SA Parliament adopts report on Border Management Authority Bill

Several media reports have recently published misleading information in regard to the South African Revenue Service and the Border Management Authority Bill. The following statement by Parliamentary Communication Services offers context in the matter –

Parliament adopts report on Border Management Authority Bill

Border Management Authority bill takes another step towards becoming law

The Portfolio Committee on Home Affairs adopted a report on the Border Management Authority Bill [B9B-2016] and will recommend to the house to adopt and pass the Bill into an Act of Parliament.

The adoption follows the recommendations and amendments made by the Select Committee on Security and Justice while processing the Bill. The committee agreed that the amendments are valid and strengthen the Bill to ensure that it delivers on its mandate.

An important amendment made by the National Council of Provinces is to highlight the consensus reached between the Minister of Finance and Minister of Home Affairs, which removes the South African Revenue Services from the application of the Act. “We appreciate that the two departments have reached a consensus on how to handle the custom-related issues at port of entries, which has been a major sticking point impeding the completion of the Bill,” said Advocate Bongani Bongo, the Chairperson of the committee.

The committee welcomes the fact that as a result of this consensus, the Bill commits both the Department of Home Affairs and National Treasury to agree on an implementation protocol to enable seamless functioning and co-ordination of border management areas within six months of the implementation of the Act.

The committee is of the considered view that the passing of the BMA Bill is a step in the right direction to secure our borders and end fragmentation within this environment. The committee will table its report before the National Assembly and recommend that the Bill be passed and sent to the President for assent into law.

Regarding the performance of the department in quarter three and four, the committee notes the piloting of an e-visa in Kenya. While the committee is aware that this pilot phase should have been rolled out to six missions across the world, it nonetheless welcomes the announcement that the pilot will be extended to India, Nigeria and China in the course of this quarter. The committee has urged the department to fix teething problems identified and to conclude the piloting stage with the aim of introducing the programme.

The fight against corruption is an important pillar in strengthening accountability and good governance. In line with this, the committee welcomes the announcement that 86.6% of the department’s fraud and corruption cases are finalised within 90 days. The committee continues to emphasise the need for the speedy finalisation of corruption cases and the sanctioning of departmental employees.

The committee will continue to monitor the implementation of the Annual Performance Plan to ensure delivery of services to the people.

For media enquiries or interviews with the Chairperson:

Committee’s Media Officer
Malatswa Molepo 
Parliamentary Communication Services

18 February 2020

Third anniversary of WTO Trade Facilitation Agreement

Three years since the Trade Facilitation Agreement (TFA) entered into force on 22 February 2017, WTO members have continued to make steady progress in its implementation. Director-General Roberto Azevêdo, on the occasion of the TFA’s third anniversary, welcomed members’ efforts to ensure traders can reap the full benefits of the Agreement.

The TFA, the first multilateral deal concluded in the 25-year history of the WTO, contains members’ commitments to expedite the movement, release and clearance of goods across borders. As of the TFA’s third anniversary, 91% of the membership have already ratified the Agreement. It entered into force three years ago when the WTO obtained the two-thirds acceptance of the Agreement from its 164 members.

The Agreement is unique in that it allows developing countries and least-developed countries (LDCs) to set their own timetables for implementing the TFA depending on their capacities to do so. They can self-designate which provisions they will implement either immediately (Category A), after a transition period (Category B), or upon receiving assistance and support for capacity building (Category C). 

As of 22 February 2020, over 90 per cent of developing countries and LDCs have notified which provisions they are able to implement after a transition period, and the ones for which they will need capacity-building support to achieve full implementation of the Agreement. Developed countries committed to immediately implement the Agreement when it entered into force.

Based on members’ notifications of commitments, 65 per cent of TFA provisions are being implemented today compared to the 59 per cent implementation rate recorded on the Agreement’s first anniversary. Broken down, the latest figure equates to a 100 per cent implementation rate for developed members and 64 per cent for developing members. As for least-developed countries, the improvement in the implementation rate is particularly notable at 31 per cent today versus the 2 per cent recorded a year after the Agreement entered into force. The implementation rate for each WTO member can be viewed here

The Agreement has the potential, upon full implementation, to slash members’ trade costs by an average of 14.3 per cent, with developing countries and LDCs having the most to gain, according to a 2015 study carried out by WTO economists. It is also expected to reduce the time needed to import and export goods by 47 per cent and 91 per cent respectively over the current average.

Source: World Trade Organisation, 22 February 2020

WCO supports SARS with AEO programme implementation

Under the framework of the Southern African Customs Union (SACU) Customs Modernization Programme, funded by the United Kingdom Foreign and Commonwealth Office, WCO experts were invited to lead an AEO Validation Workshop for the South African Revenue Service (SARS). The Workshop was held from 10 to 14 February 2020 in Pretoria, South Africa. Mrs. Rae Vivier who is the Group Executive responsible for AEO in SARS opened the workshop and welcomed the WCO and SACU representatives with a key note address to all attendees. She gave assurance to the audience that AEO is taken seriously by SARS and is one of the organization’s key deliverables. 

During the five day Workshop, the SARS AEO validation team was given an introduction to the WCO SAFE Framework of Standards (FoS), including all its Pillars, core elements, and AEO criteria etc. This was followed by a discussion on the essential elements of the AEO Validation Guidance, the sequential steps of the AEO validation procedures and the skills required by AEO validators. 

The participants, comprised of Customs auditors, legal experts and client relationship managers, were given an opportunity to share their views on the similarities and differences between AEO validation and post-clearance audit. The core values of Customs-Business partnerships were highlighted as an important aspect towards achieving AEO programme implementation. Auditors with a Customs compliance mindset were given security validation knowledge and taught how to hold discussions with business on coordinating and enhancing international supply chain security and safety. Another important element underscored during the training was that validation of the applicant is central to accreditation, and that the applicant’s supply chain may not be tested. Accordingly, the applicant is responsible for securing its own supply chain. 

The Workshop entailed extensive discussions on the self-assessment questionnaire prepared by SARS for potential AEOs taking part in the country’s AEO pilot. While referring to the WCO self-assessment template, the WCO experts also shared questionnaires by other Customs administrations. The participants and experts discussed how to enhance the questions posed, making it simpler for business to understand and answer them. A number of recommendations were made, including adding explanatory notes to the self-assessment questionnaire to help clients provide accurate information about their security and safety protocols.

A further aim of the Workshop was to include practical sessions, such as the mock validation process held at BMW’s South African plant in Rosslyn. Participants were told how BMW guarantees supply chain safety and security. Equipped with this information, the Workshop participants were given a walk-through of BMW South Africa’s processes for receiving goods. The lessons learned were shared among the Workshop participants and SARS management during the post-validation assessment. During that session, several Mutual Recognition Arrangements/Agreements (MRAs) signed between different Customs administrations were also referenced, so as to enhance learning and information sharing. 

SARS embarked on its Preferred Traders Programme (PTP) in May 2017. The initial number of 28 accredited traders (importers/exporters) has grown to reach 119 as of 14 February 2020. Under the SARS Strategic Plan for 2023, the priority will be to focus on improving voluntary compliance and supply chain security through implementation of the standardized WCO SAFE/AEO programme. At the same time, SACU wishes to roll out PTPs for all its Members, while moving towards a full-fledged AEO programme in phases. To this end, the WCO experts discussed and shared views on the PTP compatibility assessment tool aimed at ensuring mutual recognition of Preferred Traders among SACU Members.

Source: WCO, 19 February 2020

Guide: Goods and Conveyance Reporting in South Africa

A companion guide in support of increased compliance in the reporting of goods and conveyances (RCG) to Customs, South Africa.

Necessary information for – Air, Sea and Road carriers, vessel’s agents, NVOCCs, freight forwarders, Air and Sea terminal operators, container depot operators, transit shed operators and de-grouping depots. Also, all private software service providers to the trade.

The guide offers easy navigation through –

  • registration and electronic trading with SARS Customs
  • the various electronic messages mandated by law, covering import and export movements, across all modes of permissible international transportation
  • message types for each transaction type
  • scenarios to facilitate easier understanding across operators in the supply chain on how the various electronic reports are sequenced, ensuring that Customs formulates a comprehensive end-2-end view of a international trade transaction
  • reference webpages, official notifications, Customs rules and other pertinent information concerning cargo reporting.

All information is hyperlinked to SARS documentation, found on the official SARS website www.sars.gov.za

You may download the Guide below (File size: 3MB)

Illicit Cigarettes – Hong Kong customs intercepts four shipping containers

Photo: Winson Wong

Hong Kong customs has uncovered HK$85 million worth of smuggled cigarettes in the largest seizure of its kind in two decades, after authorities acted on intelligence indicating a syndicate was shipping the haul into the city in four containers.

Some 31 million cigarettes were stashed in the containers from Yokohama in Japan. They were then shipped through different ports in South Korea, Vietnam and mainland China, according to Lee Hoi-man, deputy head of the Revenue and General Investigation Bureau under customs.

He said the circuitous route was used by smugglers to avoid detection.

“The containers were shipped into three to four different ports before they came to Hong Kong,” Lee said adding that the contents listed on import documents were changed to throw off law enforcement in various jurisdictions.

Four men – one mainlander and three Hongkongers – aged between 24 and 41 were arrested in the operation on Monday. They were still being held for questioning on Tuesday evening.

Information on the containers was shared to a global database operated jointly by customs from different countries, under an anti-smuggling campaign code-named “Project Crocodile”.

A law enforcement source said the containers were left idle at another port since December, but were then suddenly moved across different countries before arriving in Hong Kong, one at a time since last Friday.

Lee said: “It is possible smugglers believed our frontline officers were tied up in dealing with the coronavirus outbreak.” He added that some of the contraband items were believed to be destined for countries in eastern Europe as some cigarette brands seized in the operation were popular there.

Hong Kong customs began investigating the syndicate in mid-December before identifying the four containers.

On Monday afternoon, officers from the Revenue and General Investigation Bureau swooped into action and seized 22 million sticks of cigarettes stashed in three containers at yards in Yuen Long, Sheung Shui and Man Kam To, arresting the four men.

At the Sheung Shui site, officers also seized 3,500 bottles of duty-not-paid liquor worth HK$2.5 million.

On Tuesday, the fourth container which had arrived from Shenzhen a day before was selected for inspection. Nine million cigarettes were found in it.

Lee said the combined haul had an estimated street value of HK$85 million, and was the biggest seizure of its kind in two decades in a single operation.

He said his team was working with overseas counterparts to determine the exact origin of the shipment and track down the ring leader and core syndicate members.

In Hong Kong, importing or exporting unmanifested cargo carries a maximum penalty of seven years in jail and a HK$2 million fine.

Source: Article by Clifford Lo, South Morning Post, 18 February 2020

South African Customs – Recent Illicit Goods Busts

Customs teams from Durban, Cape Town, Gauteng and the Free State recently dealt a blow to non-compliant traders by busting drugs, illicit cigarettes and undeclared fuel.

Customs officers at OR Tambo International Airport (ORTIA) were responsible for several major drug busts over the past couple of weeks, including the following:

  • On 8 February, a female passenger arriving from Sao Paulo was stopped and her luggage scanned, which revealed suspicious images. After searching her luggage, officers discovered packages wrapped in black tape and containing a white powdery substance. The powder was tested and confirmed to be cocaine, valued at approximately ZAR54 284 349. Officers also searched a male passenger arriving on the same flight and discovered three body wraps on his torso, containing a white powdery substance. The contents were tested positive for cocaine, valued at about ZAR9 057 566. On the same day, officers intercepted a male passenger about to board a flight for Hong Kong and searched him. They discovered body wraps on his upper torso containing cocaine valued at about ZAR11 700 000.
  • On 2 February, a male passenger arriving from Sao Paulo was stopped by Customs officers and his luggage searched. After a luggage scan revealed irregular images, officers searched his bags and discovered packages wrapped in black tape containing cocaine, valued at about ZAR5 850 000.
  • On 27 January, in a similar incident to the above, a male passenger arriving from Sao Paulo was arrested after Customs officers discovered a false compartment in his luggage, which contained cocaine valued at about ZAR6 750 000.

In all the above incidents, the suspects and goods were handed over to the SAPS for further investigation.

In the Durban incident, officers became suspicious of two containers of goods arriving on a vessel in the Durban harbour from China.

The containers, which were declared to contain glassware and household goods, were placed for examination at a cargo depot in Durban. 

Upon inspection by Customs officers on 5 February 2020, the containers were found to contain various suspected counterfeit goods, and several cartons with tablets packed in plastic packets.

Members of the Customs detector dog unit reacted positively to the cartons, which were tested and found to contain Methaqualone (Mandrax).

There was a total of 15 cartons, each containing 20 000 Mandrax tablets with a street value of about ZAR24 million. The case has been handed over to the SAPS for further investigation.

In Cape Town, officers were responsible for a massive bust of illicit cigarettes, one of SARS’ key focus areas when it comes to illicit trade (particularly in terms of lost revenue due to the fiscus). 

After receiving an alert from the Compliance Risk and Case Selection team about a possible mis-declaration of a container on a ship arriving in South Africa, a detention notice was issued to the shipping liner and the goods were detained in December 2019.

After following the required legal processes, a Customs Branch Physical Inspection team searched the container at the Cape Town harbour on 20 January 2020.

During the inspection, the team discovered 1050 master cases of “LEGATE” cigarettes, each case containing 50 cartons of 10 packets, with an estimated street value of about ZAR3 150 000.

If the consignment of cigarettes was not detected, the potential loss of revenue would have amounted to about ZAR12 208 350 in Customs & Excise duties and VAT. 

The Western Cape Customs Branch Inspection team has handed over the case to Criminal Investigations from further investigation.

In the Free State, Customs officers dealt a blow to another key area of illicit trade, ie. ghost exports or false declarations of fuel. On 31 January 2020, officers stopped a truck coming from Lesotho through the Ficksburg border post. They had become suspicious of this particular trucking company, as they had recently changed their route to using South Africa as a transit route from Mozambique to Lesotho. 

Officers noticed that the same truck had driven through the border into Lesotho the day before, having declared the truck full with fuel they acquired in Mozambique. The following day it re-entered South Africa, with the driver claiming that the truck was empty (which could indicate a possible ghost export in which they were trying to avoid paying taxes and duties/levies).

They then asked the driver to park the truck at the depot for inspection. However, after the truck was taken to the depot, the truck driver disappeared and the truck company’s lawyer was called to attend an inspection. 

Customs officers then discovered the truck contained 26 000 litres of diesel, with the owners having failed to pay duties and taxes totalling ZAR176 000 due to the fiscus. The truck was detained for further investigation.

And in a similar incident, two trucks were stopped at the Maseru Bridge border post on 4 February for falsely declaring fuel coming from Mozambique to Lesotho. The trucks contained 39 388 litres and 39 414 litres of petroleum respectively. Both were detained for further investigation. 

Source: South African Revenue Service [SARS]

Insight: Transnet import/ export delays harming SA’s competitiveness

The following article provides insight into prevailing problems concerning rail transport between Durban and Johannesburg, in particular containerised and bulk rail cargo. Again, private enterprise is ahead of the game, but must wait for the availability of reliable rail services to permit uninterrupted movement of goods. The bottom line – an under-performing and unreliable railway network to South Africa’s hinterland means the country’s road networks will remain under stress; and, will themselves fall into a state of disrepair. This contributes to the country’s lack of competitiveness. The article puts into perspective the announcement of the Distribution Junxion, Port of Gauteng which will be situated south of Ekurhuleni, where it borders conveniently on the Durban-Johannesburg railway line.

Article: Hurry up/Wait: Transnet import and export delays harming SA’s competitiveness, authored by Sasha Planting, Daily Maverick, 16 February, 2020

Cooperative Law Enforcement forces Rhino Poaching into decline

The Department of Environment, Forestry and Fisheries recently released a report on rhino poaching in the country for 2019. Minister Barbara Creecy said wildlife trafficking constitutes a highly sophisticated form of serious transnational organised crime that threatens national security.

“The aim is to establish an integrated strategic framework for an intelligence-led, well-resourced, multidisciplinary and consolidated law enforcement approach to focus and direct law enforcement’s ability supported by the whole of government and society.”

She paid tribute to rangers who battle poaching in the conservation areas on a daily basis. In 2018, 769 rhinos were killed for their horns in South Africa. During 2019, rhino poaching declined, with 594 rhinos poached nationally during the year.

This decline can be attributed to a combination of measures implemented in line with government’s strategy, including improved capabilities to react to poaching incidents, linked to better situational awareness and deployment of technology; improved information collection and sharing among law enforcement authorities; better regional and national cooperation and more meaningful involvement of the private sector, NGOs and donors.

“A decline in poaching for five consecutive years is a reflection of the diligent work of the men and women who put their lives on the line daily to combat rhino poaching, often coming into direct contact with ruthless poachers,” Creecy said.

Some 2 014 incursions and poacher activities were recorded in the Kruger National Park (KNP) in 2019. A total of 327 rhino were lost as a result of poaching.

The department reported that 31 elephants were poached in South Africa in 2019. Of them, 30 animals were in the KNP and one in Mapungubwe National Park.

This is a decrease in the number of elephants poached in 2018, when 71 were killed for their tusks. During 2019, some successes have also been recorded through the number of arrests and convictions linked to rhino poaching and the illicit trade in rhino horn, that reflects the joint and integrated work of law enforcement entities, including the Stock Theft and Endangered Species Unit of SAPS, the Hawks, SANParks, provincial park authorities and environmental management inspectors (Green Scorpions) and Customs as well as the National Prosecuting Authority.

High-profile cases that remain on the court roll in the Lowveld include:

  • State vs Jospeh Nyalungu and nine others in Nelspruit Regional Court. Provisional date for trial is May 25.
  • State vs Rodney Landela in Skukuza Regional Court. Trial date set for
  • February 19.
  • State vs Petrus Sydney Mabuza, Nozwelo Mahumane, Moshe Thobela and Romez Khoza. Trial date set in the High Court of Mpumalanga in Mbombela for July 27 and August 14.
  • State vs Petrus Sydney Mabuza and Joseph Nyalunga. Trial date set in the High Court of Mpumalanga in Mbombela on May 25 to June 19.

Since the last report on the rhino poaching situation and efforts being made to address the crime, rhino horn samples have been received for analysis from Vietnam to determine if the horns confiscated are linked to crimes in South Africa.

The Hawks have also received very good cooperation from China, Hong Kong, Malaysia, Singapore, Vietnam and Japan in their efforts to combat wildlife trafficking.

While acutely aware that criminal elements will continue to take advantage of the socioeconomic pressures and drive demand for illegal wildlife products, the department said it was working with a number of communities, NGOs and donors, and identified various community developmental programmes, including awareness programmes.

Source: Hazyview Herald, 13 February 2020

South Africa to lose preferential access to US markets

The US has narrowed its list of countries it considers to be developing nations, including SA, to prevent them getting special trade preferences.

SA is set to lose preferential access to US markets after the Trump administration moved to change key exemptions to America’s trade-remedy laws on Monday.  

In 2019, US President Donald Trump issued an executive memo that asked US trade representative Robert Lighthizer to determine whether there has been “substantial progress” towards limiting the number of countries considered developing nations. 

“The WTO [World Trade Organisation] is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment. NO more!!! Today I directed the U.S. Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!” Trump said in a tweet in July.

In doing so, the US eliminated its special preferences for a list of self-declared developing countries that includes Albania; Argentina; Armenia; Brazil; Bulgaria; China; Colombia; Costa Rica; Georgia; Hong Kong; India; Indonesia; Kazakhstan; the Kyrgyz Republic; Malaysia; Moldova; Montenegro; North Macedonia; Romania; Singapore; South Africa; South Korea; Thailand; Ukraine; and Vietnam.

The US trade representative said the decision to revise its developing country methodology for countervailing duty investigations is necessary because America’s previous guidance — which dates back to 1998 — “is now obsolete.”

In a separate, but related matter the US is already considering whether SA can continue to be part of its preferential trade programme.

The Trump administration wants to reconsider SA’s preferential access to its markets over concerns that the Copyright Amendment Bill will threaten intellectual property (IP) rights. Should the US decide to suspend SA from the trade programme, the country could lose as much as R34bn in export revenue. The bill, which is being opposed by several local and international lobby groups, has been on President Cyril Ramaphosa’s desk for 10 months.

The International Association for the Protection of Intellectual Property (AIPPI), which represents US companies that produce copyright-protected material including computer software, films, television programmes, music, books, and journals (electronic and print media), is objecting to the bill because of the risk it poses to US IP rights. As a retaliatory measure, the association has been lobbying the US government to withdraw SA’s preferential trade status.

Under the US Trade Act, one of the criteria for eligibility for the generalised system of preferences (GSP) programme is that the state “provide ‘adequate and effective protection’ of American copyrighted works and sound recordings”.

Source: Article by Bekezela Phakathi, Business Day, 11 February 2020

Other useful reads

South Africa will caution Trump on ‘premature’ trade review (Tralac)

Port of Gauteng development

USCBP extends secure e-commerce supply chain pilot

Customs and Border Protection (CBP) has expanded its pilot of a new, voluntary scheme to try to improve the security of low-value shipments entering US borders.

The Section 321 Data Pilot is focused in particular on e-commerce, and aims to improve data-sharing between online marketplaces, carriers, technology firms and logistics provider to help protect American consumers from illicit goods arriving by air, ocean, truck, or rail.

That includes, “illicit narcotics, unregulated prescription drugs, brand counterfeits, and unsafe food and beauty products”, according to the CBP, which plans to run the pilot until August 2021.

Nine companies have been selected to participate in the pilot, including e-commerce giants Amazon and eBay, carriers Zulily, FedEx, DHL and UPS, as well as technology firm PreClear and logistics providers XB Fulfillment and BoxC Logistics.

CBP has said that it plans to expand access to all interested and qualified participants “in early 2020.”

The participants will provide cargo origin, content, tracking, recipient and other information to CBP upfront, in addition to the information that is currently legally required for Section 321 shipments – in other words one shipment per day for eligible importers, individuals or companies with a value of $800 or less.

CBP says it wants to see whether having that additional information will enable it to perform “more effective and efficient targeted screening” of these low-value shipments.

Research published in 2018 has suggested that two-thirds of counterfeit goods intercepted by customs around the world are discovered in small parcels sent through postal or courier services.

In part because they are harder for customs officials to track and seize, and also because in many jurisdictions they have not required detailed manifests for their contents. The US stepped up the manifest requirements for Section 321 shipments from January 1, 2019.

CBP broadened the scope of the 321 Data Pilot last month, shortly after the pilot was launched in August, to include ocean shipments and international mail which weren’t included in the original plan.

“Combined with the exponential growth of the online shopping market in the US over the past five years, CBP has seen a significant increase in small, low-value packages,” said the agency in a statement.

“Today, CBP processes more than 600 million express consignment and international mail shipments a year – approximately 1.8m a day. The unprecedented growth in volume of these low-value shipments requires creative solutions to interdict illicit and dangerous products to enter the US.”

Source: article by Phil Taylor, Securityindustry.com, 20 January 2020

Kenya – Single Window costs to impact on traders

Importers and exporters will have to pay to use the Single Window System, Kenya Trade Network Agency(KenTrade) has said.

The agency dismissed concerns that it will increase the cost of doing business.

This comes as it moves to upgrade its system which provides the sole trading platform for lodging entries and accessing trade approvals, mainly by government agencies.

Companies will now have to pay Sh5,000 [ZAR722] annually as registration to the Single Window System. Application for Unique Consignment Reference (UCR) number in the system costs Sh750 [ZAR108] per UCR.

Arrival notification for any the impending arrival notice of a consignment will cost Sh7,500 [ZAR1,080] per ship. 

The charges have been approved by the National Treasury and Planning, following a legal notice issued on December 24 which became effective this month.

This is to support the cash-strapped government agency’s operations after Treasury cut its budget by more than a half.

KenTrade CEO Amos Wangora said the  charge are informed by low funding by the exchequer,which is threatening sustainability of the Single Window Services.

“The agency has over the years relied on the exchequer for funding to run its operations as well as maintain the system, this funding has not been sufficient and has been declining over the years,” Wangora said.

The Single Window System was rolled out in 2013, providing a single platform to process import and export cargo documentation.

It currently serves 12,000 users and processes close to 800,000 transactions annually.

The system brings together 35 permits, licenses and certificates from various government issuing agencies whose cargo clearance documentations have been interfaced with the  KenTrade system.

It is also linked to financial institutions (banks, mobile payment solutions) through Kenya Revenue Authority (KRA) iTax System and the governments eCitizen platforms.

Source: article published in The Star, Kenya, 24 January 2020

ICD 2020 – #MakeTradeWork

Picture courtesy of the WCO

To mark International Customs Day 2020 – focusing on the theme of ‘fostering Sustainability for People, Prosperity and the Planet’, the following article from the Spring 2018 edition of World Trade Matters by Jan Hoffmann, the Chief of the Trade Logistics Branch, Division on Technology and Logistics at UNCTAD, is relevant. The article discusses global trade facilitation reforms, the digitalisation of trade and measures towards ensuring long-term sustainability in the maritime industry. 

Confronted with growing populism and a surge in protectionist measures recorded by the WTO, policy makers and enterprises are struggling to avoid a backlash in international trade. At UNCTAD’s Trade Logistics Branch, we support these endeavours by helping to make trade work better. Through trade facilitation reforms, the promotion of digitalisation, and ensuring the long-term sustainability of international transport, we aim at ensuring that the international movement of goods is not confronted with unnecessary obstacles and costs. 

A multilateral agreement to facilitate international trade

Under the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO), developing countries commit to implement a number of very practical measures that make trade easier and more transparent. Countries are obliged to publish duties and procedures on the web, traders can transmit their declarations prior to the arrival of the goods, payments can be made electronically, and fees and charges must not become hidden taxes to generate income for the government. These are but some of the 37 concrete measures grouped into 12 Articles of the TFA. They are all useful and help make trade more efficient. 

However, many of these measures involve an initial investment or reforms that require human and financial resources to start with, which developing countries many not have. The good news is that the TFA also includes a novel mechanism – the so called “Special and Differential Treatment” – that helps developing countries plan and acquire the necessary capacity prior to being fully committed to comply with all 12 Articles. Concretely, the mechanism puts the developing countries in the position – and obligation – to analyse and notify their own implementation capacity. At UNCTAD, we are working closely with the developing countries to enable them to do so. Our main counterpart in this endeavour are the National Trade Facilitation Committees (NTFCs) that each country must set up under the TFA. UNCTAD’s Empowerment Programme for NTFCs includes training and knowledge development for the members of the NTFC, combined with advisory services and the development of a Roadmap of TFA implementation. 

By the same token, UNCTAD also supports developing countries in setting up Trade Information Portals. Under the TFA, members of the WTO are obliged to make relevant information on tariffs and trade procedures available on-line. UNCTAD’s Trade Information Portals not only help countries become compliant with this obligation, but in the process of analysing and publishing applicable trade procedures, a Trade Information Portal effectively helps countries identify the potential for the further simplification of procedures. Thanks to these new insights, NTFCs can then develop programmes and reforms that subsequently ensure the further simplification of procedures. 

Technological progress will never be as slow as today

My favourite provision of the TFA is Article 10.1., as it provides for a dynamic dimension of the Agreement. According to this article, countries need to minimize “the incidence and complexity of import, export, and transit formalities”, continuously “review” requirements, keep “reducing the time and cost of compliance for traders and operators”, and always choose “the least trade restrictive measure”. As such, even if a country is compliant with all TFA provisions today, countries will need to continue monitoring if existing procedures are still appropriate in view of technological or regulatory developments. 

As trade becomes increasingly digitalised, and new technologies which do not yet exist will be developed, it will be important that governments continuously revise and review the applicable rules and regulations. 

Digitalisation comes in stages. First, we optimize existing procedures, making use of cargo tracking, the Internet of Things, blockchain et al. Second, new businesses are developed which could not exist without the new technologies; new platforms come into being and we see more “uberisation”. Finally, there is transformation and science fiction; still in our lifetime Artificial Intelligence will overtake human capabilities to manage international trade and its logistics. 

But let us take one step at a time. At UNCTAD, we support developing countries through eTrade readiness assessments, the development and upgrade of technological solutions in Customs automation and Single Windows, and by providing a Forum for our members to analyse and discuss the challenges that come with digitalisation. We encourage the development of global standards that allow for interoperability among new systems. The challenge for policy makers it to encourage private sector investments in new technologies and solutions, while ensuring that no new monopolies emerge that might exclude smaller players.  

And it has to be sustainable

While we aim at ensuring continued growth in international trade, there is a catch. The transport of this trade encompasses increasing externalities, such as pollution, green-house-gas emissions, and congestion. 

Ports need to minimise social and environmental externalities. Many port cities are among the most polluted places to live, as ships burn heavy oil, and delivering trucks produce noise and cause traffic congestions. In addition, ports need to be resilient in the face of disruptions and damages caused by natural disasters and climate change impacts. 

International transport, including shipping, needs to play a larger role in addressing global warming and contribute to mitigating the carbon emissions that are causing climate change. Shipping emits less carbon dioxide (CO2) per ton-mile than other modes of transport, but then due to its sheer volume it also produces many ton-miles. Would it be possible that the industry could be charged by its main regulatory body not per ship tonnage (as is currently the case), but per tonne of CO2 emission? 

Currently, the International Maritime Organization is funded proportional to the tonnage registered under the members’ flags. Like this, Panama, Marshall Islands and Liberia pay for the largest share of the IMO budget – and in the end, this is passed on to the ship-owner, who in turn passes this on to the shipper, who will charge the consumer. This is a good established mechanism that could be expanded to also internalize the external costs of CO2 emissions. 

Being the most globalized of all businesses, maritime transport should consider adopting a global regime that helps further internalize its environmental externalities – to ensure prosperity for all.  

It is all about efficiency

Investing in trade facilitation reforms, making intelligent use of the latest technologies, and ensuring that externalities are internalized are all several sides of the same coin. Trade efficiency is necessary to promote an open international trading system. It requires a continuous effort by policy makers to continuously review current procedures, apply the most appropriate technological solutions, and support an efficient allocation of scarce resources. 

Source: Jan Hoffman, UNCTAD – originally published in World Trade Matters, Spring Edition, 2018

China’s most ambitious One Belt, One Road (OBOR) initiative

View the high resolution version here!

Visual Capitalist – Costing between $4-8 trillion and affecting 65 countries, China’s ambitious One Belt, One Road (OBOR) initiative is the granddaddy of all megaprojects.

By the time of it’s estimated completion in 2049, OBOR will stretch from the edge of East Asia all the way to East Africa and Central Europe, and it will impact a lengthy list of countries that account for 62% of the world’s population and 40% of its economic output.

Today’s infographic from Raconteur helps visualize the initiative’s tremendous size, scale, and potential impact on Asian infrastructure.

The tangible concept behind OBOR is to build an extensive network of infrastructure – including railways, roads, pipelines, and utility grids – that help link China to the rest of Asia, as well as Africa and Europe. 

This multi-trillion dollar project will fill the infrastructure gap that currently inhibits economic growth potential on the world’s largest continent, but it has other important objectives as well. By connecting all of these economies together, China is hoping to become the gatekeeper for a new platform international trade cooperation and integration.

But that’s not all: if China’s economic corridor does what it’s supposed to, the countries in it will see more social and cultural links, financial cooperation, and a merger of policy goals and objectives to accomplish. 

Naturally, this will expand the clout and influence of China, and it may even create the eventual scaffolding for the renminbi to flourish as a trade currency, and eventually a reserve currency.

One Road or Roadblock?

When billions of dollars are at play, the stakes become higher. Although some countries agree with the OBOR initiative in principle – how it plays out in reality is a different story.

Most of the funding for massive deep-water ports, lengthy railroads, and power plants will be coming from the purse strings of Chinese companies. Some will be grants, but many are taking the form of loans, and when countries default there can be consequences.

In Pakistan, for example, a deep-water port in Gwadar is being funded by loans from Chinese banks to the tune of $16 billion. The only problem? The interest rate is over 13%, and if Pakistan defaults, China could end up taking all sorts of collateral as compensation – from coal mines to oil pipelines.

Meanwhile, Sri Lanka was unable to pay its $8 billion loan for the Hambantota Port. In the middle of 2017, the country gave up the controlling interest in the port to a state-owned company in China in exchange for writing off the debt. China now has a 99-year lease on the asset – quite useful, since it happens to be right in the middle of one of China’s most important shipping lanes to Africa, the Middle East, and Europe.

Natural Opposition

While most economies in Asia are willing to accept some level of risk to develop OBOR, there is one country that is simply not a fan of the megaproject.

India, a very natural rival to China, has a few major qualms:

  • The China-Pakistan Economic Corridor (CPEC) goes right through Kashmir, a disputed territory
  • Chinese investment in maritime trade routes through the Indian Ocean could displace India’s traditional regional dominance
  • India sees the OBOR megaproject as lacking transparency

Meanwhile, with neighboring states such as Sri Lanka and Pakistan getting billions of dollars of investment from Chinese state-run companies, it likely creates one more issue that Indian Prime Minister Modi is not necessarily happy about, either.

Source: Original article by Jeff Desjardins, Visual Capitalist, published on 15 March 2018

AU – Online tool to remove Trade Barriers in Africa goes live

An online platform developed by UNCTAD and the African Union to help remove non-tariff barriers to trade in Africa became operational on 13 January.

Traders and businesses moving goods across the continent can now instantly report the challenges they encounter, such as quotas, excessive import documents or unjustified packaging requirements.

The tool, tradebarriers.africa, will help African governments monitor and eliminate such barriers, which slow the movement of goods and cost importers and exporters in the region billions annually.

An UNCTAD report shows that African countries could gain US$20 billion each year by tackling such barriers at the continental level – much more than the $3.6 billion they could pick up by eliminating tariffs.

“Non-tariff barriers are the main obstacles to trade between African countries,” said Pamela Coke-Hamilton, director of UNCTAD’s trade division.

“That’s why the success of the African Continental Free Trade Area depends in part on how well governments can track and remove them,” she said, referring to the agreement signed by African governments to create a single, continent-wide market for goods and services.

The AfCFTA, which entered into force in May 2019, is expected to boost intra-African trade, which at 16% is low compared to other regional blocs. For example, 68% of the European Union’s trade take place among EU nations. For the Asian region, the share is 60%.

The agreement requires member countries to remove tariffs on 90% of goods. But negotiators realized that non-tariff barriers must also be addressed and called for a reporting, monitoring and elimination mechanism.

The online platform built by UNCTAD and the African Union is a direct response to that demand.

Hands-on training

Complaints logged on the platform will be monitored by government officials in each nation and a special coordination unit that’s housed in the AfCFTA secretariat.

The unit will be responsible for verifying a complaint. Once verified, officials in the countries concerned will be tasked with addressing the issue within set timelines prescribed by the AfCFTA agreement.

Hands-on training

UNCTAD and the African Union trained 60 public officials and business representatives from across Africa on how to use the tool in December 2019 in Nairobi, Kenya.

They practiced logging and responding to complaints, in addition to learning more about non-tariff barriers and their effects on trade and business opportunities.

“The AfCFTA non-tariff barriers mechanism is a transparent tool that will help small businesses reach African markets,” said Ndah Ali Abu, a senior official at Nigeria’s trade ministry, who will manage complaints concerning Africa’s largest economy.

UNCTAD and the African Union first presented tradebarriers.africa in July 2019 during the launch of the AfCFTA’s operational phase at the 12th African Union Extraordinary Summit in Niamey, Niger.

Following the official presentation, they conducted multiple simulation exercises with business and government representatives to identify any possible operational challenges.

Lost in translation

One of the challenges was linguistic. Africa is home to more than 1,000 languages. So the person who logs a complaint may speak a different language from the official in charge of dealing with the issue.

Such would be the case, for example, if an English-speaking truck driver from Ghana logged a complaint about the number of import documents required to deliver Ghanaian cocoa to importers in Togo – a complaint that would be sent to French-speaking Togolese officials.

“For the online tool to be effective, communication must be instantaneous,” said Christian Knebel, an UNCTAD economist working on the project.

The solution, he said, was to add a plug-in to the online platform that automatically translates between Arabic, English, French, Portuguese and Swahili – languages that are widely spoken across the continent. More languages are being added.

UNCTAD’s work on the AfCFTA non-tariff barriers mechanism is funded by the German government.

Source: UNCTAG.ORG, 17 January 2020