Trade Facilitation in Eastern South Asia: Towards Paperless Trade Prabir De RIS, New Delhi

5 December 2013 Bali, Indonesia South Asia yet to witness regional trade facilitation Period Regional trade* Trade Trade (US$ billion, %) liberalization facilitation 1980-89 0.98; 3.11 Nil Nil (2.00)

1990-99 1.73; 4.15 SAPTA Nil (4.00)

2000-09 8.04; 5.96 SAFTA Nil (8.00)

2010 - 12 19.05; 5.80 SAFTA + SATIS Nil (20.00)

*In terms of exports

#Data in parentheses are approximate informal trade volume ADB-ESCAP BPA Study 2013: Products analyzed Export Processes Third Country

Fruit juice Bhutan (0.0, 1.83) Orange Lentil Bangladesh (1.54, 6.57) (1.03, 42.56) LAA CSO**

Import Processes Import Nepal (0.06, 1.56) (8.72,82.01) Carpet* Third (146.36, country 60.61)

*Import processes excluded from analysis. ** Export processes excluded from analysis. LAA and CSO mean lead acid accumulator and crude soya bean oil, respectively. Data in parentheses are trade volumes in US$ million for the years 2000 and 2010), sourced from COMTRADE Study corridors

Corridor Countries Distance, Distance, Products Linked Total Transit Traded

Corridor 1 (Nepal corridor) Nepal – 1152 km# 54 km  Lentil Kakarvitta-Panitanki-Fulbari- -  LAA* Banglabandha Bangladesh Corridor 2 (Bhutan corridor) Bhutan – 630 km^ 115 km  Orange Phuentsholing-Jaigaon-Hasimara- India -  Fruit -Burimari Bangladesh juice

Corridor 3 (Nepal corridor) Nepal - 1287 km$ 1047 km  Carpet Kathmandu-Birgunj-Raxaul - India  CSO** Kolkata

*Lead acid accumulator **Crude soya bean oil #Kathmandu to Dhaka. ^Thimpu to Dhaka $Kathmandu to Kolkata Business processes, time, cost

Corridor Exporter Importer Products Procedures (No.) Time Cost

Exporter Importer Total (Day) (US$/TEU) Corridor 1: Nepal Bangladesh Lentil 18 13 31 23.40 791.8 Kakarvitta- Bangladesh Nepal LAA 12 16 28 29.26 Panitanki-Fulbari- Banglabandha 1402.05 Corridor 2: Bhutan Bangladesh Orange 18 14 32 18.60 569.84 Phuentsholing- Jaigaon-Hasimara- Bangladesh Bhutan Fruit Juice 9 16 25 20.13 527.61 Changrabandha - Burimari Corridor 3: Nepal Third Carpet 23 23 26.00 2285.40 Kathmandu-Birgunj- country* Raxaul-Kolkata Third Nepal CSO 18.00 country** 21 21 689.74 *Excluding export processes **Excluding import processes Parties engaged in export and import processes

Corridor Exporter Importer Products Parties (No.) Exporter Importer Total Pub Pri Total Pub Pri Total Corridor 1: Kakarvitta- Nepal Bangladesh Lentil 7 7 14 4 5 9 23 Panitanki-Fulbari- Banglades Nepal LAA 3 4 7 7 5 12 19 Banglabandha h Corridor 2: Bhutan Bangladesh Orange 10 4 14 3 4 7 21 Phuentsholing- Banglades Bhutan Fruit Juice 3 4 7 11 2 13 20 Jaigaon-Hasimara- h Changrabandha- Burimari Corridor 3: Nepal Third Carpet 8 7 15 15 Kathmandu-Birgunj- country* Raxaul-Kolkata Third Nepal CSO 13 country** 7 6 13

*Excluding export processes **Excluding import processes Parties dealing procedures by country and corridor Parties Involved in Export of LAA from Bangladesh to Nepal Sr. Procedures Public / No. Private 1 Contacting importers Private 2 Fixing terms of trade with importer via Private Local office 3 Sending draft contract and proforma Private invoice 4 Receiving acceptance letter and Private acknowledge L/C copy 5 Obtaining cargo insurance2 Private 6 Preparing documents for export3 Private 7 Load in truck and deliver to port Private 8 Deposit chalan fee, VAT and customs Public and declaration Private 9 Customs inspection and clearance by C& Public F agent 10 Out Pass handing over by C&F Agent to Private importer’s representative and unloading of the commodity to importer’s carrier 11 Receive payment Private

Source: Yunus (2013) Documents and copies required

Corridor Exporter Importer Products Documents & Copies (No.)

Exporter Importer Total

Corridor 1: Kakarvitta- Nepal Bangladesh Lentil 18 18 36 Panitanki-Fulbari- (44) (71) (115) Banglabandha Bangladesh Nepal LAA 15 15 30 (50) (33) (83) Corridor 2: Phuentsholing- Bhutan Bangladesh Orange 14 18 32 Jaigaon-Hasimara- (26) (69) (95) Changrabandha-Burimari Bangladesh Bhutan Fruit Juice 9 16 25 (30) (44) (74) Corridor 3: Kathmandu- Nepal Third Carpet 19 19 Birgunj-Raxaul-Kolkata country* (44) (44) Third country** Nepal CSO 22 22 (49) (49)

*Excluding export processes **Excluding import processes

Numbers in parentheses are copies needed for export and import. Submission of documents

. Submission of documents largely handled manually (over 80% of trade documents on avg.) . Automation of trade documentation is relatively a new process in SASEC except India.

Export time in Corridor 1

Process Product Exporter Importer Procedure Time (Days) Buy (pre-shipment procedure) 1.00 Export/Import procedures Documents preparation 8.00 Export Lentil Nepal Bangladesh Inland transportation 1.00

Time at Customs 1.00 Time at border 1.00 Time at transit 1.00 Pay (post-shipment procedure) 1.00 Buy (pre-shipment procedure) 4.00 Export/Import procedures Documents preparation 12.50 Export LAA Bangladesh Nepal Inland transportation 1.00 Time at Customs 0.56 Time at border 0.76 Pay (post-shipment procedure) 5.00 Export time in Corridor 2

Process Product Exporter Importer Procedure Time (Day) Buy (pre-shipment procedure) 2.00 Export/Import procedures Documents preparation 9.25 Export Orange Bhutan Bangladesh Inland transportation 0.25 Time at Customs 0.25 Time at border 0.25 Time at transit 0.50 Pay (post-shipment procedure) 7.00 Buy (pre-shipment procedure) 11.50 Export/Import procedures Export Fruit juice Bangladesh Bhutan Documents preparation 9.00 Inland transportation 0.55 Time at Customs 1.13 Time at border 1.20 Pay (post-shipment procedure) * Export and import time in Corridor 3

Process Product Exporter Importer Procedure Time (Days) Buys (pre-shipment procedure) 5.00 Export/Import procedures Export Carpet Nepal Documents preparation 8.00 Third country Inland transportation 2.00 Time at Customs 2.00 Time at border 2.00 Time at transit 9.00 Pay 1.00

Buys (pre-shipment procedure) 4.00

Export/Import procedures Import CSO Third Nepal Documents preparation 10.00 country Time at transit 11.00 Time at Customs 1.00 Time at border 1.00 Inland transportation 1.00 Pays (post-shipment procedure) 1.00 At present, trade facilitation measures are narrow in South Asia, but showing huge scopes of improvement 1. Modern and effective customs administration and management → Accession to and alignment with RKC; SAFE Framework implementation 2. Streamlined and transparent trade processes and procedures → ASYCUDA World; National EDIs and Single Windows 3. Improved services and information for traders → Trade portals; Trade facilitation committees Trade facilitation agenda - moving from paperbased to paperless trade e-Single Window & paperless trade

National data Process harmonization simplification and harmonization Cross-border data harmonization & exchange Document simplification and alignment

Business .4 SASEC countries Process .3 SASEC corridors Analysis BPA to implement paperless trade .1 transit port .July’12 – June’13 .ADB-ESCAP support BPA II to start from January 2014 Recommendations of ADB-ESCAP BPA Study 2013

1. Reduce lengthy Customs and cargo handling time at Port of Kolkata in Corridor 3 through automation and modernization 2. Faster opening of L/C account in bank with the help of ICT 3. Faster cargo insurance with the help of ICT, process reengineering and competition among service providers 4. Use of ICT to obtain permits and certificates 5. Synchronization of cross-border Customs in SASEC should be the priority objective. 6. Remove the regulatory burden on exports and imports 7. Trade will be much faster with minimum process reengineering. 8. Acceptance to subregional transit 9. Development of border infrastructure at Corridors 1 and 2 is must. 10. National single window is essential for paperless trade in SASEC. 11. Implementation of basic trade facilitation measures should be consistently enforced and re-enforced nation-wide. 12. Comprehensive study such as BPA+ WTO TFA* – Likely Implications on South Asia

*Rev 18, October 23, 2013 draft A 7. Release and clearance of goods

AFG BHU BAN IND MAL NPL PAK SL 1. Pre-arrival processing 2. Electronic payment 3. Separation of release of goods 4. Risk management 5. Post-clearance audit 6. Publication of release time 7. Measures for authorised operators 8. Expedited shipments 9. Perishable goods Not in place In place but improvement needed In place

Technical assistance and capacity building needed A 9. Border Agency Cooperation

Commitment Current status Clause 2 (i) Alignment of Possible Not fully done, ex. India – Bangladesh working days and hours Clause 2(ii) Alignment of Possible Partly done procedures and formalities

Clause 2(iii) Development Possible Don’t exist and sharing of common facilities Clause 2(iv) Joint controls Possible Don’t exist Clause 2(v) Establishment Difficult in Don’t exist of one stop border post short run control A 10. Formalities Connected with Export and Import and Transit AFG BHU BAN IND MAL NPL PAK SL 1. Formalities and documentation requirements 2. Acceptance of copies 2.3 Acceptance of e-copy and no requirement of original copy by importer 3. Use of international standards 4. Single Window 5. Pre- and Post- shipment inspection 6. Use of Customs brokers 7. Common border procedures and uniform documentation requirements 8. Rejected goods 9. Temporary admission of goods / Inward and Outward processing A 11. Freedom of Transit

• Overland and sea transit critical in South Asia • Good initiative, but requirements: – Large scale infrastructure investment. – Additional financial burden • Not clear about charges • It does not talk about explicitly electronic processing of transit documentation A 12. Customs Cooperation

• Workable, but several issues: – Verification and acceptance of documentations – Dispute settlement – etc. A 13. Institutional Arrangements

• Some South Asian countries already have trade facilitation committee • Making it sole authority of TF difficult for large country like India Conclusions • Development of hard and soft infrastructure shall go in parallel • Trade facilitation varies across procedures, countries, products and corridors • No single TF measure may fit the entire subregion • Huge scopes of reengineering of processes • Simplification of procedures and processes are crucial for facilitation of trade. • Huge scopes for improvement in trade facilitation in Eastern South Asia (SASEC). • Development organisations like ADB has a strong facilitating role in development of infrastructure. • WTO TFA is a workable draft, promising a future, potential to standards, paperless trade etc., but needs drastic changes to safeguard LDCs and developing countries. Thank you [email protected] [email protected]