Global minimum tax – a head-scratcher for developing countries

Picture: John Tyson on Unsplash

In a meeting with prospect investors, Jamaican industry minister Aubyn Hill eloquently conveyed his vision for a new free zone in Caymanas, Kingston. A smirk appeared on his face as he delivered the final line. 

“Developers will enjoy a 50-year total exemption on corporate income tax,” Mr Hill said on June 16, seemingly indifferent to the 15% global minimum tax rate that 136 countries, including Jamaica, are expected to implement from 2023 onwards. 

His remarks embody the ambiguity of many developing countries towards the OECD-sponsored reform. While most of them subscribe to the idea behind the reform, they cannot help seeing fiscal incentives as a key pillar of their investment promotion strategies. 

Viable tool  

Policy-makers across the globe have resorted to tax cuts to lure foreign businesses as competition for investment went global in the past 40 years. The world’s weighted average statutory corporate income tax (CIT) rate has declined from 46.5% in 1980 to 25.4% in 2021, according to figures from the Tax Foundation. 

Developing countries in particular have raced to lower national CIT rates to boost their investment appeal. The global minimum tax reform now puts them between a rock and a hard place. 

“From a resource mobilisation perspective typical of a finance minister, the reform may be seen as a good base to stop the race to the bottom,” Bogolo Joy Kenewendo, an economist and former minister of investment of Botswana, tells fDi, on the sidelines of AICE2022, the annual gathering of free zones organised by the World Free Zones Organisation in Jamaica in June 13-17. 

“However, from an investment promotion perspective, tax incentives are the tools we use to attract investment. OECD countries, in particular G20 countries, have already gone through that development phase and built their industries. They no longer need that race to the bottom, but what about countries that see this as a viable tool?” 

The OECD proposal is built on two main pillars. The first proposes to re-allocate some taxing rights over multinational enterprises from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there. The second introduces a global minimum corporate tax rate set at 15%, which will apply to companies with revenue above €750m and is estimated to generate around $150bn in additional global tax revenues annually.

Free zones 

Developing countries often resort to fiscal incentives to offset structural weaknesses that would otherwise sink their hopes of landing big ticket investments. Free zones are a case in point. They have flourished on their unique combination of fiscal incentives, customs facilitations and plug-and-play infrastructure. Unctad tracked as many as 5383 free zones in 2019, 89% of which were located in developing economies.

Almost 80% of the special economic zone (SEZ) laws worldwide provide for fiscal incentives, such as tax holidays for a defined period of often five to 10 years, or the application of a reduced tax rate, Unctad also found. 

“Differentiated taxes are a necessary compensatory measure to offset the inherent inefficiencies and disadvantages of developing nations which suffer from high energy costs, deficient infrastructure, and higher inbound/outbound transportation costs,” Cesare Zingone, the CEO of Zeta Group Real Estate, a developer of free zones in Central America, tells fDi.

“Therefore an equal minimum tax would increase compliance costs, place developing countries at a competitive disadvantage, and finally favour the relocation of companies to wealthy, developed nations. However if the minimum global tax were to be implemented, it would be imperative for developing countries to implement other compensatory measures, such as reducing social security costs on labour, property taxes or import duties.”

Regardless of the OECD’s global minimum tax push, fiscal incentives continue to feature at the heart of the offer of some of the world’s biggest free zones under development. Among others, in Guatemala, developer Pacific Investment is developing 1200 hectares of land for the new Michatoya SEZ, which promises no CIT for 10 years; Indonesia has just named the island of Natuna Regency in the South China Sea as a SEZ, offering zero CIT for 10 years; Iraq is launching three SEZs to trigger development, also offering zero CIT for the duration of the project. 

If policy-makers and zones developers seem unfazed by the global minimum tax reform, the OECD is equally unfazed. 

“SEZs don’t seem to have done much to prepare for this. The reality is that this is happening, and they will have to get ready for this to come,” Pascal Saint-Amans tells fDi, oozing his confidence in the fact that once the EU and US approve the reform, a domino effect will prompt all the countries that endorsed the reform to fall in line. 

However, the road for the OECD remains uphill. In the EU, Hungary has vetoed a key vote on June 17 to approve the reform. 

Back in Caymanas, Mr Hill continued to mingle with prospect investors, pushing the CIT exemption as the icing on the cake for the package on offer. As with any other policy-maker in developing economies, he is taking his chances at the policy-making table — and so is the OECD. 

Source: FDi Intelligence

Maritime Traffic Around the World

Visual Capitalist.com

Each year, thousands of ships travel across the globe, transporting everything from passengers to consumer goods like wheat and oil. 

But just how busy are global maritime routes, and where are the world’s major shipping lanes? This map by Adam Syminton paints a macro picture of the world’s maritime traffic by highlighting marine traffic density around the world.

It uses data from the International Monetary Fund (IMF) in partnership with The World Bank, as part of IMF’s World Seaborne Trade Monitoring System. 

Data spans from Jan 2015 to Feb 2021 and includes five different types of ships: commercial ships, fishing ships, oil & gas, passenger ships, and leisure vessels.

Read the Full Article

WTO to debate tariffs on $26.7tr in global e-commerce

For the past quarter century, the meteoric rise of the digital economy has been exempt from the kind of tariffs that apply to trade in physical goods.

That era may come to a screeching halt this week as a handful of nations threaten to scrap an international ban on digital duties in a game-changing bid to draw more revenue from the global e-commerce market that the United Nations estimated at $26.7-trillion.

If governments fail to reauthorize the World Trade Organization’s e-commerce moratorium, it could open a new regulatory can of worms that could increase consumer prices for cross-border Amazon.com purchases, Netflix movies, Apple music, and Sony PlayStation games.

“Absent decisive action in the coming days, trade diplomats may inadvertently ‘break the internet’ as we know it today,” International Chamber of Commerce Secretary-General John Denton wrote in a Hill opinion piece published last week.

E-Commerce Tariffs
The WTO’s e-commerce agenda dates back to 1998, when nations agreed to avoid taxing the then-fledgling market for digital trade. WTO members have periodically renewed that ban at their biennial ministerial meetings and are considering whether to do so again at this week’s gathering of ministers in Geneva.

But some nations like India and South Africa argue that the growth of the internet justifies a rethink about whether the WTO’s e-commerce moratorium remains in their economic interests. In 2020, they introduced a paper that said the moratorium prevents developing countries from gaining tariff revenue from transformative technologies like 3D printing, big-data analytics, and artificial intelligence.

While nations could draw somewhere between $280-million and $8.2-billion in annual customs revenue, new digital tariffs would also harm global growth by reducing economic output and productivity, according to the Paris-based Organization for Economic Cooperation and Development.

The International Monetary Fund previously calculated that a splintering of the digital economy could ultimately deliver a 6% hit to global economic output over the next decade.

If the moratorium lapsed, “it could set in motion a stampede to impose tariffs on digital flows across borders, put an unnecessary strain on an already battered global economy, and signal to the world that inflation be damned,” according to John Neuffer, the CEO of the Semiconductor Industry Association.

Practical Challenges
To be sure, it’s not immediately clear how exactly a government would impose customs duties on electronic transmissions.

It would probably be “prohibitively expensive” for customs officials to track and quantify the value of the countless data packets that bring these products to consumers’ devices, according to Denton.

“While viewing a single movie, a device could receive as many as 5-million data packets from nine jurisdictions,” Denton wrote. “How, then, would countries accurately (and impartially) calculate the tariff on a single viewing session, byte of data or file size – let alone on the endless stream of data and messages that enable modern business-to-business transactions?”

Furthermore, the WTO does not define the scope of e-commerce transmissions so there is no clarity as to which online services would be subject to new duties – be it Bitcoin cryptocurrency transactions, Airbnb lodging, Uber car rides, Doordash food delivery or Peloton fitness classes.

Finally, the proliferation of virtual private network applications that mask internet protocol addresses would complicate, if not render impossible, efforts to identify the origin of many digital commerce transactions.

Economic Trade-Off
There’s reason to believe that India is using the threat of new tariffs as a negotiating tactic to persuade other nations to concede to its demands for unrelated trade concessions.

India previously threatened to scrap the e-commerce moratorium during the WTO’s last ministerial in 2019 but backed off after nations agreed to avoid initiating disputes over certain questionable intellectual-property practices. The e-commerce debate may also be used as leverage for India’s demands to water down WTO subsidy rules for public stockholding food programs.

Such brinkmanship is made possible by the WTO’s principal of consensus, which allows any one of its 164 members to block any agreement for any reason.

“India, South Africa and their allies use the moratorium as leverage because they can,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels. “Developing countries have everything to win and nothing to lose by holding the WTO prohibition on data tariffs ransom.”

AfCFTA – Why regional support is crucial for effective implementation

Wamkele Mene, Secretary-General of the AfCFTA Secretariat

In order to support the implementation processes of the African Continental Free Trade Area agreement, Regional Economic Communities (RECs) need to make informed choices about how to reap the benefits presented by the agreement, while at the same time managing the challenges that may be encountered in the course of the implementation. 

Wamkele Mene, Secretary-General of the AfCFTA Secretariat, stressed this Tuesday, June 7, on the occasion of the second coordination meeting of the CEOs of RECs, on the implementation of the AfCFTA held at the EAC Headquarters, in Arusha, Tanzania.

The meeting sought to take stock of the progress made since the last meeting in Accra in 2021.

The role of the continent’s eight RECs is critical especially as the latter are building blocks for the AfCFTA.

Mene said the implementation of the AfCFTA will likely influence future trade policies of the RECs. 

“In this regard, effective collaboration between the RECs and the AfCFTA Secretariat is necessary to ensure that the AfCFTA outcomes are consistent with regional advancements in trade integration made thus far and the projections for the future,” Mene said.

“Therefore, the coordination meetings offer us an opportunity to listen to one another, to better understand our areas of difference, and to work together to build consensus around common positions critical to our success at creating an African Economic Community.”

African leaders mandated the AfCFTA Secretariat, the African Union Commission, and the RECs to develop a framework of collaboration to enhance complementarity, synergies, and alignment of programmes and activities to facilitate the effective implementation of the AfCFTA. The negotiation of the AfCFTA is now in phase two which covers investments, intellectual property rights, women and youth in Trade competition policy and digital trade. 

It is Mene’s strong conviction that by agreeing on a workable framework which will strengthen the interdependence of RECs on the one hand, and strengthen the cooperation between RECs and the AfCFTA Secretariat on the other hand, “we will be taking steps critical to the success of the AfCFTA.”

“We have already received instructions from the Assembly of Heads of State and Government of the African Union to take all necessary steps to ensure the effective implementation of the AfCFTA, including facilitating commercially meaningful flow of goods and services under the AfCFTA preferential regime, across the continent. We were also instructed to develop a coordinated approach to the implementation of the AfCFTA Agreement, with the existing RECs as building blocks.”

Peter Mathuki, the EAC Secretary-General, noted that Africa is one of the world’s fastest-growing economies, but trade in goods and services accounts for an estimated 3% of global exports and imports on average. 

As noted, the share of Intra African trade remains low: on average, 13% for intra-imports and 20% for intra-exports, while ExtraAfrican trade accounts for more than 80% of the total trade. Africa’s exports to the rest of the world consist of raw materials, such as oil, gas, minerals, and agricultural commodities, with little to no value addition.

Mathuki said: “There are many reasons why intra-Africa trade is low; these include differences in trade regimes (8 AU recognised RECs), inadequacies of trade-related infrastructure (poor intermodal connectivity), trade finance and trade information. 

“Other constraints are customs, administrative and technical barriers, limited productive capacity, lack of factor market integration and inadequate focus on internal market issues.”

With a market of around 1.3 billion consumers and a GDP of $ 3.4 trillion, Mathuki reiterated, AfCFTA will unlock many opportunities in the continent and redesign the architectural framework of its economic systems. 

“The eight AU recognised RECs are the official pillars of the African Economic Community (AEC) set out in the Abuja Treaty establishing the AEC. The RECs play a critical role in coordinating and submitting REC tariff offers, schedules, and commitments on trade in services and are fully involved in negotiations on outstanding issues,” Mathuki said.

“Active engagement and input from the private sector and interest groups at the national and REC level are needed to shape the AfCFTA trade regime and resolve challenges ahead.”

Amb. Liberata Mulamula, Tanzania’s Minister of Foreign Affairs, said her country commends the initiative of establishing collaboration between the AfCFTA and RECs towards implementation of the AfCFTA Agreement. 

“Tanzania as a member of EAC Customs Union has ratified the AfCFTA agreement and is also a member of SADC and EAC. In order to have a meaningful implementation of the agreement, the United Republic of Tanzania needs to align its participation in the AfCFTA to that of the RECs as its member.”

“I am confident that this framework will underpin the interface between the AfCFTA and RECs Free Trade Area and laydown actionable policy proposals that would assist in ensuring coherent, coordinated and fully responsive collaboration between the AfCFTA and RECs.”

Source: The New Times, 8 June 2022

Container Port Performance Index 2021

This second edition of the Container Port Performance Index (CPPI), has been produced by the Transport Global Practice of the World Bank in collaboration with the Maritime, Trade and Supply Chain division of S&P Global Market Intelligence.

The CPPI is intended to identify gaps and opportunities for improvement that will ultimately benefit all stakeholders from shipping lines to national governments to consumers. The CPPI is intended to serve as a reference point for key stakeholders in the global economy, including national governments, port authorities and operators, development agencies, supranational organizations, various maritime interests, and other public and private stakeholders in trade, logistic, and supply chain services. The CPPI is not intended to cover the entire performance of a port, but to illustrate opportunities for improvement and, hopefully, stimu­late a dialogue among key stakeholders to move this essential agenda forward.

The development of the CPPI rests on total port time in the manner explained in subsequent sections of the report. This second iteration utilizes data for the full calendar year 2021. It includes ports that had a minimum of 20 valid port calls within the 12-month period of the study. Accordingly, the number of ports covered has increased from 351 in CPPI 2020 to 370 in this edition.

The CPPI 2021 has again employed two different methodological approaches, an administrative, or technical, approach, a pragmatic methodology reflecting expert knowledge and judgment, and a statistical approach, using factor analysis (FA). The rationale for using two approaches was to try and ensure that the ranking of container port performance reflects as closely as possible actual port performance, whilst also being statistically robust.

Download the Report Here!

FIATA – Launches Paperless FBL Solution

Picture: Glenn Carsten-Pieters

FIATA is proud to bring its members a pragmatic solution to move from paper documents to paperless FIATA BLs, which can be issued directly through their everyday tools. The FIATA solution improves the level of security of the FIATA BL in comparison to the paper version, making use of blockchain technology to authenticate the documents and provide an audit trail. Conscious of the various challenges which remain to be overcome to achieve worldwide adoption and legal recognition of electronic exchange of data, the paperless FBL is an answer to the needs of the industry for improved access and exchange of trade documents. The document issuer can decide in which format (s)he wishes to share the original unaltered document with its stakeholders: in paper form or as a PDF. Based on its eFBL data standard, FIATA has developed an API service, available free of charge to all software providers, allowing them to connect with FIATA to create secured paperless FBLs.

As of today, seven software providers have already signed an agreement with the Federation to implement the solution: AKANEA, CargowiseCargoXedoxOnline (Global Share), InfoSysTech-ISTNabu and Usyncro. We are very pleased to announce that the paperless FBLs can start to be issued as of today with edoxOnline, InfoSysTech-IST and Usyncro who have already finalised the implementation.

FIATA encourages all TMS’s, eBL providers and other software providers to join them and implement their solution to offer this new service to their customers. All technical specifications are available on FIATA’s GitHub repository.

 The solution, developed by FIATA partner Komgo, will help to reduce fraud risks, as each document is recorded on an immutable ledger and will be verifiable at any time by all stakeholders interacting with the document. Stakeholders will be able to either scan the QR code at the top right of the document, or directly upload the PDF on FIATA’s verification page to access the document audit trail which will

  • certify the validity of the document,
  • the identity of its issuer, and
  • the integrity of its content.

Souleïma Baddi, CEO of Komgo, when asked to comment on the paperless FBL launch said: ‘Documents are the bedrock of international trade, but they don’t operate like we need them to and they’re susceptible to fraud and forgery, that happens quite often.

Trakk is the digital ecosystem of trust for trade documents. I am thrilled to see FIATA joining all companies, financial institutions, warehouses and others who are using Trakk to protect their documents against fraud.’

‘WiseTech Global congratulates FIATA on the launch of their electronic bill of lading.’ The company continued: ‘This initiative will support transparency and security across the supply chain and will help companies to accelerate their digitalisation efforts. It was a pleasure to work with FIATA on this initiative. CargoWise customers will be able to request a connection to FIATA’s eFBL from June 2022.’ 

‘FIATA is very excited to embark on this important milestone of its digital journey which paved the way for great opportunities for the future of freight forwarders’, said FIATA Director General Stéphane Graber.

For more information, visit FIATA’s dedicated webpage

WTO launches new WTO data portal

The WTO has launched a new WTO data portal to provide easy access to key databases offering trade statistics and information on WTO members’ trade-related measures.

The new portal allows users to navigate a wide range of WTO databases covering trade in goods, services, dispute settlement, environmental measures, trade-related intellectual property rights and more. 

One of the databases is the “WTO Stats portal“, which allows users to access and download time series statistics on trade in goods and services on an annual, quarterly and monthly basis. It also contains market access indicators providing information on governments’ bound, applied and preferential tariffs as well as non-tariff information and other indicators.

The data portal will be regularly updated to take account of new systems and updates.

The WTO data portal is available here. The WTO Stats portal can be accessed directly here.

New Global Alliance of Special Economic Zones to boost development

 A special economic zone in the Dominican Republic.

UNCTAD joined hands with seven global, regional and national associations representing over 7,000 special economic zones (SEZs) to launch a global alliance on 17 May.

SEZs are geographically delimited areas within which governments promote industrial activity through fiscal and regulatory incentives and infrastructure support.

They go by many different names, including free-trade zones and industrial parks, and are widely used by developed and developing economies.

The Global Alliance of Special Economic Zones (GASEZ) seeks to drive the modernization of these zones across the world and maximize their contribution to the UN Sustainable Development Goals (SDGs).

UNCTAD Secretary-General Rebeca Grynspan said: “The United Nations 2030 Agenda for Sustainable Development provides an opportunity for special economic zones to attract investment by putting SDGs at the forefront of their value proposition.”

Ms. Grynspan added: “A new model of sustainable special economic zones is therefore rapidly taking shape and they are contributing to more inclusive, resilient and sustainable economies in the countries where they operate.”

Pooling expertise

The alliance pools the expertise of its members to increase collaboration between SEZs, advocate on their behalf and enhance their contributions to sustainable development.  

SEZs are faced with new challenges and opportunities that require them to adapt and innovate.

Some challenges are related to the COVID-19 pandemic, with new lockdown measures in some parts of the world or disruptions due to the war in Ukraine.

Other challenges and opportunities are longer term, stemming from changing global value chains, including reshoring and nearshoring, and increased digitalization and investments in digital assets.

In addition, ongoing global corporate tax reforms require governments to re-evaluate their fiscal tools and incentives, which SEZs have traditionally relied on.

Many zones are also embracing the SDGs and targeting investment related to these goals.

Towards a global platform

During the alliance’s launch, its founding members expressed their desire to make GASEZ a global platform to catalyse partnerships and bring on board more stakeholders, including governments, the private sector and international organizations.

John Denton, secretary-general of the International Chamber of Commerce (ICC), said: “We support this important initiative…Through collaborative efforts you will be able to help improve SEZ services to business and at the ICC global network we stand ready to work with you to achieve this objective.”

Deepak Bagla, president of the World Association of Investment Promotion Agencies, said: “As supply chains re-organize themselves in a post-pandemic world order, we have a great opportunity where we can work together and create economic zones which will be based on the core pillars of sustainability, of efficiency, of creating jobs and helping us all working together with our complementarities.”

Founding members 

The alliance’s founding members include the Africa Economic Zones Organization, the Free Trade Zones Association of the Americas, the Green Partnership for Industrial Parks in China, the International Association of Science Parks and Areas of Innovation, the National Association of Foreign-Trade Zones of the United States of America, the World Free and Special Economic Zones Federation, the World Free Zones Organization and UNCTAD. The Alliance’s members represent 7,000 special economic zones in 145 economies, employing over 100 million people.

Source: UNCTAD, 17 May 2022

The Subtleties of Red Tape 

Picture – Vincent Branciforti

The following article by Dr Richard Grant, originally featured in BizNews on 19 April 2022.

It might be hard to imagine that ‘red tape’ could be your friend. Although we never actually see the red ribbon or tape that was once used to bind government documents, we do see the ponderous power of its spirit when experienced as in the Britannica Dictionary definition: “A series of actions or complicated tasks that seem unnecessary but that a government or organisation requires you to do in order to get or do something.”

Dr Richard Grant who does not have a suppressed memory of the stress, frustration and wasted time that so often come with the need to deal with a government bureaucracy to obtain a document, or to get something done? Who has not asked, “Can’t we just cut through all this red tape?” I can certainly commiserate. But be careful what you wish for.

Those old red ribbons or tape that bound those documents were merely a physical manifestation of the existence of law. Although the king might have been absolute in his power, he would keep that power only through a set of rules that would constrain the subsidiary power and reach of those who acted in his name. Throughout the ages, each government officer or bureaucrat has had his own personal desires and interests that could be quite different from those of the legitimate government leaders or of the ‘will of the people’. The rules imposed on them by the king or parliament serve not only to ensure that the king’s will would be done by the bureaucrats, but also to protect the king’s subjects from the personal whims of those same bureaucrats.

It is this latter feature that we are most in danger of losing. The protection of citizens from the arbitrary powers of government bureaucrats and their superiors is a key feature of those countries that are not only the most prosperous and free, but also most respectful of their citizens. That is the essential purpose of the rules and conventions that we call red tape. Without such controls, each bureaucrat with whom we deal would have potentially unlimited dictatorial powers. The red tape limits the size of the bureaucrat’s fiefdom and the scope of his powers within that fiefdom, thereby limiting the reach of his power over us.

Our problems with bureaucracy arise, not from the bureaucracy itself, but from the government (elected or otherwise) that creates more programmes and regulations for the bureaucracy to manage and enforce. As governments interfere more in our lives, bureaucracies must necessarily grow and become more powerful. That is what pushes out more red tape to bind ‘we the people’ rather than the bureaucrats and government officials.

When the people demand that the government do more for them, they are in essence asking the government and its officials to take on greater power and to have greater influence over our lives. That is when red tape becomes a visible and pernicious issue in daily life. Increasingly, we find ourselves dependent on some bureaucrat’s permission to conduct even the most basic aspects of our lives. To what extent do we need a bureaucrat to determine what we may buy and sell, what we must pay for petrol, from whom we are allowed to receive medical services, how we may produce and buy food, and how we might educate ourselves and share information? We might even find that we need a bureaucrat’s permission to venture out of our homes, and to do so with our faces uncovered – again.

The highest form of red tape is the national Constitution, whether explicitly written or by evolved convention. It is the Constitution that specifies and thereby limits the powers of the government and its officials. It is the set of rules within which the lesser rules, such as legislation, are made. A true constitution is necessarily far more difficult to change than is mere legislation. Just as giving a referee the power to change the rules in the middle of a rugby match would ruin the game, giving a legislature the power to change the rules that constrain it, would unleash the seekers of plunder and dictatorial rule.

Those who would live in a free and prosperous society must remember that the purpose of a constitution, and the red tape necessary to enforce it, is to constrain the power of the government, not of the citizens. When citizens experience increasing interference in the normal conduct of their lives from government regulators and other officials, the solution is not to cut through the red tape, but to push back on that red tape to bind more tightly the legislators and executives who empowered the bureaucracy.

A free and prosperous people are those who bend red tape away from themselves, instead to encircle their government and its officials, to limit their bureaucratic powers, and to tie it tightly.

Original Article

SARS Head Accreditation and Licensing, elected Vice Chair for WCO SAFE Working Group

Ms Rae Vivier, Head Accreditation and Licensing at the South African Revenue Service, has been elected by the World Customs Organisation (WCO) Member States as a Vice Chair for the WCO SAFE Working Group.   

The role of the WCO’s SAFE Working Group is to advise, as appropriate, the Policy Commission, the Permanent Technical Committee and the Secretary General on the full range of issues concerning the SAFE Framework of Standards. Such issues include matters relating to implementation and amendments concerning the SAFE Framework and further developing and monitoring other World Customs Organization (WCO) initiatives and related Customs matters that impact the operation of the SAFE Framework of Standards.

In accepting her election at the SAFE Working Group Meeting which took place on the 11 – 13 April 2022, Ms Vivier indicated that she was truly humbled by her election to the position and that it is an inordinate privilege to serve all 184 members and the WCO for the next 4 years.

Even though South Africa has been instrumental in the development of key instruments and tools designed by the WCO, it is a first time that the African continent will be holding such a leadership role in this key international platform i.e., SAFE Working Group.  The Vice Chair position will subsequently assume the role of Chair of the SAFE Working Group after two years.

Source: SARS

SARS – Rhino horn found in luggage at OR Tambo International Airport

Customs officers of the South African Revenue Service (SARS), in collaboration with other government departments, intercepted the luggage of a female South African passenger at OR Tambo International Airport which contained twelve (12) pieces of rhino horn weighing  30.7 kilograms.

The interception of the rhino horn came after the SARS Customs and other government officials received a tip-off regarding a passenger travelling to Dubai.

The Customs team reacted swiftly and accompanied the female passenger to the Customs area for further Customs inspection. The two luggage bags and a box were inspected by a baggage scanner that identified irregular images suspected to be rhino horn.

This led to a physical inspection of the luggage and box in which twelve (12) pieces of rhino horn, weighing 30.7kg were found. The passenger together with the rhino horn were handed to the South African Police Service after which a criminal case was opened for further investigation.

Between July 2020 and December 2021, a total of 125 pieces of rhino horn, weighing 452 kilograms, were seized at OR Tambo International Airport.

  • December 2021: Six (6) pieces of rhino horn, weighing 4kg declared as ‘Personal Effects’, bound for China.
  • December 2021: Five (5) pieces of rhino horn, weighing 10kg declared as ‘Scanners’, bound for Malaysia.
  • July 2021; Thirty-Two (32) pieces of rhino horn, weighing 160kg declared as ‘Live Plants, bound for Malaysia.
  • February 2021: eighteen (18) pieces of rhino horn, weighing 63kg declared as ‘HP Cartridges Developers’, bound for Malaysia.
  • December 2020: seventeen (17) pieces of Rhino Horn weighing 72.4kg concealed in a geyser bound for Malaysia.
  • September 2020: six (6) pieces, weighing 4.9kg declared as “Coffee Beans”, bound for Malaysia.
  • July 2020: forty-one (41) pieces, weighing 137kg declared as “Fine Arts”, bound for Malaysia via Doha.

SARS Commissioner Edward Kieswetter expressed his sincere thanks to Customs officers and their counterparts from South African Police Service for working diligently to curb the smuggling of rhino horn and many related crimes.

He said, “We will leave no stone unturned to detect and prosecute these criminal syndicates and individuals who break the law.  SARS and the law enforcement agencies will spare no efforts to ensure they are brought to book.”

For more information, contact SarsMedia@sars.gov.za

The Most Produced Cash Crops in Africa

Agriculture makes up nearly 20% of Sub-Saharan Africa’s economy—a higher percentage than any other region worldwide. 

From Nigeria to the fertile land across the East African Rift Valley, the continent is home to 60% of the world’s uncultivated arable land

Given the massive role of agriculture across the region, this infographic from Zainab Ayodimeji shows the most produced cash crops in Africa and their share of total global production.

To view the Top 20 Cash Crops, link to the Full Article here.

Source: The Visual Capitalist

SAFE Working Group urges greater harmonization of AEO programmes

Picture – Nazarizal Mohammed

The 26th/27th Meetings of the SAFE Working Group (SWG) were held successfully from 11 to 14 April 2022. The virtual meetings brought together more than 260 delegates representing Customs administrations, the Private Sector Consultative Group (PSCG), other international organizations and academia.

In his opening remarks, Mr. Pranab Kumar Das, WCO Director of Compliance and Facilitation, highlighted that the SWG had reached an important juncture as the new three-year SAFE review cycle 2021-2024 was about to enter into discussions. It was pointed out that 17 years after it was first published, the SAFE Framework of Standards (FoS) had garnered substantial interest from WCO Members. During the meetings, Guyana became the 172nd WCO Member to express its interest in implementing the SAFE FoS. 

With a view to continued enhancement of the AEO criteria and provisions to strengthen the SAFE FoS, WCO Members made several new proposals to revise the Framework. The SWG also received feedback from the private sector on the urgent need to enhance the harmonization of SAFE and AEO implementation. In this context, the SWG heard a presentation by the WCO Anti-Corruption and Integrity Promotion (A-CIP) Programme on maintaining the integrity and transparency of AEO implementation.

On this occasion, the SWG reviewed and adopted the new Work Plan for 2022-2024, which reflected the critical activities the SWG will carry out over the next two years until 2024, in parallel with the SAFE review cycle. The SWG also received an update on the development of new features for the Online AEO Compendium (OAC) and the other extensive work underway in collaboration with other international organizations in the areas of security and facilitation.

Against the backdrop of the WCO’s theme for 2022, the panel discussion on “Scaling up Customs Digital Transformation by Embracing a Data Culture and Building a Data Ecosystem” attracted significant interest from Members and the private sector. The experienced speakers from Member Customs administrations, the private sector and the Secretariat enriched the discussions by sharing their best practices on using data for enhancing risk management and monitoring AEO programmes.

As a way forward, the SWG agreed that efforts will be reserved for a comprehensive review to assess and monitor SAFE implementation for greater harmonization of AEO programmes globally.

Source: World Customs Organisation, 25 April 2022

Satellite Maps – Shanghai’s Supply Chain Standstill

China has mandated a strict “zero COVID” policy since the onset of the global pandemic, which has led to tight lockdowns across the country whenever cases have started to spike. 

Recently, lockdown restrictions have been enacted in major cities like Shenzhen and Shanghai, as China deals with one of its worst outbreaks since Wuhan in December 2019.

These cautionary measures have had far-reaching impacts on China’s economy, especially on its supply chain and logistics operations. Shanghai’s port system, which handles about one-fifth of China’s export containers, is currently experiencing significant delays as a result of the recent government lockdown.

Shipping volume has dipped drastically since early March this year, right after partial lockdowns began in Shanghai. By the end of March, as restrictions continued to tighten up, shipping activity dipped nearly 30% compared to pre-lockdown levels. And while activity has recently picked up, it’s still far below average shipment volumes prior to the recent lockdown.

While the port is still technically operating, shipping delays will likely cause hiccups in the global supply chain. That’s because the Shanghai port is a major hub for international trade, and one of the largest and busiest container ports in the world.

How Bad is the Back-Up?

Here’s a closer look at satellite imagery that was captured by the Sentinel-1 satellite, which shows the current congestion at Shanghai’s port as of April 14, 2022. In the image, a majority of the white dots are cargo ships, many of which have been stuck in limbo for days.

Traffic has been building up at the Shanghai terminal. As of April 19, 2022, over 470 ships are still waiting to deliver goods to China. If you’d like to check out the Shanghai ports most up-to-date traffic, this live map by MarineTraffice provides real-time updates.

Much of these delays are due to transport issues—an estimated 90% of trucks that support import and export activities are currently offline, which is causing dwell time for containers at Shanghai marine terminals to increase drastically. 

Wait times for at Shanghai marine terminals has increased nearly 75% since the lockdowns began. Delays at the Shanghai terminal have sent ships to neighboring ports in Ningbo and Yangshan, but those ports are beginning to get congested as well.

The global impacts of this current bottleneck are still pending, and depend greatly on the length of Shanghai’s lockdown. According to an article in Freight Waves, this could turn into the biggest supply chain issue since the start of the pandemic if China’s marine shipping congestion isn’t cleared up soon.

Read Full Article Here!

Source: Visual Capitalist, article by Carmen Ang and Graphics by Nick Routley, dated 21 April 2022

Golden Triangle – The World’s Worst Special Economic Zone

Picture: Wiki Commons

The Golden Triangle SEZ in Laos is mired in scandal and criminality, but the silence from SEZ authorities on the matter is deafening.

In February 2022, authorities raided the Golden Triangle Special Economic Zone (SEZ) in Laos, freeing dozens of Chinese women from forced prostitution.

For years, the Golden Triangle SEZ has been home to numerous illegal industries including human trafficking, wildlife smuggling and drugs production. Despite this, the zone has announced significant expansion plans.

SEZs are business parks or cities that have been granted exemptions from most national-level economic regulations. They often enjoy tax breaks, different labour laws, special visa rights, import/export exemptions and streamlined regulations. There are more than 7,500 SEZs in 100 countries worldwide. The overwhelming majority of SEZs are legitimate centres of industry. They play key roles in the global tech, manufacturing, supply chain, logistics and tourism industries. However, a small minority of SEZs, such as the Golden Triangle, have been implicated in serious issues that threaten the credibility of the entire industry.

The shame of the Golden Triangle SEZ

On 5 February 2022, Laotian police raided the Golden Triangle SEZ, rescuing six women who were victims of human trafficking. The women came from impoverished backgrounds in southern China. Recruiters told them that they could have lucrative jobs as telemarketers in the Kings Roman Casino, the anchor tenant of the zone. When they failed to meet sales quotas, their employers declared that they were in debt. The women were then brought to local pimps, who separated the ones considered beautiful from the rest. Some of the women were sent to brothels; the others were forced to work in the laundry service of the casino.

In January, eight women staged a daring escape where, in the middle of the night, they met up with human rights activists who helped them escape the zone’s fence. After repeated complaints by the authorities, they carried out the raid, which would rescue six more women.

Authorities have now rescued 50 Thai women from the Golden Triangle SEZ, although, according to Laotian authorities, there may be up to 200 more women of other nationalities still trapped there. Some of the women have reportedly been enslaved there for up to a decade. In 2012, 50 women were rescued after similar complaints led to a similar bust.

Laotian authorities are powerless to act – the Golden Triangle’s status as an SEZ means that authorities cannot enter in the absence of a formal complaint. The zone is run by the Chinese-owned Kings Roman Corporation, based out of Hong Kong.

On 29 January, the second-largest drug seizure in Asian history occurred right outside of the Golden Triangle SEZ. Authorities caught four men in a nearby village attempting to smuggle 36 million pills of methamphetamine to Thailand. Authorities speculated that the meth was produced in the Golden Triangle SEZ, and was ultimately destined for lucrative markets such as China and Australia. An Australian federal police official stationed in the area estimated that between 60% and 80% of all of Australia’s methamphetamine came from the Golden Triangle region.

The World Wildlife Fund also warns that the Golden Triangle SEZ is a hotbed of wildlife smuggling. Endangered species such as tigers, elephants, bears and pangolins are sold and butchered there for use in Chinese traditional medicine. The number of illegally held animals has significantly increased since the beginning of 2022.

Why can’t Golden Triangle SEZ be closed down?

Human trafficking, methamphetamine production and wildlife smuggling barely scratch the surface, however. The zone was built on stolen indingenous land, workers are routinely unpaid and forced to work against their will, and the zone regularly dumps toxic waste into local streams.

SEZ officials do not deny any of the human trafficking, drug smuggling or wildlife smuggling. However, they say that this is being done by tenants and not by the zone itself. SEZ officials have agreed to pass new labour rules designed to protect women in the zone, but critics worry that these are just token reforms.

Despite everything, Laotian authorities are unwilling to shut down the zone. This is partially due to pressure from the Chinese, but also because the rest of the country outside of the zone is also chaotic. Local authorities are barred from entering and international inspectors are routinely turned away.

Instead, the government of Laos is doubling down. The Golden Triangle SEZ is currently building a new international airport to attract more Chinese tourists. Zone management is also investigating a possible expansion of the zone, which might result in more land expropriation from nearby communities.

The expansion of the Golden Triangle SEZ should be seen as an embarrassment to the global SEZ industry. Despite this, none of the major international SEZ trade associations – the World Free Zones Organisation, the Africa Economic Zones Organisation, or the Free Zone Association of the Americas have publicly condemned the Golden Triangle SEZ.

International SEZ organisations must issue statements publicly condemning the Golden Triangle SEZ. Doing so would cost them nothing – a single press release, an email blast to their newsletter audiences and a public statement condemning the project. It would, however, have a significant impact – it would give activists in Laos and the Mekong region more ammunition to pressure the government to shut down the zone. It would also send a message to international investors to stay away. Failure to properly address zones such as the Golden Triangle actively damages the credibility of the SEZ trade associations. It creates a false perception that these groups stand to gain by enforcing the status quo. In reality, international zone associations have everything to lose by failing to publicly condemn bad SEZs.

Strongly worded statements will not solve the problems of the Golden Triangle and other SEZs that fall below the required standards of decency, but they will send a message to the Golden Triangle – and other problematic zones – that they are being watched.

Source: Investment Monitor, article by Thibault Serlet, 28 March 2022