Trade facilitation

Last updated

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 objectives. Business costs may be a direct function of collecting information and submitting declarations or an indirect consequence of border checks in the form of delays and associated time penalties, forgone business opportunities and reduced competitiveness.

Contents

Understanding and use of the term “trade facilitation” varies in the literature and amongst practitioners. "Trade facilitation" is largely used by institutions which seek to improve the regulatory interface between government bodies and traders at national borders. The WTO, in an online training package, has defined trade facilitation as “the simplification and harmonisation of international trade procedures”, where 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”. [1]

In defining the term, many trade facilitation proponents will also make reference to trade finance and the procedures applicable for making payments (e.g. via a commercial banks). For example, UN/CEFACT defines trade facilitation as "the simplification, standardization and harmonisation of procedures and associated information flows required to move goods from seller to buyer and to make payment". [2]

Occasionally, the term trade facilitation is extended to address a wider agenda in economic development and trade to include: the improvement of transport infrastructure, the removal of government corruption, the modernization of customs administration, the removal of other non-tariff trade barriers, as well as export marketing and promotion.

The World Trade Report 2015 provides an overview of the various trade facilitation definitions from academia as well as various international organizations, contrasting them with the scope of the WTO Trade Facilitation Agreement (TFA) concluded in December 2013. [3] The WTO TFA has become the new baseline for trade facilitation, with many countries striving to implement measures going beyond those included in this Agreement in order to maintain a competitive advantage in global markets. [4] Notably, most countries have focused their trade facilitation efforts on establishing electronic single windows and other paperless trade systems to further reduce trade costs. [5]

Driving Factors of Trade Facilitation Agenda

The trade facilitation objectives were introduced in the international agenda basically because of four main factors. [6]

1) The successful implementation of the trade liberalization policy within the WTO frameworks caused the significant reduction of tariff and non-tariff barriers, that is common for developed countries (the average rate of customs duty from 4,5% to 6,5%, the share of duty free HS subheadings in customs tariffs from 29,2% to 53%). This reduced the revenue functions of customs and thus, the possibility of simplifying customs procedures with a moderate level of risk for national revenue opened up for a significant number of states.

2) The reduction of customs tariffs has caused the situation where the amount of import duties has become commensurate or even lower than trade transaction costs (TTC) with regards to compliance with customs and border formalities, since the latter are estimated on various data ranging from 1.5% to 15% of the transaction value. Respectively, trade transaction costs has started to be considered as the main trade barrier in the conditions of liberalized market access.

3) The industrial development in the modern global world based on the Global Value Chains (GVC) has transformed a cross-border movement of goods. Today, up to half of the total imports and exports of developed countries are “intermediate goods”, which are components of the corresponding GVCs. Accordingly, the cost of customs borders for business has increased significantly.

4) The expansion of production processes based on the principles of Just-In-Time (JIT) and of e-commerce shipments, which increased the requirements for the speed release of goods by customs.

Examples of regulatory activity in international trade

Fiscal: Collection of customs duties, excise duties and other indirect taxes; payment mechanisms

Safety and security: Security and anti smuggling controls; dangerous goods; vehicle checks; immigration and visa formalities

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; export refunds

Topics and issues in trade facilitation

Trade facilitation has its intellectual roots in the fields of logistics and supply chain management. Trade facilitation looks at operational improvements at the interface between business and government and associated transaction costs. Trade facilitation has become a key feature in supply chain security and customs modernisation programmes. Within the context of economic development it has also come to prominence in the Doha Development Round. However, it is an equally prominent feature in unilateral and bilateral initiatives that seek to improve the trade environment and enhance business competitiveness. Reference to trade facilitation is sometimes also made in the context of "better regulation". Some organisations promoting trade facilitation will emphasize the cutting of red tape in international trade as their main objective. Propagated ideas and concepts to reforming trade and customs procedures generally resonate around the following themes:

Related Research Articles

Free-trade area Regional trade agreement

A free-trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other. If natural persons are also free to move between the countries, in addition to a free-trade agreement, it would also be considered an open border. It can be considered the second stage of economic integration.

Customs Government agency which regulates the flow of goods and collects tariffs

Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs has been considered as the fiscal subject that charges customs duties and other taxes on import and export. In recent decades, the views on the functions of customs have considerably expanded and now covers three basic issues: taxation, security, and trade facilitation.

World Customs Organization Intergovernmental organization

The World Customs Organization (WCO) is an intergovernmental organization headquartered in Brussels, Belgium. The WCO is noted for its work in areas covering the development of international conventions, instruments, and tools on topics such as commodity classification, valuation, rules of origin, collection of customs revenue, supply chain security, international trade facilitation, customs enforcement activities, combating counterfeiting in support of Intellectual Property Rights (IPR), drugs enforcement, illegal weapons trading, integrity promotion, and delivering sustainable capacity building to assist with customs reforms and modernization. The WCO maintains the international Harmonized System (HS) goods nomenclature, and administers the technical aspects of the World Trade Organization (WTO) Agreements on Customs Valuation and Rules of Origin.

UN/CEFACT is the United Nations Centre for Trade Facilitation and Electronic Business. It was established as an intergovernmental body of the United Nations Economic Commission for Europe (UNECE) in 1996 and evolved from UNECE's long tradition of work in trade facilitation which began in 1957

Non-tariff barriers to trade Type of trade barriers

Non-tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs.

A free trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. There are two types of trade agreements - bilateral and multilateral. Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities. Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.

Market access Ability to sell goods and services across borders

In international trade, market access is a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or requirements, whereas under ideal free trade conditions goods and services can circulate across borders without any barriers to trade. Expanding market access is therefore often a more achievable goal of trade negotiations than achieving free trade.

The single-window system or single-window concept is a trade facilitation concept which allows an international (cross-border) trader to submit information to a single agency, rather than having to deal with multiple agencies in multiple locations to obtain the necessary papers, permits, and clearances to complete their import or export processes. There is an obvious time saving benefit to the single window system. The concept is recognised by organisations such as the United Nations Economic Commission for Europe (UNECE) and its Centre for Trade Facilitation and Electronic Business (UN/CEFACT), World Customs Organization (WCO), the United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT), and the Association of Southeast Asian Nations (ASEAN).

Certificate of origin International trade document

A Certificate of OriginDeclaration of Origin is a document widely used in international trade transactions which attests that the product listed therein has met certain criteria to be considered as originating in a particular country. A certificate of origin / declaration of origin is generally prepared and completed by the exporter or the manufacturer, and may be subject to official certification by an authorized third party. It is often submitted to a customs authority of the importing country to justify the product's eligibility for entry and/or its entitlement to preferential treatment. Guidelines for issuance of Certificates of Origin by chambers of commerce globally are issued by the International Chamber of Commerce.

International Trade Centre

The International Trade Centre (ITC) is a multilateral agency which has a joint mandate with the World Trade Organization (WTO) and the United Nations (UN) through the United Nations Conference on Trade and Development (UNCTAD).

ATA Carnet International customs document

The ATA Carnet, often referred to as the "Passport for goods", is an international customs document that permits the tax-free and duty-free temporary export and import of nonperishable goods for up to one year. It consists of unified customs declaration forms which are prepared ready to use at every border crossing point. It is a globally accepted guarantee for customs duties and taxes which can replace the security deposit required by each customs authority. It can be used in multiple countries in multiple trips up to its one-year validity. The acronym ATA is a combination of French and English terms "Admission Temporaire/Temporary Admission." The ATA carnet is now the document most widely used by the business community for international operations involving temporary admission of goods.

Rules of origin Rules to attribute a country of origin to a product

Rules of origin are the rules to attribute a country of origin to a product in order to determine its "economic nationality". The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tariffs, quotas, trade remedies, in various cases, depends on the country of origin of the product at hand.

Success in export markets for developed and developing country firms is increasingly affected by the ability of countries to support an environment which promotes efficient and low cost trade services and logistics. Policies related to trade facilitation and economic development reflect the idea that trade can be a powerful engine for accelerating economic growth, job creation, and poverty reduction.

European Union Customs Union EUs common customs area

The European Union Customs Union (EUCU) is a customs union which consists of all the member states of the European Union (EU), Monaco, and the British Overseas Territory of Akrotiri and Dhekelia. Some detached territories of EU states do not participate in the customs union, usually as a result of their geographic separation. In addition to the EUCU, the EU is in customs unions with Andorra, San Marino and Turkey, through separate bilateral agreements.

International Commercial Law is a body of legal rules, conventions, treaties, domestic legislation and commercial customs or usages, that governs international commercial or business transactions. A transaction will qualify to be international if elements of more than one country are involved.

Customs valuation is the process where customs authorities assign a monetary value to a good or service for the purposes of import or export. Generally, authorities engage in this process as a means of protecting tariff concessions, collecting revenue for the governing authority, implementing trade policy, and protecting public health and safety. Customs duties, and the need for customs valuation, have existed for thousands of years among different cultures, with evidence of their use in the Roman Empire, the Han Dynasty and the Indian sub-continent. The first recorded customs tariff was from 136 in Palmyra, an oasis city in the Syrian desert. Beginning near the end of the 20th century, the procedures used throughout most of the world for customs valuation were codified in the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994.

State Customs Committee (Azerbaijan)

The State Customs Committee of Azerbaijan Republic is a governmental agency within the Cabinet of Azerbaijan in charge of customs clearance for imports and exports, and regulation of all customs activities within Azerbaijan Republic. The committee is headed by Safar Mehdiyev.

The Bali Package is a trade agreement resulting from the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia on 3–7 December 2013. It is aimed at lowering global trade barriers and is the first agreement reached through the WTO that is approved by all its members. The package forms part of the Doha Development Round, which started in 2001.

Paperless trade refers to “trade taking place on the basis of electronic communications, including exchange of trade-related data and documents in electronic form” in the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific, adopted at United Nations Economic and Social Commission for Asia and the Pacific in May 2016.

The United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) is a community of trade facilitation specialists and practitioners focusing on simplifying import, export and transit procedures by enabling traders and governments to exchange information electronically and through automated and integrated systems, including national and regional Single window. The Network has made significant contributions to the development of Trade facilitation and Paperless trade in the region.

References

  1. ↑ "Compendium of Trade Facilitation Recommendations", issued by UN/ECE (TRADE/WP.4/INF.91); published by UNCTAD: TD/B/FAL/INF.91.
  2. ↑ "TRADE FACILITATION IMPLEMENTATION GUIDE - Introduction". tfig.unece.org. Retrieved 2015-10-07.
  3. ↑ "WTO World Trade report".
  4. ↑ "Asia Pacific Trade and Investment Report 2015 (see Chapter 4 pp.53-68)" (PDF). Retrieved 2016-03-17.
  5. ↑ "UNRC Trade Facilitation and Paperless Trade Implementation Survey 2015" (PDF). Retrieved 2016-03-17.
  6. ↑ Kormych, Borys (2018). "The Modern Trends of The Foreign Trade Policy Implementation: Implications for Customs Regulations". Rochester, NY. SSRN   3294040 .Cite journal requires |journal= (help)
  7. ↑ "Trade Facilitation and Paperless Trade Implementation Survey 2015 in Asia Pacific" . Retrieved 2016-03-08.
  8. ↑ "Trade Facilitation in Asia and the Pacific: Which Policies and Measures Affect Trade Costs the Most? 2015 Update" . Retrieved 2016-03-08.
  9. ↑ "Estimating the Benefits of Cross-Border Paperless Trade" . Retrieved 2016-03-08.
  10. ↑ "Data Harmonization and Modelling Guide for Single Window Environment" . Retrieved 2016-03-08.
  11. ↑ "UNNExT Guide on Design of Aligned Trade Forms" . Retrieved 2016-03-08.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.