Focus

Highlights of the WCO Global Transit Conference

The WCO organized the first edition of its Global Transit Conference from 10 to 11 July 2017 with the double objective of stimulating discussions on how to improve transit regimes and to promote the Organization’s newly published ‘Transit Guidelines.’

Many speakers and participants highlighted the value of an effective transit system. Representatives from landlocked countries described how their economies were stifled by unfairly high import and export costs, with higher transport costs in particular more than doubling the cost of trade transactions in terms of price and time. In general, a landlocked country’s level of development was 20% lower than what it would be if it were not landlocked, explained an expert.

Other statistics were brought to the fore. For example, the African continent has the highest transport costs in the world: in 12 sub-Saharan countries, transport accounts for 7% of the value of an export. If long distances contribute to the situation, difficulties and delays at borders are also to be blamed. Moreover, Intraregional trade in the African continent is low, at 10 percent of total trade, and, there is a general consensus on the need for efficient transit processing in order to fast track regional integration.

Guidelines

The conference provided the WCO with an opportunity to introduce its Transit Guidelines, which offer Customs administrations clear principles and recommended practices for the establishment of effective transit regimes. Development of the 150 guidelines was a collective effort involving experts from Customs administrations as well as from many other organizations[1]. The guidelines touch on all the pillars for transit effectiveness:

  • effective information sharing internally and with neighbouring countries, based on a cohesive legal framework (Guidelines 1-35);
  • a well-functioning guarantee system (Guidelines 36-66);
  • fees and charges should be reasonable, and refer to the actual cost of the services rendered (Guidelines 67-72);
  • the simplification of Customs formalities (Guidelines 73-88);
  • the use of risk management to identify cargo presenting a risk, and the establishment of a compliance programme, such as the authorized economic operator (AEO), to identify compliant traders (Guidelines 89-92);
  • the use of Customs seals and other security measures to ensure goods reach the other end of the transit untouched (Guidelines 93-119);
  • ensuring coordinated border management (Guidelines 120-131);
  • improving physical infrastructure (Guidelines 132-135);
  • improving transparency and integrity (Guidelines 136-141);
  • improving the consultative process with industry (Guidelines 142-146);
  • measuring performance through regular auditing (Guidelines 147-150).

Each of these aspects was addressed during the event. Some regional and national experiences were shared by participants, and their reflections on the challenges related to transit operations as well as the way forward are reported below.

Regionally integrated transit systems

Unlike clearance, which happens in one place, transit requires an exchange of information from at least three places: that of the transit initiation; that of transit termination; and that of the guarantor (to validate and discharge the bonds). There are obvious advantages to integrating transit across borders in a region or along a trade corridor into a single, seamless procedure, and several examples of these integrated systems were presented during the conference.

The European Union shared its experience in building the New Computerised Transit System (NCTS) that replaced a paper based system, which was prone to fraud. The system, which allows for real-time messages to be exchanged between countries, the tracking of goods and the management of guarantees, from one end to the other, is a stand-alone application which has to be implemented by all parties. Under the scheme, the information technology (IT) systems of the different parties are connected to the NCTS, but linking up different transit systems is another way to achieve the same objective.

The Eurasian Economic Commission explained that the regional community, which comprises five States and covers over two million square kilometers, was on track to also develop a computerized transit system. Development of the IT system to minimize the use of paper at borders and allow for pre-declaration had been undertaken together with the development of a new Customs code aimed at modifying transit procedures, among other things. Today, operators may decide what is more convenient to them: the paper or the electronic procedure. Future developments will include the linking of the system to countries in Europe and Asia.

The Asian Development Bank gave an overview of the different projects aimed at improving the procedures between the 11 countries that are part of the Central Asia Regional Economic Cooperation Program (CAREC), of which eight are landlocked. The projects include building physical infrastructure, six transport corridors and a single electronic transit system as a stand-alone information system similar to the NCTS. A prototype of the system has been designed to test the system between pilot countries and, more specifically, the use of a single transit declaration and comprehensive guarantee mechanisms. In developing the system, the real challenge is ensuring cooperation among the involved countries to simplify procedures, enhance coordination at borders, and implement risk management schemes and AEO programmes as the electronic transit system provides a guarantee mechanism that rewards compliant economic operators.

The Economic Community of West African States (ECOWAS) is also moving from manual and paper based procedures to an automated regional transit system that will connect all ECOWAS countries’ IT systems. As ECOWAS countries use three different types of automated systems, an interface had to be built to allow the exchange of information and communication, based on standardized messages in terms of structure and data format. The system is currently being piloted in four countries.

In countries having ratified the Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention) and which had to adapt their legislation accordingly, operators can use the TIR carnet to move goods across borders by road vehicles and containers. The carnet is a single document that accompanies the shipment along the transit chain, and allows officials to verify the shipment’s compliance. The TIR system is the only global transit system, and was designed to help connect national transit systems across the world without the precondition of harmonization and integration. It can coexist with other regional transit regimes, as an additional option. Operators may choose between the TIR and the NCTS when moving goods from Turkey to Europe for example. Figures show that operators prefer to use a computerized environment, and the computerization of the TIR is, therefore, a priority. An eTIR system has been developed and is being piloted for this purpose (see article in the WCO News February 2017 edition).

A private sector service provider also explained how logistics sector operators can delegate the management of their transit operations by road, rail and waterway, to his company in countries where it acts as a principal (the person who places goods under a transit procedure, even where this is done by an authorized representative) for Customs purposes – mainly under the framework of a common transit procedure, including the NCTS. Through a web-based application, clients can create transit declarations and submit them to any of the Customs systems, and track them online. The company arranges and lodges the required guarantee – issued by approved banks – in favour of Customs. Bank guarantees are lodged in each country involved in the transit operation, in order to avoid issues that can arise when a country’s Customs calls for a guarantee issued in another country. Another advantage for Customs is that it only has to deal with one reliable, experienced and national service provider with an international presence.

Hard and soft infrastructure

As a representative from the road transport industry pointed out, infrastructure is a great asset, but without proper practices and policies in place, it won’t help to reduce difficulties at the border. Transit flows should be separated from the flows cleared at the border, and infrastructure also has to take into account procedures such as pre-declaration, or a specific status such as an AEO for which special lanes should be planned.

The African Development Bank (AfDB) explained that transport represents 30% of the Bank’s investment, the idea being to build a highway network that would boost regional trade and integrate African economies. About 47 countries are currently involved in a project funded by the AfDB related to infrastructure development, including port and airport extension, border post facilities and “one stop border posts (OSBPs).” Some are multinational projects that are cross-border in nature, and others are national projects that contribute to transit, especially along main highways. But, the AfDB pointed out that they had introduced a rule that 10% of the budget allocated to a project should be spent on activities that aim to change or improve the regulatory environment. If a country is borrowing for a road construction project, then it must dedicate money to the reform of its transport policy environment for example.

The Japan International Cooperation Agency (JICA) also highlighted the need to work on “soft infrastructure” that includes: the harmonization of documentation; the provision for a transit manifest different in form and substance from a Customs clearance declaration; capacities in terms of risk management; and the implementation of AEO programmes with benefits such as simplified procedures and simplification related to bank guarantees or a waiver when appropriate.

Another initiative discussed was the OSBP, the installation of which is supported by many donors, including the JICA. A representative from Zambia, the first African country to create such a border post back in 2009 at its border with Zimbabwe, explained that such a mechanism helps overcome logistical challenges at the border, such as working hours for example. Some countries, such as Laos and Vietnam, have established a single border post at their shared border – a common control area enables border authorities from both countries to better coordinate their controls.

Here again, if there is a lot of experience in building infrastructure, work has to be done to ensure cooperation and communication in order to streamline procedures and implement joint inspections. In many cases, IT communication tools are missing or electricity cuts can make them useless, so some countries have to retain paper based procedures. Regional bonds are also not common, so operators still need to lodge guarantees in every country they pass through and wait to get the guarantee discharged. In addition, some administrations require documents in local languages or extra certificates. These are just a few issues that operators have to face.

The World Bank explained that one of the lessons learned, during the implementation of the many projects funded by the Bank aiming to improve trade corridors, is the need to focus more on the enabling side of things: processes, procedures, legal framework, investment in people and their capacity to manage, and IT. This involves analysing, spending time thinking about what really needs to be fixed, using the WCO Time Release Study to identify bottlenecks, mapping business processes, and undertaking detailed work that drills down to the details of operating procedures, in order to get a clear, precise idea of the new model, which should be robust and reward good behaviour. Identification and quantification of the risk are also obviously necessary. During the conference, some participants remarked that they do not see major risk in terms of revenue leakage, while others stated that they still encounter massive transit fraud.

Security measures

Participants also discussed actions to ensure the integrity of the consignment during the transit operation, and, more specifically, the use of seals, including electronic seals based on radio frequency identification (RFID) or global positioning system (GPS) technology, as well as the use of prescribed time limits and itineraries. The experience of Jordan Customs, with the use of an electronic seal system to track goods transported in transit and of mobile intervention teams when something suspicious is detected, was also mentioned.

The acceptance of foreign seals, which remains a challenge in some regions with operators having to buy different seals along the transit route as a consequence, was also brought to the fore. A representative from Uganda introduced the Regional Electronic Cargo Tracking System that was implemented with Kenya and Rwanda along the East African Community (EAC) Northern Corridor. Only one type of seal is used here, which removes the need for arming and disarming the electronic seals at Partner States’ territorial borders, and enables the end-to-end monitoring of transits along the Northern Corridor. The tracking system also relies on automatic number plate recognition (ANPR) facilities that have been installed at port gates and borders.

Railways

The particularities of transit goods being transported by rail were also presented. There is no globally unified regime to cover rail transport in the same way as for air and maritime transport, and countries wishing to allow trains to cross borders have to sign bilateral agreements. There are, however, two organizations dealing with the development and unification of rail transport law:

  • on the one hand, there is the Intergovernmental Organization for International Carriage by Rail (OTIF) that developed the Convention concerning International Carriage by Rail (COTIF) and whose membership is mainly made up of European countries;
  • on the other hand, there is the Organization for Cooperation of Railways (OSJD) that conceived the Agreement on International Railway Goods Transport (SMGS) and the Agreement on International Passenger Transport (SMPS) gathering countries from Eastern Europe.

Experts reported that, in order to facilitate the development of international rail transport, Customs administrations should focus on the harmonization of transport documents and technical standards, the use of electronic records and pre-electronic declaration, and the simplification of Customs procedures. There is also a need for a comprehensive approach to national and regional rail infrastructure development.

Cooperation

The fact that implementing an effective transit regime requires collaboration at many levels was highlighted on many occasions. Internally, there is a need to ensure that all relevant actors are involved in transit related projects. On this point and as an example, the AfDB pointed out that infrastructure projects are usually driven by the Ministry of Transport in most countries, and that a dialogue should be established with other agencies on what else is required to make sure that infrastructure, such as an OSBP, is functional.

Between neighbouring countries, there must also be a willingness to collaborate, and an acknowledgement by each party of their responsibilities and duties in terms of the modernization of Customs operations, the implementation of effective anti-corruption measures, and the digitalization of procedures based on a robust computer and back-up system, including a reliable electricity supply system.

We have at our disposal the new WCO Transit Guidelines and many models, but what is holding us back?” asked a participant, adding that “to jump from good ideas to actions, you need leadership, an ability to motivate people and lead, and the need to create an appetite for change.”

The WCO hopes that the discussions inspired participants to move forward in their effort to put in place effective transit regimes, and that the Transit Guidelines will be of help when designing transit related projects.

 

More information
www.wcoomd.org

 

[1] These included the African Development Bank (AfDB), the African Union (AU), the Asian Development Bank (ADB), the Caribbean Customs Law Enforcement Council (CCLEC), the European Union (EU), the General Secretariat of the Andean Community (SGCAN), the Inter-American Development Bank (IADB), the International Road Transport Union (IRU), the Japan International Cooperation Agency (JICA), the Secretariat for Central American Economic Integration (SIECA), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Europe (UNECE), the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), the United States Agency for International Development (USAID), the World Bank (WB), and the World Trade Organization (WTO). In addition, transit experts from Regional Economic Communities also participated in the drafting of the guidelines – the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Economic Community of West African States (ECOWAS), the Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the West African Economic and Monetary Union (UEMOA).