JANUARY 2004

Policy Department External Policies

TRADE FACILITATION AND IMPORT-EXPORT PROCEDURES IN THE EU: STRIKING THE RIGHT

BALANCE FOR INTERNATIONAL TRADE

INTERNATIONAL TRADE

EN

BRIEFING PAPER

March 2008

EP/EXPO/B/INTA/2008/06 March 2008 PE 388.936 EN

This briefing paper was requested by the European Parliament's Committee on International Trade.

It is published in the following languages: EN (OR), FR Author: Dr Andrew Grainger

Trade Facilitation Consulting Ltd

Responsible Official: Levente Császi Directorate-General for External Policies of the Union Policy Department BD4 06M 55 rue Wiertz B-1047 Brussels E-mail: levente.csaszi@europarl.europa.eu

Publisher European Parliament

Manuscript completed on 25 March 2008.

The study is available on the Internet at http://www.europarl.europa.eu/activities/committees/studies.do?language=EN

If you are unable to download the information you require, please request a paper copy by e-mail : xp-poldep@europarl.europa.eu

Brussels: European Parliament, 2008.

Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament.

© European Communities, 2008.

Reproduction and translation, except for commercial purposes, are authorised, provided the source is acknowledged and provided the publisher is given prior notice and supplied with a copy of the publication.

ii.

Executive Summary The trade environment is complex. It is easy to count 60 or more trade procedures in any of the EU’s member states. These include regulations specific to revenue collection, safety and security, environment and health, consumer protection and trade policy. Over the last few years traders have suffered an avalanche of new, security focused controls. These add to their regulatory burden. This regulatory burden has been acknowledged by policy makers. The EU is currently rolling out its “electronic customs initiative”. Multilateral trade negotiations on trade facilitation within the WTO are beginning to take substance. The topic of trade facilitation is also a significant feature within many aid-for-trade donor projects, where large funds are being invested. Trade operations tend to rely on the services of many intermediaries, including: shipping lines, airlines, express carrier and postal services, trucking and haulage companies, railway companies, logistics service providers, freight forwarders, customs brokers, banks and finance companies, insurance companies, seaport and airport operators, international rail-terminal operators, inland container port operators, stevedores, cargo handlers and handling agents, warehouse operators, transit-shed operators, independent testing and inspection companies, port community system providers and specialist IT service providers. Import and export procedures currently depend on the submission of multiple documents or their electronic equivalents. This information is required by customs authorities as well as many different executive agencies operating under the customs umbrella or independently. Compliance will usually require the many operators involved in moving the goods to exchange and consolidate information. Trade procedures have transaction costs. Costs can be direct (e.g. compliance costs, charges and fees) or indirect (e.g. delay at the border, additional storage charges, missed business opportunities). The concept of trade facilitation recognises that trade transaction costs are undesirable. Trade facilitation seeks the simplification, harmonisation, standardisation and modernisation of trade procedures. A long catalogue of trade facilitation recommendations has been produced by international organisations, like the World Customs Organisation (WCO) and United Nations Economic Commission for Europe (UNECE), to help improve trade procedures. Proponents of trade facilitation tend to propagate 18 generic ideas that help reduce transaction costs whilst meeting control objective. The desire to strike a balance between trade facilitation and controls is misguided. Facilitation and control are not exclusive and benefits through trade facilitation can be found for both government and business. In terms of control, best trade facilitation practice frees-up regulatory resources and improves control efficiency. In terms of compliance, it reduces the considerable regulatory burden suffered by traders. Successful implementation of trade facilitation concepts is not easy. There are a lot of different stakeholders to contend with and their interests are not necessarily aligned. Sources of conflict may be found between: government and business stakeholders; local, national and international interests; government departments (e.g. customs and

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veterinary inspectors); policy priorities; industries (e.g. freight forwarders and transport operators); countries (e.g. who have different legacy arrangements or IT system suppliers); and between liberal and protectionist trade policy tendencies. The EU’s electronic customs initiative began as a very ambitions programme with trade facilitation at its core. However, much of the original ambition has been eroded in the name of compromise and search for consensus. While new security controls are being implemented, wider regulatory reform aimed at reducing the overall trade transaction cost burden is yet to materialise in any meaningful way. Examples of concern are many, and include: insufficient benefits for Authorised Economic Operators; a disbelief that member states will be able to achieve interoperability and overcome national differences; concern in how implementation has been split into separate projects despite obvious dependencies; the apparent exclusion of VAT from centralised clearance; and the failure to progress in substance with regards to a fully fledged, EU wide single window system. As the example of the EU’s electronic customs initiative shows, reaching compromises does not necessary yield the most desirable overall outcome, especially if there are significant external pressures – like for instance from China and India with their low-cost labour advantages, or from those economies which are beginning to significantly step-up their efforts in removing wasteful trade transaction costs (e.g. within the APEC region). In contrast, an ambitious trade facilitation programme at home and internationally (e.g. via WTO negotiations) will reduce waste, free-up economic resources, create opportunities for EU based businesses as well as help tighten control. The EU’s institutions currently do not have a dedicated home for trade facilitation. This paper recommends the creation of a trade facilitation body which would be able to consolidate knowledge and expertise, help overcome conflicting interests and institutional limitations, help hold the Commission and member states accountable to delivering on trade facilitation promises as well as help coordinate a stronger EU position at international organisations where the subject matter relates to trade procedures (e.g. WCO, WTO and UNECE).

iv.

Specifications

A. Purpose and Background of the Briefing Paper

The European Parliament's Committee on International Trade would like to commission this paper to serve as a general background document to an own initiative report to be drafted on this important subject. Import and export rules and procedures have always played an important role in the implementation of trade policy and have recently gained increased significance due to the growing volumes of international trade, renewed concerns about security and product safety, as well as issues discussed in multilateral, regional and bilateral fora, such as trade facilitation, rules of origin and counterfeiting. For the EU, the largest trading block in the world, striking the right balance between facilitating legitimate trade and effectively controlling traded goods in order to ensure compliance with applicable rules is crucial, and both the ongoing revision of the Community Customs Code and the management of the EU's new external borders represent important challenges in this respect.

B. Contents of the Briefing Paper

The central focus of the papers is to examine whether the EU has struck the right balance between controlling the flow of goods in order to efficiently protect the community interest and promoting legitimate trade.

Your paper should focus essentially on trade facilitation and export-import procedures: understanding the business/industry point of view and the balance with other considerations. Modern supply change management, globalisation in general and a constantly evolving environment in which new challenges and threats emerge (e.g. security issues), it is vital to understand stakeholdres' views about the role of customs, the desired path of reform and trade facilitation. The paper should ideally also briefly present:

* Industry and trading partners' views on the ongoing EU reform process

* The state of play of WTO negotiations on trade facilitation (including technical assistance and support to capacity building in favour of developing countries).

v.

Index Executive Summary ........................................................................................ iii.

Specifications....................................................................................................v.

Index ................................................................................................................vi.

1. Introduction..............................................................................................................1

2. The Regulatory Environment at the EU’s Borders and New Initiatives ............2 2.1. Trade and Security .................................................................................3 2.2. A EU Paperless Trade and Customs Environment ................................3 2.3. WTO ......................................................................................................6

3. International Supply Chains and Trade Procedures............................................6 3.1. Trade Documents and Systems..............................................................8 3.2. Trade Transaction Costs ......................................................................10 3.3. Economies of Scale..............................................................................11

4. Trade Facilitation...................................................................................................11 4.1. Trade Facilitation Recommendations ..................................................13

5. Striking the Right Balance ....................................................................................18 5.1. Conflicting Interests.............................................................................19 5.2. Business Stakeholder Concerns Specific to the Electronic Customs

Initiative ...............................................................................................20 5.3. Institutional challenges ........................................................................21

6. Conclusion ..............................................................................................................23

Annex I ........................................................................................................................26

Annex II ......................................................................................................................27

References...................................................................................................................29

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1. Introduction Trade plays a significant role in the EU. In 2006 goods worth a total of €2,516.6 billion were traded between the EU and 3rd countries (EUROSTAT 2007). With a share of 17.1% of the world’s imports and export, the EU is the world’s largest trader (European Commission 2007). Trade in goods between the EU’s member states was worth a further €4,789.7 billion (EUROSTAT 2008, p.158). Over the last few years traders have seen a number of significant regulatory developments which have a direct bearing on how the movement of goods across national borders is governed. Most notable is the recent avalanche of new, security focused trade procedures. These add to the regulatory burden. For example, recent research published by SITPRO, the UK trade facilitation agency, counts 37 security procedures and controls that impact on trade operations (SITPRO and Grainger 2008). Despite the added security burden, EU traders have also seen the internal market grow; now encompassing 27 member states with more candidate countries waiting in the wings. Further more, the EU is undergoing an unprecedented attempt of further integrating the member states customs administrations through the use of electronic systems (COM(2003)452 final 2003). The underlying vision of this effort is welcomed by most parts of European business. A successful implementation would provide EU based business with greater international competitiveness as well as help further integrate the common market (Grainger 2005). With ever falling tariff levels, international organisation like the WTO are now also taking a closer interest in the non-tariff area, including trade facilitation. They define trade facilitation as “the simplification and harmonisation of international trade procedures” and trade procedures are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade” (WTO 1998). Tied to GATT Articles V, VIII and X – covering the freedom of transit, fees and formalities, and publication and administration of trade regulations – trade facilitation is seen by many as a particularly promising and non-contentious initiative that has emerged from within the Doha trade round. Similarly, regions like APEC (APEC 2007), are increasingly looking towards trade facilitation as a means to achieve greater economic growth and competitiveness. Benefits resulting from a successful conclusion of a trade facilitation agreement are expected to be high. For example, the OECD calculates that each 1% saving in trade related transaction costs yields a world-wide benefit of US$43 billion (OECD 2003). In view of the recent regulatory and policy momentum in the area of trade and security as well as trade facilitation, the purpose of this paper is to take a more detailed look at import/export procedures and business stakeholder requirements, modern supply chain management principles in today’s global environment, stakeholder views and concerns, and the desired path for reform and trade facilitation. Underlying this brief is the principle question of whether the EU has struck the right balance between controlling the flow of goods in order to efficiently protect the communities interest and promoting legitimate trade. This paper has been commissioned by the European Parliament’s Committee on International Trade to serve as a background document for an own initiative report.

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2. The Regulatory Environment at the EU’s Borders and New Initiatives

Although the post-World War II area has seen an unprecedented effort towards trade liberalisation, falling tariff levels and the emergence of a global production structure, cross-border operations remain complex. The number of applicable controls and procedures is extensive. It is easy to count at least 60 or more trade procedures enforced in most of the EU member states (e.g. Linington 2005; Grainger 2007a). They broadly fall into the regulatory categories of “Revenue Collection”, “Safety and Security”, “Environment and Health”, “Consumer Protection” and “Trade Policy”. Examples of activities falling under these regulatory categories are provided in (Table 1).

Table 1. Examples of international trade related regulatory activity Regulatory Category

Examples of related activity

Revenue Collection Collection of Customs duties, excise duties and other indirect taxes; payment of duties and fees; management of bonds and other financial securities

Safety and Security Security and anti smuggling controls; dangerous goods; vehicle checks; immigration and visa formalities; export licences

Environment and Health Phytosanitary, veterinary and hygiene controls; health and safety measures; CITES controls; ships’ waste

Consumer Protection Product testing; labelling; conformity checks with marketing standards (e.g. fruit and vegetables)

Trade Policy Administration of quota restrictions; refunds; suspensive regimes

(Grainger 2007)

While in most countries the lead border agency is customs, other government agencies include immigration, border-guards, police, veterinarians, plant health inspectors, trading standards inspectors, marketing standards inspectors, health and safety executives and more. These agencies work towards rules and procedures defined by international (e.g. WTO, UN), regional (e.g. EU) and national (e.g. EU member states) legislation. Additional procedures may be specific to the local management practices at each and every port and border. Typically, traders face exposure to trade procedures at both ends of their operations, for example in the context of an export declaration on the way out and an import declaration when entering their chosen market. Often goods need to transit through third countries, adding yet a further layer of complexity. The burden of controls at the border has recently been compounded through new security focused controls and procedures. However, there are also a number of recent initiatives aimed at reducing the regulatory burden in international trade. In the EU this includes the “electronic customs initiative” and within the WTO it includes the inclusion of negotiations on “trade facilitation” within the wider Doha trade round.

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2.1. Trade and Security As just outlined, regulatory burden within international trade operations has being increased by an avalanche of new procedures specific to trade and security. This includes the EU’s Security Amendment to the Customs Code and Implementation Provisions (648/2005/EC; 1875/2006/EC). These two instruments have introduced to the EU the Authorised Economic Operator (AEO) concept, the electronic exchange of risk management data between EU customs administrations and the requirement for traders to pre-notify customs administration. In addition, traders with the EU largest trading partner, the USA, face a number of new pre-export procedures. The Customs and Trade Partnership against Terrorism (CTPAT) came to life in 2001. It confers some preferential treatment by US authorities to suitably authorised traders. Traders exporting food to the USA also need to register with US authorities under the USA’s Bioterrorism Act 2002. Containerised goods are subject to the Container Security Initiative (CSI). Established in 2001, the CSI’s aim is to prevent the use of legitimate container trade for acts of terrorism. CSI requires carriers to provide consignment details to US authorities 24hours prior to departure. The CSI programme now has 58 ports in its fold, including most major EU container ports. Most CSI ports also have US customs officers on site. The USA’s recent Secure Freight Initiative (SFI) builds on the CSI and is currently in a trial stage. It requires 100% of all US bound cargo to be scanned for nuclear and radioactive materials. In the EU the SFI is under trial at the UK’s port of Southampton. Security is also a theme that runs through other, non-customs areas of trade related regulatory activity. DG Transport and Energy issued its communication on “enhancing supply chain security” proposing a regulation on greater protection for all european freight transport against possible terrorist attacks (COM(2006)79 final). EU security provisions specific to aviation (2320/2002/EC), including the “known shipper” concept, and provisions for the maritime and port sector (725/2004/EC) fall under further sets of legislation. Further more, the EU enforces a wide range of trade related prohibitions and restrictions. Examples range from controls as varied as: controlling goods with military applications (1334/2000/EC); stopping trade in torture instruments (1236/2005/EC), conflict diamonds (2368/2002/EC) and materials used in the manufacture of illegal drugs (273/2004/EC); to safeguarding phytosanitary measures (2000/29/EC), veterinary measures (97/78/EC) and marketing standards, like the “organic” label (2092/91/EEC; 94/92/EEC; 1788/2001/EC), or counterfeit and pirated goods (1383/2003/EC). The list does not stop here and there are many more examples, which can be cited as illustrations in how the EU seeks to protect its citizens though controls at the border (Grainger 2007b). All member states are obliged to implement these controls. The resulting complexity and overlap between various security focused initiatives in international trade is described by some as “security spaghetti” (e.g. Grainger 2007a; Annex I).

2.2. A EU Paperless Trade and Customs Environment In July 2003 the EU Commission (DG TAXUD) presented a vision for a “paperless trade and customs environment” (COM(2003)452 final), subsequently supported by a Council Resolution on 5 December 2003 (2003/C305/01) and jointly adopted by the

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European parliament and the Council on 15 January 2008. The vision is commonly referred to as the “electronic customs initiative” (TAXUD/477/2004, 2007) and includes a complete overhaul of EU customs legislation. This includes the recently added Security Amendments to the Customs Code (648/2005/EC; 1875/2006/EC), and further down the time-line, a more comprehensive effort towards a Modernised Customs Code, with the purpose of offsetting the additional burden created by security provisions as well as increasing efficiency and control. The Modernised Customs Code was adopted subsequent to the European Parliament's vote of 19 February 2008 in second reading. The original vision for a paperless trade and customs environment, set out by the Commission in 2003 (COM(2003)452), has seven key features. The seven key features that were proposed in 2003 are as follows:

Since the Commission’s communication of the original vision back in 2003, the electronic customs initiative’s has been rolled out within a framework of more narrowly defined project facets. These facets are described, with reference against a time-line, in an annually updated document called the Multi-Annual Strategic Plan

1. All customs and trade transactions are to be handled electronically and IT systems in each member state ought to offer traders the same facilities and be fully inter-operable; seemingly operating as if they were one single system.

2. All import and export compliance requirements are to be channelled through one single entry point / gateway.

3. The electronic exchange of declarations, including required supporting information and accompanying documents, would become the norm. Traders ought to be able to lodge declarations and notifications directly from their own IT systems.

4. The electronic transmission of harmonised data through common interfaces will allow traders to avoid the duplicate submission of similar data to other, non-customs agencies (e.g. for VAT, Excise, veterinary and other procedures). With reference to the Single Window concept traders will have to provide data only once, irrespective of the number of member states involved in the shipment.

5. Existing customs procedures are to be simplified and reduced from thirteen to three: importation, exportation and suspensive regimes.

6. The merger of existing procedures would allow the use of single guarantees for all procedures, including VAT and Excise.

7. The Single European Authorisation (SEA) would no longer be subject to bi-lateral agreements between member state customs administrations, and permission for central simplified clearance would be granted by the customs office responsible for the place where the trader is established, holds his main accounts or performs his main economic activities.

(COM(2003)452, EUROPRO and Grainger 2004)

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(MASP) (TAXUD/477/2004, 2007). The sum of the MASP components aims to deliver the legislatively defined (or anticipated) requirements of the Security Amendment to the Customs Code, the Modernised Customs Code and their implementing provisions. Projects falling under the MASP include (Figure 1):

• the New Computerised Transit System (NCTS, pre-dating the electronic initiative);

• a Risk Management Framework and an Economic Operators’ Registration and Identification System (EORI)

• the Export Control System (ECS) and Import Control System (ICS), to be followed by the Automated Export System (AES) and Automated Import System (AIS);

• an upgrade to the NCTS to incorporate TIR-procedures; • an Integrated Tariff Environment, a EU Customs Information Portal and a

Single Electronic Access Point Few would fault the original vision’s aspirations for an integrated trade and customs environment and business interest groups have in large been very supportive. However, as will be outlined later (on page 20), many business stakeholders – and customs administrations – have concerns about how this customs reform project is rolled out, the underlying costs and value to traders and security.

Figure 1. MASP Rev. 8 - A Staged Approach Towards Implementation

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2.3. WTO With ever falling tariff levels, the non-tariff area and trade facilitation in particular is gaining considerable policy momentum with the multilateral framework of the WTO. Trade facilitation was first raised at the 1996 WTO ministerial meeting in Singapore and adopted as part of the four “Singapore issues” in the 2003 Cancun ministerial meeting. The four Singapore issues are trade facilitation, transparency in government procurement, investment policy and competition policy. While the Singapore issues faced much resistance, especially from the developing world, trade facilitation survived. Tied to GATT Articles V, VIII and X – covering the freedom of transit, fees and formalities, and publication and administration of trade regulations – it is generally seen as a relatively un-contentious issue and has the support of most of the developed and developing world. Negotiations on trade facilitation commenced in 2004 and although a significant degree of consensus has been found, agreements are dependent on the wider Doha trade round negotiations. Scope and content of trade facilitation measures under negotiation have been summarised in a WTO compendium (WTO 2007). Themes include amongst others: provisions for advanced rulings and appeal procedures; discipline on fees and charges; specifications for publishing rules and procedures; the single window concept; use of risk management techniques and post clearance controls; and use of simplified procedures for suitably authorised persons. Closely tied to trade facilitation negotiations are requirements set by developing countries for capacity building and technical assistance. Donor funding in the wider area of aid-for-trade, including trade facilitation focused projects as well as more expensive infrastructure projects (e.g. roads and ports), has been markedly stepped-up. Between 2002 and 2005, donors committed on average $21 billion per year on more narrowly defined aid for trade projects. This included $11.2 billion to build economic infrastructure, $8.9 billion to promote productive capacities (including $2 billion for trade development), and $0.6 billion for increasing the understanding and implementation of trade policy and regulations (OECD and WTO 2007). The EU has pledged an annual spend on aid-for-trade worth $2 billion from 2010 onwards (Peter Mandelson, Louis Michel et al. 2007). The WTO and OECD record a growth from $101 million in 2000 to $391 million in 2006, in spend on trade facilitation specific projects (WTO/OECD 2008). As already outlined in the introduction, benefits resulting from trade facilitation initiatives are expected to be high. The OECD calculates that each 1% saving in trade related transaction costs yields a world-wide benefit of US$43 Billion (OECD 2003).

3. International Supply Chains and Trade Procedures This paper has described a complex regulatory environment with a wide range of trade procedures. Trade procedures cover the areas of revenue collection, safety and security, environment and health, consumer protection and trade policy. For most businesses the commercial arrangements involved in moving goods across borders are no less complex. Business supply chains tend to have a number of operational steps. Prior to export this includes packaging, storage, haulage to the port, port entry and loading onto a vessel. Once shipped to the port of destination operations tend to involve the entry into the port of arrival, release from the port, delivery to the buyer, unpacking, storage and after-sales services. Depending on the trading terms between

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buyer and seller, contractual responsibility for the transaction can lie with one or the other party, or it can be split anywhere along the way (ICC 1999). Typically, the trade of goods will involve a wide range of intermediaries and service providers (Figure 2) which add to the cost of conducting trade. Intermediaries supporting trade movements include: shipping- and airlines, express carries and postal services, trucking and haulage companies, railway companies, logistics service providers, freight forwarders, customs brokers, banks and finance companies, insurance companies, seaport and airport operators, international rail-terminal operators, inland container port operators, stevedores, cargo handlers and handling agents, warehouse operators, transitshed operators, independent testing and inspection companies, port community system providers and specialist IT service providers (SITPRO and Grainger 2008). Most intermediaries are likely to further sub-contract elements of their activities (e.g. a freight forwarder is likely to subcontract elements of his operations to other freight forwarding companies as well as draw on the services of independent hauliers, cargo consolidators, packers, specialist brokers and shipping lines). Within international supply chain operations it is unusual for any one single party to have immediate knowledge of all operational steps. For example, an exporting trader may know what goods he has consigned to his overseas customers. However, it will be his logistics partner who knows which containers have been used and how much the shipping line is charging for transport. The shipping line knows on which vessel the container has been shipped and when the container is expected to arrive. The overseas agent knows the specific requirements for clearing the goods at the point of import. The overseas customer knows what he has paid for the goods and when he took delivery.

Seller

$

$

$

BuyerCountry A Country B

Global Freight Forwarding Company / Transport Integrator

Local Freight Forward Shipping Line Local Freight Forward

Local Freight Forward

Local Haulage Company / Trucker Airline Line Buyer’s own Truck

Local Haulage Company /

Trucker

Local Freight ForwardCustoms Broker Shipping LineShipping

Agent

Seller’s own Truck

Global Freight Forwarding Company / Transport Integrator Bank

Shipping Line Third Party Logistics Service Provider

Local Haulage Company /

Trucker

Local Freight Forward (B)

Local Freight Forwarder (A)Airline LineBank Customs Broker Customs

BrokerBank

Port StevadorePackaging Company

Inland Port or Warehouse

Shipping Line

Port OperatorConsolidator

Local Haulage Company /

Trucker

Customs Broker

Rail Road / Train Operator

Local Haulage

Company / Trucker

Warehouse

Local Freight Forward

Transit Shed

Free Zone or Customs

Warehouse

Source: own practitioner observations; interviews

Shipment

(Grainger 2007)

Figure 2. Examples of intermediary combinations in trade transactions

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3.1. Trade Documents and Systems A wide range of documents and information must be prepared to enable import and export clearance. In the EU this includes a) customs declarations, b) supporting documents for non-customs controls that are tied into customs controls, and c) further sets of documents that are necessary for non-customs controls outside the umbrella of customs declarations. Depending on how the trade transaction is structured, the burden and cost of supplying information will fall on the seller, buyer, or (more commonly) on one or many of the employed intermediaries. Figure 3 is based on research by Andrew Grainger (2007b) and illustrates some of the documentary requirements necessary for imports into the UK. Figure 4 shows some of those more commonly used for export. Arrangements for trade documents will be similar in other member states. The figures show document requirements – or their electronic equivalents – in the “documents” column (on the left), and the associated issuing or controlling authorities in the right “controls” column.

Documentary Requirement for Imports into the UK from 3rd Countries

Documents Control

Rel

ated

act

ivity

und

er

Cus

tom

s C

ontro

lN

on-C

usto

ms

rela

ted

activ

ityC

ore

Cus

tom

s ac

tivity

Declarant Customs ReleaseCustoms Control

DEFRA Plant Health

Inspectorate

Forestry Commission

Organic Certificate Port health Authority

Veterinary Certificate (CVED)

Import Licences (Trade Policy)

Phytosanitary Certificate

DEFRA Horticulture and

Marketing Division

Food Hygiene Certificates

Customs Declaration (SAD)

Certificate of origin

Value Declaration

Preferential Origin (e.g. EUR1)

Excise Movement Certificate

CITES Certificate

Wood Packaging Certificate

Conformity Certificate

Parallel Declarations Outside of Customs Control

Customs and Non-Customs Support Documents

Documents Presented to Non-Customs Agencies

Transit Documents (e.g. T1, T2 or T5)

Dangerous Goods Declarations (Air)

Vehicle Weight Certificate (Road)

Transport Operator

HM Immigration

Immigration Documents

Declarant

Import Licences (Product Controls)

Dangerous Goods Declarations (Sea)

Dangerous Goods Declarations (Rd.)

Dangerous Goods Declarations (Rail)

Vehicle Licences Operator Licences

Banking Documents

Third Country Documents

Civil Aviation Authority

Maritime Coast Guard Agency

Trading Standards

Summary Declaration

Relevant Pre-notifications

Submit

Health & Safety Executive

Medicines. & Healthcare Prod.

Reg. Agency

Medicines. & Healthcare Prod.

Reg. Agency

Police

Port Authority

Declarant

Submit

Customs Pre-notification Shipping Manifest

Figure 3. Documentary requirements for imports

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Documentary Requirements for Export out of the UK to 3rd Countries

Documents ControlU

K D

ocum

ents

to A

id

Impo

rt in

3rd

cou

ntrie

sN

on-C

usto

ms

Rel

ated

D

ocum

ents

Fre

quen

tly

Req

uire

d to

Effe

ct E

xpor

tE

xpor

t Con

trols Declarant Customs ReleaseCustoms Control

Organic CertificateVeterinary Certificate (CVED)

Phytosanitary Certificate

Food Hygiene Certificates

Customs Declaration (NES)

Certificate of origin

Preferential Origin (e.g. EUR1)

Excise Movement Certificate

Wood Packaging Certificate

Conformity Certificate

Transit Documents (e.g. T1, T2 or T5)

Dangerous Goods Declarations (Air)

Vehicle Weight Certificate (Road)

Transport Operator

HM Immigration

Immigration Documents

Declarant

Export Licences (Product Controls)

Dangerous Goods Declarations (Sea)

Dangerous Goods Declarations (Rd.)

Dangerous Goods Declarations (Rail)

Vehicle Licences Operator Licences

Banking Documents

Third Country Documents

Civil Aviation Authority

Maritime Coast Guard Agency

Health and Safety Executive PSI Companies

Rural Payment Agency (for CAP

refunds)

Operator Licences

Medicines. & Healthcare Prod.

Reg. AgencyPolice

Export Licensing AuthoritiesIssues

Customs

DEFRA Plant Health

Inspectorate

Forestry Commission

Local Authority

DEFRA Horticulture and

Marketing Division

Customs

Chamber of Commerce

Issues

Issues

Third country Registration Docs.

Declarant

Support Documents

Figure 4. Documentary requirements for export

The consolidation of information necessary to prepare and submit information – be it electronic, by fax, telephone or paper – is a complex operation in its own right. It involves all actors, ranging from the importer and exporter to the transport and port operators. In the old days much of the information necessary to prepare and submit documents was consolidated with the help of post, fax and express services. Increasingly, information is exchanged through use of electronic channels such as EDI and web-based technologies, though the legacy of paper based documents remains strong – especially in the non-customs area. Figure 5 maps out the extent of electronic and paper based communication necessary to clear goods though CHIEF, the UK’s customs computer. Arrangements will be similar in other member states, though the degree of reliance on electronic systems and use of paper documents is likely to vary significantly.

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CHIEF

Customs Bureaus (Brokers)

Shipping Line

Systems

Trader

Paper Support Documents

Freight Forwarder’s Computer Systems

HMRC

Non-Customs Government

Agencies

Source: consolidated interview findings

Port Systems(CSPs)

Figure 5. Trade Systems in the UK

3.2. Trade Transaction Costs Faced with the operational challenge of meeting regulatory requirements, traders frequently complain about excessive documentation requirements, lack of automation and use of information technology, incompatible technologies, lack of transparency in requirements and objectives, inadequate procedures and operating practices as well as lack of modernisation. In an environment where trade-tariffs are falling and competition is increasing, businesses are becoming increasingly sensitive to trade-related transaction costs (Staples 1998; Grainger 2003). Good supply chain management practice dictates that trade transaction costs are to be kept to a minimum. Failure to do so is penalised with competitive disadvantage. Transaction costs can be direct or indirect. Direct costs consist of: compliance costs; and charges and fees for goods related services. Compliance costs are those costs immediately associated with collecting, producing, transmitting and processing required information and documents. Charges and fees include the expense of setting up and financing customs bonds and guarantees, laboratory testing and examination expenses, inspection fees, stamp charges, service fees levied by shipping lines and banks, labour and handling charges to deliver goods to inspection facilities and to present goods, storage charges and possible out-of-hours surcharges. Further direct costs are incurred where third party intermediaries charge a service fee. Indirect costs result from: delay at the border; uncertainty in the environment; and most of all, the loss of business and opportunities. Typically these can be associated with inadequate

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or contradictory documentation, congestion at inspection facilities, lack of staff (especially outside normal working hours) and unforeseen emergency measures (e.g. bad weather, damage to infrastructure). They also include any additional handling, storage and demurrage charges associated with delay (OECD 2003; Grainger 2007c).

3.3. Economies of Scale A large proportion of compliance costs are fixed. Businesses wishing to make customs and trade declarations need to employ specialist staff and also need to procure and maintain dedicated IT systems. Early research by Verwaal and Donkers (2002; 2003) in the Netherlands and Grainger (2007b) in the UK suggests that economies of scale are at work. These allow businesses with large volumes of trade to spread fixed costs across a large volume of transactions. In contrast, occasional or smaller traders with low transaction volumes find it difficult to justify the fixed costs investments necessary to make their own declarations. Thus, these companies are more likely to employ the services of specialist agents – such as customs brokers and freight forwarders. A reduction of transaction costs will have a direct impact on the business models of intermediaries. If government is able to reduce trade transaction costs, smaller traders will have an incentive to bring compliance operations in-house. In contrast, if fixed cost requirements should rise (e.g. through the introduction of new security controls), it is more likely that small and occasional traders will chose to become more reliant on agents and intermediaries. At present, anecdotal evidence suggests that a simple customs declaration can cost less than €10 for an express carrier with a uniform operations model and very large economies of scale. In contrast, larger manufacturers (500+ employees) with more complex operations and customs requirements have reported in confidence that declaration costs can range between €30 and €120 per customs transaction (Grainger 2007b).

4. Trade Facilitation The concept of trade facilitation recognises that transaction costs in international trade are undesirable. Trade facilitation ideas have been part and parcel of trade agreements since the very beginning. Even today many European medieval towns (e.g. Bern) keep on display, at the town gates, the unit measures and rules applicable for trade on their market squares. Within the last decade trade facilitation has become a topic of substance within a number of international organisations, most prominently at the WTO, WCO and UN/CEFACT. Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory control objectives. This paper has already made reference to the WTO who define the term trade facilitation as: “The simplification and harmonisation of international trade procedures” and trade procedures are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade” (WTO 1998). Subsequently, many practitioners define trade facilitation as the simplification, harmonisation, standardisation and modernisation of trade procedures. However, other definitions go a little further. For example, UN/CEFACT defines trade facilitation as "the

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simplification, standardization and harmonisation of procedures and associated information flows required to move goods from seller to buyer and to make payment" (OECD 2001). By emphasising payment procedures, international financial institutions are introduced as a distinct and separate party. Occasionally, the term is also used more literally, and is extended to mean the improvement of transport infrastructure (i.e. transport facilitation), removal of government corruption, reduction of customs tariffs, removal of inverted tariffs, resolution of non-tariff trade barriers, export marketing and export promotion. The list of international recommendations and instruments is long and covers a wide range of topics (Table 2). Helpfully, the UN/CEFACT and UNCTAD produced a summarising compendium (UN/CEFACT and UNCTAD 2002). Within the context of security, trade facilitation has been discussed in a somewhat narrower context. Typically it includes the use of risk management techniques, the development of partnership programmes, the preferential treatment of authorised firms and individuals, the standardisation of data requirements, cooperation and mutual recognition of controls between agencies and governments, and the replacement of paper documents with the use of electronic reporting systems (Grainger 2007c). The underlying regulatory objective of most newly added security regimes is to identify security risks before goods move by looking at the full length of supply chain operations rather than just the cross-border transaction. Subsequently, customs and other agencies are attempting to insert themselves into business supply chain operations (Figure 6). The recent avalanche of security in trade initiatives is seen by many as a result of this effort (Grainger 2007a). Holding against the – often uncoordinated – attempt to add layers of security to trade controls, trade facilitation proponents argue that trade facilitation principles and recommendations can be utilised to tighten controls as well as reduce the overall transaction cost burden to trader. Trade facilitation can be achieved through a number of ways. Typical recommendations offered by practitioners include the 18 points detailed in 4.1 (Grainger 2007c).

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Table 2. Scope covered by international trade facilitation recommendations

International trade facilitation recommendations cover: • Trade procedures • Customs and regulatory bodies • Provisions for official control procedures applicable to import,

export and transit including: general arrangements, customs controls, official documentation, health and safety, financial securities, and transhipment

• Provisions relating to transport and transport equipment, including: air transport; sea transport; and multimodal transport

• Provisions relating to the movement of persons • Provisions relating to the management of dangerous goods • Provisions relating to payment procedures • Provisions relating to the use of information and communication

technologies • Provisions relating to the commercial practices and the use of

international standards • Legal aspects of trade facilitation

(UN/CEFACT and UNCTAD 2002)

Procurement Manu-facturing Factory Distribution CustomersSuppliers Endusers

Bord

er

Bord

er

Bord

er

Bord

er

Government Actors

Bord

er

Bord

er

(Grainger 2007a)

Figure 6. Government Actors - a New Thread Running Across the Supply Chain

4.1. Trade Facilitation Recommendations

1. Simple Rules and Procedures The core argument here is that that if rules and procedures are kept simple, their administration and compliance should correspondingly require less effort and less costs. The cross-border environment with its rules, procedures and institutions is complex. In contrast, the pursuit of simpler rules and procedures is seen by many proponents of trade facilitation as a means to creating an environment in which transaction cost problems do not carry the same scale as they currently do. Simpler

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rules and procedures are also seen as a means to ensuring tighter and more efficient controls.

2. Avoidance of Duplication The aim here is to avoid duplication of controls and procedures. Given the many regulatory bodies with an interest in controls, the alignment of controls and procedures between administrations requires extensive efforts. The overlap between recently added security controls (e.g. the Security Spaghetti detailed in Annex I) serves as a negative example. This objective also includes the idea of mutual recognition of controls at multilateral and bilateral levels. For example the information required for export declarations in one country could be recycled for import declarations in another. Another variant of this objective is for regulatory bodies to recognise a businesses’ internal control measures (e.g. for audit, finance or quality control purposes) in lieu of controls and inspections enforced by government executive agencies. For example, many EU based companies fear severe repercussions from consumers and shareholders should they fail to meet their expectations. Subsequently, they operate very tight internal control systems. These are usually more comprehensive than those mandated by government. Nevertheless, these companies still need to comply (at a cost) with the government specified procedures. Industry examples can be found in the food, pharmaceutical, arms and toy industries.

3. Memoranda of Understanding (MoUs) MoUs between business and government parties and among executive agencies (e.g. customs and veterinarians) or governments, help clarify the control objectives and can also be used as instruments to guide cooperation. They often offer greater flexibility than narrowly defined legislative instruments and are therefore more accommodating of dynamic operational needs. Also, they can provide very cost-effective alternatives when compared to the institutional effort associated with drafting and implementing new regulations.

4. Alignment of Procedures and Adherence to International Conventions Essentially this is about bringing consistency in trade procedures as enforced by individual states and regions. The more aligned these are, the less traders need to duplicate effort in developing capabilities, systems and compliance procedures. One of the key international instruments is the Kyoto Customs Convention (WCO 1999). However, where a common regulatory framework is not agreed upon, an alternative model is for governments to formally recognise the control objectives of their trading partners. Where governments are satisfied that the institutions of their trading partners meet their regulatory objectives, even if they use different procedures and methods, there is no need for them to duplicate controls (OECD 1994).

5. Trade Consultation It is unlikely that legislators have full knowledge of commercial and operational practices. Most proponents of trade facilitation therefore argue that for legislation to be drafted in a way in which its objectives are met with the least impact on operations and cost, extensive consultation efforts with traders are a necessary prerequisite (e.g. through user and policy groups or national PRO committees).

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6. Transparent and Operable Rules and Procedures Governing rules and procedures are often perceived to be poorly or ambiguously drafted, adding cost and causing confusion. For example, key definitions such as “consignment” and “shipment” in EU veterinary and plant health legislation do not match general commercial practices (Lacors 2003, p.5). Occasionally, rules and procedures may not even be implemented in any practical manner, placing costly obligations on parties who are unable to meet them. For example under the UK’s Anti Terrorism Act (2000) and its Information Order (2002) it is theoretically possible for Government executive agencies to ask shipping lines and their agents to provide specific cargo related information to which they have no access1. Similarly, IT systems take time to develop. Where system requirements have been communicated too late or are not clearly defined and documented, implementation and transaction costs are likely to escalate significantly. Consequently, proponents of trade facilitation will make a strong case for any new proposals, policies and regulations to be pre-notified at the earliest possible stage.

7. Accommodation of Business Practices There are many variants on this theme, but in principle it hinges on businesses’ desire for regulatory controls and procedures to fit their operational requirements. One of the most significant aspects of this theme includes ideas revolving around inland clearance – allowing goods to leave the port where checks and controls can be conducted more cost-effectively as, for example, when unloading containers at the trader’s premises. Other themes look at the use of open information standards for Customs’ IT systems that integrate easily with existing commercial software, rather than the de facto requirement for using the propriety standards imposed by government system suppliers (as is currently the practice in many member states).

8. Operational Flexibility Although consistency in enforcement (a “level-playing field”) is desirable for fairness reasons, a degree of operational flexibility is considered necessary by many proponents. Infrastructure and systems can break down or be placed under stress due to unforeseen circumstances (e.g. bad weather, strikes, fires, power-outage, military mobilisation etc.). In such instances traders and operators wish to draw on some degree of leniency, if controls in the prescribed manner are not practical. Similarly, operational environments can vary from location to location and rigidly formulated procedures may not always work in the prescribed manner. Again, traders and operators may ask for a degree of regulatory flexibility.

9. Customer Service Provisions for Government Administrations There are numerous concepts of customer service that proponents of trade facilitation seek to encourage. This fits in very closely with GATT Article X negotiations (GATT 1947; 1994). It includes the use of Charter standards committing government agencies to pre-specified service levels. For example customs may agree locally to clear goods within x-amount of hours and keep the same office hours as the port operator. Other service provisions might include dedicated help-lines, an up-to-date website, a free-to-use customs tariff, training events and open surgeries.

1 Usually this information is held by the shipping lines’ customers, who in most instances will consider it as commercially sensitive.

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10. Mechanisms for Corrections and Appeals Efficient correction and appeals mechanisms allow traders to take appropriate actions in response to the decisions taken by individual enforcement officers. Proponents of trade facilitation will argue that mistakes do frequently occur. For example, an “I” and a “1” or a “B” and an “8” can easily be misread, leading to erroneous declarations (e.g. through incorrect reference numbers). Similarly, given the inherent complexities in international trade, proponents of trade facilitation will argue that it is easy for traders as well as officials to be unclear about governing procedures and requirements. In contrast, efficient correction and appeals mechanisms allow resulting costs to be kept to a minimum (where errors and mistakes have been made unintentionally or in good faith).

11. Fair and Consistent Enforcement The worry here is that where rules and procedures are applied inconsistently, it diverts traffic from the most direct route and also distorts competition. Some industries will also make cases for ensuring that regulations do not affect them unfairly. For example, lobbyists working for express parcel carriers frequently lament that national post-office companies, who offer similar services, enjoy significant customs privileges that other parcel operators are unable to take advantage of (e.g. see WCO and UPU 2004).

12. Proportionality of Legislation and Control to Risk Here it is held that control regimes should not be disproportionate to the risks that they aim to provide protection against. For example, as customs tariffs fall, it becomes increasingly difficult to justify the expense of drafting legislation and procedures that seek to collect them. However, a more contentious area in this respect is the threat of terrorism. Given the uncertainty of risk to security from international trade, it is unclear to most parties involved in control and operations how far security measures should go2.

13. Time-release Measures The recommendation by proponents of trade facilitation here is to measure the time it takes for goods to clear through the regulatory process. With such measures in place, interacting parties can then work together at improving their performance. In this context Charter standards, where goods are guaranteed to be cleared within a certain timeframe, are frequently propagated.

14. Risk management and Trader Authorisations The idea here is to focus government resources and efforts on illegal activity, while freeing up the legitimate trade from regulatory burden. Rather than enforcing blanket controls at set quotas (e.g. 100%, 50% or 5% of all traffic), control levels are determined in proportion to the perceived degree of risk. Traders can seek to build a relationship of trust with executive agencies and in turn enjoy lower risk profiles and physical disruption through checks. Moreover, where traders are deemed to be trustworthy, they may be given further customs privileges, by being granted an authorisation, which includes simplified customs procedures or other accommodating operational and fiscal benefits. While risk based controls are provided for by EU customs legislation, this is not necessarily the same in other areas of trade related controls. For example, port health officers at UK ports are likely to complain that they 2 In this context one may wish to consider Donald Rumsfleld’s famous remarks on the “known knowns, known unknowns and unknown unknowns” (Rumsfeld 2002).

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are forced by legislation to repeatedly check the same cans of tuna, even if they come from a very reputable food importer and have never failed inspections. From their point of view, time and effort would have been better spent at targeting more risky importers.

15. Standardisation of Documents, Data-sets and Electronic Messages Providing the backbone to trade facilitating electronic systems, common standards for documents and their electronic equivalent are generally considered to be essential prerequisites (Mulligan 1998). For example, the harmonisation of document layouts will increase familiarity and reduce levels of error (UN/CEFACT 1981). The document harmonisation project started with the advent of photocopiers, allowing users to transpose information contained on one type of document (e.g. an invoice) onto another (e.g. a customs declaration). In the electronic world, the same principle applies. If information is communicated in the same way (e.g. by XML or EDI), it can be read more easily by other systems, greatly increasing scope for interoperability. Although most EU customs documents are aligned to international document standards, other agencies – like for example in the veterinary and phytosanitary area – still have some way to go. Clarity on data elements contained within documents (or their electronic equivalent) can also reduce confusion. For example, in the English-speaking world it is customary to notate decimals by using a decimal point (“.”) and separate units of thousand by a comma (“,”). In contrast, continental EU member states use the comma as a decimal point and the decimal point as a separator for units of thousands. Thus 1,000 tonnes without clarification on the notation can be read as one thousand tonnes or just one tonne3. Agreement on common standards avoids repeated typing of information into document and information systems, reduces error rates, improves the quality of data, and provides for greater interoperability between systems.

16. Automation The introduction of electronic customs clearance systems is often described as revolutionary (Appels and de Swielande 1998). Many traders are familiar with the benefits of automation within their own organisations and wish to use electronic means when interfacing with government agencies. Some even advocate “pull” technologies where administrations help themselves to required information, thus freeing them from having to actively make any formal declarations (though this would require changes to existing legislation).

17. The Single Window Probably one of the biggest single issues in the field of trade facilitation is the concept of the single window, which looks at enabling traders to submit trade related information once at a single entry point, saving them having to interface with a multiple of different government executive agencies (UN/CEFACT 2004). Usually single window ideas propagate a high use of electronic systems, eliminating requirements for paper and providing an infrastructure for greater integration among the many government agencies as well as between government and business actors.

3 Practitioners can give many further examples including the same name for different unit measures (e.g. tonne and ton), different place names for the same location (e.g. Geneva, Genève, Genf and Ginevra), inconsistencies between reference numbering systems, confusion between generic and trade names or literal language translations.

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The single window system in Singapore has been particularly inspiring. It links multiple parties involved in external trade transactions, including 35 government institutions, to a single point of transaction for most trade documentation tasks. (Applegate, Neo et al. 1993; 1995; Wulf 2004; International Trade Institute of Singapore 2005).

18. International Electronic Exchange of Data Numerous initiatives are being pursued to help the exchange of trade data between governments and business. For examples, shipping lines use their booking systems to collect data from their customers. This data is then reused and consolidate into a shipping manifest, which in turn can be recycled into a pre-arrival declaration for customs clearance purposes (as is currently the practice at UK container ports). However, agreement on common standards is often a necessary prerequisite for such exchange of data. Another example of electronic transmission is provided by New Zealand. Their veterinary service places its veterinary certificates on a password protected website. Instead of having to ask New Zealand suppliers to send the documents by courier, overseas traders are given the facility to download and print the certificate directly from the official website.

5. Striking the Right Balance At the heart of examining whether the right balance between control and trade facilitation has been struck, is to understand official control and business stakeholder requirements. On the control side of trade operations, the aim to identify and intercept any goods posing a risk before harm is done. To do this, executive agencies need to distinguish between legitimate trade and any clandestine activity. Trade procedures provide a means for traders and all other parties involved in moving goods, to declare their legitimate intentions. Upon successfully identifying and excluding legitimate trade from further investigation, executive agencies are free to focus their resources on targeting clandestine and illegal activities. Thus, efficient trade procedures free up resource that can be redeployed to tighten controls. With growing trade volumes and limited resources at the disposal of customs and other executive agencies, the ability to managing trade procedures efficiently has a direct bearing on their effectiveness to intercept and prevent the clandestine movement of goods. On the compliance side of trade operations, legitimate businesses want to show that they are compliant with the least amount of costs and disruption to their operations. Trade facilitation, such as the 18 concepts previously outlined, help achieve more efficient trade procedures yielding benefits for both traders and those executives tasked in controlling trade and movement of goods. However, the challenge in implementing trade facilitation ideas can be extensive. Considering the complexity of current arrangements, legacy systems and number of different types of stakeholders in both business and government (see Annex II) a multiple of different, often conflicting, interests are at play. Although the overall objective of trade facilitation is to drive out transaction costs, stakeholders are affected in different ways and not all are likely to benefit in the same way. Some may even be resistant. Subsequently trade facilitation is at once a political, economic, business, administrative, technical and technological issue (Butterly 2003).

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5.1. Conflicting Interests There are many examples of conflicting interest which hamper successful implementation of trade facilitation initiatives. Sources of conflict may be found between: government and business stakeholders; local, national and international interests; government departments (e.g. customs and veterinary inspectors); policy priorities; industries; countries (e.g. who have different legacy arrangements or IT system suppliers); and between liberal and protectionist trade policy tendencies. The following paragraphs offer a few illustrations. Conflicting interests can be observed between the public and private sector stakeholders. Most trade and customs procedures enforce a specific obligation on a trader. The relationship is defined as one between compliance and enforcement. While the trade facilitation rhetoric is strong in both camps, the operational practices of “die-hards”, who assume that every trader is a potential smuggler, remain all too visible. Many enforcement officers have been trained in an environment where the worst is always assumed. They find it difficult to acknowledge legitimate trade and reduce their degree of heavy handedness. Perhaps unsurprisingly, in a survey of UK importers 19% (N=131) of respondents admitted to actively diverting traffic cargo to an alternative port because of actual or perceived differences in the enforcement of rules and procedures (Grainger 2007b). Similar re-routing of traffic due to differences in the enforcement of procedures is likely to be systematic across the EU. Further conflict may arise from the incompatibility of procedures with local operational practices. For example, with the UK’s introduction of x-ray equipment at ports, customs mandated port operators to deliver goods to the x-ray facilities. Where port operators also acted as stevedores, for example in container ports, this was not much of a problem. However, in RO/RO and ferry ports the port operators do not own any handling equipment. At these ports it is customary for trucks to drive straight off the vessels. With the introduction of x-ray examination equipment truck drivers can no longer just leave the ship and drive off the port. Where selected, they need to divert to the customs x-ray facility, causing delay – sometimes compounded by further delay subsequent to restrictions on maximum working and driving hours. Conflict of interests can also arise through overlaps between regulatory regimes and amongst government departments. The recent avalanche of security requirements is a particularly illustrating example of this problem. As outlined earlier, security interests cut across government departments. Similar procedures with similar objectives are being enforced by different agencies in very different ways. The resulting overlap of controls and procedures is reminiscent of a bowl of spaghetti (Annex I). Overlapping and duplicating controls – as opposed to rationalising and aligning them – adds to the regulatory burden. A similar problem that causes conflict relates to different political priorities. For example, security can be neatly presented as a political priority. In contrast, trade facilitation – even if it serves security in trade objectives – is a less tangible political driver. To illustrate this point, the EU’s electronic customs initiative originally had trade facilitation at its very heart (COM(2003)452 final). However, faced by political pressures to fast-track supply chain security, the project began with the Security Amendment to the Customs Code (648/2005/EC). While the provisions of the Security Amendment to the Customs Code are now being implemented, benefits

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promised under the original vision for a paperless trade and customs environment remain in the making. Conflicting and opposing industry interest add to the difficulty of implementing trade facilitation recommendations. As Annex II highlights, business stakeholders are represented by many different trade associations at the national (e.g. UK customs’ consultation groups), regional (e.g. DG TAXUD’s Trade Contact Group) and international policy levels (e.g. WCO’s Private Sector Council Group) – each with their own specific interest. Depending on their sector specific interests, positions will vary. Some associations will have vested interests to protect. They will also have different preferences on outcomes (e.g. standards, use of information technology etc.). Their behaviour can often be explained by their sector specific exposure to costs, benefits and opportunities. The evaluation of presented views can be a daunting task. Policy makers require intimate knowledge of how the trade environment functions and what the underlying competitive pressures are. Given the complexity of commercial and regulatory arrangements, this knowledge can be difficult to obtain and is seldom found in any one single organisation. Having identified this problem, the UNECE recommends the creation of dedicated trade facilitation bodies – so called PRO committees (UN/CEFACT 1974). Examples of established PRO organisations can be found in the UK and Sweden.

5.2. Business Stakeholder Concerns Specific to the Electronic Customs Initiative

This paper does not attempt to offer a full fledged evaluation to the EU’s electronic customs initiative – that would be a separate project and outside the scope of this paper. However, some lessons can be learnt by reflecting on concerns that have been informally gained through interviewing trade representatives. They prominently highlight institutional problems that make the successful implementation of EU wide trade facilitation measures difficult. The gist of the electronic customs initiative has already been outlined in this paper (see page 3). To recap, the initiative aims to simplified customs legislation, streamlined customs processes and procedures and convergence of IT systems. While the original vision placed trade facilitation principles at its heart, the subsequent programme’s initial driver has been security. EU legislation and decisions make explicit reference to several trade facilitation principles and concepts, including: centralised clearance, allowing traders to centralise and rationalise compliance; risk-management; the use of simplified procedures; international standards; and the single window concept. This commitment trade facilitation in the original vision, as documented in Commission workshops and seminars, was warmly greeted by the majority of relevant EU trade associations. However, as the project is gradually rolled out in a step-by-step approach, many business representatives are quick to point out that much of the original ambitions have been eroded in the name of compromise and search for consensus. Subsequently many of the benefits originally promised to offset the additional burden of security appear faint. Examples of concern include: insufficient benefits for Authorised Economic Operators; a disbelief that member states will be able to achieve interoperability and overcome national differences – effectively creating 27 separate customs systems instead of one single european one; concern in how the MASP has

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been broken down into separate projects despite obvious dependencies; the apparent exclusion of VAT from centralised clearance, thus significant reducing the procedures benefits; and the failure to progress in substance with regards to a fully fledged, EU wide single window system that allows traders to submit information to government executive agencies via one single interface (e.g. see Trade Action Group 2004; UN/CEFACT 2004). Individuals familiar with large scale IT projects sometime question why there is no attempt to develop an open-source solution. A commitment to open-source development would allow member states to share development costs as well as insure greater interoperability. Open source projects are nothing new in the customs world. One such example is ASYCUDA, which was sponsored by UNCTAD and is used in 80 countries – including some of the newer EU member states. A commitment to shared standards and open source could also bring down costs for the private sector, enabling them to recycle some of the open source for developing interfaces with the European customs administrations. Concerns also include a call for a more “hands-on” approach to project management and tallying up the costs and benefits as and when the individual project milestones take shape. Individuals more at home in IT project management complain that systems requirements have not yet been clearly defined. This uncertainty adds significantly to development costs – for both member states, who need to implement customs systems, as well as for traders, who need to develop systems that interface with government systems. Moreover, in the absence of strong central project management it is less likely that one common, fully interoperable European solution is found. Faced by competition from emerging economies like China and India, most EU based businesses will argue that they can ill afford the high trade transaction costs and fragmented nature of the current trade and customs environment. They will also argue that the current shape and form of the electronic customs initiative is neither sufficiently ambitious nor adequately resourced and managed. Recognising these problems, some business groups have recently offered constructive recommendation on how to set the vision back on track (e.g. SITPRO 2007).

5.3. Institutional challenges The gradual rolling out of the MASP has exposed several institutional challenges, which observes will argue, lies at the heart of eroded ambitions in search for consensus and compromise. Although the EU is a Customs Union, the customs and trade environment is currently driven by existing national practices, priorities and requirements. Recognising the considerable degree of variance in national practices and their associated costs, the original vision foresaw tighter integration between national administrations through use of new technologies, enabling customs administration (and tying in other agencies where possible), to operate as if they were seemingly one (EUROPRO and Grainger 2004, COM(2003) 452). However, despite common ambitions, the electronic customs initiative tasks each individual member state’s customs administration with meeting the ambitions set out in the original vision. Thus, member state administrations find themselves faced by a number of difficulties. Foremost is the question of authority and capabilities. There are several elements to this challenge.

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Observers of the electronic customs initiative will point out that “trade facilitation” has been replaced with “security” as the main political driver. It was assumed that “security” would secure stronger political support and help overcome differences between the member states. However, this has also led to a mistaken desire of balancing trade facilitation with security instead of identifying trade facilitation as a concept able to achieve both a reduction in trade related transaction costs as well as increase the quality of regulatory controls. Though much of the original trade facilitation ambitions (and good-will from Commission officials) survive, the result is described by many observes as a compromise and missed opportunity. The question of authority also arises where the electronic customs initiative extends beyond the customs domain. As outlined earlier, many different types of government agencies have a stake in trade related controls. However, without strong political support, customs administrations have difficulties enticing other executive agencies, especially where non-customs agencies need to change or amend governing legislation. These problems have surfaced in the area of VAT and Excise and will be just as much of a challenge with veterinary, phytosanitary and other procedures. Another example can be found with the split between “operations” and “policy”, prevalent in many customs administrations. Much of what may be described traditionally as “operational” or “technical” (e.g. collecting information, stamping documents, utilising IT systems) has now become “policy”. The MASP – like many proponents of trade facilitation – sees advances in information technology as an opportunity to overhaul governing policies and legislatively set regimes. This exposes a number of fault lines within member state’s customs administrations. One such fault line is the distance between local customs offices and their headquarters in the capitals. While the former tends to have the day-to-day operational experience (including some knowledge of how improvements can be found), it often is the latter that sits and negotiates in Brussels (and one step removed from day-to-day operations and frustrations). A further example of conflict between “operations” and “policy” is the reliance of customs administrations on their third party IT suppliers. Much of the technical infrastructure used by EU customs administrations has been developed and is maintained by third party suppliers. Subsequently, any project that seeks to overhaul customs infrastructure, like the MASP, requires member state administrations to revisit their contractual arrangements with suppliers. These are often tangled-up in complex public procurement procedures. Moreover, the immediate interests of IT suppliers, often benefiting from exclusive contractual arrangements, might not necessarily be compatible with EU harmonisation and standardisation objectives. A more integrated and harmonised trade and customs environment is likely to expose incumbent suppliers to greater competition and reduced profit margins. A further area of difficulty for the electronic customs initiatives is the coordinated implementation of the programme. Member states have different levels of resources (financial and staff), technical capabilities and experiences. Neither are member state budgets and spending cycles aligned. This makes the delivery of an EU wide project even more difficult and many member states have already slipped, or are threatening to slip, on meeting several of the MASP stipulated time frames. Failure to provide an

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integrated operational environment means that European operating business will have to carry on shouldering the burden and disruption associated with variances between member states. Much of the Security Amendment and the Modernised Customs Code seeks to redefine the relationship between businesses and customs administrations. The underlying vision of the electronic customs initiative recognises that closer alignment between control and modern supply chain management must be found. For many member state customs administrations this is new territory. The supply chain is a commercial construct that is very fluid. For customs to integrate their controls more effectively across the supply chain requires skill and sensitivity to commercial practices. Considering the complexity of trade operations and commercial considerations, awareness of the trade environment and underlying dynamics is something that is not easily obtained. Very few member states have consultation mechanisms as comprehensive as those found, for example, in Sweden and the UK. Similarly, few member states – let alone the EU’s institutions – have well funded trade facilitation bodies dedicated to bringing business and government stakeholders together and identifying how trade facilitation concepts (as the 18 outlined earlier) can be implemented in a win-win way. One final institutional problem worth noting is that although trade facilitation has a strong voice within international organisation, like the WTO, WCO, UNECE, OECD and World Bank, there is no dedicated centre of expertise and knowledge at the European level. Considering the complexity of the trade and customs environment, subsequent transaction costs and trade barriers, relatively little substantiated research has been conducted. There is much awarness of transaction cost problems. However, the trade facilitation agenda has no one single home upon which the EU institutions and member states can draw and look for expertise. The notion that trade facilitation can achieve both improved controls as well as reduce trade related transaction cost – as evidenced by frequent reference to the mistaken need to balance trade facilitation with security – has gradually been lost within the electronic customs initiative.

6. Conclusion The brief for this paper was very wide. The underlying question set when commissioning this paper, was whether the EU has struck the right balance between controlling the flow of goods in order to efficiently promoting the communities interests and protecting legitimate trade. This paper has: provided the reader with an introduction to the regulatory environment; given an up-to-date summary account on trade and security, EU customs modernisation and WTO trade facilitation initiatives; described international supply chain operations and trade procedures; given consideration to trade transaction costs; provide a detailed account of trade facilitation concepts and described how trade facilitation can help reduce trade transaction costs as well as increase regulatory performance (including the area of security); and highlighted stakeholder concerns with current EU customs reform. The paper describes a complex operational environment in which traders suffer many overlapping controls. The recent avalanche of security focused controls has added to their burden. Organisations like the WCO and UNECE have developed and achieved consensus on a number of trade facilitation concepts that can help improve the trade environment. This paper identifies 18 trade facilitation concepts frequently

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propagated by trade facilitation proponents; all of them aimed at alleviating the transaction costs burden whilst recognising the necessity of control. Proponents of trade facilitation hold that these concepts are able to achieve increased efficiency and control for government as well as reduce transaction costs for traders. Thus, it is wrong to weigh-up trade facilitation against controlling the flow of goods. Rather than looking for a balance, trade facilitation helps reduce transaction costs with immediate benefits to executive agencies and to businesses. Governments gain through more efficient procedures and freed-up resources (that can be redeployed to target clandestine activity). Traders benefit from a lessened regulatory burden – which currently is very substantial. The benefits of trade facilitation concepts have not gone unrecognised by trade negotiators. They now form an integral facet within WTO negotiations. Trade facilitation has also been adopted as a subject matter within wider capacity and aid projects. Organisations like the WCO and UNECE have produced realms of recommendations and examples of best practice. Benefits from a successful outcome are expected to be high. As outlined earlier, the OECD calculates that each 1% saving in trade transaction costs yields a world wide gain worth $43 billion. Within the EU, trade facilitation has been placed at the heart of the electronic customs initiative. However, as many trade associations are likely to point out, much of the original ambitions have been eroded in the name of compromise and search for consensus. Concerns are many, especially as many of the promised benefits remain unclear. This failing is mourned particularly by those in favour of eliminating transaction costs and improving efficiency as well as those more aware of competition from the more innovative and the emerging economies. Trade facilitation addresses a problem that involves many different stakeholders, each with their own specific interests. Subsequently, as outlined, the implementation of trade facilitation concepts can face many obstacles. As the example of the EU’s electronic customs initiative shows, striking compromises does not necessary yield the most desirable overall outcome, especially if there are significant external pressures that threaten the EU’s competitiveness – like for instance from China and India with their low-cost labour advantages, or from those economies which are beginning to significantly step-up their efforts in removing wasteful trade transaction costs (e.g. within the APEC region). In contrast, an ambitious trade facilitation programme at home (within the member states and across the EU’s customs union) and internationally (e.g. via WTO negotiations) will reduce waste, free-up economic resources, create business opportunities for EU based businesses as well as tighten control. In trade facilitation these objectives are not exclusive; there is no need for striking a balance between controls and facilitating legitimate trade, both can be achieved.

Recommendation The principle purpose of this paper is to serve as a background document, though recommendations have been encouraged where they point to obvious solutions. Considering recent policy momentum behind trade facilitation – the WTO, capacity building and within the context of supply chains security – there is a strong case for creating a dedicated home within the EU’s institutional framework. At present, expertise that spans both the business and government domain is hard to find. The

25

trade environment is a complex construct and is at once a political, economic, business, administrative, technical and technological issue (Butterly 2003). As the examples in 5.1 and 5.3 shows, there are many conflicting interests and institutional limitations to the successful implementation of trade facilitation principles. The task for a dedicated trade facilitation body would be to help overcome those obstacles. A dedicated EU trade facilitation body would need to have detailed knowledge of trade operations – this includes business and customs procedures as well as all the procedures enforced by other government agencies with an impact on the movement of goods. In order to accumulate this expertise this body would need to be able to bring together business and government stakeholders. It would also need to be in a position where it can commission research to help qualify, evaluate and prioritise the extent of current problems. At present, trade facilitation knowledge at EU level is fragmented (e.g. within the Commission’s DG Trade, DG TAXUD, DG SANCO, DG Internal Market and DG Development) and there are very few coordination mechanisms in place. A dedicated EU trade facilitation body could also operate as an additional resource when implementing EU wide projects that have a direct impact on the trade and customs environment – like for example the remaining stages of the electronic customs initiative. With the right political support, it could also help hold the Commission and member states accountable to meeting trade facilitation objectives, providing less scope for watered down ambitions. Finally, such a body could also help coordinate a stronger EU position at international organisations – like the WCO, WTO and UNECE – where the subject matter relates to trade procedures.

***

26

Annex I

H M R C D e p a rtm e n t fo r T ra n s p o r t

H o m e O ff ic e

U K T ra d e rs a n d th e ir

re p re s e n ta t iv e s

T ra n s p o r t O p e ra to rs P o r ts

D G T A X U D D G T re n

W C O S u p p ly C h a in

S e c u r ity F ra m e w o rk

IM O IS P S C o d e

IA T A K n o w n S h ip p e r IS O 2 8 0 0 0

U S B io te rro r is m

A c t

U S C u s to m s a n d T ra d e P a r tn e rs h ip A g a in s t T e r ro r is m

(C T P A T )

U S C o n ta in e r S e c u r ity In it ia t iv e

(C S I)

E U C u s to m s C o d e

S e c u r ity A m e n d m e n t

U S C u s to m s a n d B o rd e r P ro te c t io n

Im m ig ra tio n a n d

N a tio n a lity A c t

W C O IM O IA T A IS O

T R A N S E C

U S F o o d a n d D ru g A d m in is tra t io n

S e c u r ity m e a s u re s a p p lic a b le o r p ro p o s e d :- E U C u s to m s C o d e S e c u r ity

A m e n d m e n t (m a n d a to ry 2 0 0 9 )

- IS O 2 8 0 0 0 (o p t io n a l)- C T P A T (O p tio n a l)- B io te r ro r is m A c t

R e g is tra t io n (U S A tra d e o n ly )

- IA T A K n o w n S h ip p e r (o p tio n a l)

S e c u r ity m e a s u re s a p p lic a b le o r p ro p o s e d :- E U C u s to m s C o d e S e c u r ity

A m e n d m e n t (m a n d a to ry 2 0 0 9 )

- IS O 2 8 0 0 0 (o p t io n a l)- C T P A T (U S A o n ly )- B io te r ro r is m A c t

R e g is tra tio n (U S A tra d e o n ly )

- IA T A K n o w n S h ip p e r (o p t io n a l)

- D fT O p e ra to r L ic e n c e (m a n d a to ry )

- T ra d e d e c la ra t io n s u n d e r H o m e O ff ic e le g is la t io n (m a n d a to ry )

S e c u r ity m e a s u re s a p p lic a b le o r p ro p o s e d :- E U C u s to m s C o d e S e c u r ity

A m e n d m e n t (m a n d a to ry 2 0 0 9 )

- IS O 2 8 0 0 0 (o p t io n a l)- C T P A T (U S A o n ly )- B io te r ro r is m A c t

R e g is tra t io n (U S A tra d e o n ly )

- H M R C a u th o r is a t io n (m a n d a to ry )

- T ra d e d e c la ra t io n s u n d e r H o m e O ff ic e le g is la t io n (m a n d a to ry )

- IS P S C o d e- C S I (U S A tra d e o n ly )- O p e ra t io n o f d e te c t io n

e q u ip m e n t u n d e r C y c la m e n

T e r ro r is m A c t

In te rn a t io n a lly -s e t S e c u r ity R e g im e s

E U -s e t S e c u r ityR e g im e s

S e c u r ity R e g im e s in th e U K

U S -s e t S e c u r ity R e g im e s

P ro je c t C y c la m e n

S e c u r ity le g is la t io n o r p ro g ra m m e

In s t itu t io n o r g o v e rn m e n t b o d y

D e m a rc a t io n o f p o lic y le v e l

L e g e n d :

(Grainger 2007a)

Figure 7. Security spaghetti

27

Annex II

A ir l in e O p e ra to rs C o m m itte e C a rg o

(A O C C ) [c a rg o h a n d le rs ]

A u to m a te d C u s to m s a n d In te rn a t io n a l T ra d e

A s s o c ia t io n (A C IT A ) [ la rg e m a n u fa c tu re rs ]

F re ig h t T ra n s p o r t A s s o c ia t io n [ in -h o u s e tra n s p o r t o p e ra to rs ]

R o a d H a u la g e A s s o c ia t io n (R H A )

[ro a d h a u la g e ]

C h a m b e r o f S h ip p in g [s h ip p in g ]

U K W a re h o u s in g A s s o c ia t io n (U K W A )

[w a re h o u s in g s e rv ic e s ]

U K C o m m e rc ia l A v ia t io n In d u s try C u s to m s G ro u p

(U K C A IC G ) [a irc ra ft m a n u fa c tu r in g ]

In te rn a t io n a l R o a d U n io n ( IR U )

[ro a d tra n s p o r t]

A s s o c ia t io n o f In te r -n a t io n a l C o u r ie r a n d

E x p re s s S e rv ic e s (A IC E S ) [p a rc e ls ]

In s t itu te o f C h a r te re d S h ip b ro k e rs ( IC S B )

[s h ip p in g a g e n c y s e rv ic e s ]

F o o d a n d D r in k F e d e ra t io n (F D F )

[fo o d in d u s try ]

C u s to m s P ra c tit io n e rs G ro u p (C P G )

[s p e c ia lis ts , a d v is e rs a n d la w y e rs ]

C u s to m s A ir T ra n s p o r t C o n s u lta t iv e G ro u p (C A T IC G ) [a ir l in e s ]

C o n fe d e ra t io n o f B r it is h In d u s try (C B I)[U K In d u s try ]

B r it is h P o r ts A s s o c ia t io n (B P A ) [p o r t in d u s try ]

B r it is h In te rn a t io n a l F re ig h t A s s o c ia t io n

(B IF A )[fre ig h t fo rw a rd e rs ]

B r it is h C h a m b e rs o f C o m m e rc e

[U K b u s in e s s e s ]

S IT P R O U K T ra d e F a c ilita t io n A g e n c y

W in e & S p ir its A s s o c ia t io n

[U K d r in k in d u s try ]

A s s o c ia tio n o f F re ig h t S o ftw a re S u p p lie rs (A F S S ) [s o ftw a re

d e v e lo p e rs ]

In v ite d R e p re s e n ta t iv e s :U K P o r t C o m m u n ity

S y s te m P ro v id e rs [ IT ]

O n e In v ite d R e p re s e n ta t iv e fro m th e

R a il In d u s try

In t. C h a m b e r o f C o m m e rc e U K ( IC C U K )

[t ra d e & c o m m e rc ia l s e rv ic e s ]

U K M a jo r P o r ts G ro u p (U K M P G ) [p o r t in d u s try ]

F e d e ra t io n o f E u ro p e a n T ra d e F a c ilita t io n

C o m m itte e s (E U R O P R O )

F e d e ra t io n o f E u ro p e a n B u s in e s s A s s o c ia t io n s (U N IC E ) [E U b u s in e s s ]

E u ro p e a n E x p re s s A s s o c ia t io n (E E A )

[p a rc e ls ]

E u ro p e a n E le c tro n ic C o m p o n e n ts In d u s try

(E E C I) [m a n u fa c tu r in g ]

E u ro p e a n A s s o c . fo r F o rw a rd in g , T ra n s p o r t ,

L o g is t ic s & C u s to m s S e rv ic e (C L E C A T ) A m e r ic a n C h a m b e rs o f

C o m m e rc e to th e E U (A M C H A M E U )

[U S b u s in e s s e s in E U ]

A s s o c ia t io n o f E u ro p e a n A ir l in e s (A E A ) [a ir l in e s ]

A s s o c . E u ro p e a n S e m ic o n d u c to r In d u s try

A s s o c ia t io n (E S IA ) [m a n u fa c tu r in g ]

E u ro p e a n S h ip p e rs C o u n c il (E S C ) [t ra d e rs

a n d fre ig h t u s e rs ]

E u ro p e a n C o m m u n ity S h ip o w n e rs ’ A s s o c ia t io n

(E C S A ) [s h ip p in g ]

E u ro p e a n S m a ll B u s in e s s A ll ia n c e

(E S B A ) [S M E s ]

A s s o c . o f E u ro p e a n C h a m b e rs o f C o m m e rc e

& In d u s try (E U R O -C H A M B E R S )

E U R O C O M M E R C E[E U re ta ile rs ]

F re ig h t F o rw a rd in g In te rn a t io n a l [ la rg e E U

fre ig h t fo rw a rd in g c o m p a n ie s ]

F e d e ra t io n o f E u ro p e a n P r iv a te P o r t O p e ra to rs

(F E P O R T ) [p o r ts ]

O rg a n is a t io n o f E C S h ip -s u p p lie rs (O C E A N )

[s h ip p in g a g e n c y s e rv ic e s ]

P o r t O p e ra tio n s a n d S te v a d o r in g

B u s in e s s S e c to rIn te r re s ts

E u ro p e a n B u s in e s s U m b re lla O rg a n is a tio n s

T ra n s p o rt S e rv ic e s

M o s c o w In te rn a t io n a l B u s in e s s A s s o c ia tio n

In te rn a t io n a l F e d e ra t io n o f C u s to m s B ro k e rs

( IF C B A )

A m e r ic a n A s s o c . o f E x p o r te rs a n d Im p o r te rs

(A A E I)

J a p a n M a c h in e ry C e n tre fo r T ra d e a n d

In v e s tm e n t

G lo b a l E x p re s s A s s o c ia t io n (G E A )

[p a rc e ls ]

In te rn a t io n a l C h a m b e ro f S h ip p in g ( IC S ) [s h ip o w n e rs a n d o p e ra to rs ]

In te rn a t io n a l C h a m b e r o f C o m m e rc e ( IC C )

[b u s in e s s ]

In te rn a t io n a l A ir T ra n s p o r t A s s o c ia t io n

( IA T A ) [a ir lin e s ]

W o r ld S h ip p in g C o u n c il [s h ip p in g l in e s ]

In te rn a t io n a l A s s o c ia t io n o f P o r ts a n d H a rb o rs

[p o r ts ]

In te rn a t io n a l A llia n c e fo r S e c u re C o m m e rc e (B A S C ) [s e c u r ity ]

S IT P R O U K T ra d e F a c ilita t io n A g e n c y

P o rt a n d T ra n s p o r t S e rv ic e s

U K B u s in e s sU m b re lla

O rg a n is a tio n s

B u s in e s s S e c to r In te r re s ts

N a tio n a lly S p o n s o re d In te rn a tio n a l T ra d e

O rg a n is a tio n s

P o r t a n d T ra n s p o rt S e rv ic e s

B u s in e s s U m b re lla

O rg a n is a tio n s

W C O P r iv a te S e c to r C o u n c il G ro u p

D G T A X U DT ra d e C o n ta c t G ro u p

H M R C J C C C M e m b e rs

- B a r lo w o r ld- B o in g C o m p a n y- B P- C a rre fo u r- C O S C O- F e d E x- G e n e ra l M o to rs- H u tc h in s o n P o r ts

- IB M- L im ite d B ra n d s- M a e rs k S e a la n d- M ic ro s o ft- N is s a n- P h il ip s- P ro c to r & G a m b le- S ie m e n s- T h a le s

N a m e d F irm s

(Grainger 2007a)

Figure 8. Trade association spaghetti

28

Business Stakeholders Traders • Small and Medium Seized Enterprises • Large and Multinational Enterprises • Foreign Firms and Investors • Exporters/Importers: operating within one

industry • Exporters/Importer: operating across

industries • Distributors and Retailers • Buyer’s and Seller’s Agents • Foreign Companies Exporting to the UK

from Developed Countries • Foreign Companies Exporting to the UK

from Less Developed Countries

Transport and related services • Shipping Lines • Ferry Operators • Airlines • Trucking and Haulage Companies • Railway Companies: operating

international routes • Logistics Service Providers • Freight Forwarders • Customs Brokers • Banks and Finance Companies • Insurance Companies

Facilities and infrastructure • Seaports • Ferry-ports • Airports • International Rail-terminals • Inland Container Ports • Port Operators and Stevedores

• Cargo Handlers and Handling Agents • Warehouse Operators • Transitshed Operators • Port Community System Providers • IT Service Providers • IT Systems Developers

(SITPRO and Grainger 2008)

Figure 9. Business Stakeholders in International Trade

29

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