GEA and Trade Facilitation
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1 GEA and Trade Facilitation The Global Express Association has been a strong advocate of trade facilitation ever since its establishment more than twenty five years ago. While in some quarters the term trade facilitation has been taken to include increased market access, or improvement of physical infrastructure, GEA activity in this area has reflected, in common with the WTO and UNECE, a narrower understanding of the term, namely the simplification and harmonization of the procedures and processes associated with the cross-border movement of goods, including the collection, presentation, communication and processing of the data associated with such movement. In essence, this has meant focusing on the simplification and harmonization of Customs procedures and practices. The importance of Customs performance to international express delivery and, therefore, efficient trading is self-evident. Express delivery is guaranteed delivery within a definite period of time, often by the next day. Because express delivery operations are highly time-sensitive, inefficient and obsolete Customs procedures present a serious obstacle for global express delivery companies and their operations. The GEA and its members have therefore been in the forefront of efforts to automate and streamline border clearance processes, and those efforts continue today. Trade facilitation is all the more important for business during a time of global economic downturn as increased cross-border trade will help economic recovery. This is why the GEA welcomes the considerable progress made to date in the context of the WTO Doha Development Agenda and in particular concerning the negotiations on trade facilitation. 1
2 A WTO trade facilitation agreement is fundamental to the establishment of an improved and more efficient management process for international trade in goods on a global basis. All WTO member countries will benefit from it, especially developing countries which are often burdened with the least efficient trading processes. Such an agreement will augment their capacity to enlarge their share of international trade, not least their trade with other developing countries. As a majority of the measures contained in the latest draft text of the WTO TF agreement (Doc. TN/TF/W/165) are in conformity with the WCO s Revised Kyoto Convention, which the GEA has actively promoted since its establishment in 1999, there is clearly a sound basis for a final agreement. Certain of those measures are considered essential to increased trade, increased foreign direct investment and improved economic performance and competitiveness and these are highlighted below in the same order as presented in the above-mentioned document. Transparency and Predictability Publication of laws and regulations affecting the trade in goods is fundamental to international investors and decision makers considering establishing long-term supply contracts with vendors in foreign markets. Such laws and regulations should be made easily accessible, for example, via the internet, so that they can be readily understood and observed. Public participation in establishing or amending trade-related rules and regulations is a key ingredient of successful economies which are characterized by public/private sector joint ventures. It is essential that businesses have an opportunity to comment in advance on proposed new regulations or amendments to regulations. Such prior consultation is facilitated by the institution and maintenance of formal Customs/trade consultative relationships. Provision of Binding Advance Rulings to applicants in good time facilitates customs compliance and allows traders to plan future business operations with a large degree of certainty. While the most common area for binding 2
3 rulings is tariff classification, WTO members should also issue origin and valuation rulings. Right of Appeal against Customs Rulings and Decisions allows for more consistent application of national customs laws, as well as reducing opportunities for corrupt behaviour by customs officials. All WTO members should establish appeal procedures for contesting customs decisions. Efficient Borders Use of International Standards and Guidelines, such as the Revised Kyoto Convention, the HS Convention, the WCO Immediate Release Guidelines, the WCO Data Model and the ATA Convention, as a basis for import, export and transit formalities and procedures, significantly facilitates trade by reducing transaction costs and enhancing cooperation between governments on regulatory compliance. Standard trade documentation and customs data requirements, especially for release of shipments at the borders, are essential to efficient international trading. Automation is the key to pre-arrival processing, proper risk management and assessment and the establishment of single-window regimes, enabling expedited release and minimizing arbitrary examinations by customs officers. Automation also allows for the adoption of two-step customs processes, whereby the more urgent process of releasing shipments to operators is separated from the complex process of preparing and submitting formal customs entries to satisfy all fiscal requirements. All WTO members are strongly recommended, therefore, to make optimum use of modern information and communication technology and to separate physical release from fiscal clearance, where appropriate. Cross border trade is also facilitated by the establishment of realistic deminimis thresholds, whereby low value shipments are exempted from taxes and duties and full customs formalities. The establishment of de-minimis regimes is about fiscal efficiency and recognizes the fact that wasting government and business time and resources on the collection of small amounts of revenue is counterproductive for the national economy as a whole. De-minimis regimes also allow customs administrations to allocate 3
4 more of their scarce resources towards risk assessment, thereby improving border security. Risk Management/Assessment applications are an integral part of efficient border controls. Purely random inspection systems do not reward the efforts of highly compliant traders, and reliance on inspector discretion although useful as a secondary measure creates significant opportunities for abuse and corruption when it is the primary basis for deciding to inspect. Examination of all shipments, whether or not by using sophisticated inspection equipment, is costly and inefficient. All WTO members are therefore encouraged to develop risk-based systems for designating goods for inspection. Authorized Traders The granting of additional facilitation measures to economic operators who meet criteria specified by Customs and other concerned border agencies is very much supported, but only if the concept of authorized trader is understood and accepted as in the WCO s Revised Kyoto Convention, where there is no reference to the application of security and safety standards. The GEA is concerned that the reference to security and safety in the latest draft text is an attempt to make implementation of the EU s Authorized Economic Operator (AEO) programme mandatory under WTO rules. It should also be noted that if AEO programmes were to become mandatory in this way, and thus subject to the dispute settlement mechanism, there would have to be a clear set of standards laid down concerning the requirements to be satisfied in order to acquire AEO status as well as standards on the benefits that would accrue to certified AEOs. Without precise and detailed standards there can be no effective WTO enforcement. Therefore, we believe that the WCO, which has already issued detailed guidelines on AEO programmes in the context of its own SAFE Framework, is the appropriate body to manage the implementation of such programmes globally. 4
5 Expedited Shipments Expedited delivery services have become increasingly important to ensuring the continued global competitiveness of companies in all areas, including sales, logistics and storage, production, and customer support functions. They enable small and medium size businesses to access foreign markets and through the provision of rapid and secure delivery services allow all companies to minimize their inventory costs. Further, in terms of economic success, they are particularly critical to the knowledge-based sectors, such as pharmaceuticals, financial and business services, which are heavily dependent on the rapid movement and delivery of their time-sensitive, high-value products. Many economic operators, including manufacturers, shippers and carriers, could potentially benefit from the introduction of expedited release procedures by WTO members. In Doc. TN/TF/W/165, Article 7, paragraph 7 outlines the conditions to be satisfied and the customs procedures to be applied to obtain expedited release. Further, it is generally understood that the term expedited shipments means shipments for which expedited release by customs is requested (as per the WCO Immediate Release Guidelines). The intent of the proposed measure is that any operator who meets the stipulated conditions should be able to secure such release. The GEA supports inclusion of this proposal in the final Trade Facilitation text. We urge all WTO members to implement these procedures as soon as possible and strongly recommend that they make specific commitments on expedited release procedures to ensure non-discriminatory access to these procedures for all economic operators that satisfy the requirements. As the Authorised Trader and Expedited Shipment proposals provide for different requirements and benefits and are designed to achieve different objectives, they should be maintained as separate proposals. Use of Customs Brokers Article 10, paragraph 7 of Doc. TN/TF/W/165 begins by providing for the phasing out of the mandatory use of customs brokers, a measure which the GEA fully supports. Unfortunately, as a result of consistent lobbying by 5
6 certain WTO members, additional language, albeit in square brackets, has now been incorporated in the draft text which effectively condones the compulsory use of customs brokers in situations where such use is based upon the implementation and maintenance of transparent and reasonable licensing requirements. We strongly oppose such language, mainly on the grounds that the mandated use of the services of a favoured professional group is a symptom of and contributor to political corruption. Customs brokers can provide highly valuable services and many importers choose to use those services even when they are free to transact business with customs directly themselves. But, like all other professionals, customs brokers should rely on the market for their business, not government coercion. Governments should not be in the business of mandating use of private commercial services. General Comment Finally, the GEA strongly recommends that WTO members agree to implement all aspects of the final Trade Facilitation text, subject to reasonable phase in periods and appropriate capacity building measures. June
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