initiatives. However, the regional initiatives they share often also include Turkmenistan, Russian Federation and China, among others. Therefore the Lao People’s Democratic Republic and Mongolia and the Central Asian countries (the Central Asian Region or CAR) must be considered as separate entities, while recognizing participation in the various initiatives that CAR countries share.

A. Kazakhstan

Kazakhstan was accorded WTO observer status in 1996 and is currently involved in negotiations for full membership. At the national level, a new customs code was passed in April 2003. The national customs policy is aimed at protection of the domestic market, encouragement of competition, regulation of monopolies, and attraction of foreign investment.

Kazakhstan has a relatively strong telecommunications sector with a fixed-line penetration of 20 per cent, or 2 million lines. However, the country’s infrastructure remains poor in quality. Only a small proportion of the switching system is electronic and much of it is old.

In 2003, the Customs Control Agency (CCA) began its modernization programme of 2004–2006 with the objectives of (a) simplifying customs procedures; (b) facilitating transit trade of neighbouring countries; and (c) developing automated customs clearance and border infrastructure. The Customs Automated Information System (CAIS) is at the heart of the country’s customs automation efforts. However, in order to keep up with the latest technological developments, CCA had a plan to upgrade the system and technical platform as well as software applications. The plan included the introduction of the Automated Logistics Control System (ALCS) to integrate such features as transport tracking and radiation control with centralized monitoring mechanisms. The long-term goal is the establishment of an electronic customs information system, or “e-customs”, to create a uniform customs information environment for customs services, provide Web-based services and enable electronic declaration of goods.

In terms of transport facilitation, Kazakhstan acceded to the TIR Convention in 1995. It increased and improved the country’s road transportation and transit trade. In 2001, Kazakhstan Customs Authority joined the SafeTIR system.

59

B. Kyrgyz Republic

Since December 1998, the Kyrgyz Republic has been a full member of WTO. The legal regime of trade policy in the Kyrgyz Republic is adjusted to WTO conditions.

At the national level, Kyrgyzstan has enacted new customs codes which broadly conform to the international Convention on the Simplification and Harmonization of Customs Procedures (“Revised Kyoto Protocol”) and WTO standards (including the rules for customs valuation).

The principal vehicle for customs ICT/automation planning is the ADB-supported UAIS. UAIS (local name Bajy) is the platform for ICT policy for the period 2002 to 2010. It aims to:

• Enhance transparency of customs procedures; • Facilitate the process of collecting, processing, storing, and analyzing information; • Assist in operational decision making; • Minimize subjectivity (the human element); and • Simplify and speed up interactions with declarants and PIAs.

At the same time, the Government plans to improve the border post infrastructure since the border post is where most scrutiny, if not entry processing, will take place. The transition to a more centralized information processing approach will take considerable planning and implementation subtlety.

According to ADB, the development of a master plan for customs automation was launched in October 2005 within the framework of the Regional Customs Modernization and Infrastructure Development Project. The proposed assistance also includes business process reengineering, training, and change management.

C. Lao People’s Democratic Republic

The Lao People’s Democratic Republic is at the earliest stage of trade facilitation. It is progressing through the policy stages with agreements on Association of Southeast Asian Nations (ASEAN), the ASEAN Free Trade Area (AFTA), and some bilateral agreements. It is addressing WTO accession and the tariff regime together with an early understanding of the General Agreement on Tariffs and Trade (GATT) regulations on red tape.

Although the liberalization of the telecommunications sector has made progress and new operators have entered the market to offer various services, ICT usage in general is relatively limited. Government agencies have little experience in using ICT; it mainly serves a few officials for exchanging e-mail. Likewise, the development of Internet-related applications has not been widely spread in the business sector. The current status of ICT legislation and regulation in the Lao People’s Democratic Republic is also at a very early stage due mainly to lack of infrastructure, services, and expertise.

Customs have no plans for automation or any ICT initiatives, apart from post clearance data entry of SAD for statistics, based on the assumption that their volumes do not justify an ICT installation. Hence any plans for an ICT enabled trade facilitation initiative await customs realization of the importance to national trade of ICT in customs.

60

D. Mongolia

Since Mongolia became a WTO member in January 1997, it has maintained a liberal trade regime and liberalized telecommunications and IT sector such as domestic (2000) and international telephone services (2002), cellular and Internet-based. Supported by an increasing number of ICT experts, Mongolia has made considerable progress in developing its information and communications infrastructure in recent years, particularly in the availability of modern basic service and cellular services.

Mongolia is by far the most advanced in the adoption of ICT for trade facilitation among those countries under review. A new customs ICT system recently replaced the original 1993 installation, ASYCUDA, which had very limited functionality with numerous perceived technical failings without network functionalities. Therefore, Mongolia introduced a locally developed, Mongolian-language, Windows-based replacement in June 2003 known as the Mongolian Customs Automated Data Processing System (GAMAS). The goal of GAMAS was to create a unified information system that covers all data within the customs system, interfacing other government agencies, banks, freight forwarders, and customs brokers, and that computerizes the tasks of estimation, calculation, and duty assessment, among others.

GAMAS is customs-centric but has national coverage and a consistent approach, which is a vital precursor for full customs automation. Other Government departments do not yet have an electronic approvals process, in spite of their e-government plans. ADB has proposed a Single Window based on the Singapore model. The Bank provided in-country support for customs modernization assessments to assist with gap analysis and formulation of a strategy and implementation plan for customs modernization and single electronic window services for the business community. The country is currently preparing a strategic framework for single electronic window practices. Mongolia is also implementing a rail upgrade programme with World Bank assistance and a border-crossing TIR initiative under ongoing regional trade facilitation initiatives.

Despite an ICT-literate population, Mongolia’s ICT installation is relatively basic in terms of TTF. A fully functional Single Window would place enormous stress on its infrastructure and capabilities. It has a long way to go in making a reality of its ambitions in paperless trade and much more work to do on ICT initiatives at border crossings, on legal and payment initiatives, in liberalizing the trade professional market and in adopting international standards.

E. Tajikistan

Tajikistan is a small, post-conflict trading nation in transition to a market economy. The key component of trade facilitation, customs, has only recently emerged from management by the Customs Committee. Customs revenue is a major element of the national revenue plan. Customs is at a very early stage of modernization.

Tajikistan's telecommunications network is arguably the least developed of all the countries that have emerged from the former Soviet Union. The war and other negative influences after the declaration of independence have delayed its market development.

According to ADB, the development of a master plan for customs information systems, UAIS, was launched in October 2005 within the framework of a Regional Customs

61

Modernization and Infrastructure Development Project. The proposed assistance also includes business process reengineering, training, and change management.

Electronic transactions in customs are virtually non-existent by contemporary standards. Customs are struggling with problems such as drugs smuggling and other forms of smuggling and trafficking, incorrect commodity classifications, and under-valuations that translate into State revenue losses. All international and development organizations agree that the application of ICT to customs and revenue gathering is vital for the future economic health of the country. Urgent attention to cross-border transit issues and a TIR transit arrangement is required.

F. Uzbekistan

Uzbekistan is negotiating for access to the WTO/GATT. It also has a partnership agreement with the European Union which obliges it to harmonize its legislation with European Union legislation.

The Government, influenced by European Union and WTO/GATT accession arrangements, is drafting a new customs code, which will conform to the revised Kyoto Convention on simplification of harmonization of customs procedures. The new Code will ensure transparency in administrating all customs procedures and protecting the domestic market from smuggled products.

Uzbekistan has been struggling to bring its telecommunications system up to the same standard in developed countries. The government strategic policy is to privatize the incumbent operator, Uzbek Telecom, and to open the market to competition in accordance with the country’s aim to join the WTO membership.

The Uzbekistan’s first customs automation system, UAIS (Unified Automated Information System), was designed for automation of the major key functions of the customs. The UAIS pilot project was rolled out in the Tashkent region in December 2003.

In October 2003, one of the UAIS subsystems called Unified Electronic Information System for External Trade Operations (UEIS ETO) has started the operation. It is a system to provide interactive functionalities between all concerned ministries and agencies responsible for registration and performance-monitoring of foreign trade contracts.

Uzbekistan joined the TIR Convention in 1995 and actual implementation started in 1996. Since then, more than 35 per cent of goods in foreign trade are transported under the cover of TIR carnets. Customs authorities currently apply ICT in controlling delivery of goods and termination and completion of transport under the TIR carnets. They are part of the SafeTIR system.

62

VII. KEY INITIATIVES

In reviewing the selected countries as separate entities and also as members of a regional group, work undertaken to date has focused almost entirely on customs issues; understandably so, since very few regional customs authorities have yet to deploy any relevant ICT applications. Lao People’s Democratic Republic is undoubtedly aligned with ASEAN and that alignment was covered in relevant detail in Annex I. Mongolia also has its own regional affiliations which are covered in its own section. However, the central Asian economies have active regional TTF programmes, the reasons for which are briefly introduced here.

TRACECA

Transport Corridor Europe-Caucasus-Asia (TRACECA) is the most active programme aimed at improving border control and transit operations between and across central Asian countries and several others in the Europe-Caucasus-Asian trade bridge. TRACECA also includes the development of a physical transport corridor and legal measures aimed at trade facilitation across the whole region.

Briefly, the objectives for the TRACECA project are:

• Elimination of bottlenecks; • Harmonization of legislation and regulations in accordance with international

standards; • Promotion of harmonized and simplified procedures; • Combating fraud; • Promotion of close partnerships between agencies acting at the border; and • Development of networks for exchange of information.

Current TRACECA border-crossing projects include:

• Harmonization of descriptions of border-crossing procedures, including listing of all documents and reengineering controls to conform to international norms and standards;

• Unified policy on transit fees and tariff descriptions to promote development of a commercially unified system; and

• Common legal basis for transit transportation description that can help promote modern technical standards for road vehicle operations and characteristics, which conform to European Union norms.

ITC

The International Trade Centre (ITC) also emphasises the importance of cross border issues in trade facilitation. They believe that, although liberal tariff policies will be beneficial, growth will only follow successful trade facilitation measures. Many of the costs associated with shipping, transit or customs in the CAR countries are avoidable consequences of complicated and lengthy customs clearance processes, poorly coordinated control services, too much red tape, inadequate capacities, informal payments, and poor infrastructure. They claim that potential benefits resulting from trade facilitation measures can be substantial and range between 2 per cent and 3 per cent of the total trade value. Other reports claim the costs of administration and documentation can total as much as 7 per cent of global trade. Clearly there are measurable benefits to successful trade facilitation implementations, supported by ICT.

63

RTFCCP

ADB has a project called Regional Trade Facilitation and Customs Cooperation Programme (RTFCCP), launched in 2002 as part of the Central Asia Regional Economic Cooperation (CAREC) Program. RTFCCP5 is a three-pronged strategy for trade facilitation, all currently customs-centric. Its targets are to:

1. Modernize customs infrastructure, including legal and physical infrastructure; 2. Develop customs-supporting infrastructure by fostering private associations (such

as broker’s associations) and their participation in trade facilitation; and 3. Support regional customs cooperation to address issues of common concern and

complement country-specific support.

In August 2002 the Customs Coordination Committee (CCC) endorsed a seven (7) point common action plan, comprising studies of:

• Simplification and harmonization of customs procedures; • Development of border posts and facilities; • Development of simplified transit systems; • Data sharing and ICT for customs operations; • Development of risk management and post-entry audit; • Development of a regional intelligence system; and • Capacity building for regional customs organizations.

Other issues were discussed and agreed, including:

• Strong country ownership of cooperation initiatives; • Country-specific activities with strong regional orientation; • Support for training and knowledge sharing; and • Donor coordination.

Almaty Programme of Action

The Almaty Conference, held in Kazakhstan, was the first United Nations-sponsored attempt to address economic issues of LLDC. The outcome of the Almaty Conference included the following five actions:

1. Policy improvements - reduce customs bureaucracy and fees to cut costs travel days for landlocked countries exports;

2. Improved rail, road, air, and pipeline infrastructure - implement projects that reflect local transport modes;

3. International trade measures - give preferential treatment to exports of landlocked countries, making them more competitive;

4. Technical and financial assistance - donor countries to lend know-how and money to landlocked and transit countries for infrastructure and policy improvements; and

5. Monitoring and follow-up on agreements - measurable criteria such as travel days and costs to be used. An annual review before the United Nations General Assembly is to be considered.

5 <www.asiandevbank.org/Projects/TradeFacilitation/Documents/TF-Progress-Future-Directions.pdf>

64

VIII. BEST PRACTICES IN TRADE AND TRANSPORT FACILITATION USING ICT

The term “best practices” suggests a specific model that everyone is aiming for, with a clear set of guidelines on how to get there. However, the complexity of the whole business of trade and transport facilitation is apparent; the ICT aspects alone are perhaps the most complicated combination of computers and communications for any application ever contemplated. And the technology continues to be refined and developed so that the target for best practice is perpetually advancing. In addition, each country or region or community has evolved in different ways, because of its geography, language, history and culture, trade groupings, colonial background, system of government, infrastructure, and numerous other factors, not least its the scale of operations.

So, for the time being, no universal model is possible for best ICT practice in TTF. Such a model could conceivably evolve, but the means of realizing it are not yet apparent. A vision of an eventual best-practice model might be more easily composed of a comparison of current status against such a theoretical or laboratory model, thereby enabling gap measurements and assessments of how much work, time and investment are needed in given cases.

A. A vision for now

Based on the known possibilities and available technologies or those being rolled out, the parameters of such a model might include the following. Principles already articulated in the Guidelines are assumed to be givens in such a model namely:

• Operations are paperless; • Electronic signatures replace handwritten signatures and chops; • Encryption, PKI, smart cards and interoperable security systems are fully

implemented; • Financial transactions are conducted electronically with credit, charge, stored-

value and debit cards, EFT, e-banking and direct debits; • All permits are issued, signed and approved electronically; • COO, where still used, are issued and read electronically; • Legal and regulatory instruments that govern this electronic, paperless system are

accepted by all jurisdictions concerned; any transaction that is generated or compiled electronically may be presented, processed, approved, stored and audited electronically for all legislative and taxation purposes;

• Transactions are electronically generated by supply chain systems and extracted from their databases, in combination with trade-professional systems such that paper documents in support of customs declarations are no longer needed;

• Freight capacity and port and border control time slots are booked electronically; • Most clearances and approvals are completed before the freight and carriers reach

the port or border so normally no physical inspection is needed; • All carrier licences, vehicle and prime mover and rolling stock are similarly pre-

approved before arriving at ports or borders; • Inspections (customs, PIA) are conducted before shipment or after arrival, on

traders’ premises, according to a well-understood risk-management regime;

65

• Customs systems are totally automated and integrated with all its operational and administrative systems, including taxation, payment, statistics, training, document management and storage, and all administration, mail, Web processes, and ICT operations;

• Valuation is automated and integrated on an international basis so that data are shared with all other affected jurisdictions and aligned internationally;

• Risk management is similarly internationally aligned; • Customs has targets for volume by import/export, ports, airports, road and rail

border crossings, by industry of HS code; the metrics are published and available for public scrutiny;

• New technology (such as global positioning system [GPS] and differential GPS, bar coding and radio frequency identification [RFID], digital container seals and on-board computers) can contribute to recording the location, tracking and tracing, scheduling and management of rolling stock and freight carrier assets, including containers and pallets, and of dangerous goods and physical security;

• All communications are available in multiple languages through efficient natural language translation;

• All electronic communications take place through a virtual network, even if subsystems have their own dedicated networks, and accessible by all users; and

• The standards for such a paperless, transparent all-encompassing TTF model are based on United Nations Directories for Electronic Data Interchange for Administration, Commerce and Transport (UN/EDIFACT), electronic data interchange (EDI; for volume transactions) and Extensible Markup Language (XML; for Web-based transactions), the United Nations Layout Key, WCO data models and the International Telecommunication Union (ITU) telecommunications standards, World Wide Web Consortium (W3C) emerging standards.

The foregoing description may just amount to an outline or “wish list” of what a future best-practice model will look like. Technology will probably help shift the emphasis and make other things possible, but it is a starting point, or something to aim for.

B. Clusters of TTF automation

Clusters or “islands” of TTF automation have developed over the last 25 years or so. Typical examples include:

• Supply chain/trade and transport professional networks/gateways; • Customs automation; • Automated PIA; • Port community systems (including maritime, inland waterways and airports); and • Border control systems (road and rail).

The present chapter examines how each cluster has evolved and how it could be linked to an integrated Single Window, with examples from countries that have implemented Single Window TTF systems.

Current models of Single Window are automated customs systems with remote trader data-entry using EDI and Web-based XML; or ebXML data-formatting technologies for automatic data entry into customs databases and communication with trader’s databases. The

66

current concept of the Single Window (sometimes) includes an automated PIA process. It does not include port communities, transport and logistics networks, border control systems or a variety of networks for international services, such as risk management, customs valuation services, external clearance systems, express parcel and courier services, dangerous-goods tracking and tracing, and so on. Today’s Single Windows therefore appear to be functional clusters that address part of the TTF process. Customs and e-government (PIA systems) are public-sector focused, so naturally they have greater international applicability. To date, other clusters identified here are much more oriented to the private sector, and thus are much more localized and receive less attention from the international community.

Functional clusters typically include 11 features that are described as follows:

1. Supply chains and trade professionals

Traders in many countries can now transmit electronic documents to fellow trade professionals, enabling them to submit electronic customs declarations (CusDec) or SAD. The more ICT-capable trader can submit a SAD/CusDec by EDI, directly to the customs system. A trader can send his customs broker an EDI, e-mail or electronic pro forma invoice, a sales contract or purchase order, a commercial invoice, a packing list or other document in portable document format (PDF). Traders and trade professionals around the world use off-the-shelf trade documentation software packages to do so. The pioneers were probably the trading community of the Port of Felixstowe in the United Kingdom, the Australian Customs Brokers and Freight Forwarders Council (CBFCA), and Singapore TradeNet® between 1984 and 1985.

2. Customs automation

Around 100 or more countries have computerized parts of their customs clearance processing and statistics-gathering. They normally start with data entry of a customs declaration (Stage I), then progress to a customs bureau where traders can enter their own data (widely known as “direct entry”, Stage II). More recent versions have enabled traders to use their own computer systems to assemble a customs declaration from their own databases, allowing an EDI translator software system to select and reformat the required data and then transmit EDI messages directly to the customs database (Stage III). The latest version of that process is to enable traders to enter a declaration from a customs web page and submit it over the Internet (Stage IV): that is clearly a solution for smaller-volume declarations and occasional users.

The customs system edits the data in the declaration and returns non-compliant declarations. It applies risk management processes to selected green or red channels (straight-through or inspection-required). Other programs check declared valuations, process electronic payments, validate electronic signatures, and process statistics, among many other functions. Most customs systems are not yet that sophisticated and are only part way through the migration from manual to automated processes. Fully automated customs processes enable traders’ declarations to be accepted within a few minutes so that they may collect their imported goods on the day of arrival, or deliver them to the port within four to six hours of their booked departure. While the United States, the United Kingdom, Australia, New Zealand, Singapore and a few other countries already operate to such standards, best practice in customs automation at this level of sophistication is rare. A growing number of customs authorities expect to implement similar modules over the coming years.

67

That level of automation applies to export, import, trans-shipment and transit processing and to road, rail, air, maritime and river transport, especially in Europe and across the US–Canadian border.

3. Automated PIA

An automated PIA enables traders or customs brokers/forwarders to make electronic lodgements to obtain permits and approvals. While very few countries have implemented electronic signatures, e-payments are quite common. Most often, only some of the PIA community is able to participate. SPS approvals are often more complex and require a unique clearance process. The United States, Japan, United Kingdom, the Netherlands, Canada, and Australia have hybrid PIA systems where most approvals are electronically lodged while SPS, quarantine, security, and dangerous goods (DG) have separate systems.

In a reengineered customs environment, such PIA approvals and selected associated inspections take place before submission of export customs declaration and transport of goods. They also take place before import, transit and trans-shipment declaration are processed. Any risk management and system-selected inspections take place after goods arrival, most typically at point of sale (standards inspections), at owner’s premises for normal container and general cargoes, and at point of import for certain chilled or fresh products, and selectively for DG.

COO can be automated. They are usually only needed for closely controlled quota merchandise, such as textiles and apparel, although the end of the Multi Fibre Agreement means that only the European Union requires COO for such purposes, and only then if a trader is seeking special market access or tariff terms. The Gulf Cooperation Council countries (among a very small number of trading groups) still require COO from member countries, which many judge to be a trade inhibitor within a regional trade agreement that is meant to stimulate regional trade. Singapore, the European Union and the International Chamber of Commerce in Brussels offer an electronic COO system or service, as do a few commercial ICT vendors.

Note that PSI organizations have automated their processes and supply electronic notification of findings in EDI formats as required. Those organizations are also beginning to offer outsourcing of customs clearance processes, valuation services and selected customs /PIA inspection services.

4. Port community systems

Port operations are increasingly becoming wholly or partly privatized. An entire port may be outsourced by the owner (the State or a state-owned enterprise [SOE]). Alternately, specific functions — typically container handling — may be outsourced. There are other models for ownership and operation of container handling and associated capital equipment. A common model is the State, through an SOE, that owns the land where the port is situated, including a regulated waterfront area, and provides — at a minimum — landlord functions involving property management and maintenance services. Typically the SOE also provides maritime services, including pilot and tug navigation services, oversight and inspection of various certificates and licences for vessels, masters, crew, and DG. It may also provide bunkering services (fuel and oil) and stevedoring services, although legal codes in differing countries can create a variety of different environments for port labour.

In most circumstances the landlord (the port corporation) invoices its users, such as shipping companies, shipping agents, freight forwarders, transport companies, and property

68

lessees. Where a container terminal handling facility is a contracted out service — an increasingly popular model — it also bills the port for land, services and a proportion of container handling revenue. The container handler bills traders, usually through their freight forwarders, for their services.

In the majority of cases the port is customs-free (not duty-free) operation, although it may provide specific premises for customs inspection and storage. It may also provide an area for empty container storage. Storage of containers before export and after import is a chargeable service (demurrage) although local regulations may provide free storage for up to 15 days, to compensate for inefficient customs and inspection processes. Efficient ports within a modern trade regime impose demurrage after only two or three days. Efficient supply chains are not designed to have fully loaded containers lying around for two weeks.

The information interface between the port and customs import systems is the shipping manifest. Shipping companies electronically submit a ship’s manifest to the port several days ahead of time (e.g., date of arrival), or, at the latest, from the last port of departure. The container handler is thus enabled to allocate storage and yard locations for each specific container. Yard and on-board container locations are communicated, in advance, by an EDI message called the Bayplan (Bayplan/Stowageplan occupied and empty location message [BAPLIE] of the United Nations Trade Facilitation and Electronic Business [UN/CEFACT]). Container handlers thus know exactly where each container is located — on board the liner, where it is to be stored in the yard, and at what height — containers can now be stored eight or nine units high on board and up to five high on the port pavement. They can thus electronically inform freight forwarders and transport companies of availability and location of containers.

The import manifest has a record of container ID (identity or serial number, which can be verified visually or, quite soon, by radio frequency identification devices, which are scanned automatically as they enter/ exit the port gate). The tracking and tracing of containers, loaded or empty, is an important container handling function. The manifest also contains detailed contents of the container, compiled by the shipping company from BOL. The container handler at the port provides customs with a copy of the electronic manifest. The port corporation — where it has a trade logistics function — also provides customs with manifests for bulk and general cargo, among others. Customs use the electronic manifest to discharge (keep track and complete clearance of) containers and cargo.

In a modern port, empty containers occupy areas outside the port’s functional operations area, allowing transparent operations and a clean handover of responsibilities. Pre-clearance and post-event auditing and/or inspections enable the containers to transit the port in an efficient manner. Ports measure their container operations by container “dwell time”; i.e., the average time, measured across all traffic that a container spends at the port, after unloading and before departure through the gate. The world’s most efficient ports can measure this dwell time in hours. Three days’ dwell time is considered unsatisfactory in efficient ports.

Port community systems enable the clients — shipping companies and freight forwarders — to enter BOL and manifests into their system using EDI and Web technologies. They also automatically book berth space and confirm times of arrival or departure. They may also book bunkering, maintenance and repairs and submit the variety of certificates and visas needed for specific goods, vessel, crew and passengers so that all data logistics and clearances are obtained off the critical path of arrivals and departures. Ports are now also allocating vehicle (truck) scheduling systems so that trucks arrive at a precise, scheduled

69

time, ensuring minimum waiting time, and efficient use of equipment by all concerned. For further efficiency and cost reductions in logistics, some ports also provide a backhaul booking service so that trucks delivering full containers can book a full (or empty) container, or several, to collect for the return journey.

5. Airports

Airport information systems operate similarly to maritime port equivalents, although the booking and air waybill (AWB the air transport equivalent to the BOL) systems are operated by individual airlines. Note that the host-country airline usually provides the principal electronic booking service. An airline or airport services, freight forwarders, postal services and express messenger/courier services that often have special arrangements with customs regarding manifest presentation and clearance and revenue payment to ensure fast clearance and logistics. In some countries express messenger/courier services operate as the customs revenue collection agency for parcels and air freight.

An airline gateway service provides most of the services that maritime port community services offer. The airline servicing the specific route may electronically submit the manifest to the airport, which provides a copy to customs. Some airlines also provide advance passenger manifests (UN/CEFACT PAXLST or Passenger List Message) to customs and immigration authorities at the port of arrival.

6. River ports

Where a river port is notionally the national port of entry/departure to a country, the port provides, in principle, the same services as a seaport. In practice, river ports overwhelmingly service bulk cargo — agricultural products, minerals, fuel, and building products. River transport which is container-capable and also crosses national borders is fairly unusual. T hey often deploy non-standard containers, specially manufactured for local shipping purposes. Volumes are usually relatively small so that any form of (ICT) automation is quite unusual at this level.

7. Border crossings and landlocked countries

In many developing countries the administration interface between two countries at a road and/or rail border crossing is a tedious, manual affair. Goods often have to be unloaded at the border so that they can be loaded onto trucks of the importing country — where there is no trade agreement to permit the exporting country’s trucks or specific goods to travel within, or through, the importing country. Furthermore, customs on both sides of the border require customs duties to be guaranteed or prepaid. Vehicle inspections, driver qualifications and licences, even fuel and maintenance inspections take place at the border. Where rail gauges are common between countries, similar processes take place for rail transport.

TIR and ATA carnet agreements are increasingly being implemented on a regional basis. In some countries a pre-clearance gateway service is being implemented to facilitate TIR and cross-border transit. Such agreements are currently limited to European Union and South East Europe TRACECA arrangements, although some African and Central Asian countries are beginning to benefit from early implementations.

Automated TIR and border-crossing ICT automation systems are in their infancy, although the European Union and ADB in particular, are placing increasing emphasis on their development.

70

8. Inland (dry) ports

Inland or “dry” ports are implemented where maritime ports are some distance from the main import/export centres, particularly for merchandise trade. They act as a multimodal logistics centre, where all formalities, customs and PIA may be completed. Containers may be sealed at an inland port and convoys assembled to travel directly through to a specified dock location, in a bonded or customs-controlled environment. That is the theory; however, in developing countries, they tend to operate much like a conventional container storage park. The United Kingdom and several European countries operate inland ports, or multimodal logistics centres, complete with all electronic clearance facilities. Australia anticipates a nationwide network of inland ports to aid maritime port productivity as part of the next generation of trade logistics infrastructure.

Use of the concept is expected to grow as congestion on maritime port premises grows, costs of land for expansion grow and the need for port productivity grows in importance.

9. Dangerous goods

The International Maritime Organization (IMO) is entrusted with developing a code to regulate and manage the international movement of dangerous goods (IMODG). The IMODG is a code set that identifies dangerous goods at all levels of severity and risk. It determines separation rules for DG cargo and containers and specifies emergency and remedial action in case of accident. An online system which illustrates the features of DG reporting and management is Hazcheck®.

In transit, the responsibility for DG is assumed to be the carrier (by sea, air, rail or road). Users observe specific routines and precautions. However, the weak link in DG processes is the interface between the carrier and the next link in the chain. DG may transit a maritime port or an airport or a rail yard. Each has different responsibilities and logistics routines; there is rarely a centralized authority that oversees all aspects of DG movement and lifecycle. As a result the goods, after collection from the international carrier, are often administratively invisible until (and if) the end user reports receipt and enters them into an auditable stock record.

WCO, in concert with several governments and local transport, trade and customs authorities, is planning national DG recording and track-and-trace databases to help nations comply with international obligations, security concerns, arms and ammunition reporting and cross-border transit notifications, in addition to quality and status checks, vendor and manufacturer monitoring and the control of new substances and substitutes. Such DG networks or cluster systems will need to interface with customs systems, shipping manifests and BOL and PIA systems. They are as yet unspecified, however.

10. Extended customs services: cooperative international systems

Another set of subsystems, or clusters, is beginning to emerge. All customs systems need to check on declared valuations and risk management factors, among other data that may emanate from outside its own jurisdiction. For example, an imported product has already been declared and valued and had duty paid in the exporting country. Is it really necessary for the importing customs authority to duplicate such checks, especially when the original exporting regime is so much more experienced in the product and more knowledgeable of the exporter? Valuation databases are being offered by express messenger and courier companies and by PSI organizations. Their databases can accurately identify the

71

HS code to the most detailed level possible, often much more accurately than the customs’ own eight-digit code.

Similarly, many highly successful and reputable companies operate on all continents and in most countries. Why should each customs regime operate its own, independent risk-management system wherein each of these companies is judged by a unique, local set of rules? The global companies should of course be subjected to random inspections but, in the interests of efficiency, a global risk management system should be established for major international companies which each customs authority’s computer could automatically refer to in its risk management operations. That would reduce the computing load and time of selectivity and inspection by a dramatic amount. It would provide a more consistent and certainly faster risk management process, in every country, and would reduce need for customs and PIA inspection. Local legislation and practices are acknowledged to be a sovereign right but it should only be a matter of time before a commercial or independent service is offered to the market place to cover global traders.

National product standards authorities have mutual recognition services with each other so that a standards-approved appliance or product from, say, the United States or Germany, is automatically approved in the United States, European countries and all others within the mutual recognition regime. All new models must be tested for compliance and safety in each country, of course; but once that is completed, only risk management-based selectivity is used as the criteria for further inspections, and then only at the point of sale, the logical place for inspections of such a consumer protection function. Any other inspections become simply an excuse for additional revenue raising and are clearly a non-tariff barrier to trade. Standards authority databases should be fully compatible with those of their trading partners, allowing importers and exporters to access and to quote compliance data and therefore to avoid gratuitous and expensive, time-consuming additional inspections by standards authorities.

11. Intelligent transport systems (ITS)

ITS are being introduced to enable different community systems related to goods movement to track and trace all consignments from origin to destination. Originally conceived for defence and DG tracking purposes, the technologies are being deployed in rail systems, passenger systems, and many other surface carriage systems. They have been present in aircraft for over 10 years. The concept is to install technologies, such as on-board computers and Internet access, bar codes, RFID scanners, analogue or digital GPS and electronic seals, to provide a traceable, secure, tamper-proof means of freight carriage. New containers are already being fitted with such capabilities. Special-purpose DG freight and logistics systems are also being equipped with the technology as will an increasing variety and number of freight-carrying trucks and passenger vehicles. Networks and scanning stations will emerge to record movements of the vehicles and vessels and be integrated in future TTF systems.

The following figure 17 illustrates the components of future and developing TTF clusters and the emerging concept of the TTF Single Window. The figure summarizes the components of present and future TTF systems and categorizes them under the headings of:

• Users, • Information and service providers, • Systems, and • Technology and standards.

72

Figure 17: Components of emerging TTF systems

C. Current examples of best practice

Current practices vary depending on the state of automation of such major participants as:

• Customs • PIA • Supply chains • Trade professionals • Transport and logistics • Ports, harbours and border crossings.

Some countries have customs-centric communities, while some have port-centric communities. The United States has a strong road/border-crossing emphasis, while Japan; Taiwan Province of China and Hong Kong, China have notably successful port-centric community systems. The archetypal model for port-centric community systems is Felixstowe, the United Kingdom, closely followed by Rotterdam, Hamburg, Marseilles and some United States and Canadian ports.

Large countries, naturally enough, appear to have massive and very advanced systems. European Union countries, particularly the United Kingdom and the Scandinavian countries, are all good examples, as are the United States and Canada. Of the smaller countries, Singapore is often held up as a fine example. Taiwan Province of China, Republic of Korea, Australia, New Zealand, and Hong Kong, China are all different but very informative examples.

Users: User Groups•Traders•Supply Chains•Customs Brokers•Freight Forwarders•Shipping Agents•Integrated Logistics

Suppliers•Express Messenger/

Couriers•Road Freight•Rail Freight•Shipping•Inland Waterways •Air Freight•Airports•Maritime Ports•Inland Ports•River Ports•Border Crossings

Information and Service Providers•Lloyds•IATA•IMO•PSI Services•Valuation Services•HS Code Services:

Tariffs•Banks•Insurance Companies

Technology and Standards•ICT•EDI•UNCEFACT•ebXML/XML•UNLK•UNTDED•EAN/UCC (Product/

Bar Codes)•RFID•GPS/DGPS•Compliant Data Bases

Systems•Customs•PIA•COO•PSI•Port Community Systems•Inspection Services•DG Track and Trace•Border Control/TIR Systems

73

Many countries have a stated policy of developing a Single Window. For some, that means having a single point at which all transactions and payments take place; and that traders use for centralizing transactions. In the ICT context, a Single Window is a virtual network, as described in the vision above. With one possible exception, Singapore, that goal has nowhere been fully realized. While many countries are aiming for such ICT architecture, Singapore leads the way at the moment.

Of the smaller and less-developed nations, Mauritius provides a very good case to research, having gone from a paper-based customs system all the way to a local version of an electronic Single Window in five to seven years’ time. Tunisia provides another good example of a Single Window from a developing country. Cambodia has an excellent plan for total migration to a Single Window over the next few years but has yet to start implementation.

To summarize, the range and variety of current best practice is still at a fairly early stage of evolution. The concept of the Single Window is taking hold, but most implementations are for data entry into customs-centric systems. Other variants are for individual PIA, such as for animal quarantine, SPS and other PIA activities. Single windows that automate both customs and all PIA requirements from a network-accessed supply chain can be demonstrated in the United States, Canada, Australia, New Zealand, Singapore, Taiwan Province of China, the United Kingdom, Germany, several Scandinavian countries and Hong Kong, China. However, virtually no one has yet completed the implementation for all industries, for all import/export points, for all PIA and for all transaction types and volumes.

The best reference for keeping track of an individual country’s status normally is through its customs web site, to start with, that can be accessed through the WCO web site.

Transport facilitation

Transport facilitation models have been developed in isolation in many countries. For example, the United Kingdom has some port community systems and airport community systems. It has a customs-centric clearance system, individual PIA systems and some multimodal community systems that are not integrated into a single system. That is true of most European countries, Japan, the Republic of Korea, Canada and Hong Kong, China. Two island states, Singapore and Australia, have Single Window trade facilitation systems and a variety of port and airport community systems, which are not integrated. Neither of them has border-control rail and road systems — they are both islands. Emerging systems like valuation, HS codes, PSI, DG track-and-trace, and ITS, are all at beginning stages of application in different countries.

National integrated (TTF) Single Window

The national integrated Single Window (see figure 18) is emerging from the conviction that integrated trade and transport is the key to real trade efficiencies and competitiveness. Until now, the complexities of public-sector responsibilities, such as customs and PIA processes, and the proprietary nature of private sector or shared public/private sector enterprises such as ports and airports, have hindered a holistic development of trade and transport systems.

74

Figure 18: An integrated TTF Single Window

D. Best practice TTF model

As an illustration of best practice in an efficient TTF regime, table 1 shows a timeline over a hypothetical period of 8 days of the processing and transit of goods from origin (the exporter) through the port of shipment. While it identifies maritime port processes, it is essentially generic to sea, inland waterway, air, road, and rail border crossings. The processing resembles that in several advanced countries but is not specific to any particular country’s operations.

Table 1: Best practice TTF model

Day number Step Description

1 2 3 4 5 6 7 8

1 Receive import/export order

2 Process PIA approvals

3 Submit SAD to customs

4 Customs process SAD

5 Inspections by risk management selection

6 Notify port

7 Obtain container

8 Prepare documentation

CustomsPIA

User Communities

Maritime Ports Community Systems

Airport Community Systems

Border Control/TIR Systems

Inland Waterways and Ports

Inland (Dry) PortsInspectionRegimes

External Services•Track and Trace•Valuation•HS Codes•Risk Management•PSI Services•External Clearing

Services•IMO•IATA•Lloyds•Banks •Insurance

75

9 Stuff container, create BOL

10 Assemble required documents

11 Goods transported to port

12 Move container to selected bay

13 Port updates manifest with BOL details

14 Container loaded on board liner

15 Liner departs

16 Port transmits manifest to next destination

17 Port updates statistics

18 Customs updates statistics

Note: Day 7 = Departure date.

This best-practice example shows that export goods can be delivered to a port (or border), processed by customs and PIA agencies, and loaded on board the container ship (liner) or rolling stock or truck, and departs for its destination, all within 24 hours. That would be normal in many European countries, the United States, Canada, Singapore, Australia, New Zealand, and Hong Kong, China. Other countries, particularly in Asia and northern Europe, have partly implemented that model. The trader’s steps in the export process comprise 1 to 11 (11 steps maximum). Steps in export goods movement comprise steps 1 to 13 (13 maximum). While steps 1-11 may be completed within a 24-hour period, they are illustrated here as a seven-day process to spell out the separate activities required in any TTF regime.

For best practice with import processing at seaports, the information flow would also illustrate a less-than-one-day process — steps 6, 7, and 9 are not needed for imports. A maximum of 8 steps is required of the trader, while movements of imports take a maximum of 10 steps. The same is true for imports and exports at airports. Best-practice border controls also hold possibilities for such speedy clearance and crossings; for the time being, however, they only take place within Europe and between the United States and Canada.

The basic principle behind this illustrated exercise is to perform all lodgements and obtain approvals off the critical path of goods movement. Customs and PIA approvals and inspections, where needed, also take place off the critical path of goods movement. The logistics for goods movement are all organized electronically, in time for optimal logistics movements. All information, signatures and payments are transmitted electronically.

The exercise reveals a process in which consignments that remain in dispute after an inspection are able to complete import/export approvals and logistics cycle at an average of fewer than three days from receipt of an order for goods already available for export. In the majority of cases this can be achieved in 24 hours. The main impediments are now physical

76

transport and handling. Information is handled within minutes, together with pre approvals and post-event auditing and off-line inspections.

E. Singapore

One of the best practices of Single Window systems, Singapore’s TradeNet®, may provide insights useful to other countries that are planning to design and implement a Single Window TTF solution.

Already in the mid-1980’s, Singapore had decided to streamline its regulatory processes of trade-related approvals as means of facilitating external trade and further strengthening its status as a regional trade hub. Starting with automating the trade processes involving a few Government agencies in 1989, the system aimed to reduce the cost of trade documentation, streamline process flow and increase its attractiveness for foreign direct investment through improvements in operational efficiency and transparency.

Before the system was introduced, various Government agencies processed the documents manually. Working groups were formed in 1986 and eventually conceptualized the first Single Window model after analyzing, documenting and simplifying various procedures and processing requirements.

Source: CrimsonLogic TradeNet & e-customs System

Figure 19: Inefficient trade procedures

The country implemented the plan in stages. The first stage was electronic processing and approval of import and export permit applications for non-controlled and non-dutiable goods. The second stage included controlled and dutiable goods. Automated inter-bank deductions and applications for COO were subsequently introduced. Electronic submission of documents is mandatory now, although manual applications were initially permitted as an option.

77

TradeNet® functionalities are reproduced here.

Box 9: TradeNet® functionalities

The TradeNet® system allows the application, submission, receiving, processing, and returning of response to trade declarations submitted. It covers the import (dutiable/ Goods and Services Tax (GST)/non-dutiable/warehousing/free trade zone), export (GST/non-dutiable), and trans-shipment declarations.

For importers/exporters/freight forwarders, among others, the major services include:

• User and company registration; • Receipt and intelligent routing of user submitted permit and Certificate of Origin (CO) applications from the Trade Net® Front-End software to the Singapore customs (SC) and the Controlling Agencies (CA) for their Processing; • Syntax checks on the message structure; • Code table validations of the received applications against the code tables (e.g.,

Product Codes, Harmonised System Codes, etc.); • Automated permit processing based on the rules and criteria of Singapore customs and the CAs; • Web enquiry facilities to:

o Check the status of their TradeNet® permit applications, o Enquire & download code tables (e.g., Port code, Country, etc.);

• Automated billing and direct bank account debit facility on the statutory and processing fees incurred; and • 24x7 Call Centre Support.

For CAs and SC, the major services provided under TradeNet® include: • Automated and online processing (i.e., to allow manual intervention to hold,

approve, reject some selected types of applications) of permit application; • Online enquiry and downloading of TradeNet® permit applications; • Online maintenance of the CAs and SC code tables (e.g., Product codes,

Trader, License, Establishment codes, etc.); • Interconnectivities with the CA in-house systems for the file transfer and

reporting functions for transferring and uploading of the CA controlled permit information and databases (e.g., trader, declarant and license information); and

• Generation of ad hoc and periodic statistics reports.

To TradeNet® CO Officers: • Automatic and online processing of user submitted permit application; • Online enquiry and printing of TradeNet® permit applications / certificates;

and • Online maintenance of the CO code tables.

To other Users such as the Port of Singapore Authority: • Extraction cum provision of interconnectivities with the user in-house system

for transfer of TradeNet® permit information to PSA; and • Provision of interconnectivities for exchange of information between PSA and

SC such as data for Manifest Reconciliation. Source: UNECE Single Window Repository, Singapore Single Window Case

78

Source: CrimsonLogic TradeNet & e-customs System

Figure 20: After TradeNet®

Figure 21: TradeNet® web site

79

Operational since January 1989, the system has evolved to provide the trade community with an electronic capability of document submission to the concerned government agencies through a Single Window. Within 10 minutes of submission, traders receive a response with the approval conditions or reasons for rejection. Now all trade declarations are submitted online. The system processes more than 9 million trade permit applications and 70,000 COO per year. Approximately 8,000 clients in 2,500 companies use it.

Users pay the one-time registration fee and a monthly fee to maintain an account with the system. A usage fee is also imposed for every permit processed. All the fees are deducted from users’ bank accounts.

Table 2 illustrates some of the tangible benefits to the trading community generated by TradeNet®, excluding economic gain such as the FDI figures.

Table 2: Tangible benefits to the trading community generated by TradeNet®

Characteristics Previous Manual Process With TradeNet® Submission of documents By dispatch clerks From comfort of office Submission of documents Within office hours only Available 24 hours daily Trips to the Controlling Authorities per document

At least 2 required None required

Copies of documents Multiple copies (up to 35 forms)

Single copy (to be printed at user's premise)

Processing time for approval

From 4 hours to 2 days Within 10 minutes

Dutiable goods handling

Separate documents for customs processing

Same electronic document routed to Customs for processing

Controlled goods handling Separate documents to different Controlling Agencies for processing

Same electronic document routed to Controlling Agencies for processing

Fees charged S$ 10 - S$ 20 S$ 3.30 Customs duties collection By cheque Automated bank deductions

Source: UNECE Single Window Repository, Singapore Single Window Case

The system has contributed to cost savings and improvements in efficiency and turnaround delivery times, enhancing the country’s pro-business environment and international competitiveness. A study undertaken to determine the impacts of TradeNet® (Teo Hock-Hai 1997) concluded that the system and its related organizational transformation has resulted in significant gains for the public and private sectors in Singapore. A survey among the trading community also confirmed that national competitiveness and productivity has increased as a result of the introduction of the Single Window.

Chapters IV and V examine the technological aspects of a Single Window system in detail.

80

F. Trade and transport facilitation in landlocked developing countries: Practice and model

The question arises: what conditions and practice models are appropriate for LLDC in automating their trade facilitation systems?

Table 3 represents current practice and reflects challenges and obstacles common to LLDC. It assumes basic customs automation, sufficient to be able to perform basic SAD processing. (Automation to such an extent has not yet taken place in many LLDC, although some have taken it beyond that stage.) Apart from initial data entry, all customs and trade documents are still in hard copy and still require signatures, multiple originals, stamps and fiscal stamps, and many cash payments — official and unofficial. Many inspections are required from customs and PIA. Additional inspections may be required by other agencies. As in page 74, this set of steps applies generically to sea, inland waterways, air, road and rail and for import, export, transit and trans-shipment. It may not accurately depict a transport and logistics mode of an individual country but can easily be modified to produce an accurate reflection of steps in most.

Generally, there are no consistent trade patterns among imports, exports or transit in trade by road, air or sea because:

• Each country has its own complex mixture of restrictions and prohibitions, varying applications and associated inspections and time requirements for fulfilling them;

• Variable application of COO and the time and fees incurred in obtaining them; and

• The arbitrary nature of inspection requirements and their costs in time and fees, has led to companies keeping extra stocks and safety stocks, to avoid supply shortfalls.

Another characteristic inconsistency among countries is that computer systerms of customs (where available and functioning) are constantly evolving; so a process observed on a given day may have been improved within a few months.

Table 3: LLDC TTF Model

Day Number # Description

1 2 3 4 5 6 7 8 9 10 11 12 13

1 Receive Import/Export Order

2 Process PIA approvals

3 COO

4 Prepare documentation

5 Obtain container

6 Stuff container, Create BOL

7 Submit SAD to customs

8 Customs Process SAD

9 Present hard copy SAD and trade

81

docs

10 Acceptance

11 Selectivity and risk management-red/green

12 Inspections by Risk Management Selection

13 Inspections by PIA/Standards

14 Pay customs fees and Excise

15 Release goods for export

16 Notify Port

17 Make truck booking

18 Security Inspection

19 Goods transported to Port

20 Move container to selected bay

21 Pay port duties and fees

22 Port updates Manifest with BOL details

23 Container loaded on board Liner

24 Liner departs

25 Port transmits Manifest to next destination

26 Port updates statistics

27 Customs updates statistics

Note: Day 12=Departure date. Additional factors play a part in shaping evolving TTF practice as follows: • Varying national applications of ad valorem customs processing fee, customs

overtime charges, customs storage charges, customs fines and associated informal charges;

• Additional security inspections and the time and costs of avoiding them; • The process and time taken in obtaining suitable containers and appropriate

transport, not to mention the costs involved; • Inflexible and creative application of regulations by both private and public sector

intermediaries in order to create rent-seeking opportunities; • The multiplier effect of informal payments on trade professionals’ fees; and • Costs of infrastructure use.

Under certain circumstances, an import or an export order can be completed within two days, with a lot of luck and extra expenses. For that to happen, the trader must organize all approvals, COO, security inspections and other PIA inspections, well before transport

82

time. Availability of transport and suitable containers must also be coordinated in advance involving use of messengers, customs brokers, freight forwarders and shipping agents, the ports, border control and container parks, rail services and trucking companies. Official and unofficial charges must be paid to meet the imposed deadlines.

G. Impact of processes on costs

Traders must bear several categories of costs to move their goods to their export partners, including those incurred for:

• Local trucking; • Container; • International road/rail/air/maritime/inland waterway transport; • Storage by trade professionals at the various terminals used in international trade; • Stevedores, baggage handlers, and labourers; • Customs tariffs; • Customs fees and charges; • Customs fines; • PIA fees and charges; • Inspection charges by PIA, customs and security services; • Trade professional and messenger costs; • Unofficial costs at several points; and • Costs of safety and buffer stock caused by slow trade processes.

While the impact of such costs varies in each country, they can easily add more than 20 per cent to the total of best practices, thereby exacerbating issues of LLDC price competitiveness. The extra time taken by the processes adds extra penalties, even if price and quality are not an issue.

The only answer to this state of affairs is to apply ICT to as wide a spectrum of the process as possible, together with regulatory and legal modernization, administrative reform and stringent oversight of trade process and best practice principles.

H. LLDC TTF practices: Comments

Under existing practices in an LLDC, there is a small possibility (perhaps 20 per cent) of exporting products from an LLDC within one day and importing products within two days; the possibilities of doing so with no informal payments is, however, virtually zero. With the introduction of a Single Window system, such as TradeNet®, there should be more than a 90 per cent chance to export and import products within one day — often considerably less — and always without unofficial payments.

The current TTF system for LLDC is essentially a manually generated, paper-based, signature-stamp-and-cash-driven system. Attempts by customs to introduce transparency have been only partially successful, because personal interactions are required at every step except for initial data entry. The numerous physical inspections are at the discretion of individual customs officers which is insupportable as a substitute for the knowledge base of a risk management system. Customs law and mandates of most LLDC need updating to help in simplifying and expediting their trade facilitation systems.

83

REFERENCES

ADB, 2002. ICT for Customs Modernisation: Experiences in Australia and Asia Pacific (A presentation).

ADB, 2003. The Central Asian Transit Challenge.

ADB, 2004. Customs Procedures for Transit (A presentation).

ADB, 2004. Institutional Arrangements (A presentation).

ADB, 2004, Regional Trade Facilitation and Customs Cooperation Program, (www.asiandevbank.org/Projects/TradeFacilitation/Documents/TF-Progress-Future-Directions.pdf).

ADB, 2004. TA to the Islamic Republic of Afghanistan for Cross-Border Trade and Transport Facilitation.

ADB, 2005. GMS Project and OSS in Thailand: Thailand Customs (A presentation).

ADB, 2005. Implementing Trade Facilitation Measures: Costs and Benefits (A presentation).

ADB, 2005. Regional Transit Between Black Sea, C. Asia, Mongolia and China.

ADB, 2005. Seminar on Single Stop/Joint Border Processing for Central Asia: Keynote Speech (A presentation).

ADB, 2005. World Class Customs: Thailand Customs (A presentation).

ADB, 2005. WTO Tools for Trade Facilitation (A presentation).

ADB/CAREC, 2005. Trade Facilitation.

APEC, 2002. Trade Facilitation Action Plan.

APEC, 2004. Measuring the Impact of APEC Trade Facilitation: A Gravity Analysis.

APEC, 2004. Trade Facilitation and Trade Liberalisation: From Shanghai to Bogor.

APEC, 2005. Committee on Trade and Investment (CTI).

APEC, 2005. Lessons Learned from the APEC/WTO Roundtable.

APEC, 2005. Public Key Infrastructure Guidelines.

ASEAN, 2000. e-ASEAN Framework Agreement.

ASEAN, 2001. E-ASEAN Reference Framework for Electronic Commerce Legal Infrastructure.

ASEAN, 2002. South East Asia: A Free Trade Area

ASEAN, 2003. ASEAN Transport Action Plan 2005-2010.

ASEAN, 2003. Background of Customs Cooperation in ASEAN.

ASEAN, 2003. Promoting Trade Facilitation Through Mutual Recognition Agreements

ASEAN, 2004. ASEAN Statistical Yearbook, Chapter VII: Transport and Communication.

Bowman, Robert J., 2003. “Adaptive Logistics Management: A Tool for Troubled Times”, Global Logistics and Supply Chain Strategies.

Bowman, Robert J., 2003. “Cargo Security, Good Business Practices May Go Hand in Hand”, Global Logistics and Supply Chain Strategies.

84

CAFTA, 2003. Trade Facilitation Data (A presentation).

CEFACT, 2001. Codes for Modes of Transport.

CEFACT, 2001. Compendium of Trade Facilitation Recommendations.

CEFACT, 2005. A Roadmap Towards Paperless Trade.

CEFACT, 2005. The Trade Facilitation Maturity Model.

COMESA, 2002. Experiences of COMESA in Intra-Regional Trade (A presentation).

Commonwealth, 2004. Issues Emerging and Lessons for Developing Countries (UNCTAD XI:).

Commonwealth, 2004. Trade Facilitation: Facilitating Trade for Development.

Commonwealth, 2005. TOR: TA for a Strategic review of Mozambique Customs.

Development Gateway, 2003. The World Trade Point Federation.

Development Gateway, 2005. Trade Facilitation Articles Index.

ECLAC, 2000. Strategic Vision for Ports: The Year 2010.

ESCAP, 2002. Trade Facilitation Handbook for the Greater Mekong Subregion (ST/ESCAP/ 2224).

ESCAP, 2002. World Bank/ESCAP Technical Workshop on Transport and Trade Facilitation (A presentation).

ESCAP, 2003. Foreign Direct Investment in Central Asian and Caucasian Economies: Policies and Issues (Studies in Trade and Investment, No 50) (ST/ESCAP/ 2255).

ESCAP, 2003. Least Developed and Landlocked Developing Countries (Item 4).

ESCAP, 2003. Least Developed and Landlocked Developing Countries on Its Fourth Session (Report of the Special Body on Least Developed and Landlocked Developing Countries on Its Sixth Session - Item 6 [f] of the provisional agenda) (E/ESCAP/1303).

ESCAP, 2003. Transit Transport Issues in Landlocked and Transit Developing Countries - Item 4 of the provisional agenda) (E/ESCAP/SB/LDC[6]/1).

ESCAP, 2004. Good Practices in Information and Communication Technology Policies in Asia and The Pacific: Promotion of Enabling Policies and Regulatory Frameworks for Information and Communication Technology Development in the Asia-Pacific Region (ST/ESCAP/ 2347).

ESCAP, 2004. Harmonized Development of Legal and Regulatory Systems for E-Commerce in Asia and the Pacific: Current Challenges and Capacity Building Needs (Studies in Trade and Investment No. 54) (ST/ESCAP/ 2348).

ESCAP, 2004. Strengthening Institutional Capacity to Promote Investment and Transfer of Technology with Special Emphasis on Information and Communication Technology (ST/ESCAP/ 2340).

ESCAP, 2004. ESCAP Trade Facilitation Framework: A Guiding Tool (ST/ESCAP/ 2327).

ESCAP, 2005. Contractual Framework of Freight Forwarders’ Activities and Cargo Handling Techniques (Course notes).

85

ESCAP, 2005. Contractual Framework of Freight Forwarders’ Activities and Cargo Handling Techniques: Appendix, Trade Documents (Course notes).

ESCAP, 2005. Contractual Framework of Freight Forwarders’ Activities and Cargo Handling Techniques: Appendix, Examinations and Examples (Course notes).

ESCAP, 2005. Contractual Framework of Freight Forwarders’ Activities and Cargo Handling Techniques: Appendix, Methodology for Handling a Transport File (Course notes).

ESCAP, 2005. IAI Project: Subregional Seminar on Sustainable Capacity Building and Training of Trainers in Freight Forwarding, Multimodal Transport and Logistics (ST/ESCAP/ ).

ESCAP, 2005. Institutional Capacity Building for the Facilitation of International Trade and Transport in Landlocked and Transit Countries (ST/ESCAP/ ).

ESCWA, 2002. The Role of ESCWA in Promoting Trade and Transport Facilitation in the ESCWA Region.

ESCWA, 2003. Trade and Transport Facilitation: E-Business and Information and Communications Technology Applications.

EU, 2000. The Development of the Customs Union: The Early Years.

EU, 2001. Customs: Introduction.

EU:TACIS, 2001. TRACECA: CIS and Georgia.

Faye, Michael L. and John W. McArthur, 2004. “The Challenges Facing Landlocked Developing Countries”, Journal of Human Development 5(1), March 2004, pp. 31-68.

Financial Times, 2002. World Desk Reference, Fourth Edition (The Financial Times).

FITA, 2005. FITA Index of Web Resources (Tradelinks).

Fountain, Jane E., 2001. Building the Virtual State (Brookings Institute).

Glassner, Martin Ira, 2000. Bibliography on Landlocked States, Economic Development and International Law (M. E. Sharpe).

GTN, 2004. Trade Facilitation Summary.

Hoekman, Bernard; Philip English and Aaditya Mattoo, 2002. Development, Trade and the WTO (World Bank).

ICC 2000. Incoterms 2000 (ICC).

ICC, 2003. ICC Customs Guidelines.

InfoDev, 2005. ICTD Development.

IRU, 2002. Road Transport Transit, Trade and Tourism facilitation.

IRU, 2003. Road Transport Facilitation.

ISO, 2004. ISO Action Plan for Developing Countries

ITEC, 2004. IT Landscape in Nations Around the World.

Kimberley, Paul, 1991. Electronic Data Interchange (McGraw Hill, New York).

86

Kimberley, Paul, 2004. Reviewing National Initiatives: Global Experience, Trends and Best Practices (World Bank Global ICT).

Kotok, Alan, 2003. “Understanding ebXML: A New Global Standard for E-Business”, Tradegate ECA Newsletter (EC Edge).

Low, Patrick, 1995. Pre Shipment Inspection Services (World Bank).

Martinus Nijhoff Publications, 1995. Ocean Bills of Lading: Traditional Forms, Substitutes and EDI System (Martinus Nijhoff Publications).

Afghanistan, Ministry of Communication, 2004. Project Document for Securing Trade and Transport Facilitation.

Müller-Jentsch, Daniel, 2002. Transport Policies for the Euro-Mediterranean Free Trade Area: An Agenda for Multimodal Transport reform in the Southern Mediterranean (World Bank).

Nathan Associates, 2002. Customs Related Technical Assistance for Trade Capacity Building.

OECD, 2004. Donor ICT Strategies matrix.

Oxford Economic Forecasting, 2005. The Impact of the Express Delivery Industry on the Global Economy.

Philippine Shipping Association, 2004. PortCalls.

PlanConsult, 2003. Interim Report II: TTFSE: Consulting Services in User Survey Design and Implementation.

Raven, John, 2000. Trade and Transport Facilitation: An Audit Methodology (World Bank - IECC).

Raven, John, 2001. Trade and Transport Facilitation: A Toolkit for Audit, Analysis and Remedial Action (work in progress) (World Bank).

Rege, Unod, 2001. Pre Shipment Inspection (Commonwealth Secretariat).

SBS, 2004. SBS World Guide (Hardie Grant Books)

Schware, Robert and Paul Kimberley, 1995. Technical Paper Number 316: Information Technology and National Trade Facilitation: Making the Most of Global Trade (World Bank).

Schware, Robert and Paul Kimberley, 1995. Technical Paper Number 317: Information Technology and National Trade Facilitation: Guide to Best Practice (World Bank).

SITPRO, 2001. What Does the Kyoto Convention do?

SITPRO, 2005. Paperless Trading.

South Centre, 2005. A Compilation of Negotiating Proposals on Trade Facilitation.

Swedish National Board of Trade, 2003. Trade Facilitation from a Developing Country Perspective

SWEPRO, 2002. Trade Facilitation-Impact and Potential gains.

Swiss Agency for Development and Cooperation (SDC), 2005. Upscaling Pro-Poor ICT Policies and Practices.

87

TACIS, 2001. Central Asian Border Crossings: Project Inception Report.

TACIS, 2002. Central Asian Border Crossings: Progress Report.

TFA, 2004. Trade Facilitation Alliance.

The Economist, 1989. The Economist World Atlas and Almanac (The Economist).

The Economist, 1990. Vital World Statistics (The Economist).

The Economist, 2003. “The Revenge of Geography”, The Economist.

TIACA, 2004. Facilitation and Security in Air Transport.

TIACA, 2004. What is International Trade Facilitation?

TRACECA, 2002. TRACECA Projects.

TRACECA, 2003. Customs Facilities at C. Asian Road Border Crossings.

TRACECA, 2004. Transit (A presentation).

TTFSE, 2002. BBL Trade and Transport Facilitation: Learning from Each Other (A presentation).

TTFSE, 2003. Trade and Transport Facilitation in Southeast Europe Program (TTFSE): TTFSE Manual.

TTFSE, 2005. Trade and Transport Facilitation in Southeast Europe Program (TTFSE).

Unattributed, 2002. Landlocked Countries: Opportunities, Challenges, Recommendations.

Unattributed, 2003. Trade and Transit Facilitation in Southeast Europe I and II (A presentation).

UNCTAD, The Least Developed Countries Report 2004.

UNCTAD, 2001. Technical Assistance and Capacity Building in Trade Facilitation (A presentation).

UNCTAD, 2002. UNCTAD Handbook of Statistics On-line.

UNCTAD, 2003. Efficient Transport and Trade Facilitation to Improve participation by Developing Countries in International Trade.

UNCTAD, 2004. Afghanistan: A Landlocked Country With Transit Potential (A presentation).

UNCTAD, 2004. Assessment of a Seaport land Interface: An Analytical Framework.

UNCTAD, 2004. Container Security: Major Initiatives and Related International Developments.

UNCTAD, 2004. Design and Implementation of Transit Transport Arrangements.

UNCTAD, 2004. High Level Panel on Trade and Development Strategies for Least Developed Countries.

UNCTAD, 2004. Implementing the WSIS Plan of Action: Issues for Trade and Development.

UNCTAD, 2004. Ministerial Communiqué of Landlocked Developing Countries.

UNCTAD, 2004. New Geography of International Trade: South-South Cooperation in an Increasingly Interdependent World.

88

UNCTAD, 2004. Report of the Expert Meeting on the Design and Implementation of the Transit Transport Arrangements.

UNCTAD, 2004. Report of the United Nations Conference on Trade and Development on its Eleventh Session.

UNCTAD, 2004. Review of Maritime Transport 2004.

UNCTAD, 2004. The Establishment and Operation of an Electronic Single Window: Case Study of Guatemala.

UNCTAD, 2004. Trade and Development Benchmarks: A Work in Progress.

UNCTAD, 2004. Trade and Development Report 2004.

UNCTAD, 2004. Trade and Transport Facilitation: Building a Secure and Efficient Environment for Trade.

UNCTAD, 2004. Trade and Transport Facilitation: Building a Secure and Efficient Environment for Trade.

UNCTAD, 2004. UNCTAD Transport Newsletter No. 26, Q4 2004

UNCTAD, 2004. UNCTAD Transport Newsletter No. 27, Q1 2005

UNCTAD, 2005. Evolution in the Terms of Trade and its Impact on Developing Countries.

UNCTAD, 2005. Gaza Disengagement Plan: Implications for the Palestinian Authority in the Area of Trade Facilitation.

UNCTAD, 2005. Trade and Development Report 2005.

UNDP-ESCAP, 2005. Trade Facilitation: GATT, WTO Proposals and Future Directions (A presentation).

UNECA, 1998. Presentation presented at the ad hoc Expert Group Meeting on Intra-African Trade.

UNECE, 2002. The TIR Customs Transit System.

UNECE, 2003. Capacity Building in Trade Facilitation and Electronic Business in the Mediterranean.

UNECE, 2003. Electronic Business for SMEs in the Supply Chain.

UNECE, 2003. TIR Transit (A presentation).

UNECE, 2003. Trade and Transport Facilitation in SEE, Pan European Corridors IV and X. Phased Implementation of UNeDocs in Turkey, Bulgaria, Serbia and Montenegro.

UNECE, 2003. United Nations Layout Key for Trade Documents (SAD).

UNECE, 2005. Improving Security by Facilitating Trade Information Flows (A presentation).

UNECE, 2005. UN/CEFACT Releases Roadmap to Paperless Trade.

UNeTrades.Net, 2005. Standards for Trade and Electronic Business.

United Nations, 2003. Trade Facilitation: The Challenges for Growth and Development (United Nations).

US Transport Security Agency, 2003. “Securing a Supply Chain at Sea”.

USAID, 2005. The East and Central Africa Global Competitiveness Trade Hub.

89

WC, 2005. Tools for Trade Facilitation (A presentation).

WCO, 2000. Recommendation of the Customs Co-operation Council Concerning: Facilitation, Information Technology, etc.

WCO, 2000. Revised Kyoto Convention in 9 Questions.

WCO, 2002. Text of the Revised Kyoto Convention.

WCO, 2003. Strategy Paper: Customs and E-Commerce.

WCO, 2003. The WCO Customs Data Model.

WCO, 2003. WCO Recommendations on the Unique Consignment Reference Number (UCR).

WCO, 2004. Illustrative List of Codes for WCO Customs Data Model, version 1.

WCO, 2005. Customs-Business Dialogue on Trade Security and Facilitation.

WCO, 2005. Framework of Standards to Secure and Facilitate Global Trade.

WCO, 2005. Maintenance of International Customs and Trade Instrument.

WCO, 2005. One Stop Service at Borders.

WCO, 2005. Self Assessment Checklist for Fees and Formalities Connected with Import and Export (GATT V, VIII and X).

WCO, 2005. Technical Assistance and Capacity Building (A presentation).

WCO, 2005. Trade Facilitation Initiatives.

WCO, 2005. WCO (Asia Pacific) Regional Activities.

WCO, 2005. Wider Dialogue Between Trade Facilitation Role Players to Maximise Potential Benefits.

Webber, David R. R., 2003. “Core Web Services Today”, Tradegate ECA Newsletter (EC Edge).

de Wolf, Luc and José B. Sokol, 2005. Customs Modernization Handbook (World Bank).

World Bank, 2000. Trade Facilitation in the Caucasus.

World Bank, 2002. Implementation Completion Report: Trade and Transport Facilitation in Romania.

World Bank, 2003. Good Practice in Trade Facilitation-The Role of Information Technology.

World Bank, 2003. Trade Facilitation and Economic Development: Measuring the Impact.

World Bank, 2004. “International Trade and Global Poverty”, CEPAL Review.

World Bank, 2004. Customs Strategies.

World Bank, 2004. Experience with Project Design and Implementation, Tunisia.

World Bank, 2004. Good Practice in Trade Facilitation: Lessons from Tunisia (World Bank, PREM Notes).

World Bank, 2004. Identifying Trade Logistics and Facilitation Projects (A presentation).

World Bank, 2004. Reducing the “Economic Distance to Market”-A Framework for Development of the Transport System in South East Europe.

World Bank, 2004. Regulation and Standards: Best Practice Principles Behind the Borders.

90

World Bank, 2004. Trade and Transport Facilitation-Improving the Investment Climate in Southeastern Europe.

World Bank, 2004. Trade Facilitation and Bank Operations: From Theory to Practice (A presentation).

World Bank, 2004. Trade Facilitation and Data and Indicators: An Overview (A presentation).

World Bank, 2004. Trade Facilitation and Development in the World Bank (A presentation).

World Bank, 2004. Trade Facilitation and the Role of Information Technology (A presentation).

World Bank, 2004. Trade Facilitation and the Role of Modern Technology (A presentation).

World Bank, 2004. Trade Facilitation at the WTO: Relevant Disciplines in the GATT (A presentation).

World Bank, 2005. Trade Facilitation in the World Bank.

World Bank-GFP 2005. The Almaty Agenda

World Bank-GFP, 2005. Assuring Trade Liberalisation Agreements Achieve Their Goals.

World Bank-GFP, 2005. Cargo and Vehicle Tracking.

World Bank-GFP, 2005. Enabling SMEs to Enter the International Supply Chain.

World Bank-GFP, 2005. Integrated Border Management

World Bank-GFP, 2005. Public-Private Partnerships in Trade and Transport Facilitation.

World Bank-GFP, 2005. Simplification and Harmonisation of Border Measures Enforcing Non-Tariff Barriers at the Border.

World Bank-GFP, 2005. Trade Logistics: Practical Measures.

World Bank-GFP, 2005. Transport Intermediaries: Types and Selected Drivers of Efficiency.

WTO, 2002. GATT 1994: Scope and Application, Article VIII.

WTO, 2004. Understanding the WTO: The Agreements. Non-Tariff Barriers, Red Tape, etc.

WTO, 2004. WCO Instruments and GATT, Articles V, VIII and X.

WTO, 2005. Standards in the Multilateral Trading System.

91

ANNEXES

I. Country Reviews

The six landlocked countries under review are described in Annex I from the perspective of trade and transport facilitation. Each country review consists mainly of the:

• Current customs procedures, policy, and regulations; • Current information and communications technology (ICT) infrastructure,

development and legal and regulatory frameworks; and • Summary of customs automation initiatives and future plans.

A. Kazakhstan

1. Recent developments concerning customs

Kazakhstan received World Trade Organization (WTO) observer status in 1996 and is currently involved in negotiations for full membership.

At the regional level, Russian Federation and Kazakhstan signed an intergovernmental agreement regarding expanded cooperation between the two countries along the Kazakhstan–Russian border in 1995. In that year representatives from Kazakhstan, Russian Federation, and Belarus signed a memorandum regarding the creation of a single customs union. Later, Kyrgyzstan and Tajikistan joined the memorandum and obtained membership in the Commonwealth of Independent States (CIS) Customs Union6.

A new national customs code was passed in April 20037. Customs policy is aimed at protection of the domestic market, encouragement of competition, regulation of monopolies, and attraction of foreign investment. In January 2004, Kazakhstan joined the International Convention on Harmonized System of Commodity Classification, which applies a 10-digit commodity classification code.

2. Customs clearance

The customs system is administered by the Customs Control Agency, whose head reports directly to the Prime Minister and President. Since January 2004, the newly established department of customs statistics within the agency manages statistical aspects of customs procedures.

All goods entering Kazakhstan are subject to declaration and clearance at approved clearance points. There are 16 approved regional customs control departments in the country and one in Astana. Almost half of all imported goods clear customs in Almaty.

Customs clearance begins when documents concerning imported goods are submitted to the customs body. A declaration must be filed within 30 days of arrival of goods. A brief declaration and notification of arrival of goods shall be submitted to the

6 Note that all Customs regimes follow similar principles and processes. Kazakhstan is described in some detail. It may be assumed that all other countries under review are quite similar except where expressly mentioned. 7 See <www.bisnis.doc.gov/bisnis/bisdoc/0306AnalKZCustoms.htm>

92

customs body within 24 hours after the goods cross the border and are in temporary storage.

Foreign entities cannot deal directly with customs officials. They are legally required to use services provided by licensed brokers. The Customs Control Agency maintains a register of licensed brokers on the official web site at <www.Customs.kz>.

3. Transport

In 1995, Kazakhstan acceded to the Transport Internationaux Routiers (TIR) Convention. It increased and improved the country’s road transportation and transit trade. In 2001, Kazakhstan Customs Authority became part of the SafeTIR system. Since then, the amount of non-compliance has been reduced, with the Authority receiving a total of only 5 claims following reported shortage of goods by the international freight forwarders. However, the high cost of membership in the national transport association does not allow a wide usage of the system. In 2003, only 10 per cent of the transported goods were reported to be subject to TIR procedures8.

4. Telecommunications regulations9

The Communications Law is the primary legislative act regulating telecommunications. The law was adopted in 2004 to liberalize the country’s telecommunications sector and to create a comprehensive environment for its operation. The law limits foreign ownership of telecommunications (ground, fixed-line) companies to not more than 49 per cent.

Under the Law on Licensing and other applicable legislations, telecommunications services are subject to mandatory licensing. The Agency on Communications is the agency authorized to issue postal and telecommunications licenses. The Agency is required to keep a single national register of licenses issued in this sector.

5. ICT access and use

(a) Fixed-line

• Kazakhstan has a relatively strong telecom sector with a fixed-line penetration of 20 per cent (2 million lines). However, the country’s infrastructure remains in poor quality. Only a small proportion of the switching system is electronic and much of it is old.

• The national operator, Kazakh Telecom, has launched a programme to modernize the country’s telecommunication system. The plan includes the modernization of the company’s rural telecom network by introducing the use of digital telephone exchange. Satellite facilities have been installed in Kazakhstan’s rural areas.

8 Jeffrey Liang and Dorothea Lazaro, The Customs Transit System; Experiences and Initiatives of CAREC Participating Countries (ADB , Jan 2006) 9 <www.unescap.org/tid/publication/tipub2348_part3i.pdf>, <www.researchandmarkets.com/reports/ 302146/302146.htm>, <www.chinaccm.com/80/8020/802001/news/20051118/174418.asp>, <www.bakernet.com/NR/rdonlyres/1E007228-ED7E-4475-8ED7-0BDBA7B76FD3/38334/ DBIKazakhstanJan2005.pdf>.

93

(b) Mobile

• The mobile market soared from 67,000 subscribers in 1999 to 3.2 million subscribers by March 2005.

• Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA) mobile communication services operate 25 per cent of the whole market. Altel, the country's first mobile operator, has been joined by two new operators offering GSM services. As a result, prices have been reduced and services broadened.

(c) Internet

• Commercial Internet services first became available in Kazakhstan in April 1996.

• Internet user penetration is less than 5 per cent. However, the population at large shows strong interest in using the Internet.

6. ICT-related legal and regulatory issues

In 2003, Kazakhstan adopted the Law on Electronic Document and Electronic Digital Signature, which stipulates, inter alia, that an electronic document has the same legal force and effect as a document signed by hand, unless there is a need to notarize or register the document; in which case only documents signed by hand are acceptable. The law makes it possible to use electronic signatures while concluding deals. Special codes will be used to ensure the technical security of electronic documents.

The country passed the Law on Electronic Document and Digital Signature 2003, in which the following legal issues of e-commerce environment are also established.

(a) Certification authority: The Certification Centre shall be a legal entity with the following verification activities:

• Conformity of open digital signature key to closed digital signature key. • Registration of certificate authenticity.

The certification centre may provide services to several e-document systems.

(b) Electronic document/online transactions: An electronic document shall be equivalent to a paper document. An e-document certified by e-signature may apply in making any contract, which does not require notary authorization or State registration. The Law on Regulation of Trade 2004 also states that e-trade shall be implemented through trade transaction supported by the contract between the parties who purchase goods by means of electronic communication. The procedures of e-trade shall be determined in pursuance with the rules approved by the Kazakhstan Government.

(c) Electronic/digital signature: A digital signature is equivalent to manual signature of the signatory. It entails equal legal consequences. A foreign electronic digital signature with foreign registration certificate shall be admitted as an electronic digital signature in Kazakhstan in pursuance with international treaties adopted by Kazakhstan or after introduction into the register of registration certificates.

(d) Electronic payment: The above laws also touch upon e-payment transactions arising from creation and use of e-documents certified by digital signature. Moreover, the Law on Banks and Banking Activities in the Republic of Kazakhstan 1996 as well

94

as Law on Payments and Money Transfers 1997 also stipulate key provisions for electronic payments.

(e) Judicial system and security: Kazakhstan adopted the International Commercial Arbitration Law in December 2004. The law is set to cope with the uncertainty and controversy concerning the right to arbitrate and the enforcement of arbitration awards. The International Commercial Arbitration Law roughly follows the United Nations Commission on International Trade Law (UNCITRAL) Model Law on international commercial arbitration. It applies in disputes in which at least one party is not a resident of Kazakhstan.

(f) Protection of consumer rights: Parties to an e-document have the right to apply to the certification centre for confirmation of identity and validity of the open e-digital signature key, registered by this certifying agency. Additionally, the Law on Protection of Consumer Rights of 1991 (amended in 1992) guarantees basic consumer rights.

(g) Cybercrime: The country has made progress in the adoption of updated legislation to combat cybercrime. A special State programme on the protection of information resources, both technical and software, is also being developed.

(h) Intellectual property: Kazakhstan began to implement a national system for registering and protecting intellectual property rights in 1992. It has been a party to the Convention Establishing the World Intellectual Property Organization (WIPO) since 1993 and to the WIPO Performance and Phonograms Treaty (WPPT) since 2004. Legislation on intellectual property rights in Kazakhstan includes the Copyrights Law, the Trademark Law, the Patent Law and the Law on Selection Achievement. Computer programs and databases are protected under the Copyright Law. The creation of computer programs, alteration of existing programs, and unlawful access to legally protected computer information may give rise to civil, criminal and administrative liability.

7. Customs automation10

In 2003, the Customs Control Agency of Kazakhstan initiated the Programme of Modernization of Customs Services for 2004–2006 with the objectives of (a) simplification of customs procedures; (b) facilitating transit trade of neighbouring countries; and (c) developing automated customs clearance and border infrastructure.

Objective (a) consists of (i) “one-stop clearance” to develop a standardized system of border control for both rail and road by establishing entry control at the road-crossing points; (ii) the “Single Invoice” which covers all potential payments in relation to clearance and transit movement; (iii) a 3-stage customs clearance, instead of the previous 5 stages; and (iv) risk management to reduce delays at the border and clearance points.

For objective (b), in order to facilitate transit trade of neighbouring countries, the country has implemented the installation of SafeTIR and introduction of the Preferential Customs System Project which is a transit guarantee system similar to the

10 Murat Amanbayev and G.M. Konkasheva, Customs Reform and Modernization Initiatives and future Plans of Kazakhstan (2004), at <www.adb.org/Documents/Events/2004/CCC/Third-Meeting-of-CCC/KAZ-Initiatives-eng.pdf>

95

TIR Convention. Additionally, the TC-SCAN system has been installed at the border-crossing shared with China.

For objective (c), the Customs Automated Information System was introduced in 1997 at the heart of the country’s customs automation efforts. It performs:

• Automation of customs clearance and control processes; • Provision of management information systems for decision making; • Collection of statistical data on international trade; and • Exchange of information with neighbouring countries.

The Agency reports that the new automated system has helped in its efforts to:

• Expedite the customs clearance process; • Simplify border crossing procedures; • Collect customs duties in a timely manner; • Compile statistics; and • Contribute to increasing efficiency and transparency of services.

The system now covers 16 regional departments, 11 customs units and 99 of 158 customs posts.

However, in order to keep up with the latest technological developments, the Agency planned to upgrade the system and technical platform as well as software applications. The plan included the introduction of the Automated Logistics Control System to integrate such features as transport tracking and radiation control with centralized monitoring mechanisms. The long-term goal is the establishment of an electronic customs information system, or e-customs, to create a uniform customs information environment for customs services, provide web-based services, and enable electronic declaration of goods. The country also plans to develop joint border controls, based on various bilateral agreements, i.e., with Kyrgyzstan.

Summary

The key building blocks for planning are in place. Kazakhstan customs and its major trading partners in freight forwarders and customs brokers can see clear routes ahead, although there is still some way to go. Legislative change is in the pipeline; plans for border control and transit issues are in the public domain. ICT infrastructure appears to be sufficient for the purpose of a customs-centric system, which is the first phase of a model paperless trading or trade facilitation regime. However, a great deal of detailed implementation planning, training, proof of concept and administrative reform are needed before the plans can mature and materialize. Even then, there is still no clear path to facilitate the supply chain’s integration into the customs community.

B. Kyrgyzstan


Since December 1998, Kyrgyzstan has been a full member of WTO. The legal regime of trade policy in Kyrgyzstan is adjusted to WTO conditions. Trade relations

96

with neighbouring China follow most-favoured-nation (MFN) guidelines, based on the WTO agreements11.

Kyrgyzstan has free-trade agreements with almost all CIS countries. On 15 April 1994, CIS (Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan) signed an agreement to establish a free-trade zone. According to the agreement, imports of goods produced within CIS having respective certificates of origin are not subject to any customs in Kyrgyzstan. However, the exemption does not cover excise goods, furniture, video, television, computer equipment, or any accessories to such electronic equipment.

Within the Eurasian Economic Union (EEU), established in 1995, Russian Federation, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan have signed an agreement on customs. The EEU countries plan to form a complete customs union by 2006. In February 2004, they signed an agreement on forming single customs tariff and agreed to create working groups on coordinating plans and actions of members of the EEU for joining WTO on the monthly basis. Creation of a customs alliance should simplify customs procedures and reduce or even abolish customs tariffs within the EEU. It would be a significant step toward economic integration.

At the national level, Kyrgyzstan has enacted new customs codes which broadly conform to the international Convention on the Simplification and Harmonization of Customs Procedures (“Revised Kyoto Protocol”) and WTO standards (including the rules for customs valuation)12.

There are also various decrees, regulations and Government legislation of the Customs Service Department under the Revenue Committee of the Ministry of Finance. A full list of customs legislation is available at <www.customs.gov.kg>.

2. Transport

The country ratified the TIR Convention in 1997 and started the implementation of the SafeTIR system in 2000. In 2005, Kyrgyzstan signed an agreement with Kazakhstan on road transport of goods through the Kazakh territory. The agreement abolished the requirements for the transit permit and customs convoy for cargoes using TIR coverage and consequently resulted in a substantial decline in the amount of official payments for the covered transit. A challenge, however, still remains the lack of an effective mechanism of enforcement13.

3. Telecommunications regulations and infrastructure14

Reform in the telecommunications sector is well advanced. Kyrgyzstan has been expanding and upgrading its telecommunications network since 1991. In 1998, a new telecommunications law was enacted and an independent regulator was established.

11 <www.bisnis.doc.gov/bisnis/bisdoc/cr_kyrgyzstan.htm>. 12 Tajikistan Fact Sheet (UNDP). 13 Jeffrey Liang and Dorothea Lazaro, The Customs Transit System; Experiences and Initiatives of CAREC Participating Countries (ADB , Jan 2006). 14 <www.bisnis.doc.gov/TDABrussels_files/KyrgyzstanProfile.pdf>, <ar-namys.org/en/view.php?i=524>, <www.unescap.org/tid/publication/ tipub2348_part3i.pdf>, <www.kyrgyzpatent.org/english/republic/ iproperty.htm>, <r0.unctad.org/ecommerce/event_docs/trans/summary_ex.pdf>, <www.unece.org/operact/ enterp/documents/coverpagkyrgyz.pdf>.

97

The telecommunications market is open to both foreign and domestic investors. The National Communications Agency was established as an independent regulatory agency to implement main tasks of licensing and certifying in the telecommunications sector, supervising the quality of telecommunication services and equipment, protecting free competition in the communication services and equipment, developing national communication standards and coordinating in the area of communications.

Many telecommunications projects have been already completed. The first telecommunication project was funded with a loan from the World Bank and the European Bank for Reconstruction and Development (EBRD) to the Kyrgyz Government. The project budget was USD 27,400,000. The following infrastructure has been improved considerably:

• Earth satellite stations of the standards A, F and B were installed; • A network connecting regional centres was reconstructed; • Digital telephone stations were built in Bishkek and regional centres; and • Digital telephone stations in Bishkek were linked by fibre-optic cables,

with the help of synchronous digital hierarchy (SDH) technology.

Currently, Kyrgyz Telecom controls a large network as the national operator of Kyrgyzstan and provides telephone and telegraph services throughout the territory of Kyrgyzstan. Kyrgyz Telecom is responsible for laying 184 km (114 miles) of Transasian–European fibre-optic line within Chui Oblast in Kyrgyztan for the Shanghai–Frankfurt connection.


(a) Fixed-line

• “Teledensity” of the fixed-line market in Kyrgyzstan was reported at 78 lines per 1,000 people in 2004. Kyrgyz Telecom is the main network operator from which other network providers such as cellular phone operators and Internet services providers (ISPs) mostly buy their connectivity capacity.

• Kyrgyz Telecom has an installed capacity of 475,266 lines, but only 365,801 lines are utilized. Just over 72 per cent of lines are installed in urban areas. The majority of the network, however, uses analog rather than digital switches with only 31 per cent of the installed capacity being digital.

(b) Mobile

• The mobile market is still in its infancy, with penetration at around 4 per cent.

• Presently, mobile cellular communication is managed by two operators: Katel and Bitel.

• Katel has started its operation in 1994. Katel’s base equipment was installed by Ericsson and Motorola. The network covers Bishkek, Chui Oblast, Issyk-Kul Oblast, Osh, and Jala-Abad.

• Bitel’s system is based on the European GSM standard. The network has been operating for more than three years, and has registered more than 10,000 customers. Most of Equipment used is made by Ericsson, Siemen,

98

and Huawei. The GSM network covers Bishkek, Chui Oblast, northern part of Issyk-Kul Oblast, and Osh.

(c) Internet

• According to the State Committee on Managing State Property and Attracting Direct Investment, Kyrgyzstan had the highest number of direct Internet subscribers in Central Asia, at about 7,000 in July 2000. Just six months earlier there had been only 3,000.

• Elcat and Asiainfo are the two biggest ISPs. They provide wideband access to asymmetric digital subscriber line (ADSL) technology.

• As of August 2003, there were about 16 ISPs, with more than 800 combined modem pool. Internet bandwidth, which was estimated at only 768 Kb/sec in 1998, increased more than 20 times with a total capacity of 15 Mb/sec. ISPs provide their services by using different digital subscriber line (DSL) technology services including ADSL, very high bit rate DSL (VDSL), and single line DSL (SDSL).

• In the first half of 2003, Internet users numbered about 100,000, growing to 120,000 by August 2003. Currently, there are approximately 2,000 web sites and 35,000 e-mail addresses registered with the .kg domain name15.

5. E-commerce issues

The ICT National Strategy of Kyrgystan focuses on three main areas: e-government, e-economy and e-education. During its first stage of implementation (2003–2005), the adoption of e-commerce laws and regulations was considered as a priority, in parallel with such issues as the development of offshore zones, the creation of awareness on new online business opportunities, the creation and improvement of delivery systems and the development of projects on electronic and online payments.

(a) Certification authority: The Certifying Centre is a legal entity which is authorized to certify the possession of a concrete open digital signature key to a certificate holder, as well as to certify its terms of validity.

(b) Electronic signature: President Askar Akayev signed the Law on Electronic Digital Signature in 2004. Along with the Law on Electronic Payments, the new legislation is expected to facilitate development of e-commerce activities in the country. The new law specifies the legal basis of the use of digital signatures in e-mail exchange, as well as the principles and terms of digital signature verification.

(c) Electronic commerce/online transactions: The draft law of e-commerce of 2004 regulates legal conditions for e-commerce, stipulates rights and duties of persons involved in e-commerce, and determines rules for transactions on the basis of e-documents signed by alternative means to manual signature. It also recognizes e-documents as evidence in court.

(d) Electronic payment: The Law of Kyrgyzstan on E-payments of 1999 establishes the legal status of e-payments and processing of e-payment transactions. The National Bank of Kyrgyzstan shall regulate e-payments in order to assure efficiency, security and reliability of the system. The Bank shall also license and

15 Asel Sulaimanova, BISNIS Representative in Bishkek, Kyrgyz Republic <www.bisnis.doc.gov/bisnis/bisdoc/ 0308KG_ICT_Report.htm>, August 2003.

99

regulate operations of financial and other institutions that render services related to e-payments.

(e) Protection of consumer rights: The Law on Protection of the Rights of Consumers of 1997 does not refer to business conducted electronically.

(f) Personal data protection: In 2004, the Ministry of Transport and Communication drafted a law on personal data related to the processing, transmission and storage of electronic personal data. The draft has been under discussion to ensure compliance with international standards.

(g) Intellectual property: The country has been a member of the following international bodies in connection with WIPO treaties:

• WIPO Convention, since December 1991; • Paris Convention (Industrial property), since December 1991; • Berne Convention (Literacy and Artistic Works), since July 1999; • WIPO Copyright Treaty, since March 2002; • WIPO Performance and Phonograms Treaty, from August 2002; and • WTO: member and signatory to Trade-Related Aspects of Intellectual

Property Rights (TRIPs) Agreement, since August 2002.


The principal vehicle for customs ICT/automation planning is the Asian Development Bank (ADB)-supported Unified Automated Information System (UAIS). Known locally as “Bajy”, UAIS is the platform for ICT policy 2002–2010 with the following aims:

• Enhancing transparency of customs procedures; • Facilitating the process of collecting, processing, storing and analyzing

information; • Assisting in operational decision making; • Minimizing subjectivity (the human element); and • Simplifying and expediting interactions with declarants and permit-issuing

authorities.

Customs authorities also plan to improve border-post infrastructure since the border post is where most scrutiny, if not entry processing, takes place. The transition to centralized information processing requires considerable planning and implementation.

ADB reports that the development of a master plan for customs automation was launched in October 2005 within the framework of the Regional Customs Modernization and Infrastructure Development Project. The proposed assistance also includes business process reengineering, training and change management. The developed master plan will be shared with other countries having UAIS experience to solicit comments and suggestions.

Summary

In brief, Kyrgyzstan is at the beginning of the automation process in trade and transport facilitation. The country has been developing its ICT infrastructure and legal and regulatory frameworks.

100

C. Lao People’s Democratic Republic


Apparel accounts for around one third of merchandise exported from the Lao People’s Democratic Republic (and of textiles as imports). That trade is under serious pressure now that the Multi-Fibre Agreement has expired. Although currently in WTO accession negotiations, the country is not yet a member of WTO, thus placing it at a disadvantage while its neighbours China (a WTO member), Viet Nam (in accession negotiations), and Thailand (WTO member) are experiencing rapid growth.

Pending membership in WTO, the Lao People’s Democratic Republic does not yet have MFN status with the economic powerhouses of the trading world. However, it does have access to the European Union under the “Everything But Arms” arrangement of the General System of Preferences. It will submit an action plan for enacting legislation on agriculture, sanitary and phyto-sanitary measures, technical barriers to trade under the General Agreement on Tariffs and Trade (GATT V, VIII and X), services, and intellectual property.

The Lao People’s Democratic Republic joined ASEAN and the ASEAN Free-Trade Area (AFTA) in 1998, at which time it began to implement the AFTA Common Effective Preferential Tariff. Some bilateral trade agreements have been reached with neighbouring countries. The country is in the early stages of regional and global trade memberships and agreements.

Much of the Lao People’s Democratic Republic’s trade is informal, with significant black market and unrecorded cross-border trade activities16. Economic activity is concentrated around the capital city of Vientiane. The country’s strategic positioning on the Mekong River makes it a natural transit corridor for the region, including Thailand, Viet Nam, southern China, Cambodia, and Myanmar, in contrast with other landlocked countries. Its geographic position may indeed disqualify the country from consideration as a truely landlocked country since it has a water-based transport route of communication with neighbouring countries and the sea. However, more than 90 per cent of freight, much of it agricultural, is transported by road. The two main transit neighbours for the country’s trade are Viet Nam and Thailand. The Lao People’s Democratic Republic aims to “transition” itself from a landlocked to a land-linked economy.

Thailand, with daily feeder connections to Singapore, remains the preferred transit route to sea-borne trade with the rest of the world. Transit of goods through Thailand between Laos and a third country (or transhipment) is governed by the annually renewed Transhipment Agreement between the two Governments.

Road transit is subject to inadequate infrastructure, complex customs procedures, and lack of transparency. They coincide to raise transport costs and delivery times. Trucks cover the 670 km from Vientiane to the port of Bangkok in 2 to 3 days. Sealed containers have to pass additional customs inspections at the Thai border. Trucks (general cargo) must be unloaded and reloaded onto Thai trucks at the border. Transhipment through Thailand from Laos can only be done through specially licensed haulers, of which there is only one in the country.

16 Lao PDR: Diagnostics Trade Integration Study - Concept Paper, <www.integratedframework.org>.

101

Effective transport is vital to the development of any landlocked country; the Lao People’s Democratic Republic is no exception. The country needs to ensure reliable internal connections with national centres of commerce, and regional centres, in order to facilitate trade. However, trade and transport facilitation does not depend solely on infrastructure. Most trade delays in the Lao People’s Democratic Republic occur because of delays at the border, caused by complex processes and regulations.

2. Transport

The communications, transport, post and construction sector is one of the priority areas on which the Government is focusing in order to turn the Lao People’s Democratic Republic from a landlocked to a land-linked country. Each year the Government invests 30 to 50 per cent of the annual State budget in maintaining and developing sectoral infrastructure. Moreover, in 2001 it established a road maintenance fund in order to facilitate the construction and maintenance of roads. Through such endeavours the sector has developed more quickly in recent years than ever before in the nation’s history.

Road access has been made available in all the chief districts of the provinces and 125 other districts, leaving only 17 districts with unpaved roads. Currently the country has a total of 31,209 km of roads, a four-fold increase from 1975. That figure includes 4,497 km of asphalt roads (a five-fold increase from 1975), 10,097 km of gravel roads and 16,600 km of dirt roads. Over 1,000 bridges have been built in the last 30 years, including nearly 500 permanent bridges. (Two bridges have been built over the Mekong River and another is under construction.) An average of 800 km of roads has been built each year since 1975.

Water transportation has also been improved. River ports and embankments at many points along the Mekong River have been constructed and navigation on northern sections of the river has been improved to facilitate water transportation in the four northern Mekong countries: the Lao People’s Democratic Republic, Thailand, Myanmar, and China.

Overland transportation of goods and passengers in the country and border areas has increased consistently. The amount of goods transported by land in 2004 reached 2,351,000 tons, an 84.4 per cent increase compared with the 1976 total. Some 31 million passengers were transported by land, a 1,411.8 per cent increase from 1976. The total amount of goods transported by water has also increased, but has been limited by the need to improve the navigability of the northern Mekong.

The country’s air transportation system has improved. In 2000, there were over 440,000 air passengers, while in 2004 there were over 384,000. To facilitate the increase in air traffic and cope with increased passenger numbers, Wattay International Airport was upgraded to meet international norms and can now provide landing facilities for large airliners such as the Boeing 747. In 2004, the Government improved air traffic control for flights passing through the Lao People’s Democratic Republic, helping to generate revenue of USD 23 million.

3. ICT infrastructure

Enterprise of Telecommunications Lao (ETL) of the Government, Lao Telecommunications Limited (LaoTel), Lao Telecom Asia Co., Ltd. (LAT),

102

MILICOMLAO Co., Ltd. (Tanko), and Sky Telecom are providing telecommunication services through the country.

In 2004, there were 23 automatic telephone centres. The number of mobile telephone centres increased from 1 in 2001 to 5 in 2006. There are over 400,000 fixed-line and mobile subscribers, an average of 6.5 users per 100 people. That is more than double the 2005 target of 3 subscriber numbers per 100 persons. Telecommunications networks cover more than 80 districts throughout the country.

Currently 11 ISPs provide Internet access: Enterprise Telecom of Lao PDR, Lao Telecom Ltd, Lao Asia Telecom, Sky Telecom, Lanexang Internet Ltd., Planet Internet, KPL Internet (ex GlobeCom), Champalao Internet, Unicom ISP, Lao Cable TV and LANIC, this last which is Government-owned and provides service only to Government organizations and academic institutes. As of May 2003, private ISPs serviced around 3,800 subscribers, with LaoTel controlling around three quarters of the market.

An estimated 250 Internet cafés exist in the Lao People’s Democratic Republic, of which 70 are located in the Vientiane municipal area. However much the services of Internet cafés might have improved, it is ETL that has provided the fibre solution for their services.

4. ICT utilization

During the past five years Internet penetration has grown faster than mobile, telephone and computer penetration. The numbers of ISPs, Internet cafés and users greatly increased at the same time that prices dramatically decreased. However, Internet penetration here may have increased for different reasons than might exist for other developing countries: the main purpose of Internet utilization in the Lao People’s Democratic Republic appears to be for e-mail communication, followed by entertainment. Very few users seem to be interested in education or Government information.

The survey report by the Lao National Internet Committee at the beginning of 2004 shows that 25 Government organizations in Vientiane possessed a total of 2,456 computers that were being used by 6,633 staff members. Roughly speaking, 1 in 3 Government staff members in those organizations has a computer at his or her disposal. That is a high ratio compared with the case in other developing countries. Within each individual organization, however, the ratio of computers to staff members varies greatly; only a few organizations have greater than a 50-percent ratio (1 computer per 2 persons), while some organizations still have less than a 10-per-cent ratio. An estimated 779 sets or 31.7 per cent of the total are connected with the Internet. Approximately 21.7 per cent of the Government officers use the Internet every working day, of which usage 60 per cent is for e-mail communication, 37 per cent for searching foreign information and only 2 per cent for accessing local information.

5. ICT regulation

Government authorities recognize that regulation is often insufficient to deal with the changing ICT environment, since existing legislation was drafted when the challenges facing today’s ICT environment were not envisaged.

103

Public confidence and private sector investment can be dynamically enhanced, in the official policy view, when legal guidelines and implications are clear. Existing laws and regulations relevant to ICT development need to be reviewed and adjusted accordingly while new laws and regulations are enacted. The authorities and other, concerned parties should make use of examples from international “best practices” and model laws. Institutions that can play major roles in the process need to be strengthened or established among private sector groups, non-governmental organizations and appropriate communities, as well as in the Government.

(a) Telecommunications law No. 02/NA (of 10 April 2001): The objectives in passing this law were to define the (i) principles and regulation of telecommunications organizations and activities; (ii) management of radio frequencies for radio communication, radio broadcasting and television, and of other radio frequencies; (iii) administration of numbering and infrastructure; (iv) management and use of satellite position and orbit and the country code top level domain name of Lao People ‘s Democratic Republic; and (v) management of telecommunication and Internet services nationally and internationally. The aim was to provide universal, high quality, accurate, clear, convenient, fast, safe and fair telecommunication services to society, and thus contribute to national defence and development and international cooperation.

Part 1, article 4 of law No. 02/NA provides that the State encourage local and the foreign investors to compete and to cooperate in investment in the construction, development, and expansion of the telecommunications network and services in accordance with the systems prescribed by the Government.

Part 5, article 17 of law No. 02/NA provides that the organization responsible for management and inspection of telecommunications be comprised of the Ministry of Communications, Transports, Posts and Construction; the provincial, municipal and special zone offices of the Department of Communications, Transports, Posts and Construction; and district-level Communications, Transports, Posts and Construction offices.

Part 5, article 18 of law No. 02/NA provides that the Ministry of Communication, Transports, Posts and Construction have the exclusive right to study, propose or decide the issuance of the licenses for the setting up, extension, suspension and termination of telecommunications business.

(b) Regulation No. 141/pmo on the establishment, service and usage of the Internet: The objectives of this regulation are to establish the management, services and usage of Internet access in the Lao People’s Democratic Republic, adhering to principles of order, security and high efficiency in accordance with Government policies, laws, and regulations for ICT development. Related concerns are capacity for linking with the international Internet system, securing adequate levels of speed, stability and accuracy, creating good conditions and providing facilities to enhance achievement of national socio-economic development goals.

Chapter 2, article 5 of the regulation provides that only the Lao National Internet Committee is authorized to issue ISP licenses.

Chapter 8, article 20 of the regulation provides that no individual, contact person or organization may use the Internet system in the Lao People’s Democratic Republic for such undesirable purposes as: (i) mobilizing or inciting the population inside or

104

outside the country to undermine the peace, independence, democracy, unity and prosperity of the country; (ii) inciting acts of violence, crime, perversion or drug trafficking and creating any event to destroy the good living atmosphere of the society; (iii) making any kind or form of propaganda for war of aggression or sowing enmity, tension or differentiation among nations, people of different countries and people in different ethnic groups; (iv) exporting or importing pornography, photos and technical designs prohibited by Lao laws, good traditions and rights related to intellectual property, and engaging in any kind of sexual business; (v) revealing secrets of State, military secrets and other secrets stipulated by Lao laws; (vi) publishing false, distorted or negative information aimed to harming the honour or dignity or individual rights of any citizen or institution; and (vii) using the name of an individual or organization, photos, signature, voice, other codes, credit card or individual documents for gain and other purposes without the owner’s consent.

6. E-commerce law

E-commerce is at a very early stage in the Lao People’s Democratic Republic owing mainly to a lack of such basic infrastructure as an online banking system, public key infrastructure (PKI), certification authority and appropriate computer skills. With a rapid increase in e-commerce users, the banking sector should soon be providing such services as online payment and online transactions. The Government has not yet established any kind of computer security unit or law dealing with cybercrime.

The Lao People’s Democratic Republic has demonstrated a strong interest in establishing legislation to facilitate the growth of e-commerce. In March 2005 in Vientiane, a 5-day intensive training course on “Legal Aspects of E-Commerce” was held in the framework of the Train-for-Trade Programme. In addition, training was jointly organized by the Ministry of Commerce; the Science, Technology and Environment Agency; and UNCTAD, to assist the country in drafting the final version of its e-commerce law in order to ensure its ratification by 2008, as required by ASEAN.

7. Constraints in ICT use

The main constraints in expanding ICT use and development in the country may be summarized as:

(a) Lack of a coordinated ICT master plan: Coordination is needed among several Government agencies in developing ICT plans and projects. The roles of those agencies need to be clarified and a decision made about which agency is in charge overall.

(b) Lack of ICT infrastructure: In the current telecommunications environment, high-speed information access and telecommunications access outside of urban areas are both limited. Additionally, the current legal framework for e-commerce and related ICT laws do not adequately address ICT challenges facing the country. Lack of Laotian web-based content and a national standard for the Lao font pose further problems.

(c) Lack of ICT knowledgebase: The country has a severe shortage of ICT experts to formulate and implement a coordinated national ICT policy owing to insufficient local IT training facilities. Most ICT personnel from the Government and private sector have received their training from abroad.

105

(d) Lack of financial resources: Most Laotians cannot afford computer equipment and Internet access. Lack of financial resources of the Government to implement large-scale ICT projects is another reason.

(e) Lack of awareness: Both the public and Government officials are not fully aware of the significance and implications of ICT for the development of their country.

8. Customs plans

Customs has no plans for automation or any ICT initiative, apart from post-clearance data entry for statistical purposes, based on the assumption that the volumes do not justify an ICT installation. Hence, any initiative for ICT-enabled trade facilitation must await customs understanding of the importance of ICT in its work for national trade.

Summary

The Lao People’s Democratic Republic is at the earliest stage of trade facilitation. It is progressing through the policy stages with agreements on ASEAN, AFTA and others and some bilateral agreements. It is addressing WTO accession and the tariff regime together with an early understanding of the GATT regulations. It has not yet, however, addressed ICT issues relating to customs or to technical controls/permit-issuing authorities.

The country’s ICT development has been hampered by such factors as limited infrastructure, capacity, legal and regulatory framework and financial resources. In order to realize customs automation and, eventually, a “Single Window”, ICT readiness should also be taken into account.

They have a theoretical knowledge of Single Window concept but is unlikely to advance to either customs automation or Single Window initiatives without funding support from external sources. Great potential exists for ICT, especially with customs as a starting point; but IMF and World Bank initiatives will likely be the energizer for such initiatives in 2006.

D. Mongolia


Mongolia’s economy has surged over the last few years, growing by 10 per cent in 2004. Leading the growth were gold and copper sales to China, although its most important export, apparel, is likely to falter under the changed MFN circumstances.

Since Mongolia became a WTO member in January 1997, it has maintained a liberal trade regime and liberalized the ICT sector. The Government of Mongolia has since the mid-1990s implemented a telecommunications reform programme leading to effective liberalization of all market segments, partial privatization of the fixed-line incumbent, Mongolia Telecom Company, and establishment of the Communications Regulation Commission as an independent regulatory authority. As a result, the telecommunications sector has seen considerable foreign investments and witnessed tremendous growth. The total market size has grown at a compound rate above 25

106

percent per annum over the last three years. At the end of August 2004, total fixed and mobile “teledensity” reached 20.6 per cent, up from 13 per cent in 2001.

The Government has also articulated its national ICT vision for 2010 that provides a blueprint for ICT development in Mongolia. The Government considers such action important in advancing its strategy for economic growth and poverty reduction through improving the environment for private-sector-led development and enhancing regional and rural development.

National customs is represented by the General Customs Office, Ministry of Finance17. The Customs Law of Mongolia18 was adopted in 1966 and has since issued 150 revisions (decrees), resulting in 23 changes to the Customs Law. As a consequence and also as a result of ever-expanding trade and its importance to Mongolia, a new Customs Law is imminent and may even have been passed by the time this (ESCAP) project is completed.

2. Transport

The organizational structure and activities of the Ministry of Road, Transport and Tourism includes all modes of transportation such as road, railway, air and maritime transport. Its ultimate goal is to develop an infrastructure network that can sustain economic growth.

During the socialist regime, economic development relied heavily on foreign loans, assistance and investments. After the regime fell in the 1990s, domestic production and supply of industrial, agricultural and raw materials decreased, in turn reducing the volume of goods transported by road and railway. In 2000, the volume of goods transported by road and railway decreased by 4.8 times and the number of passengers had declined by 2.5 times compared with figures for 1990. However, since 1998 the situation has improved.

Figure 22: Percentage of modes of transport in the total passenger transport turnover

17 See Mongolian Customs, via the Office of the Prime Minister, <www.customs.pmis.gov.mn>. 18 See Mongolian Customs Law, <www.indiana.edu/~mongsoc/mong/custmlaw.htm>.

27.8

44.7

27.5

47.7

29.8

22.5

54.8

18.7

26.5

50.6

18

31.4

0%

20%

40%

60%

80%

100%

1990 1995 2000 2002

CivilAviation

RoadTransport

RailwayTransport

107

Table 4: Percentage of transport modes in the freight tranport since 1990

Year Modes of Transport 1990 1995 2000 2003

1 Road Transport 71.04 18.42 13.91 35.2

2 Railway 28.94 81.53 86.04 64.8

3 Civil aviation 0.02 0.03 0.03 0.01

4 Maritime - 0.02 0.02 0

Total 100 100 100 100

(a) Road Transport: Focusing on the development of its international road transport, the Government has fostered a positive legal environment for international road transport development and has signed agreements with Russian Federation, China, Ukraine, Kazakhstan, Belarus, Turkey, and Kyrgyzstan. Mongolia also signed the Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention of 1975) and four other related conventions as well. The TIR system became operational in March 200419.

However, international road transport does not move much beyond areas bordering neighbouring countries, mainly because of the limited road network, the political and economic situation and domestic laws and regulations of neighbouring countries.

Many activities have been planned for the coming years, such as (i) concluding agreements on regulation of transit road transport with neighbouring countries and its implementation; (ii) improving passenger transport and postal deliveries to remote locations; and (iii) improving road safety and traffic management.

19 Jeffrey Liang and Dorothea Lazaro, The Customs Transit System; Experiences and Initiatives of CAREC Participating Countries (ADB , Jan 2006).

108

(b) Railway transport: Although the volume of passenger transportation by rail is not remarkable, owing to the small size of the network, the volume of freight transportation by rail has lately recorded a consistent increase. Total volume of freight transportation has increased to 11.64 million tons in 2002 compared with 9.18 million tons in 2000 and 7.33 million tons in 1997.

(c) Maritime transport: Maritime transport is undertaken by 1 tugboat along with 3 barges carrying freight only in the Huvsugul Lake between Khankh in Russian Federation and Khatgal village in Mongolia. It only operates during warm weather and carries less freight and passengers than other transport means. The components of the ship are outdated and technical performance is poor.

For the purpose of access to the sea and use of preferential treatment designed for landlocked countries, Mongolia participants in 11 international agreements, negotiations and the Convention. Ships may now fly the national flag of Mongolia under a joint venture named “Mongolian Ship Registration” of Singapore, which has registered more than 500 ships and controls and coordinates their activities.

3. ICT policy20

The Government of Mongolia gives ICT a high priority as a catalyst and an engine for socio-economic development in the 21st century. ICT offers a platform for building and applying knowledge, facilitating the participation of small and medium-sized enterprises and trade corporations, and improving the provision of public services. In accordance with the Resolution 207 by the Government of Mongolia, the Information and Communications Technology Authority was established on 20 October 2004 with the mission of “creating a knowledge-based information society in Mongolia”.

The Authority is responsible for all ICT policies, their coordination and their implementation under the direct auspices of the Prime Minister. The ICT sector is regarded as the leading component of the Government’s development strategy.

The Government approved the Communications Law of 2001 and has established the Communications Regulatory Commission to regulate the telecommunications sector. Furthermore, the Goverment approved the medium-term strategy for the development of the ICT sector and an action plan for its implementation in January 2003, and, in October 2005, a master plan for “e-governance” and the “E-Mongolia” Programme.

The Government has implemented a policy for building the appropriate regulatory and management structure, and renovation of the “backbone” telecommunications network.

The Government action plan defines practical actions concerning introduction of e-government into all Government institutions at all levels, to modernize and centralize a basic telecommunications network, to provide an integrated system of information among hospitals and to provide computers to homes and schools, among other activities.

20 <www.afact.org/include/getfile.php?fid=1108, www.witsa.org/profiles/monita.htm>, <www.un-mongolia.mn/ index.php?name=News&file= article&sid=280>, <web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/ EASTASIAPACIFIC>, <web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/ MONGOLIAEXTN/0,,menuPK:327718~pagePK:141132~piPK:141107~theSitePK:327708,00.html>, <www.unescap.org/tid/publication/tipub2348_part3i.pdf>.

109


The Mongolian telecommunications backbone network consists of 1,700 km of analog, approximately 1,000 km of digital microwave, more than 2,000 km of optical fibre cable links that will be increased by the end of 2006 by a 3,000-km link, plus 19 Very Small Aperture Terminal (VSAT) systems linked to Ulaanbaatar and all provincial centres. The existing 302 telephone exchanges have a total switching capacity of 148,000 telephone lines, with 153,000 lines currently in service. More than 95 per cent of the total switching capacity and 95 per cent of the transmission network are digital.

Mongolia has made considerable progress in developing its ICT infrastructure in recent years, particularly in the availability of modern basic service and cellular services. A number of licensed VSAT service providers offers added value, such as managed network services that allow businesses to utilize ICT. Further, Mongolia Railways owns fibre-optic infrastructure. Bandwidth has been made affordable while increasing returns on State-owned assets and investments.

(a) Fixed-line

• Approximately 95 per cent of the current fixed-line network infrastructure has been digitized.

• The proportion of fixed-line density grew from 3.5 per 100 inhabitants in 1996 to 5.6 in 2005.

• The fixed-line market is dominated by Mongolia Telecom with 153,000 subscribers in 2005. The company is owned by Mongolia (60 per cent) and Korea Telecom (in Korea; 40 per cent).

(b) Mobile

• There are three mobile operators: Mobicom Co., Ltd, Skytel Company Limited and Unitel Co., Ltd.

• Mobicom, the first provider of cellular service, began its operation in March 1996. The company is a joint investment between Japan’s Kokusai Denshin Denwa Company (KDD) and Sumitomo Corporation.

• Skytel Co., Ltd started operating in July 1999. The company is a joint venture between Korea’s SKT Co., Ltd and Taihan Electric Wire.

• Unitel Co., Ltd, is the third GSM cellular operator, which will begin to provide service in June 2006.

• The mobile market grew to approximately 550,000 subscribers in 2005.

(c) Internet

• The Internet services market is fully liberalized and there are currently 12 ISPs including Micom, MobiNet, MagicNet, Bodicom, MCScom, SkyC&C, WirelessCom, CSMS (Erdemnet and education network), and Mongolia Railway Company (RailNet).

• The total of Internet subscribers has remained steady mainly because the levels of Internet charges, interconnection fees and telephone rates have been more than an average person could afford; also, the infrastructure remains weak and ICT skills insufficient and limited.

110

• In 2005, personal computer penetration rate was 10 per cent. The “One home – One PC” Programme, providing low-cost PCs to households and small and medium-sized enterprises, is being implemented.

• Dial-up ADSL and high-speed broadband connection are provided but the quality is still a problem. People in rural areas have limited opportunity to enjoy connectivity because of their remote location and lack of opportunity to buy or use PCs.

• Currently, there are about 200,000 Internet users.

6. Legal and policy framework

The Government’s adoption of “ICT Vision 2010” highlights the importance of ICT and e-commerce issues. It commits the Government to reform the ICT sector and related regulatory structure, and to foster a legal environment for e-commerce issues. Consequently, the E-Mongolia Programme was drafted as a nationwide programme for ICT sectoral development.

The E-Mongolia Programme has strengthened the legal environment for e-commerce. In 2003, Mongolia drafted the Information Technology Law to regulate the use of ICT. Such important issues as e-signature, public key infrastructure, e-transaction, e-document, certification issues and information security are in compliance with the UNCITRAL Model Law. The final draft awaits submission to Parliament for approval. A strong publicity campaign is required to build public awareness.

Mongolia has revised its patent and copyright laws to comply with the WTO Agreement on TRIPs. The Government has adopted the Law on Joining the WIPO Copyright Treaty, and the WIPO Performers and Phonograms Treaty. There is an agency under the Ministry of Justice supervising intellectual property rights and monitoring and registering copyrights under the patent law.


Mongolia is by far the most advanced among the countries under review in the adoption of ICT for trade facilitation. It has had an automated customs system for 12 years and is now implementing an enhanced system, based on a revised customs law and international agreements. It has a sophisticated and technologically enfranchised trade-professional infrastructure, in keeping with its trade development and economic programmes.

A new customs ICT system recently replaced the original 1993 installation, ASYCUDA, which had very limited functionality with numerous perceived technical failings. The system was still manually based, apart from a multilayered statistics system. It was expensive to maintain and upgrade and time-consuming to implement. Therefore, Mongolia introduced a locally developed, Mongolian-language, Windows-based replacement in June 2003, known as the Mongolian Customs Automated Data Processing System (GAMAS). It uses standard Window based tools, including an SQL database (an international standard). GAMAS has a network and a web front-end, allows direct entry over the Internet and, reportedly, permits electronic entry on a single form.

The goal is to create a unified information system that covers all data within the customs system; interfaces with other Government agencies, banks, freight forwarders and customs brokers; and computerizes estimation, calculation and duty assessment,

111

among other tasks. The introduction of GAMAS has enabled Mongolian customs to enjoy the following features:

• Most clearance procedures have been automated; • Development of risk management software has begun; • Online and offline declaration have been enabled; • Electronic payment services are available; • The time required for customs clearance has been reduced by 5 to 8 times; • The extent of duty and tax evasion has decreased; and • Revenue collection has increased.21

GAMAS is a customs-centric system but it has national coverage and a consistent approach, a vital precursor for full customs automation. Other Government departments do not yet have an electronic approvals process, in spite of their e-government plans. Mongolian customs also plans for a GAMAS gateway, which may be a very different idea from a Single Window. An open, UN/CEFACT approach might be a better option, but any approach would require extremely careful and diplomatic planning. In the meantime a customs risk-management regime is in the planning and early stages of implementation.

ADB has proposed a Single Window based on the Singaporean model. ADB has provided in-country support for customs modernization assessments to assist with gap analysis and formulation of a strategy and implementation plan for customs modernization and single electronic window services for the business community22. The country is currently preparing a strategic framework for single electronic window practices.

Summary

Despite having an ICT-literate population, Mongolia’s infrastructure is relatively basic in terms of trade and transport facilitation. A fully functional Single Window would place enormous stress on its infrastructure and capabilities. It has a long way to go in making its ambitions in paperless trade a reality and much more work to do on ICT initiatives at border crossings, legal and payment initiatives, liberalizing the trade-professional market and adopting international standards — all at the same time.

Mongolia is also upgrading its rail infrastructure with World Bank assistance and a border-crossing TIR initiative under regional trade facilitation initiatives.

E. Tajikistan


Tajikistan is at an early stage of international treaty and agreement accession. Agreements adopted and dates of adoption include:

• Agreement on Union and Unification of Economic Environment (26 February 1999);

• Agreement on establishment of the Eurasian Economic Community (10 October 2000);

21 Mongolian Customs Automated Data Processing System-GAMAS, <www.adb.org/Projects/TradeFacilitation/ Documents/Mongolia-GAMAS.pdf>. 22 Trade Facilitation Program 2005 and 2006 Update (CAREC, November 2005).

112

• WTO “observer” status (2001); and • Various bilateral agreements.

Tajikistan is a small, post-conflict trading nation in transition to a market economy. The key component of trade facilitation, customs, has only recently emerged from management by committee, the Customs Committee. Customs revenue is a major element of the national revenue plan. Customs is at a very early stage of modernization.

2. Customs in Tajikistan

Customs in Tajikistan consists of the policy, procedures and provisions for moving goods and transportation means, levy of duties, clearance and control. The central executing agency is the Ministry of State Revenues and Duties.

A new customs code was adopted on 1 January 2005. The previous code provided the general scope of customs procedures. Additional legal documents governed specific areas of the code. The new code has eliminated that multiplicity of documentation. An outline for procedures and regulation is stipulated in the code itself, thus eliminating the need for additional enacting regulations.

3. Transport

Tajikistan ratified the TIR Convention in 1997. Implementation was, however, delayed because of the difficulty in forming independent, international transport associations and weakness of their representation. High transit costs of Tajik trucks through foreign territories and underdeveloped road networks posed major constraints in the implementation of the TIR system23.

4. ICT regulations24

The war and other negative influences following the declaration of national independence have delayed market development for Tajikistan’s telecommunication network. The telecom network in Tajikistan is based on analog transmission. The network is small, with more than one third of total telecom lines being very old. The limits of the country's telecommunications services have certainly impacted negatively on business and Government. Therefore, the country currently emphasizes upgrading and digitizing of networks rather than their expansion.

Tajik Telecom is a State monopoly for the telecommunication services. In accordance with commitments it has made towards WTO membership, Tajikistan will end that monopoly in 2006. It will include all activities of the privatization of Tajik Telecom, the ending of telecom’s public switched telephone network (PSTN) monopoly and the establishment of an independent regulator.

23 Jeffrey Liang and Dorothea Lazaro, The Customs Transit System; Experiences and Initiatives of CAREC Participating Countries (ADB , Jan 2006). 24 <www.researchandmarkets.com/reports/302146/302146.htm>, < 64.233.179.104/search?q=cache:--vZ1x391K8J>, <www.unescap.org/tid/projects/globalize_ure.pdf+ICT+sector+ development+in+Five+Central +Asian+Economies:+A+Policy+Framework+for+Effective+Investment+Promotion+and+Facilitation&hl=th&gl=th&ct=clnk&cd=1>, <www.unescap.org/tid/publication/tipub2348_part3i.pdf>.

113


(a) Fixed-line

• The existing fixed-line network is in poor condition. It cannot provide sufficient services to the Government and the population. The Ministry has been implementing a plan to replace old equipment.

• The local telephone network serves an estimated 250,000 subscribers, with a total “teledensity” in the country of less than 4 per cent.

(b) Mobile

• The number of mobile subscribers exceeds 240,000 and is expected to overtake fixed-line subscribers.

(c) Internet

• Internet services began in 1998 with Tajik Telecom serving as the national ISP. A number of other ISPs have since started offering access to the Internet.

• In 2004, there were around 5,000 Internet users in Tajikistan. Usage growth has been hindered by a number of factors including inadequate infrastructure, the absence of appropriate regulation, no high-speed international communication channels and the very limited availability of personal computers.

6. Legal and regulatory issues

Laws on “informatization” and on electronic documentation were enacted in 2001.

The former regulates legal relations in the formation and use of documented information and information resources, automated information systems and networks. It also defines procedures for protection of information resources as well as the rights and obligations of all entities participating in “informatization” processes.

The latter establishes a legal basis for the use of electronic documents, defines basic requirements for electronic documents as well as the rights and obligations of all participants in the exchange of electronic documents.

(a) Certification authority

• The Government of Tajikistan shall manage and regulate relations in e-document circulation.

• Services related to dissemination of open keys for checking of signatures shall be rendered by individual entrepreneurs or legal entities that have licenses to do so.

(b) Digital signature: The Law on Electronic Documents establishes a legal basis for using e-documents and defines main requirements, rights, duties, and responsibilities of participants in e-document circulation.

(c) Electronic commerce/online transactions: E-documents can be used in all areas of activity where hardware and software are required for creation, processing, storage, transmission and receipt of information. If legislation requires notary certification and/or State registration of a document, either an e-document or its hard copy shall be certified or registered according to legislated procedures.

114

(d) Electronic payment: The National Bank of Tajikistan, commercial banks or non-banking credit and financial institutions shall be the subjects (entities) for legal relations in the area of e-document circulation in the banking sector. Procedures for using e-documents for cashless settlements in Tajikistan shall be established by the National Bank of Tajikistan.

A certification body, defined by the Tajikistan Government, shall be in charge of certifying software and hardware technical facilities required for establishing, processing and storage of information used in banking operations. The list of software used in banking activities shall be defined by the National Bank of Tajikistan.

(e) Intellectual property: A number of conventions and treaties ratified by international organizations and the Government, such as the WIPO Convention (1967), Eurasian Patent Convention (1995), Patent Cooperation Treaty (1970), Paris Convention for Protection of Industrial Property (1883, amended 1976 and 1979), among others, are valid in Tajikistan.


ADB reports that the development of a master plan for customs automation was launched in October 2005 within the framework of the Regional Customs Modernization and Infrastructure Development Project. The proposed assistance also includes business process reengineering, training and change management. The developed master plan will be shared with other countries having UAIS experience to solicit comments and suggestions.

Summary

Electronic transactions in customs are virtually non-existent in Tajikistan by contemporary standards. Customs is struggling with such problems such as drugs smuggling, other forms of smuggling and trafficking, incorrect commodity classifications and under-valuations, meaning loss of State revenue and flourishing corruption. All international and development organizations agree that the application of ICT to customs and revenue gathering is vital for the future economic health of the country. Urgent attention to cross-border transit issues and a TIR transit arrangement is required.

F. Uzbekistan


Uzbekistan is negotiating access to WTO/GATT. It also has a partnership agreement with the European Union which obliges it to harmonize its legislation with European Union legislation.

Uzbekistan provides MFN treatment to 38 countries (including the United States) in accordance with intergovernmental agreements on trade and economic cooperation. There are both additions to and exemptions from the basic MFN tariff rates for certain categories of goods.

At the regional level, under the Agreement on Creation of a Free Trade Area, goods from CIS countries (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan,

115

Moldova, Russian Federation, Ukraine, Turkmenistan, and Tajikistan) enter Uzbekistan duty- and surcharge-free, if they are imported by legal entities and carry a valid certificate of origin. There is, however, debate about whether some countries benefit from the agreement at all. While the duty-free status of CIS mutual trade exists on paper, it does not always work out in practice. Hence, actual arrangements may not be all that they seem to be on paper.

Uzbekistan also has bilateral free-trade agreements with all CIS countries except Armenia. Preferential treatment is given to textile imports from the European Union under a bilateral arrangement.

Uzbekistan’s trade policy also includes the use of tariff-like instruments, namely import surcharges of various types. The two most important are the surcharges placed on all imports by natural persons and the surcharges on imports from third-party countries through neighbouring countries that do not have certificates of origin.

2. Transport

The Uzbekistan railway system transports the bulk of international freight, handling over 90 per cent of Uzbekistan’s exports and imports. Multimodal transport in Uzbekistan is still in its infancy. The authorities have plans to set up a specialized multimodal transport organization as well as to develop multimodal terminals throughout the country including Tashkent, Bukhara, and Termez.

Uzbekistan joined the TIR Convention in 1995, with actual implementation starting in 1996. Since then, more than 35 per cent of foreign goods have been transported under the cover of TIR Carnets. Customs authorities currently apply ICT to control the delivery of goods and termination and completion of transport under the TIR Carnets. Customs has installed the SafeTIR system25.

3. Customs in Uzbekistan

The Government, influenced by the European Union and WTO/GATT accession arrangements, is drafting a new customs code that conforms to the revised Kyoto Convention on simplification of harmonization of customs procedures. The new code ensures transparency in administrating all customs procedures and protecting the domestic market from smuggled products26. The new code also includes risk management, internal customs transit, currency control and protection of intellectual property rights27. Such a dramatic rewriting of customs law also includes a simplified control regime in accordance with the TIR convention and up to 17 other conventions on transit issues.

Customs still experiences considerable border problems. The authorities have a set of plans to achieve improvements that requires considerable effort and persistence.

25 Jeffrey Liang and Dorothea Lazaro, The Customs Transit System; Experiences and Initiatives of CAREC Participating Countries (ADB, January 2006). 26 “Uzbekistan reports 7 per cent growth in GDP for 2005, outlines priorities for 2006”, News Central Asia, 16 February 2006. 27 Information on reforms in customs legislation of the Republic of Uzbekistan (ADB).

116

4. ICT regulations28

Uzbekistan has been struggling to bring its telecommunications system up to the standard of developed countries. Governmental strategy is to privatize the incumbent operator, Uzbek Telecom, and to open the market to competition in accordance with the country’s aim to join the WTO.

In 2000, Uzbek Telecom was formed as a joint stock-holding company to manage the national telecommunications network, with privatization set for 2002. While that appeared to be the first step toward privatization, the Government has been moving quite slowly along that path. The privatization of Uzbek Telecom has been delayed several times. The Government has reduced the stakes it had planned to sell in 2004 to 49 per cent from over 60 per cent. It remains unclear whether the Government will decide upon an international tendering process. Uzbek Telecom controls around 98 per cent of the local market and 96 per cent of the international market, with a monopoly on the international gateway.


(a) Fixed-line

• The country suffers from outdated and poorly maintained analog equipment. The network is only 35 per cent digital. At the end of 2004, there were less than 2 million telephones for a population of almost 27 million.

(b) Mobile

• The mobile market grew by over 80 per cent in 2004. At the end of 2005, the number of subscribers was expected to reach 850,000.

• There are seven mobile service operators in Uzbekistan. UzDunrobita JV and Daewoo Unitel are the top two market leaders.

(c) Internet

• The total number of Internet users in Uzbekistan is expected to have reached 275,000 in 2002 and 600,000 by the end of 2004. Around 73 per cent of users live in Tashkent.

6. Legal and regulatory issues

Credit penetration in Uzbekistan is still low because almost all banking cards issued by Russian banks are debit cards that limit the purchasing power of Internet users. Currently, almost all transactions concluded over the Internet are settled in cash. Consequently, processing of large transactions raise security risks.

Uzbekistan recently adopted several new laws to widen official use of the Internet. Relevant legislation includes laws on information technology (2003), electronic digital signature (December 2003), electronic official document turnover and e-commerce (April 2004).

28 < www.unece.org/ie/enterp/documents/uzbekist.pdf>, <www.bisnis.doc.gov/TDABrussels_files/ UzbekistanProfile.pdf>, <www.unbotswana.org.bw/ undp/docs/bhdr2002/E-readiness%20assessment%20 uzbekistan.pdf >, <www.unescap.org/tid/publication/tipub2348_part3i.pdf>, <www.researchandmarkets.com/ reports/302146/302146.htm>, <www.internews.fr/documents/GIPI-2004-Final-Report.pdf >.

117

(a) Certification authority: The registration centre is a legal entity registered by the State. Its operational procedures are established by the Cabinet. It is specially authorized to implement the following functions:

• Setting up and opening digital signature keys; • Certifying copies of electronic documents signed with digital signature; • Suspending, renewing and canceling validity of digital signature certificate

keys; • Assuring protection (security) of a digital signature closed key; • Keeping a register of certificates of keys; and • Assuring its renovation and confirming digital signature validity in

electronic document.

(b) Electronic commerce/online transactions: E-document circulation is a set of deliveries and receipts of e-documents through an information system.

E-documents shall be created, processed and stored on the basis of technical facilities and services of information systems and information technologies. It shall be equal to a hard-copy document with the same legal validity.

(c) Electronic payment: E-document circulation can be used in making deals (including conclusion of agreements), settlements, and official and non-official correspondence, and in transmitting any other information.

(d) Judicial system and security: Security in e-document circulation shall be maintained in order to prevent damage to the parties involved or other legal entities or physical persons. Disputes about digital signature use shall be resolved in compliance with the law.

(e) Intellectual property rights: Enforcement of laws protecting intellectual property rights is weak. Uzbek laws do not provide adequate authority to enforce such violations, and Uzbekistan has not yet amended its criminal code with penalties for such violations, thus diminishing the country’s international reputation and discouraging foreign investment. Specifically in the ICT sector, foreign investors and vendors of products with substantial intellectual property (i.e., software) continue to hesitate to participate in the local market.

The Uzbek Government has announced its intention to amend a number of laws in order to bring Uzbekistan into compliance with international practices. As part of its ongoing efforts to join WTO, Uzbekistan must take steps to bring legislation concerning intellectual property rights into compliance with the WTO Agreement on TRIPs. In February 2004, the Uzbek Government also announced its intention to join both the Berne Convention and the Geneva Phonograms Convention.


Uzbekistan’s first customs automation system, UAIS, was designed for automation of the following key customs functions:

• Dissemination to customs of industry-specific regulation and reference information;

• Maintenance and publication of statistics; • Efficient monitoring of imports and exports; • Analysis of customs tariff efficiency;

118

• Review and assessment of declared customs value; and • Clearance of transport vehicles, among other tasks.

The UAIS pilot project was rolled out in the Tashkent region in December 200329.

In October 2003, one of the UAIS subsystems, “Unified Electronic Information System for External Trade Operations (UEIS ETO)”, started operations. It provides for interactive functionalities between all concerned ministries and agencies responsible for registering and performance-monitoring of foreign trade contracts30.

The first applications relate to statistics and control. This ICT effort illustrates the leapfrog potential for rapid development of modern technology and communications.

Summary

In an astonishing leapfrog over an apparently “backwater” ICT environment, Uzbekistan — with ample support and encouragement from ADB and other development agencies — has achieved the first step in a most ambitious customs automation project. This is, however, only the first step. There are many more customs modules to implement, trade professionals and permit-issuing authorities have yet to be integrated into the system; no plans for a Single Window have been articulated and many questions remain to be answered regarding capacity, local skills and HR resources. Nevertheless, an excellent beginning has been made.

29 Development of a United Automated Information System of the State Customs Committee of the Republic of Uzbekistan (CAREC). 30 Information System Creation: Experience of Uzbekistan Customs, <www.adb.org/Projects/TradeFacilitation/ Documents/Uzbekistan-UEIS.pdf>.

119

II. Supply-chain initiatives that capitalized on ICT advances

Annex II presents three initiatives in trading practices that capitalized on ICT advances. They illustrate the value of coherent strategy; of agreement among local and international competitors on business rules, standard codes and information types; and of an industry-wide, even global, approach to an agreed set of problems.

• The supermarket industry and its “efficient consumer response”. • A major supplier to the global supermarket industry, conforming to “just-

in-time” principles, 12,000 miles away from its customers. • The textile and apparel industry and its “quick response”.

Supermarkets and efficient consumer response (ECR)

In the 1980s, supermarkets worldwide were challenged by their declining margins, while their customers demanded a wider choice of product and better service. They had to reduce their inventory costs while providing more choice of product with fewer empty shelves. At that time one supermarket chain in the United Kingdom is reported to have had 18 weeks’ worth of stock in the supply chain — including stock on shelves, in warehouses and distribution centres, in transit and on order.

Supermarkets also had trouble in meeting suppliers’ payment terms — while they aimed for the prices and range of items that their customers wanted, they also had to pay suppliers within 7 to 14 days. Quite often, supermarkets found it impossible to process invoices in that time. One Australian chain required 29 days to process 7-day payment invoices. If a supplier provides bread or milk and dairy products to a chain of several hundred supermarkets, it is likely to make several deliveries each day, to each supermarket, resulting in monthly invoices being delivered by the box-load, which are physically impossible to check and reconcile. So, besides the problem of improving supply-chain efficiencies, the supermarket also had to speed up the payment cycle.

The system that evolved during the 1980s and 1990s has become known as ECR. It involves bar coding all products, scanning all products at point of sale (POS), and communicating the data between computers at POS and headquarters. As scanned sales are calculated, product replenishment orders are electronically issued to suppliers’ computers, across networks in agreed data formats, so that they can be processed without human intervention. Electronic orders are acknowledged online with confirmed delivery details. Goods are picked and packed 24 to 48 hours prior to delivery at the supermarket. An electronic advanced shipping note (ASN) is sent to the supermarket’s computer. On arrival at the supermarket or its distribution centre, the outer packages containing delivered goods and descriptive bar codes are scanned. If the delivery matches the electronically ordered goods within the agreed tolerances, the goods are accepted and a message is automatically sent to the supplier’s bank with payment instructions.

ECR has shortened payment times to acceptable levels. ECR has eliminated the supplier invoice — in itself a major efficiency and systems breakthrough. It has helped drive “inventory float” out of the supply chain. Some supermarkets now claim to have less than 24 hours’ worth of inventory in the supply chain, down from 18 weeks’ worth one decade earlier. Over the same period, profits have risen from around 2 per cent to over 6 per cent.

120

This success story could not have happened without industry-wide agreement on message standards, bar codes, product codes, radio frequency identification (RFID) and other logistical solutions. Supermarkets started the process with their important suppliers, using electronic data interchange (EDI) and value-added networks (VANs). They have extended their reach by using the Internet for new EDI users. They now offer web forms for smaller suppliers to enter data online which are translated to standard formats.

Supermarkets are the leading practitioners of ECR. New suppliers cannot do business with an international supermarket chain without being e-commerce-capable and displaying bar coding — later adding RFID — to all products. Evolving e-commerce techniques make the process ever cheaper and simpler for the smallest suppliers and for seasonal suppliers. EDI/e-commerce techniques now enable 80 per cent of the value of the supply chain to be processed electronically. The remaining portion will gradually be adapted to EDI or use variations of fax- and phone-automated entry methods, until all supplies are technologically compliant.

Gate to plate: just-in-time (JIT)

In the mid-1990s, a major supplier of chilled and frozen meat in New Zealand to supermarkets in over 100 countries had problems meeting contractual commitments at the high-quality end of its business. It had annual contracts with such retailers as Marks and Spencer supermarkets, supplying products for discerning clients of the “dinner party set.” The supplier, in fact a farmers’ cooperative, comprised up to 35,000 farmer-suppliers at any one time, yet could not ascertain in advance the quality and quantity of its product. The problem lay in the practice of selling at auction and withholding supply until the price was acceptable to the farmer-suppliers. Management of such open-market supply arrangements discounted any organized attempt to make forward-scheduling reliable.

One approach to solving the information problem was to identify individual animals at individual farms, all the way from rearing and husbandry, through slaughtering, to retail POS. If sales by an individual sales unit could be reported and correlated with the information held on the database, by animal and farm ID, it should be possible to identify the source and quantity of acceptable product and the best sellers. Then qualified suppliers could be “locked in” to a mutually acceptable contract.

The New Zealand cooperative organized a prototype to test the concept. In its first season it sold its full quota of high-end product from less than 800 farms. They could, therefore, buy in advance at an acceptable price to both seller and themselves, from a much smaller number of producers than expected, and guarantee the next season’s contractual commitments.

The technology here was a small transponder, comprised of a chip and miniature radio transmitter — an earlier version of the RFID tags now used in identifying pets and collecting road tolls. It was inserted subcutaneously, just beneath the fleece. Animal databases were updated with weight, treatment, feed regime and other details of each animal’s development. Individuals were scanned with wireless readers to pick up the radio transmissions that uniquely identified each animal. A code identifying the farm and account details was also automatically inserted into the transponder data.

121

When the animals were later processed for wholesale joints, or “primals”, their details were transferred to a bar code that accompanied the product through the chilling and transport process to Europe, a journey of around 5 weeks. On the day of arrival in the United Kingdom, the product was transferred to a processor that converted primals into retail joints and cuts, adding dressings, sauces or marinades as appropriate. The retail product was delivered by the start of the next working day to supermarkets throughout the United Kingdom. All products were sold, or otherwise disposed of during that working day. Sales were scanned at POS and sales data transmitted electronically overnight to the supplier, in EDI format.

One season’s data, approximately 16 weeks’ worth, were sufficient to prove that the new procurement and contract model would provide considerable efficiencies. They also revealed that the retail processor made higher profits than the supplier or the farmer. Suppliers thereupon embarked on expansion into the processor market in Europe.

While not an industry-wide phenomenon, this example does demonstrate the rapid payback from the use of automatic ID devices, codes and bar codes and standard EDI messages. Such devices have helped in a dramatic reengineering of information processing, of the relationships throughout the supply chain, and of the business itself. The example also shows how information can get into e-commerce systems by means other than fingers on keyboards. Some 90 per cent of the data we need for efficiently managing e-commerce systems will in future come from non-conventional means of capturing data.

Quick response (QR)

Not long ago, high-fashion garments required some 66 weeks, on average, to reach the retail sales floor from the date of initial order, in the United States — and longer in other countries. Traditional purchasing and emerging manufacturing techniques had extended the supply cycle. A buyer would visit fashion shows in Europe, compile a budget for the next season, obtain approvals and place orders spread across the season. Quite often the buyers would be guessing what consumers would buy 18 months from that time. Orders would go out for textiles and accessories, to overseas — particularly Asian — manufacturers.

Manufacturers would produce extremely large quantities so they could recoup their investment in capital equipment. Garments were made in large batches — once only. The final product flowed through the subassembly and distribution channels until it reached the sales shelf or hanger. The average garment required only 15 minutes to make, but 66 weeks to deliver. The rest of the time was taken up in waiting — in storage, processing, transport, and distribution.

Even though the economy of scale rewarded the buyer with cheap purchase prices, the buyer had to guess what would or would not sell. In the shops, popular items would sell quickly but could not be easily replenished because of the extended supply cycle. “Out of stock” became a synonym for lost sales. On the other hand, stock that did not move had to be marked down and disposed of, to make space for next year’s lines. The combination of lost sales and markdowns was very bad for retailers, especially the large stores, even though margins on the garments were notionally higher because of mass production and cheap labour.

122

A prototype design for a reengineered system was based on identification of best sellers at an early stage and rapid replenishment thereafter. The emphasis was changed from large volume and low costs to rapid fulfillment of demand in small batches. At first the idea was to commission batches of garments in mixed sizes and styles. Hong Kong, China fashion prototype houses had to design and manufacture on a very short cycle (say, 7 days), then deliver the product directly to store — quality assured, packaged, bar coded and price ticketed. The items were placed on the sales floor at the start of the sales week. Scanned sales were analysed at the end of the sales week. Best sellers were replenished by EDI orders; slow movers were not replenished.

The efficacy of the new system, known as QR, broke the traditional manufacturing cycle. High-fashion garments of improved quality are now made in much smaller quantities, often by local manufacturers rather than low-cost Asian manufacturers. The new industry dynamics have stimulated emergence of the boutique fashion store, fashion and label “implants” (stores within stores) and even, as in Japan, stores without stock. Many Japanese stores just rent space to fashion houses and concentrate on managing the facilities, leaving the tenants to manage their own businesses.

The trend has even extended to the web, where one jeans manufacturer makes jeans to order within 7 days for its female customers. That is possible only because it has designed a web form and manufacturing system that permits just a few choices — the material and accessories are identical in every case.

Once again, the lessons include cooperation: QR was a global, cross-industry initiative, involving agreements on standard messages, bar codes and product codes and new arrangements for quality assurance, direct-to-floor delivery, price ticketing and payment methods that suit the new industry dynamics.

Mass production does, however, continue at the price-sensitive, commodity end of the market, where the buyers, sellers, and manufacturers now share the risks in new arrangements.

123

III. Legal issues of ICT applications in trade facilitation

Annex III reviews the regulatory and legal framework for ICT applications in e-commerce that accompanies the introduction and implementation of electronic trade-facilitation systems. Referenced standards here have been developed by such organizations as the World Trade Organization (WTO), the World Intellectual Property Organization (WIPO), the Global Internet Policy Initiative, and the United Nations Commission on International Trade Law (UNCITRAL).

The objective is to provide countries with a set of best practices that they can adapt to local circumstances as they complete their own legislative frameworks.

A. Legal and regulatory issues that require attention

Based on Asian, African, and European project experience, the following list of issues has been consolidated from all sources interviewed and researched.

• Electronic banking and payments • Universal code of conduct for e-commerce • Liability • Dispute resolution • Intellectual property rights and protection:

o Copyright o Patents o Trademarks o Domain names o Web sites

• Consumer protection • Fraud and computer crime • Offensive and misleading content • Privacy • Data protection • Security:

o Public key infrastructure o Controlling agencies o Certification of independently issued certificates (interoperability) o Digital signatures o Encryption o Key escrow

• Cross-border transactions • Customs and taxation • International issues:

o Taxation o Jurisdiction o Choice of law o Interpretation o Remedies o Place of work.

124

B. Model Law on Electronic Commerce31

The strongest recommendation is to adopt the UNCITRAL Model Law on Electronic Commerce as the legal backbone for an e-commerce infrastructure, as many countries have already done.

Established by the United Nations in 1996 to harmonize laws related to international trade, UNCITRAL is a core legal body of the United Nations system that seeks to develop accessible, predictable and unified commercial laws. UNCITRAL created its model law on e-commerce to offer national legislators a set of internationally acceptable rules concerning the use of electronic communications and provide “functional equivalents” to the use of paper-based documents. Moreover, the model law helps in overcoming obstacles in national legislation to international trade when there is a dispute between parties. In 2001, UNCITRAL also created the Model Law on Electronic Signature. The two model laws have gained international acceptance and have become the basis for legislation adopted in many countries.

The UNCITRAL Model Law on Electronic Commerce is indisputably the leading international document on how commercial law should evolve to accommodate electronic communication. Many of the leading trading jurisdictions around world, including the United States, Canada, Australia, Singapore, the European Union, and Hong Kong, China, have adopted laws based upon it.

The model law on e-commerce generally covers such subjects as legal recognition of data messages, the admissibility and use of data messages as evidence in court, the archival of data messages, the formation of electronic contracts, the role of electronic signatures and writings, the attribution of electronic messages to a particular source, and establishment of the time and place of dispatch and receipt of data messages. Adoption of the model law can help reassure local as well as international businesses that local laws support e-commerce consistently with international norms.

The provisions of the model law are technology-neutral and generally have not provoked opposition or controversy. “Technology-neutral” means that the model law neither favours nor presumes any particular kind of technology; a technology-neutral law provides only general, universal rules, while leaving the user community to develop and use technologies in the context of those rules. Governments interested in adopting the model law should tailor it for consistency with local legal traditions and institutions.

C. Organization for Economic Co-operation and Development (OECD)32

The OECD is a unique forum whose 30 member States collaborate to address the economic, social and governance challenges of globalization as well as to exploit its opportunities. It grew out of the Organization for European Economic Cooperation, which administered American and Canadian aid to Europe after World War II. It aims to strengthen its members’ economies, improve market systems, expand free trade, and contribute to development in both industrialized and developing countries.

31 <www.uncitral.org>. 32 <www.oecd.org>.

125

E-commerce is a focus of OECD because of the potential gains for all countries in economic growth, trade and improved social conditions. OECD has developed policies on relevant issues that range from telecommunications infrastructure and services to taxation, consumer protection, network security, privacy and data protection as well as emerging markets and developing economies.

According to its Action Plan for Electronic Commerce of 1998, the OECD work programme focuses on building trust for users and consumers, establishing ground rules for the digital marketplace, enhancing the information infrastructure for e-commerce and maximizing the benefits of e-commerce.

D. World Intellectual Property Organization (WIPO)33

WIPO is an international organization that promotes the use and protection of works of the human spirit in the realms of art, science and technology. With headquarters in Geneva, Switzerland and 183 member States, WIPO is one of the 16 specialized agencies of the United Nations family of organizations. It administers 23 international treaties dealing with different aspects of intellectual property protection.

E. The Hague Conference on Private International Law34

The Hague Conference, with over 60 member States, is an intergovernmental organization that promotes common rules in private international law. The first session of Hague Conference was held in 1893. In 1955, after its seventh session, the Conference became a permanent organization.

In 1999, the Conference held a round table with the University of Geneva, on issues arising from e-commerce and Internet transactions. The meeting adopted recommendations in such areas as online contracts, B2B and B2C transactions, and online dispute resolution. In June 2001, the Conference held its nineteenth session to work towards a new convention on jurisdiction and foreign judgments in civil and commercial matters, and to decide on its future work programme. Delegates based their discussions on the preliminary draft convention drawn up in October 1999 and on the results of meetings of experts in e-commerce and intellectual property.

F. Key legal and regulatory issues

1. Electronic contracts35

By law, a contract is enforceable when an offer is created and its terms accepted by the other party. An electronic contract follows the same concept — a contract that is concluded by computer networking and meets all the normal requirements: offer, acceptance, intention to create legal relations, and consideration and capacity of the parties.

E-commerce is about making contracts via the Internet. In general, e-mail and “click-wrap” contracts are the two main forms of electronic contracts.

E-mail is considered to be the digital equivalent of a letter in making an offer or communicating an acceptance. In case an offer and acceptance are made by e-mail,

33 <www.wipo.org>. 34 <www.hcch.net/index_en.php?act=text.display&tid=26>. 35 <www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf>.

126

it is important to set the point when a contract concluded by e-mail is considered to have been formed. Moreover, a supplier should specify on its web site exactly what constitutes acceptance; for example, an offer is not accepted until payment has been taken from or charged to customers.

Alternatively, the click-wrap contract generally involves attachment of some form of terms-of-use agreement (TOS) — by using the web site, the user agrees to be bound by the provisions of the TOS. The user must click the button that indicates “I agree” or “I accept” in order to access the web sites.

A Government needs to examine its own legal infrastructure to determine whether paper-based form requirements prevent laws from being applied in an electronic environment. The adoption of an international instrument following the 1996 UNCITRAL model law on e-commerce is recommended as a basis for preparing new laws or adjusting the existing ones. The model law is intended to offer national legislators a template of internationally acceptable rules concerning the use of modern means of communications and storage of information, to remove legal obstacles, and to strengthen the legal environment for e-commerce. Its key concepts are described as follows:

• Article 5 addresses the concept of “electronic equivalent”. It provides that information or documents will not be denied legal effect or enforceability solely because they are in an electronic format.

• Article 6 holds that any legal requirement that information be in writing can be met by electronic communication.

• Article 8 holds that electronic documents can satisfy a legal requirement for “original” documents if there is reliable assurance about the integrity of the information and that the information is capable of being displayed to the person to whom it is to be presented. The question of whether an assurance is reliable is to be determined in light of all the circumstances, including the purpose for which the document was created. Article 8 also provides that the criteria of assessing integrity shall be whether the information has remained complete and unaltered, apart from the addition of any endorsement and any change that arises in the normal course of communication, storage, and display.

• Article 9 addresses the issue of admissibility and evidential weight of electronic communication — an electronic equivalence standard for evidentiary purposes. Evidentiary rules shall not deny the admissibility of an electronic communication solely on the grounds that it is in electronic form.

• Article 10 addresses the issue of data retention. Data retention requirements are met when the information contained in the electronic message is accessible so as to be usable for subsequent reference, the message itself is retained in the format in which it was generated, and any information including origin, destination, date, and time of the message is retained.

• Article 11 stipulates that contractual offer and acceptance may be communicated electronically and prohibits the denial of validity or enforceability on the grounds that electronic means of communication have been so used.

127

2. Electronic signature36

The term “electronic signature” refers to any method used to sign an electronic document. An electronic signature is associated with an electronic document and performs functions similar to those of a manual signature. It has the same legal effect as a written signature. It can be used to give the recipient the authentic confirmation that the communication comes from whom it identifies.

Encryption technology is important for digital signature. The technology verifies the content of the message and the identity of the signatory. It also ensures that a document was truly sent by a particular sender. As long as a secure cryptographic hash function is used to generate the digital signature, there is no way to extract someone’s digital signature from one document and attach it to another, nor is it possible to alter a signed document in any way. The slightest change in the signed document will cause the digital signature verification process to fail.

A public key infrastructure, which is rooted in asymmetric cryptography (i.e., cryptography that uses different keys for encryption and decryption), offers strong security services to internal and external users, computers, and applications.

The establishment of certification authority (CA), a trusted independent party, is needed to verify that a message had really been sent from the person alleged and not from an impostor. The CA is responsible for issuing digital certificates to users; and it can attest that a person issuing a digital signature may be presumed to be who he says he is. A digital certificate, which can be stored on a smart card, functions like a secure electronic identification card and can be used to verify the unique digital signature of a user.

The UNCITRAL Model Law on Electronic Signature adopted in 2001, is intended to endow the use of electronic signatures with legal certainty. The model law stipulates key provisions of the scope of electronic signature as follows.

• Article 1: Where electronic signatures are used in the context of commercial activities, they do not override any rule of law intended for the protection of consumers.

• Article 2: An electronic signature is defined as “data in electronic form affixed to, or logically associated with, a data message, which may be used to identify the signatory in relation to the data message and indicate the signatory’s approval of the information contained in the data message”.

• Article 6: Where the law requires a signature of a person, that requirement is met in relation with a data message if:

o A method is used to identify that person’s approval of the information contained in the data message.

o That method is as reliable as was appropriate for the purpose for which the data message was generated or communicated.

36 <www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce.html>, <www.jus.uio.no/lm/un.electronic. commerce.model.law.1996/doc>, <www.tradeforum.org/news/fullstory.php/aid/501/What_Does_It_Mean_ When_You_Click_%93I_Agree%94_.html, David Slee, Richard White, Stuart Weinstein, Course Outline (Faculty of Law, University of Hertfordshire, United Kingdom). A Guide to Global E-Commerce Law by Professor Michael Geist, University of Ottawa, Faculty of Law, Director of E-Commerce Law, Goodmans LLP (see more at www.itu.int/ITU-D/e-strategy/pdf/IP/Attach04.doc)

128

An electronic signature with the following characteristics shall be deemed a reliable signature.

o Firstly, the signature creation data are linked to the signatory; o Secondly, the signature creation data were, at the time of signing,

under the control of the signatory; o Thirdly, any alternation of the electronic signature, made after time

of signing, is detectable; and o Fourthly, where the purpose of the electronic signature is to

provide assurance that the information remains complete and unaltered, any alteration made to that information after the time of signing is detectable.

• Article 8: Signatories must use reasonable care to avoid unauthorized use of their electronic signature. If they become aware that the security of their electronic signature has been compromised, they must notify any person who might be affected without delay.

• Article 9: A certification service provider is person who issues certificates and may provide other services related to electronic signatures. The provider is required to (a) act in accordance with States’ policies and practices; (b) exercise reasonable care to ensure the accuracy of any information found on its certificates; (c) provide reasonably accessible means whereby parties relying on a certificate can confirm certain information pertaining to the certificate; and (d) utilize trustworthy systems.

• Article 11: A reliant party will bear the legal consequences of its failure to take reasonable steps to verify the reliability of an electronic signature or to observe any limitations that may be placed on a certificate. A certificate is a data message that confirms a link between the signatory and the signatory creation data. It provides verification that the persons who electronically signed a document are who they say they are.

3. Dispute resolution37

Consumers, companies or other parties can enter into commercial relationship without regard to geographic location. The question arises, however, about how disputes can be resolved, especially when buyers and sellers operate under different laws. The issue of dispute resolution is extremely important because the dispute mechanism offered will largely influence decisions about whether to participate in such commercial relationships.

In doing business both online and offline, disputes are unavoidable. The following examples of online disputes often happen.

Contractual disputes

• Disputes between the enterprise and the Internet service provider (ISP) or web-hosting service provider, including disagreements over interruption in services and breach of data security, among others.

37 <cyber.law.harvard.edu/ecommerce/disputes.html>, <www.hg.org/adr.html>, Commission recommendation of 30 March 1998 on the principles applicable to the bodies for out of court settlement of consumer disputes, 98/257/EC, Official Journal L 115, pp.31-34 or at <europa.eu.int/comm/consumers/redress/out_of_court/adr/ index_en.htm>.

129

• B2B disputes between the enterprise and its suppliers such as misrepresentation and customer complaints regarding services provided by suppliers.

• B2C disputes between the enterprise and its customers such as failure to pay for goods and services, poor performance of contract, misrepresentation, breach of the privacy policy, and breach of security of confidential information.

Non-contractual disputes

• Copyright infringement — the business uses copyright material in excess of fair use, and without the owner’s permission.

• Data protection — the business shares or reveals confidential data on customers, as discussed in the segment on privacy.

• Right of free expression — the business may be subject to defamation suits for defamatory material posted online.

• Competition law, domain name disputes — the business may be subject to trademark infringement suits if it infringes a registered or otherwise legally recognized trademark.

Businesses should settle their disputes quickly in order to sustain their reputation and customer satisfaction. Businesses commonly provide after-sales services as one means of preventing disputes. Customers are also invited to give feedback or submit their complaints, for example, through call centres or complaint services. Given that customer feedback is one of the most important factors in the success of online marketplace, such a system can help keep customers satisfied and returning.

However, where internal systems fail to handle disputes satisfactorily, alternative dispute resolution (ADR) can be recommended. ADR is widely regarded as a low-cost and efficient means of resolving consumer disputes, especially cross-border disputes. It can offer consumers a quick, effective and cheap way to obtain a remedy without the burden and expense of taking formal legal action. Many countries, especially OECD member countries, have developed policy initiatives towards the potential benefits of ADR as an alternative to formal court-based dispute resolution.

The most common forms of ADR are mediation, conciliation, assisted negotiation and arbitration. Mediation, conciliation and assisted negotiation involve a third party in facilitating communication between the disputing parties to help them reach agreement; arbitration requires a neutral party to gather information from both parties and help make a decision that is often intended to be legally binding and final. Arbitration is the best known and most used form of ADR. It is commonly imposed on consumers in B2C transactions by click-wrap terms and conditions on commercial web sites.

A recent improvement in ADR is the so-called online dispute resolution (ODR). Several forms of ODR are suitable for B2C disputes, including fully automated mechanisms whose outcomes are generated without human intervention, and assisted negotiation and mediation that bring disputing parties together “online” to participate in a dialogue for resolving their disputes.

130

There are no legally binding, international principles that set out procedural safeguards for governing the accessibility, independence, transparency and cost among issues for ADR services in B2C cases — only “soft law” principles exist. At the international level, the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce (“OECD E-Commerce Guidelines”) that were developed by the OECD Committee on Policy in 1999, recommended that business and consumer representatives establish fair, effective and transparent internal mechanisms to respond to consumer complaints and difficulties in a fair and timely manner without undue cost or burden to the consumer. Consumers should be encouraged to take advantage of such mechanisms (OECD 1999, principle IV).

4. Jurisdiction and applicable law38

E-commerce can link consumers and sellers in different countries in the cyber-marketplace. Such transactions may take place between two parties in different countries that have different legal systems. When disputes arise, issues of forum jurisdiction, choice of law and enforcement jurisdiction must be addressed. Forum jurisdiction refers to the issue of which court will decide a particular dispute. Choice of law means which country’s law will be applied in a particular dispute. Enforcement jurisdiction concerns the context in which a judicial decision made in one country may be recognized and enforced in another.

Such issues impinge on consumer confidence in e-commerce. Customers would be unlikely to shop online if they felt unsure that their local legal system would have no jurisdiction in any online dispute. In addition to the issue of choice of law, the difference between two legal systems may also reflect different levels of contract and consumer protection. Even when the consumer is innocent of wrongdoing, the judgment of the local court would be meaningless if it could not be enforced elsewhere. Businesses might consider posting legal disclaimers on their own web sites to limit the potential legal consequences in the crucial issues of jurisdiction and choice of law, limitation of liability, and copyright.

No international standards or treaties exist that govern Internet jurisdiction. However, there are attempts to advance the harmonization process of national rules in private international law. The Hague Conference has been developing an international convention on jurisdiction and the enforcement of judgments. The core content covers the issue of whether to adopt a “country of origin” or “country of destination” jurisdictional approach to Internet consumer disputes. The idea of “a country of origin approach” has been supported by most American business groups in which jurisdiction would always rest with the jurisdiction of the sellers in an online transaction. Most consumer groups in European countries, however, support a country of destination approach that would ensure that consumers could always use their home jurisdiction.

In December 2000, the European Union approved a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, which came into force in March 2002. The regulation provides a directly applicable legal instrument that replaces the 1968 Brussels Convention.

38 <www.europa.eu.int/ISPO/ecommerce/legal/documents/00010023/l_01220010116en00010023.pdf>, <www.internetpolicy.net/jurisdiction/>, <www.iccwbo.org/law/jurisdiction>, A Guide to Global E-Commerce Law, Professor Michael Geist, University of Ottawa, Faculty of Law, Goodmans LLP (available at <www.itu.int/ITU-D/e-startegy/pdf/IP/Attach04.doc>).

131

Persons domiciled in a member State, whatever their nationality, may be sued in the courts of that State (defendant’s domicile). Persons who are not nationals of the Member State in which they are domiciled shall be governed by the same rules of jurisdiction applicable to nationals of that State.

5. Consumer protection39

An environment of trust and confidence are key to success in e-commerce development. Consumers typically make their purchases on faith, knowing little about the sellers to whom they entrust their credit card data.

The OECD Council approved the Guidelines for Consumer Protection in the Context of Electronic Commerce in December 1999. It helps ensure that consumers are no less protected when shopping online than when they buy from their local store or order from a catalogue. The guidelines provide for consumer protection for online B2C transactions, thereby eliminating some of the uncertainties that both consumers and businesses encounter when buying and selling online.

(a) Transparent and effective protection: Consumers who participate in e-commerce should be afforded transparent and effective consumer protection that is not less than the level of protection afforded in other forms of commerce.

(b) Fair business, advertising and marketing practices: Businesses engaged in electronic commerce should pay due regard to the interests of consumers and act in accordance with fair business, advertising and marketing practices.

(c) Online disclosures: Clear and obvious disclosures are needed. They should be accompanied by a completed description.

(d) Confirmation process: To avoid ambiguity concerning the consumer’s intent to make a purchase, the consumer should be able, before concluding the purchase, to identify precisely the goods or services he or she wishes to purchase; identify and correct any errors or modify the order; express an informed and deliberate consent to the purchase; and retain a complete and accurate record of the transaction.

(e) Payment: Consumers should be provided with user-friendly, secure payment mechanisms and information on the level of security that such mechanisms afford.

(f) Dispute resolution: Consumers should be provided meaningful access to fair and timely ADR and redress without undue cost and burden.

(g) Privacy: B2C e-commerce should be conducted according to the recognized privacy principles set out in the OECD Guidelines Governing the Protection of Privacy and Transborder Flow of Personal Data (1980), and provide appropriate and effective protection for consumers, taking into account the OECD Ministerial Declaration on the Protection of Privacy on Global Networks (1998).

39 <www.jus.uio.no/lm/oecd.consumer.protection.in.electronic.commmerce.guideline.recommendation.1999/> , <europa.eu.int/comm/consumers/policy/developments/dist_sell/dist01_en.pdf >, <www.itu.int/ITU-D/e-strategy/pdf/IP/Attach04.doc>.

132

(h) Education and awareness: Governments, businesses and consumers should work together to educate consumers about e-commerce, foster informed consumer decision-making, and increase awareness of the framework for consumer protection that applies in online transactions.

The 1997 European Union Distance Selling Directive, which was to be implemented by all member States by May 2000, mandates that consumers be provided with the following information before the conclusion of any “distance” or online contract:

(a) Identity of the supplier and, in the case of contracts requiring payment in advance, his address;

(b) Main characteristics of the goods or services;

(c) Price of the goods or services including all taxes;

(d) Delivery costs, as appropriate;

(e) Arrangements for payment, delivery or performance;

(f) Existence of the right of withdrawal;

(g) Cost of using the means of distance communication, where it is calculated other than at the basic rate;

(h) Period of validity of the offer or price;

(i) Minimum duration of the contract in the case of contracts for the supply of products or services to be performed permanently or recurrently; and

(j) Regarding the consumer’s right of withdrawal from a contracted purchase, the directive provides that consumers have a period of at least seven working days in which to withdraw from a distance contract without penalty and without cause. The only charge that may be made to the consumer is the direct cost of returning the goods.

6. Cybercrimes40

Cyberspace poses new difficulties in deterring crimes, punishing the perpetrators, and paying compensation to the victims for damages. In most countries, the existing laws are likely to be unenforceable against such crimes. Without legal protection, businesses and Governments must rely solely on case-by-case measures to protect themselves from those who would steal, gain illegal access to, or destroy valuable information.

Cybercrime legislation is a key element promoting trust and security online. Mere self-protection is not sufficient to make cyberspace safe for the conduct of

40 <www.internetpolicy.net/cybercrime/>, The OECD Guidelines for the Security of Information Systems and Networks (OECD, May 2004) at <www.oecd.org/document/42/0,2340,en_2649_37441_15582250_1_1_1_37441,00.html> - an important benchmark for industry and other stakeholders to protect critical information infrastructures. See also the accompanying implementation guide. See also Guidelines on the Protection of Privacy and Transborder Flows of Personal Data (OECD), October 2004) at <www.oecd.org/document/20/ 0,2340,en_2649_37409_15589524_1_1_1_37409,00.html>, Information Technology Security Handbook (World Bank, Decemebr 2003) at <www.infodev-security.net/ handbook/> - sponsored by the InfoDev project of the World Bank – a major source, covering security for individuals and for organizations, government policy and IT security for technical administrators.

133

business. International and regional institutions have recommended that every nation adopt basic criminal laws against activities that attack the confidentiality, integrity or availability of computer data and computer systems. Countries where legal protections are inadequate will become increasingly less able to compete in e-commerce.

The passage of the Council of Europe’s Convention on Cybercrime in December 2001 created a sound basis for international cooperation in law enforcement and harmonization of laws to establish a common criminal policy on combating computer-related crimes worldwide. To date, the convention has been signed by 38 Council of Europe members and four non-members (the United States, Canada, Japan and South Africa). Signatories must:

(a) Define criminal offences and sanctions under their domestic laws for four categories of computer-related crimes: fraud and forgery, child pornography, copyright infringements and security breaches such as hacking, illegal data interception and system interferences that compromise network integrity and availability. Signatories must also enact laws to establish jurisdiction over such offences committed on their territories, registered ships or aircraft, or by their nationals abroad.

(b) Establish domestic procedures for detecting, investigating and prosecuting computer crimes, and collecting electronic evidence of any criminal offence. Such procedures include the expedited preservation of computer-store data and electronic communication (“traffic data”), system search and seizure and real-time interception of data. Parties to the convention must guarantee the conditions and safeguards necessary to protect human rights and the principle of proportionality.

(c) Establish a rapid and effective system for international cooperation. The Convention deems cybercrimes to be extraditable offences. It permits law enforcement authorities in one country to collect computer-based evidence for those in another. It also calls for establishing a 24-hour, seven-days-a-week contact network that can provide immediate assistance with cross-border in investigations.

Solutions to the problems of cybercrime are everyone’s responsibility. Governments, business and civil society should collaborate in strengthening legal frameworks for cybersecurity. National Governments should examine their current statutes to determine whether they are sufficient for combating and protect against cybercrimes. In most cases, current laws need updating and the rule of law must also be enforced. Principles in the guideline may need to be harmonized with the national situation and ongoing or planned national initiatives. Policies to combat cybercrime should include such activities as:

(a) Enacting a comprehensive set of substantive criminal, procedural and mutual assistance on legal measures to combat cybercrimes and ensure cross-border cooperation. That should be in line with the Council of Europe Convention on Cybercrime of 2001.

(b) Identifying national cybercrime units and points of contact for international, high-technology assistance.

134

(c) Establishing institutions that exchange, treat and assess vulnerabilities; i.e., Computer Emergency Response Teams (CERT).

(d) Intensifying cooperation between Governments and businesses in information security and fighting cybercrime.

(e) Conducting outreach support for other participants to address cybersecurity. That might include highlighting the nature of the problem, assisting participants to address security responsibilities, supporting education and training, establishing points of contact and resource sites for practical information, and supporting research and development for the development of best practices.

(f) Building awareness at every opportunity through education, training, and public announcements that emphasize the need for security.

7. Electronic payment41

A viable payment mechanism is one of the basic requirements for establishing an e-commerce regime. Among issues of immediate concern are security, liability and taxation. The need for new electronic currencies may also arise. Banking laws for domestic and international transactions must be able to accommodate payment through credit or debit cards.

Many means of making e-payments exist; including automated clearing house (ACH) funds transfers (including electronic cheques), credit card payments, and stored value or e-money payments. In the United States, credit cards are the most prevalent means of paying online. However, credit card fraud on the Internet is of increasing concern. CyberSource Corporation (Nasdaq: CYBS), a leading provider of e-payment and risk-management solutions, conducts an annual cyberspace fraud survey. Among the findings of its seventh such survey, the losses from e-commerce fraud increased to more than USD 2.8 billion in 2005, an 8 per cent increase from 2004. Although the overall rate of fraud loss remained relatively constant at 1.6 per cent of revenue, mid-sized to large merchants having online sales from USD 5 to 25 million annually reported that fraud losses had increased from 1.5 to 1.8 per cent of revenue; those selling over USD 25 million reported that losses had increased from 1.1 to 1.2 per cent of revenue.

8. Information privacy on the Internet42

Privacy protection is a critical element of trust in the online environment. It is also essential for the development of e-commerce. Online privacy is not just a matter of keeping personal information secret. Rather, it is about creating a trusted process of collecting, exchanging and using personal data in commercial and bureaucratic transactions.

The adoption of privacy policies is essential for business because it can increase consumer confidence in online offerings. Consumers must feel comfortable in providing their personal information before they make any transaction or join

41 <www.internetpolicy.net/principles/framework.pdf>, <www.paymentsnews.com/2005/11/cybersource_ rel.html>. 42 <www.internetpolicy.net/privacy/20041228privacy.pdf>, <www.oecd.org/document/53/0,2340,en_2649_ 34255_15589524_1_1_1_1,00.html>, <www.kantei.go.jp/jp/it/privacy/houseika/dai11/11siryou5.html>

135

online activities. According to the report of the Australian Government’s Office of the Federal Privacy Commissioner43, Roy Morgan Research collected responses from 1,507 adults in a nation-wide telephone study in May 2004 that investigated community attitudes towards privacy. The majority of respondents considered the following activities to be privacy invasion:

(a) A business that you do not know receives your personal information (94 per cent).

(b) A business monitors your activities on the Internet, recording information on the sites you visit without your knowledge or consent (93 per cent).

(c) You supply your information to a business for a specific purpose and the business uses it for another purpose (93 per cent).

(d) A business asks you for personal information that does not seem relevant to the current transaction (94 per cent).

The OECD developed its Guidelines on the Protection of Privacy and Transborder Flows of Personal Data in 1980. Those guidelines continue to serve as the basis for most privacy initiatives in the United States and European countries. The key principles are:

(a) Collection limits: Limits should exist on collection of personal data. Any such data should be obtained by lawful and fair means, with the knowledge or consent of the subject, where appropriate.

(b) Data quality: Personal data should relate to the purposes for which they are to be used. To the extent necessary for those purposes, data should be accurate, complete and up to date.

(c) Purpose specification: The purposes for which personal data are collected should be specified not later than at the time of data collection. Subsequent use should be limited to the fulfillment of those purposes or such others as are not incompatible with them and specified whenever they are changed.

(d) Use limitation: Personal data should not be disclosed, or made available or otherwise used for purposes other than those specified in accordance with item (b), the data quality principle, except with the consent of the data subject or by the authority of law.

(e) Security safeguards: Personal data should be protected by reasonable security safeguards against risks such as loss or unauthorized access, destruction, use, modification or disclosure of data.

(f) Openness: There should be a general policy of openness about developments, practices and policies with respect to personal data. Means should be readily available for establishing the existence and nature of personal data, and the main purposes of their use, as well as the identity and usual location or contact point of the data controller.

(g) Individual participation: An individual should have right to obtain from a data controller confirmation about whether data relating to him- or herself

43 <wwwprivacy.gov.au/publications/rcommunity/index_print.html>.

136

are being held. The individual should have the right to receive that data and be able to challenge any incorrect aspect.

(h) Accountability: A data controller should be accountable for complying with measures that give effect to the principles stated above.

G. Preliminary assessment of the legal and regulatory framework for e-commerce

A cursory comparison of legal and regulatory issues among the six landlocked countries under review (Kazakhstan, Kyrgyzstan, the Lao People’s Democratic Republic, Mongolia, Tajikistan, and Uzbekistan) appears in the following paragraphs and accompanying table at the end of annex III. Most of the information comes from web-based research and such sources as reports by ESCAP and the United Nations Development Programme (UNDP). The present assessment captures recent developments and does not reflect detailed analysis.

• All six countries have liberalized their telecommunications sector. Some kind of national, independent authority governs telecommunications activity in each country. While the need to provide universal and affordable access has become a priority, the extension of telecommunication networks has been slow in some countries.

• Each of the six Governments recognizes that a legal and regulatory framework is necessary for developing e-commerce. Key issues such as e-signature, e-transaction and certification authority are defined under current legislation. Mongolia has completed its draft which is under parliamentary discussion for approval. The Lao People’s Democratic Republic is drafting its e-commerce law and has no cyberlaw at this time.

• Some countries have enacted national legislation and ratified international treaties to secure copyright protection. Bringing national laws on copyright into compliance with WTO agreements and standards and WIPO Internet treaties has been difficult, owing to the complexity of intellectual property laws and enforcement issues.

Comparison of current laws among six landlocked countries

Country Current laws Lao People’s Democratic Republic

Telecommunication Act 2001

Mongolia Law on Telecommunications 1995 Draft Law on Information Technology 2003

Kazakhstan Law on Electronic Document and Electronic Digital Signature 2002 Kyrgyzstan Law on Electronic Payment 1999

Law on Electronic Digital Signature 2004 Draft Law on Electronic Commerce 2004

Tajikistan Law on Electronic Document 2002 Uzbekistan Law on Electronic Document Exchange 2003

Law on Electronic Digital Signature 2003 Law on Electronic Commerce 2004 Law on Information Technology 2004

137

IV. ASYCUDA and Global Customs Automation

ASYCUDA44 is the acronym used for Automated SYstem for CUstoms DAta, a mature

software product that is globally implemented and dedicated to mainline ICT activities in national customs processing.

ASYCUDA was developed, and remains, under the auspices of UNCTAD. The first system was developed for a critical path method (CPM)-based microcomputer. Later versions use UNIX. Currently, after four major upgrades, ASYCUDA is being implemented in or planned for more than 80 different countries. ASYCUDA was developed as a system exclusively for customs authorities, in an era when only those who could afford mainframe systems and proprietary systems development had previously been able to automate customs operations. Currently its core mandate is to:

• Reduce the cost and effort of processing import and export declarations; • Protect and maximize taxes and excise revenue for the nation; • Prevent fraud; • Facilitate statistical collection; and • Facilitate trade.

A typical ASYCUDA installation includes the following modules and facilities:

• Cargo and manifest processing; • Declaration processing; • Bonds and warehousing; • Transit control; • Transaction valuation and price referencing; • Payment processing and revenue accounting; • Release notification; • Security/guarantee management; • Risk management and inspection; • Exemptions management; • Selectivity intelligence and audit support; • Trade statistics and management information; • Data exchange; and • Miscellaneous items such as local language support and multiple currency

support.

44 See <www.asycuda.org>, < www.unctad.org>