World Bank -Trade and COVID-19 (Coronavirus)

Photo: Martin Sanchez, Unsplash

Maintaining trade flows during the COVID-19 pandemic will be crucial in providing access to essential food and medical items and in limiting negative impacts on jobs and poverty.

The speed and scale of the crisis are unprecedented. But governments can ameliorate the impact. The following documents, hyperlinked to this page provide initial guidance for policymakers on best practices to mitigate pandemic-related trade risks, support trade facilitation and logistics, and implement trade policy in a time of crisis.

Managing Risk and Facilitating Trade in the COVID-19 Pandemic

Maintaining trade flows as much as possible during the COVID-19 pandemic will be crucial in providing access to essential food and medical items and in limiting negative impacts on jobs and poverty.

Some countries are closing border crossings and implementing protectionist measures such as restricting exports of critical medical supplies. Although these measures may in the short-term provide some immediate reduction in the spread of the disease, in the medium term they may undermine health protection, as countries lose access to essential products to fight the pandemic. Instead, governments should refrain from introducing new barriers to trade and consider removing import tariffs and other taxes at the border on critical medical equipment and products, including food, to support the health response.

Trade facilitation measures can contribute to the response to the crisis by expediting the movement, release, and clearance of goods, including goods in transit. The World Bank Group provides guidance and technical assistance to developing and least developed countries to implement best practices to facilitate the free flow of goods.

Download the Guideline here!

Do’s and Don’ts of Trade Policy in Response to COVID-19

Despite the initial inclination of policy makers to close borders, maintaining trade flows during the COVID-19 pandemic will be crucial. Trade in both goods and services will play a key role in overcoming the pandemic and limiting its impact in the following ways:

  • by providing access to essential medical goods (including material inputs for their production) and services to help contain the pandemic and treat those affected,
  • ensuring access to food throughout the world,
  • providing farmers with necessary inputs (seeds, fertilizers, pesticides, equipment, veterinary products)for the next harvest,
  • by supporting jobs and maintaining economic activity in the face of a global recession. Substantialdisruption to regional and global value chains will reduce employment and increase poverty.Trade policies will therefore be an essential instrument in the management of the crisis.

Trade policy reforms, such as tariff reductions, can contribute:

  • to reducing the cost and improving the availability of COVID-19 goods and services,
  • to reducing tax and administrative burdens on importers and exporters,
  • to reducing the cost of food and other products heavily consumed by the poor and contributing to themacro-economic measures introduced to limit the negative economic and social impact of the COVID-19 related downturn,
  • to supporting the eventual economic recovery and building resilience to future crises.

Governments with industries producing COVID-19 medical goods or food staples can further contribute by committing to refrain from limiting exports through bans or taxes. If export restrictions must be used, then they should be targeted, proportionate, transparent, and temporary.Measures to streamline trade procedures and facilitate trade at borders can contribute to the response to the crisis by expediting the movement, release, and clearance of goods, including goods in transit, and enabling exchange of services.

Reforms can be designed to reduce the need for close contact between traders, transporters and border officials so as to protect stakeholders and limit the spread of the virus, while maintaining essential assessments to ensure revenue, health and security. Interventions to sustain and enhance the efficiency of logistics operations may also be critical in avoiding substantial disruption to distribution networks and hence to regional and global value chains.

Download the Guideline here!

Trade in Critical COVID-19 Products

The covid-19 pandemic is increasingly a concern for developing countries. Using a new database on trade in covid-19 relevant products, this paper looks at the role of trade policy to address the looming health crisis in developing countries with highest numbers of recorded cases. It shows that export restrictions by leading producers could cause significant disruption in supplies and contribute to price increases. Tariffs and other restrictions to imports further impair the flow of critical products to developing countries. 

Download the Guideline here!

Also view the Blog post – Viral protectionism in the time of coronavirus

Source: World Bank, 1April, 2020

Unpacking ICC's Digital Initiatives for global trade

ICC is partnering with government, business and other stakeholders to create digital solutions that will advance economic prosperity for all.

In line with ICC’s Declaration for the Next Century of Global Business, we are committed to maximising the benefits of the digital economy through establishing key partnerships to unify, simplify, and transform trade processes for all.

Here are seven ICC digital initiatives that will prepare business for the future of global trade:

1). TradeTrust facilitating ICC TradeFlow

During the World Economic Forum Annual Meeting in Davos, ICC joined the Singapore Government and major firms from key industries to launch TradeTrust, a public-private partnership that uses blockchain technology to digitalize global trade. The TradeTrust framework allows for interoperability across different trade platforms for the exchange of trade documents on a public blockchain.

ICC TradeFlow, a blockchain platform developed by ICC and Perlin to simplify the trade documentation process for all, was the first project built on the TradeTrust network. The platform, launched by ICC, DBS Bank, Trafigura, Infocomm Media Development Authority (IMDA), Enterprise Singapore, and Perlin, enables businesses to visually map out trade flows, issue instructions to partners, and analyse trade actions in real time.

2). Digital Trade Standards Initiative

The ICC Banking Commission has announced the creation of the Digital Trade Standards Initiative (DSI) to establish open technology standards that will promote interoperability among existing blockchain and technology platforms.

3). Digitalisation in Trade Finance Working Group

ICC’s Digitalisation in Trade Finance Working Group coordinates the ICC Banking Commission’s work related to the digitalisation of global trade, including the Internet of Things (IoT), artificial intelligence, and blockchain.

Formed in 2017, the Working Group evaluated all existing ICC rules for electronic compatibility, leading to the release of the eUCP version 2.0 and eURC version 1.0. In addition, the Working Group conducted a legal survey to understand the rights of third parties under e-Bills of Landing and developed a Digital Trade Roadmap, a communication tool for policymakers engaged in digital trade work.

4). Partnership with Perlin

In May 2019, ICC Secretary General John W.H. Denton AO announced the formation of a technology partnership between ICC and Perlin, a Singapore-based blockchain technology company. As part of this partnership, ICC and Perlin will work in close association to develop innovative blockchain products that will simplify and transform global trade for all.

AirCarbon, Perlin, and ICC at COP25

In recognition of the significant environmental impact of commercial air traffic, ICC, Perlin, and AirCarbon, formed a partnership on the side-lines of COP25 to facilitate carbon credit schemes to reduce worldwide aviation emissions. ICC will work with its global network to pursue adoption of the AirCarbon Exchange, the world’s first blockchain backed trading network for CORSIA compliant carbon credits. CORSIA, International Civil Aviation Organization’s Carbon Offset and Reduction Scheme for International Aviation, was signed in Montreal in 2016 by 191 countries.

Chambers Climate Coalition

The Chambers Climate Coalition is an initiative launched by ICC to mobilise chambers of commerce to take climate action, aligned with limiting global temperature rise to 1.5°C above pre-industrial levels and reaching net-zero emissions by no later than 2050. The Coalition, which was recognised as part of the landmark Climate Ambition Alliance at COP25, aims to reduce the greenhouse footprint from chamber service activities without delay.

Chambers of commerce can use Perlin’s blockchain technology to trace their value chains and implement a more sustainable model for their services to local businesses.

ICC Centre of Future Trade

ICC, Perlin, and Enterprise Singapore, established the ICC Centre for Future Trade in Singapore, an innovation hub for the creation and development of blockchain solutions for business. From the Centre for Future Trade, ICC and Perlin will work together to accelerate the commercial adoption of blockchain technologies for business.

International E-Registry of Ships (IERS)

In collaboration with Perlin and the Singapore Shipping Association, ICC has announced the creation of the International E-Registry of Ships, the world’s first blockchain-backed digital ship registration system. IERS will standardise the international shipping registration and renewal system through the use of digital technology.

Perlin Clarify

ICC’s partnership with Perlin enables ICC’s global membership network with access to Perlin Clarify, a blockchain solution that enables businesses to trace their value chains. Perlin Clarify allows businesses to track their compliance with government regulations, environmental standards, and other industry indicators.

The Incoterms® rules and smart contacts

ICC with support from Perlin is piloting customisable, self-executing digital sales agreements, that incorporate the latest edition of the Incoterms® rules into contracts. The creation of these blockchain-backed Incoterms® rules with smart contracts will help facilitate trade by reducing costs faced by importers and exporters worldwide.

The project was announced by Mr Denton, Dorjee Sun, CEO and co-founder of Perlin, and Satvinder Singh, Assistant CEO for Enterprise Singapore at an event in Singapore in August 2019.

5). Partnership with GIST Advisory

On the side-lines of the World Economic Forum Annual Meeting in Davos, Mr Denton joined Pavan Sukhdev, CEO of GIST and President of the World Wildlife Foundation, to launch two digital platforms that track the environmental impact of business operations for companies of all sizes. The platforms, I360X and SME360X, utilise analytics and global databases to measure the environmental impacts of market goods and services.

With the analytical information provided by these platforms, companies can transition their operations toward a more sustainable model for the future.

6). eATA Carnet

In November 2019, ICC successfully piloted the first ever digital ATA Carnet, a customs document allowing duty- and tax-free movement of goods for up to one year. The project, known as the Mercury II pilot, was initially launched by ICC in 2018 as part of the organisation’s commitment to using digital technology to simplify the trade documentation process.

Over the next six months, the project will enter a testing phase with six participating pilot countries, including Belgium, China, Russia, Switzerland, the United Kingdom and the United States. The European Union Directorate-General for Taxation and Customs Union actively supports the implementation of the eAta Carnet.

7). Digital platforms with the World Trade Organization (WTO)

Global Dialogue on Trade

In October 2018, Mr Denton and World Trade Organization Director-General Roberto Azevedo launched the Global Dialogue on Trade digital platform to gather input from policymakers, business leaders, and academia on the future of global trade.

The first series of debates, which concluded in March 2019, resulted in a set of concrete policy recommendations to provide guidance to stakeholders for strengthening multilateral trade.

Trade Dialogues

At the request of the WTO and B20, ICC is responsible for hosting Trade Dialogues, a digital platform connecting stakeholders from around the world to spark discussions among WTO members on critical business issues.

Source: ICC Website, February 2020

Digital Trade Standards Initiative launches under the umbrella of ICC

ICC has launched the Digital Trade Standards Initiative (DSI) – a collaborative cross-industry effort to enable the standardisation of digital trade.

The ICC Digital Trade Standards Initiative (DSI) will build on work done by various likeminded initiatives, many of which aim to digitise trade, notably through the development of open trade and technology standards to promote interoperability.

The ICC DSI will promote greater economic inclusion through the development of open trade standards. This will facilitate technical interoperability among the variety of blockchain-based networks and technology platforms that have entered the trade space over the past two years.

“Universal standards will connect existing digital islands and enable market forces to improve customer experience,” said ICC Secretary General John W.H. Denton AO. “As a leading and neutral voice in the industry, it made sense to bring this project under the umbrella of ICC. This will allow the ICC DSI to lead and coordinate efforts in developing standards and protocols to digitise trade.”

The ICC DSI is unique among trade digitisation initiatives due to its collective nature. Too often, digitisation is enacted through bilateral agreements between institutions that require members to run on the same platform. This has resulted in siloed data and bespoke trade and trade finance processes.

“The ICC DSI seeks to coordinate all parties in the standardisation of data formats and processes, rather than duplicate existing efforts. In turn, membership will be open to all organisations across industries and geographies supporting the project’s core mandate, including existing industry associations and initiatives,” explained Steven Beck, Head of Trade Finance at the Asian Development Bank.

The ICC DSI will be supported by seed-funding committed by the Asian Development Bank and the Government of Singapore, in addition to ICC’s support. The ICC DSI will be run as an independent entity out of the recently-established ICC Centre for Future Trade.

“We have seen the tremendous impact of technology in growing businesses and facilitating international trade,” said Gina Lim, Director of Financing Ecosystem Development at Enterprise Singapore. “The ICC DSI will promote greater adoption of technology within the trade ecosystem and facilitate greater inclusiveness for small businesses. We are excited for the establishment of the ICC DSI office in Singapore and look forward to working with our global partners across geographies and sectors.”

ICC anticipates the implementation of a full-time management team, and a global and diverse steering committee to provide guidance and set priorities for the project’s development.

ICC has opened the recruitment process to hire a managing director to lead operations within the ICC DSI, with an official launch event to follow once this first process completed.

Source: ICC webpage, 4 March 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

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

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

New 2022 Edition of the Harmonized System has been accepted

Photo by Ricardo Gomez Angel on Unsplash

HS 2022, which is the seventh edition of the Harmonized System (HS) nomenclature used for the uniform classification of goods traded internationally all over the world, has been accepted by the all Contracting Parties to the Harmonized System Convention.  It shall come into force on 1 January 2022.

The HS serves as the basis for Customs tariffs and for the compilation of international trade statistics in 211 economies (of which 158 are Contracting Parties to the HS Convention).  The new HS2022 edition makes some major changes to the Harmonized System with a total of 351 sets of amendments covering a wide range of goods moving across borders.  Here are some of the highlights:

Adaption to current trade through the recognition of new product streams and addressing environmental and social issues of global concern are the major features of the HS 2022 amendments.

Visibility will be introduced to a number of high profile product streams in the 2022 Edition to recognise the changing trade patterns.  Electrical and electronic waste, commonly referred to as e-waste, is one example of a product class which presents significant policy concerns as well as a high value of trade, hence HS 2022 includes specific provisions for its classification to assist countries in their work under the Basel Convention.  New provisions for novel tobacco and nicotine based products resulted from the difficulties of the classification of these products, lack of visibility in trade statistics and the very high monetary value of this trade.  Unmanned aerial vehicles (UAVs), commonly referred to as drones, also gain their own specific provisions to simplify the classification of these aircraft.  Smartphones will gain their own subheading and Note, which will also clarify and confirm the current heading classification of these multifunctional devices.

Major reconfigurations have been undertaken for the subheadings of heading 70.19 for glass fibres and articles thereof and for heading 84.62 for metal forming machinery.  These changes recognize that the current subheadings do not adequately represent the technological advances in these sectors, leaving a lack of trade statistics important to the industries and potential classification difficulties.

One area which is a focus for the future is the classification of multi-purpose intermediate assemblies.  However, one very important example of such a product has already been addressed in HS 2022.  Flat panel display modules will be classified as a product in their own right which will simplify classification of these modules by removing the need to identify final use.  Health and safety has also featured in the changes.  The recognition of the dangers of delays in the deployment of tools for the rapid diagnosis of infectious diseases in outbreaks has led to changes to the provisions for such diagnostic kits to simplify classification.  New provisions for placebos and clinical trial kits for medical research to enable classification without information on the ingredients in a placebos will assist in facilitating cross-border medical research.  Cell cultures and cell therapy are among the product classes that have gained new and specific provisions.  On a human security level, a number of new provisions specifically provide for various dual use items.  These range from toxins to laboratory equipment.

Protection of society and the fight against terrorism are increasingly important roles for Customs.  Many new subheadings have been created for dual use goods that could be diverted for unauthorized use, such as radioactive materials and biological safety cabinets, as well as for items required for the construction of improvised explosive devices, such as detonators.

Goods specifically controlled under various Conventions have also been updated.  The HS 2022 Edition introduces new subheadings for specific chemicals controlled under the Chemical Weapons Convention (CWC), for certain hazardous chemicals controlled under the Rotterdam Convention and for certain persistent organic pollutants (POPs) controlled under the Stockholm Convention.  Furthermore, at the request of the International Narcotics Control Board (INCB), new subheadings have been introduced for the monitoring and control of fentanyls and their derivatives as well as two fentanyl precursors.  Major changes, including new heading Note 4 to Section VI and new heading 38.27, have been introduced for gases controlled under the Kigali Amendment of the Montreal Protocol.

The changes are not confined to creating new specific provisions for various goods.  The amendments also include clarification of texts to ensure uniform application of the nomenclature.  For example, there are changes for the clarification and alignment between French and English of the appropriate way to measure wood in the rough for the purposes of subheadings under heading 44.03.

Given the wide scope of the changes, there are many important changes not mentioned in this short introduction.  All interested parties are encourage to read the Recommendation carefully (to be published soon).

Implementation

While January 2022 may seem far off, a lot of work needs to be done at WCO, national and regional levels for the timely implementation of the new HS edition.  The WCO is currently working on the development of requisite correlation tables between the current 2017 and the new edition of the HS, and on updating the HS publications, such as the Explanatory Notes, the Classification Opinions, the Alphabetical Index and the HS online database.

Customs administrations and regional economic communities have a huge task to ensure timely implementation of the 2022 HS Edition, as required by the HS Convention.  They are therefore encouraged to begin the process of preparing for the implementation of HS 2022 in their national Customs tariff or statistical nomenclatures. The WCO will step up its capacity building efforts to assist Members with their implementation.

Source: hs@wcoomd.org

South Korea – aiming to become a Global Customs Services Leader

South Korea hopes to be a leader in global customs services by offering solutions to complex international clearance procedures.

South Korea Customs Service (KCS) chief Kim Yung Moon said the agency hopes it can help foster trade relations between local businesses and partner nations worldwide.

In an interview with the Korea Times, he said the agency would continue to devote its manpower and resources to provide full support for export firms, especially the small and medium sized enterprises (SMEs) that were the foundations of the South Korean economy.

The agency’s commitment was well-illustrated as the KCS under his leadership helped limit the fallout following the ongoing South Korea – Japan trade war that has led to major losses for South Korean exporters.

Since March, KCS officials have been dispatched to 30 customs offices nationwide to offer various forms of support, including consulting, technical aid and trade statistics data management.

The support has helped 2,189 SMEs log a combined US$2.4 billion (RM10 billion) in exports in the March-October period, up 2.2 per cent from US$2.3 billion (RM9.8 billion) the year before.

“We tried to identify what the firms needed most and came up with ideas on how we could be of assistance. I am glad we were able to fulfil our public duty,” Kim said.

In July, the KCS saved a local zinc coated steelmaker 1.3 billion won (RM4.5 million) in tariffs imposed by Taiwanese customs authorities after they accepted KCS opinion asking them to reclassify the item as a tariff-exempt product.

Similarly, a team of KCS officials was able to have the Indian customs authorities in March rescind a 10 per cent tariff imposed on Korea-made copy papers categorised as a no-tariff item under the Comprehensive Economic Partnership Agreement (CEPA), a free trade agreement between South Korea and India.

This helped a local paper maker not only avoid what could have been an annual tariff of 200 million won (RM700,000), but also cleared the way for similar businesses to enter the market without the uncertainty of hefty, unexpected tariffs.

Most significant is that the agency was able to finalise the international standards on display modules, Korea’s key export item.

This allowed them to be classified as LCD modules exempt from tariffs in line with the Information Technology Agreement (ITA), a multilateral agreement enforced by the World Trade Organization (WTO).

The process required painstaking efforts to persuade members of the World Customs Organization (WCO) and it proved South Korea’s “soft power” with the international customs body comprised of 183 countries representing over 98 percent of international trade.

A senior KCS official Kang Tae Il has also been elected a director of the Capacity Building Directorate at the WCO, whose members look to South Korea for training, consulting and multilateral aid utilising official development assistance funds and Customs Cooperation Fund-Korea.

Since 2009, 3,727 customs officials from around the world have undergone training offered by the KCS.

The appointment of Kang has also boosted KCS’ standing on the global stage, coupled with its artificial intelligence-based block chain customs services in a country recognized for its high-tech infrastructure and ICT expertise.

The agency’s key achievement is UNI-PASS, a KCS-developed electronic clearance system designed to enhance swift customs clearance and logistics service convenience.

The e-clearance system highly regarded by the KCS’s global peers increases work efficiency by minimizing manual errors and improving input accuracy by auto-generation of trade records.

“We will continue our efforts to strengthen influence and boost our say in the international customs circle. We will also become a leading standard setter involving the implementation and revision of related customs practices concerning e-commerce and risk management. This will boost the standing of Korea on the global stage,” Kim said.

Source: New Straits Times – December 11, 2019 

SA Customs Procedure Guideline and Chart – 2019

SARS Customs clearance has operated under a Customs Procedure Code (CPC) regime for almost 10 years now. To commemorate the 10-year anniversary, the accompanying CPC Chart and External User Guideline is intended for expert users and newcomers to Customs clearance, alike. In particular, it is important for cross-border traders to understand that the CPC combinations cannot be used indiscriminately; but, have specific meanings and associations with various other Customs rules for the electronic processing of goods for import, transit and export. Attempts to ‘fudge’ a CPC for any particular purpose or reason, may lead to a negative result downstream. Accuracy in the use and application of CPCs results in improved trade compliance, more accurate trade statistical data and fewer declaration amendments hence less penalties and lost time. Over the last decade, it is certain that most international freight forwarders and tertiary Customs training institutes and universities have introduced some or other CPC methodology into their curricula. Feel free to use this guide in support of such curricula. I do however, request that in so doing, the attached material – made freely available to you – will be delivered ‘intact’ in the form as compiled and presented here.

The files can be dowloaded below –

External CPC Tutorial & Self-Assessment Guide 2019

CPC Chart October 2019

Embracing Blockchain for Cross-border Trade

In August of 2019, both the United States and Thailand announced their plans to test blockchain applications for tracking and managing shipments. The U.S. Customs and Border Protection (CBP) is planning to test a blockchain application against their current system to determine how distributed ledger technology (DLT) can improve its existing processes. Thailand, on the other hand, plans to use IBM’s blockchain-based logistics platform Tradelens to improve customs processes such as data sharing.

Originally developed in a joint venture between IBM and logistics giant Maersk, Tradelens seeks to streamline processes in the global shipping industry by making the flow of information occur in real-time. The blockchain platform is reported to currently process about half of the world’s shipping data.

These moves highlight countries’ increasing interest in employing blockchain technology in their customs and border operations. The Tradelens website says its ecosystem comprises over 100 different organizations including carriers, ports, terminal operators, third-party logistics firms, and freight forwarders. More specifically, a map on the Tradelens website suggests that about 60 ports and terminals worldwide are directly integrated with TradeLens.

Elsewhere, the Directorate-General for Taxation and Customs Union (TAXUD), which develops policies and operational systems for the European Customs Union, explored the applicability of blockchain in customs and taxation with a focus on utilizing blockchain as a notarization service.

The Union is looking into using blockchain to digitize ATA Carnet, an international customs document used in 87 countries for temporarily admitting goods duty-free. A pilot project conducted in collaboration with the International Chamber of Commerce World Chambers Federation (ICC WCF), was successfully tested in 2018. 

The ICC WCF, a body of the ICC that helps facilitate mutually beneficial partnerships between ICC members, has been working with different customs authorities to develop solutions for converting ATA Carnets into electronic documents.

About 80 countries around the world have developed authorized economic operator (AEO) programs and signed a mutual recognition agreement (MRA), all in an effort to streamline cargo security. Under such arrangements, individual countries identify and approve trustworthy logistics operators that pose a low risk in security and share the approval information with participating countries. 

This allows countries to piggyback on the security checks of other countries to make customs operations more efficient. However, a few problems have arisen with the program. 

  • There are information leakage risks associated with the conventional way of sharing AEO data by email. While a sender’s email server may be encrypted, there is no guarantee that the receiver’s is as well, and vice versa.
  • Data sharing is not real-time, but monthly or at an agreed-upon interval. This limits the speed at which information on new or suspended AEOs can reach all participants.

To avoid the aforementioned problems as well as achieve additional time and cost savings on security procedures, customs administrations in Mexico, Peru and Costa Rica are working with the Inter-American Development Bank to develop a blockchain application called Cadena.

The move by governments around the world to employ blockchain to improve cross-border trade marks a step toward paperless customs processes, which originally began with the digitization of information flows by making trade-related data and documents available and exchangeable electronically. For all the improvements they’ve brought to paper-heavy processes, traditional electronic data exchange systems still face the challenges of authenticity and the unavailability of real-time data exchange.

For instance, the Netherlands and China launched a five-year project in 2010 to test the applicability of electronic sanitary and phytosanitary (SPS) certificates. A World Economic Forum white paper titled “Paperless Trading: How Does It Impact the Trade System?” noted that concerns around the authenticity of the electronic documents arose. This necessitated the adoption of electronic signature systems and a whole new legal framework that recognized the electronic signature.

Still, the entire process requires longer procedures and the introduction of new types of intermediaries — e-signature providers, for instance. Moreover, low-income countries, the trade costs of which remain high compared to high-income countries as according to World Bank data, may not have the budget to implement several new systems for data and document digitization. They still need to invest in better customs infrastructure. 

Blockchain, on the other hand, if implemented in border protection, will ensure real-time availability and immutability of customs documents while saving considerable costs on excessive paperwork.

Source: Original article titled: “Blockchain Adoption as a Cure for Cross-Border Trading“, authored by Craig Adeyanju, Cointelegraph.com, 2019.09.28

9/11 – 18 years on

WTC 6, home to the US Customs Service, New York until September 2001

As unrecognisable as the building is, the same can be said for the world of Customs today. Few contemplated a ‘Customs’ parallel at the time; but, when the Department of Homeland Security was launched, the emergence of US Customs and Border Protection (USCBP) ushered in a new way of doing business. The world of Customs was literally ‘turned on its head’. Bilateral overtures seeking agreements on ‘container security’, ‘port security’ as well as an industry focussed ‘Customs and Trade Partnership Against Terrorism’ (C-TPAT) forced the World Customs Organisation (WCO) into swift action. After years of deliberation and negotiation several guidelines were released, later to be packaged as the WCO SAFE Framework of Standards. It seemed that the recent Revised Kyoto Convention (RKC) on simplification and harmonisation of Customs procedures was already ‘dated’. Customs as a proud solo entity was gone for ever, as country after country seemed compelled to address border security through wholesale transformation and upheaval of their border frontier policies and structures. Thus was born ‘border security’ and ‘cooperative border management’. In a manner of speaking, 9/11 put Customs onto the global map. Along with WCO developments, the tech industries brought about several innovations for risk management and other streamlined and efficient service offerings. Prior to 9/11, only the wealthy countries could afford non-intrusive inspection capabilities. One key aspect of the SAFE Framework’s was to include a pillar on Capacity Building. Through this, the WCO and business partners are able to offer tailor-made assistance to developing countries, to uplift their Customs and border capabilities. In particular, countries in Africa now are now in a position to consider ‘automated’ capabilities in the area of Customs-2-Customs information exchange as well as establishment of national Preferred Trader and Authorised Economic Operator (AEO) schemes. At the same time a parallel industry of ‘Customs Experts’ is being developed in conjunction with the private sector. The end result is the availability of ‘standards’, ‘policies’ and ‘guidelines’ fit for Customs and Border operations, focussed on eliminating incompatibilities and barriers to trade. Where these exist, they are largely attributed to poor interpretation and application of these principles. With closer cooperation amongst various border authorities still a challenge for many countries, there are no doubt remedies available to address these needs. In gratitude, let us remember the thousands of public servants and civilians who lost their lives that we can benefit today.

Grasping the size of Container Traffic

The following infographic is shared courtesy of Visual Capitalist

Size-of-Shipping