Improving Trade Facilitation

Coordination and Implementation of National Logistics Policies Improving Trade Facilitation

There are several tools behind the setting of national logistics policies. One concerns improving trade facilitation through simplifying, harmonizing, and standardizing trade procedures and setting free zones. The most common strategies involve the following:

  • A.1. Customs and cross-border management. At the main ports of entry, improve the effectiveness of customs operations with single window initiatives where traders can use a single platform to manage all the customs-related procedures electronically. The expected benefits concern faster clearance for international trade and improved time performance of supply chains. Supply chain security has remained an ongoing issue with an evolution of the risks. The most visible emerging form of security threat is cybersecurity, to which transportation infrastructures, carriers, and terminal operators are particularly vulnerable since it is a transnational issue. Using various scanning and sensing technologies can also improve supply chain security and the accuracy of the levied customs duties. In the case a land border is involved, there is a possibility to develop cross-border logistics, particularly since cross-border flows tend to be at a larger scale and atomized (individuals and vehicles) than flows handled by ports (single ships with large consignments). This, however, brings the risk of cybersecurity and hacking of the platform.
  • A.2. Trusted trader program. Coordinate customs operations with trusted importers and exporters that are assessed to present a lower security risk. Becoming a trusted trader requires meeting a series of standards and is subject to auditing. The main benefits are reduced inspections for imported cargo and faster clearance (fast lane), and exemptions from random non-intrusive inspections. The outcome is an improved level of service for customs since they can focus on traders and cargoes that may present a higher risk. This may create a two tiers system in customs clearance between those who are ‘trusted’ and those who are not. If the auditing process is not recurrent, there could be a decline in the level of compliance of the trusted traders with the risk of losing such a status.
  • A.3. Free zones (Foreign trade zones). The creation of special customs zones that are under a different customs regime. This has been a common strategy used for the promotion of exports since it enables a level of flexibility in the use of national customs regulations. The common aspect is to reduce or eliminate duties on goods traded and manufactured within the free zone as long as they are exported. The expectation is to attract internationally-focused logistics activities using the free zone as a base of operation. The main risks concern the loss of customs duty income and the potential for infractions in customs regulations since the zone is subject to less oversight.
  • A.4. Customs corridors. Expand the ease of moving cargo between customs entities within the same country (ports of entry, free trade zones), particularly when a large amount of transshipment is involved. This supports a better level of integration between major gateways such as ports and airports and enables additional flexibility in supply chain management since cargo can be repositioned without the administrative burden of going through customs and having to pay duties for simply being in transit. This is particularly relevant in supporting the function of a transshipment hub for maritime or air cargoes.