SWTCAR7 MODULE 2

Single Window for Foreign Trade Module 2. Bases for the construction of a Single Window

1

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Single Window for Foreign Trade

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Course author: Interamerican Development Bank (IDB) (www.iadb.org), through his Integration and Trade Sector (INT).

Course coordinator: Interamerican Development Bank (IDB) (www.iadb.org), through his Integration and Trade Sector (INT), the Institute for the Integration of Latin America and the Caribbean (INTAL), the Inter-American Institute for Economic and Social Development (INDES) (www.indes.org), the World Customs Organization (WCO) (www.wcoomd.org) and the General Secretariat of Central American Integration (SG-SICA) (http://www.sica.int/) Module author: José Andrés Giménez Maldonado, Project Technician in the field of Research, Development and Innovation (Valenciaport Foundation).

Pedagogical and edition coordination The Inter-American Institute for Economic and Social Development (INDES) (www.indes.org) in collaboration with Fundación Centro de Educación a Distancia para el Desarrollo Económico y Tecnológico (CEDDET) (www.ceddet.org) and Caribbean Customs Law Enforcement Council (CCLEC) (www.cclec.net)

2018 Edition

This document cannot be reproduced, in whole or in part, by any electronic or mechanical means, including photocopy or any recording process. Its information cannot be stored or recovered by any systems whatsoever without the due written authorization from the IDB. Any request for partial or total reproduction must be informed to: BIDINDES@iadb.org These materials have been revised in light of the ministerial decisions taken in the framework of the 9th World Trade Organization Ministerial Conference held in Bali, Indonesia, in December 2013. The adjustments were made in order to reflect a higher alignment between the course topics and the priorities identified in Bali’s Ministerial Declaration and decisions, where all IDB members participated.

Bali Ministerial Declaration and decisions 2

Single Window for Foreign Trade

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Table of Contents Index of Figures .................................................................... 6 Index of Tables ..................................................................... 7 Glossary .............................................................................. 8 Introduction ......................................................................... 9 Aim of the module ............................................................... 10 Learning-oriented questions.................................................. 10 Unit I. International frame of reference .................................. 12 I.1. Learning objectives .......................................................... 12 I.2. Regulations and instruments geared to implement Single Windows .............................................................................. 12 I.2.1. United Nations Economic Commission for Europe (UNECE) 13 I.2.2. World Customs Organization (WCO) .............................. 23 I.2.3. United Nations Conference on Trade and Development (UNCTAD) .......................................................................... 26 I.2.4. International Maritime Organization (IMO) ..................... 27 I.2.5. International Chamber of Commerce (ICC)..................... 29 I.2.6. Inter-American Development Bank (IDB) ....................... 30 Unit summary ..................................................................... 32 Unit II. Basic pillars established by the WCO for the construction of Single Windows ............................................................... 33 II.1. Learning objectives ......................................................... 33 II.2. Introduction ................................................................... 33 II.3. Objectives of the SAFE framework of standards .................. 34 II.4. Basic pillars of the safe framework of standards.................. 35

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II.4.1.

Pillar

1:

Module 2

Network

of

agreements

between

customs

authorities.......................................................................... 36 II.4.2. Pillar 2: Partnership of customs and trade ..................... 40 II.4.3. Benefits of Implementing the SAFE framework of standards ........................................................................................ 43 Unit summary ..................................................................... 46 Unit III. The role of the Single Window in the process of modernization of customs and the ports ................................. 47 III.1. Learning objectives........................................................ 47 III.2. Introduction ................................................................. 47 III.3. What is strategic management? ...................................... 49 III.4. Relationship between the Single Window and the strategic management of customs ........................................................ 50 III.5. The modernization of customs. Characteristics of a modern customs administration .......................................................... 54 III.6. Modernization of the ports. role of information systems ...... 65 III.6.1. Modernization, capacity and level of specialization in the ports ................................................................................. 68 III.6.2. Information systems as elements modernizing the ports 71 Unit summary ..................................................................... 73 Unit IV. Institutions and agents involved ................................ 75 IV.1. Learning objectives ........................................................ 75 IV.2. Public agents in the logistics and port environment............. 75 IV.2.1. The Port Authority .................................................... 75 IV.2.2. The Maritime Authority .............................................. 78 IV.2.3. Customs .................................................................. 79

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IV.2.4. Regulatory and Trade Control Agencies ........................ 80 IV.3. Private agents in the logistics and port environment ........... 81 IV.3.1. The Ship Operator .................................................... 82 IV.3.2. The Shipping Owner .................................................. 82 IV.3.3. The Carrier .............................................................. 82 IV.3.4. The Maritime Agent ................................................... 83 IV.3.5. The Customs Agent or Broker ..................................... 84 IV.3.6. The Forwarder .......................................................... 84 IV.3.7. The Warehouser ....................................................... 85 IV.3.8. The Trustee ............................................................. 86 IV.3.9. The Pilot .................................................................. 86 IV.3.10. The Longshoremen .................................................. 86 IV.3.11. The Port Tugboat Service ......................................... 87 Unit summary ..................................................................... 88 Unit V. The authorized economic operator (AEO) ..................... 89 V.1. Learning objectives ......................................................... 89 V.2. Introduction and contents ................................................ 89 V.3. The figure of the AEO in the safe framework of standards ..... 92 V.4. World AEO programs and mutual recognition ...................... 93 V.5. Procedures for obtaining AEO certificates ........................... 94 V.6. Benefits and advantages of the AEO .................................. 95 Unit summary ..................................................................... 98 Bibliography ....................................................................... 99

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Index of Figures

•

Figure 3.1. Strategic Management Areas

•

Figure 3.2. Integration Cycle in the Strategic Management Model

•

Figure 3.3. How to build a Single Window environment (I)

•

Figure 3.4. How to build a Single Window environment (II)

•

Figure 4.1. Regulatory and Trade Control Organisms in Spain

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Index of Tables

•

Table 1. Characteristics of a Modern Customs Administration

•

Table 2. First, Second and Third Generation Ports Characteristics

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Glossary

•

AEO: Authorised Economic Operator

•

B2B: Business-to-Business

•

B2G: Business-to-Government

•

CCS: Cargo Community System

•

CS: Community System

•

EPCSA:

European

Port

Community

Systems

Association

Community Systems •

FTSW: Foreign Trade Single Windows

•

G2G: Government-to-Government

•

PCS: Port Community System (PCS) or Cargo Community System (CCS)

•

SW: Single Window

•

UN/CEFACT: United Nations Centre for Trade Facilitation and Electronic Business

•

WCO: World Customs Organization

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Introduction

This Module outlines the basic instruments that would constitute an appropriate environment to build a Single Window. Throughout it, the participant can study the environment from various points of view.

Firstly, the Module introduces an international frame of reference that proposes

recommendations

made

by

the

leading

international

organizations working toward defining international standards and agreements,

which

are

aimed

at

developing

an

appropriate

environment for the creation of the Single Window. In this respect, the main recommendations and codes proposed by each one of these intergovernmental organizations and agencies are put forward.

Secondly, the Module contains a detailed overview of the basic pillars established by the World Customs Organization (WCO), which are aimed at improving the efficiency of the existing relationships between customs and international trade.

The Module also addresses the modernizing role that the Single Window may play both in terms of customs and ports, which are true enclaves that set the standards to follow in international trade.

Lastly, the main agents involved in the construction of the Single Window are also introduced, highlighting the figure of the Authorized Economic Operator.

The effective and efficient combination of the elements introduced in the Module lays the foundation for the successful construction of the Single Window.

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Aim of the module

To provide the conceptual bases and instruments to foster an appropriate environment for the construction of a Single Window as an instrument to facilitate international trade based on the various perspectives presented (regulatory, institutional, trade, etc.) whose relationships and implications directly influence the development of instruments such as the Single Window.

Learning-oriented questions

•

Which are the key organizations and institutions responsible for facilitating international trade?

•

What could be the possible Single Window environments required to facilitate Foreign Trade Operations?

•

What are the principal guidelines stipulated by the international regulatory framework for the establishment of Single Windows?

Which are the basic pillars established by the World Customs Organization (WCO)?

•

What role does the Single Window play in the customs and ports modernization process, and which or who are the agents involved in the construction of a Single Window?

•

What role does the Authorized Economic Operator (AEO) play?

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Module 2. Bases for the construction of a single window Unit 1: International frames of reference.

Unit 2: The basic pillars established by the World Customs Organization (WCO).

Unit 3: The role of the Single Window in the process of modernizing customs and the ports.

Unit 4: Institutions and agents involved in the construction of Single Windows.

Unit 5: The Authorized Economic Operator (AEO).

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Unit I. International frame of reference

I.1. Learning objectives

•

To understand which international regulations apply concerning the implementation of a Single Window.

•

To identify the main recommendations and instruments developed by various organizations to implement a Single Window.

I.2. Regulations and instruments geared to implement Single Windows

The process of constructing and implementing Single Windows is complex; therefore governments and administrations have to take into

consideration

available

recommendations,

standards

and

instruments developed in recent years by intergovernmental agencies and international organizations working in the field to facilitate international trade. The following are the most relevant institutions:

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•

United Nations Economic Commission for Europe (UNECE).

•

World Customs Organization (WCO).

•

United Nations Conference for Trade and Development (UNCTAD).

•

International Maritime Organization (IMO).

•

International Chamber of Commerce (ICC).

•

Inter-American Development Bank (IDB).

Below are the principal recommendations and instruments these organizations have developed.

I.2.1.

United

Nations

Economic

Commission

for

Europe

(UNECE) The United Nations Economic Commission for Europe (UNECE), established in 1947 to promote economic cooperation amongst its Member States, is one of the five regional commissions under the administrative management of the United Nations headquarters. It has 56 Member States, and reports to United Nations Economic and Social Council (ECOSOC). In addition to the European countries, it includes the U.S., Canada, Israel, Turkey and Central Asian republics.

UNECE contains the international centre for the development of standards and recommendations to facilitate trade and houses the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), which develops and maintains tools and instruments with the objective of simplifying, harmonizing and automatizing procedures and information flows associated with foreign trade, reducing the volume of paper documents involved in international trade transactions.

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UN/CEFACT published and has maintained a set of recommendations and standards for international trade widely recognized around the globe for more than forty years. There are presently 35 operational recommendations and two in the process of approval. Recommendations after Recommendation No. 33 have focused on developing instruments for the creation of Single Windows. These recommendations and standards outline good practices in trade procedures and list the various document and data requirements of the countries participating in the centre. It is therefore highly advisable to utilize the materials and instruments the centre provides as reference materials in order to create the most interoperable electronic Single Window environment possible. The recommendations, methodologies and standards the centre has developed have been implemented and disseminated around the world and are utilized to harmonize and simplify procedures and information flows between traders and administrations at the global level. Many of its recommendations and standards have been adopted as international standards by the ISO (International Organization for Standardization) as well. UN/CEFACT proceedings may be framed as activity guidelines: the simplification and harmonization of procedures, the generation of documentation, the introduction of international codes and the

application

and

use

of

information

technologies.

These

guidelines are oriented, and universally applicable, to the government, trade and transportation sector.

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The following are the principal UN/CEFACT recommendations in relation to simplifying and harmonizing trade procedures:

Recommendation No. 4 – National trade facilitation bodies. This Recommendation

emphasizes

the

necessity

of

intense

intergovernmental cooperation to facilitate and strengthen trade. It specifically recommends that governments establish organizations and entities dedicated to promote and facilitate national trade, with balanced public and private sector participation, in order to identify the most relevant factors in each country that affect the cost and efficiency of trade and transportation.

Recommendation No. 13 – Measures to Facilitate Maritime Transport Document Procedures. This Recommendation proposes solutions to various legal problems that arise in the procedures for the dispatch of imported merchandise.

Recommendation No. 14 – Authentication of trade documents by means other than signature. This Recommendation seeks to promote the use of electronic information exchanges in international trade, recommending that governments revise their national and international requirements in regard to the signing of commercial documents in order to eliminate the mandatory submission of paper documents with handwritten signatures by using authentication methods and guarantees to enable electronic transmission.

Recommendation International

Trade

No.

18

–

Procedures.

Facilitation This

Measures

Related

Recommendation

to

contains

provisions related to the simplification and harmonization of procedures involved in international trade, including specific recommendations on

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sending information to governments and administrations regarding the transportation of merchandise.

Each section of the Recommendation describes the area of application, the principal procedures and the documents involved, as well as the problems the measures are proposed to resolve.

Recommendation No. 27 – Inspections prior to shipment. This Recommendation promotes the utilization of World Trade Organization (WTO)

and

World

Customs

Organization

(WCO)

instruments

in

merchandise inspection matters and advises against the application of practices consisting of carrying out physical pre-inspections of all merchandise prior to export.

Recommendation No. 33 – Guidelines on Establishing a Single Window. The directives contained in this Recommendation are geared to offer advice to governments and agents who undertake foreign trade activities in the planning and establishing of Single Windows as instruments to facilitate exports, imports and transportation of goods.

Recommendation No. 33 presents the principal aspects that must be taken into consideration along those lines, in addition to the steps necessary to implement Single Windows.

Recommendation No. 34 – Data Simplification and Standardization for International Trade. This Recommendation (February 2011) advises the development of a four stage process (capture, definition, analysis and reconciliation) to obtain a standardized data set to meet the government’s necessities. This Recommendation is included as a complement to assist in the development of Single Windows and its objective is to get a more effective exchange of information between the trading community and the government. This Recommendation and its guidelines emphasize the importance of the role played by the trading, logistics and transportation community in helping reduce required data to bare minimum necessary and to utilize commercial 16

Single Window for Foreign Trade

systems

and

registry

Module 2

capacity

to

provide

the

information

the

government requires.

Recommendation No. 35 – Establishing a Legal Framework for International Trade Single Windows. This Recommendation (October 2010) is included as practical tool to assist in the development of Single Windows, focusing on legal aspects related to the exchange of trade data information at the national and international level as required in Single Window operations.

The document presents a verification list of legal aspects to be addressed in the creation of Single Windows, including the country’s existing legal framework for electronic trade operations, including electronic communications and signatures. Legal aspects presented in the Recommendation focus on the characterization of a legal base for the creation, organization and structure of a Single Window service, the protection of data, the capacity of government agencies to access and share data among themselves, questions related to identification, authentication and authorization, the quality of data, legal obligations and responsibilities, arbitration and the resolution of disputes, electronic documents,

electronic

databases,

intellectual

property

and

the

ownership of databases and jurisdiction.

Recommendation No. 36 – Single Window Interoperability. The object of this Recommendation, not officially approved as of the date of drafting this module, is to analyse the key aspects of interoperability between various National Single Window environments in order to attain a Regional Single Window environment to deal with transborder operations between various countries.

Recommendation No. 37 – Signed Digital Evidence Interoperability Recommendation. This Recommendation, not officially approved as of the date of drafting this module, defines the rules that digital signatures

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ought to follow in terms of organization and relation to the content signed, the certificates utilized and the electronic signatures produced.

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For its part, UN/CEFACT provides the following recommendations in matters of Trade documents and transportation:

Trade documents and transportation Recommendation No. 1

United Nations Layout Key for Trade Documents.

Recommendation No. 2

Locations

of

Codes

in

Trade

Documents.

Recommendation No. 6

Aligned Invoice Layout Key.

Recommendation No. 11

Documentary Aspects for the Transport of Dangerous Goods.

Recommendation No. 12

Measures

to

Facilitate

Maritime

Transport Documents Procedures.

Recommendation No. 15

Simpler Shipping Marks.

Recommendation No. 22

Layout Key for Standard Consignment Instructions).

UN/CEFACT also has the following recommendations in regard to International Trade Codes:

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International Trade Codes

Recommendation No. 3

Codes

for

the

Representation

of

Names of Countries.

Recommendation No. 6

INCOTERMS Abbreviations.

Recommendation No. 7

Numerical Representations of Dates, Times and Periods of Time.

Recommendation No. 8

Unique Identification Code

Recommendation No. 9

Alphabetic Code for the Representation of Currencies.

International Trade Codes Recommendation No. 10

Codes for the Identification of Ships.

Recommendation No. 16

UN/LOCODE

for

Ports

and

Other

Locations.

Recommendation No. 17

PAYTERMS – Abbreviations for Terms of Payment.

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Recommendation No. 19

Codes For Modes of Transport.

Recommendation No. 20

Codes for units of Measurement Used in International Trade.

Recommendation No. 21

Codes for Passengers, Types of Cargo, Packages and Packaging Materials.

Recommendation No. 23

Freight Cost Code – FCC.

Recommendation No. 24

Trade and Transport Status Codes.

Recommendation No. 28

Codes

for

Types

of

Means

of

Transport.

In relation to the use of information and communication technologies, UN/CEFACT proposes the following recommendations:

Information

and

communication

technologies Recommendation No. 25

Use of the UN/EDIFACT Standard.

Recommendation No. 26

The Commercial Use of Interchange Agreements

for

Electronic

Data

Interchange.

Recommendation No. 31

Electronic Commerce Agreement.

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In addition to other instruments, in matters of the application of information and communication technologies, UN/CEFACT makes standards and tools available that may be consulted at its website (www.ornece.org/cefact) that may be very useful in the technological development of a Single Window solution. Below there are examples of three such instruments, but there are many others constantly being changed and improved.

Trade Data Element Directory (UNTDED, ISO 7372): This is a standard reference that can be utilized with any information interchange method (including UN/EDIFACT). This directory provides a common language by defining terms widely utilized in international trade. The harmonization of information initiative promoted by the WCO is based on definitions provided by TDED. United Nations Electronic Trade Documents (UNeDocs): This is a tool based on the UN Layout Key to provide standard trade documents, on paper as well as in electronic format. Public administrations and private enterprises can both utilize them. The UNeDocs provide precise specifications not only in the form of the document but in the information required in them as well. These documents facilitate the transition from procedures based on the paper format alone toward efficiently implementing electronic interchange processes.

UN/CEFACT Modelling Methodology (UMM): This methodology facilitates the development of a model that describes the process involved

in

the

interchange

of

information

between

public

administrations and private enterprises, something that is useful in the first phases of design and implementation of an electronic information interchange system.

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I.2.2. World Customs Organization (WCO)

The World Customs Organization (WCO) is an international agency dedicated to assisting member countries (normally represented by their

respective

Customs

administrations),

to

cooperate

and

communicate with each other in customs matters. The WCO was founded in 1952 as the Council of Customs Cooperation, the name utilized until 1994, when it was changed to World Customs Organization.

From

its

headquarters

in

Brussels,

Belgium,

it

contributes to the development of consensual rules in customs procedures and provides assistance and counselling to Customs services worldwide. At the present time 174 countries are members.

The WCO does not intervene in trade or tariff disputes, which are the responsibility of the World Trade Organization (WTO).

In June 2005 the WCO published the SAFE Framework of Standards for the facilitation and security of global trade (SAFE is treated in depth in Unit 3 of this Module). SAFE is an international convention that contains 17 standards on augmenting security, trade facilitation, the fight against corruption and the collection of duties.

The World Customs Organization has made a notable contribution to the simplification and harmonization of international customs procedures.

The WCO developed the Harmonized Commodity Description and Coding System now used throughout the world as the basis for classifying merchandise; as well as to establish duties, rates and taxes, and for the determination of regulatory control measures. The WCO has also revised the International Convention on the Simplification and Harmonization of Customs Procedures (the revised Kyoto Convention).

Examples of WCO initiatives to facilitate international trade are described below.

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WCO Revised Kyoto Convention: This convention includes customs obligations in relation to locations where merchandise must be inspected (by Customs and other authorities with jurisdiction). The convention also includes border operations procedures and the establishment of offices on both sides of borders, defining the interchange of information with other organizations as well.

WCO Information and Communications Technologies (Kyoto ICT Guidelines): The purpose of these guidelines is to focus the attention of customs administrations on the impact of information and communications technologies on customs. The document emphasizes the possibilities of customs to improve its programs and services to clients and economic operators.

WCO Data Model: This model establishes a harmonized and standardized framework regarding customs information requirements.

The Data Model supports Single Window operations and allows the interchange of national and international information. This model is based on UNTDED and applies UMM methodologies (see above), as well as other international standards such as ISO and UN/LOCODE. Also, the Data Model includes directives for implementing standard messages such as UN/EDIFACT and XML specifications.

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WCO Unique Consignment Reference (UCR): The UCR is a concept based on ISO standard 15459 designed to unequivocally identify international interchanges of merchandise from origin to destination. The UCR establishes an information and documentation link between the merchandise provider and the final receiver in international trade transactions, using the same reference throughout the entire logistics chain.

The UCR should also be related to other transportation references, as it is not the only register of foreign trade transactions in use at the present time.

WCO SAFE Framework of Standards to secure and facilitate global trade: The SAFE Framework of Standards establishes the principles and standards its members should adopt to support the strategy of ensuring that safe movement of merchandise in global trade is not an obstacle but, on the contrary, facilitates such movement.

Customs Guidelines on Integrated Supply Chain Management: These guidelines constitute a basis for the interchange of data among customs administrations and between customs and operators in response to the threats of international terrorism and organized crime through greater international cooperation between customs administrations and the introduction of improved border control measures.

WCO Compendium. How to build a Single Window Environment: This WCO compendium on building Single Windows broadens the view of Single Windows, defining them as a philosophy of governance in which the traditional structures of government metamorphose into new structures better serving the needs of citizens and business, establishing unique government interfaces for that purpose. This document is especially relevant to this course and is included in numerous references.

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We recommend that the student read this compendium if he wishes to delve more deeply into the matters covered by the course.

I.2.3. United Nations Conference on Trade and Development (UNCTAD)

The United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body of the United Nations. UNCTAD is the principal organ of the UN General Assembly for matters related to trade, investments and development.

The objectives of the organization are "to maximize trade and investment opportunities, promote developing countries and assist them in their efforts to integrate themselves into the world economy.�

Among

the

actions

undertaken

by

UNCTAD

to

promote

the

development of the Single Window system, the Automated System for

Customs

Data

(ASYCUDA)

is

instructive.

ASYCUDA

is

a

management system that encompasses most of the procedures linked to customs management. The system manages such documents as merchandise manifests, customs declarations, merchandise in transit documents, etc. The system meets all the international requirements and standards developed by ISO, WCO and the United Nations Organization.

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In the same way, the system can be adapted to the different conditions of each country in matters of customs regimes, national tariffs and legislation. ASYCUDA supports electronic data interchange (EDI),

utilizing

the

EDIFACT

(Electronic

Data

Interchange

for

Administration, Commerce and Transport) standard.

The latest version of the system, known as Asycuda World offers operational

and

management

improvements,

reduces

costs

associated with its utilization, and better Internet connectivity to facilitate the interchange of information between administrations.

The ASYCUDA system is utilized in numerous countries. However, as requirements for interoperability with other systems become more necessary, many countries have opted to modernize their customs management systems to platforms offering greater flexibility in the introduction of new functionalities, so that individual systems arise in each country.

I.2.4. International Maritime Organization (IMO)

The International Maritime Organization (IMO) is a specialized United Nations agency that promotes cooperation between States and the transportation industry to improve maritime safety and prevent contamination of the oceans. Recent IMO initiatives have included reforms of the International Convention for the Safety of Life at Sea (SOLAS) and the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). Its headquarters is located in London (United Kingdom). Originally consultative in nature and known as OCMI (International Consultative Maritime Organization), its recommendations were optional.

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The International Maritime Organization deals with questions related to

facilitating

maritime

transportation

through

its

Facilitation

Committee (FAL Committee). That Committee treats matters such as the simplification of formalities, the harmonization of documentation, procedures associated with the arrival and departure of ships and standardization

of

information

required

by

public

authorities.

Electronic commerce linked to maritime transportation is one of the subjects discussed in the Facilitation Committee at the present time.

The IMO is particularly interested in establishing a Single Window information system to operate before a ship arrives in port.

Channelling through a single point of entry (the Single Window) attempts to make all the information associated with the ship and the merchandise it transports available before its arrival in port.

Some of the most significant agreements related to facilitating maritime trade transportation are the following: Convention on Facilitation of International Maritime Traffic, 1965, the FAL Convention: The objectives of this convention are: •

To facilitate international maritime transportation.

•

To prevent unnecessary delays in ships transporting people and merchandise.

•

To unify and simplify formalities, documents, requirements and procedures associated with international maritime transportation.

IMO Compendium on Facilitation and Electronic Business (FAL.5/Circ.15, February 19, 2001 and FAL.5/Circ.15/Corr.1): This is an international directive developed to facilitate electronic information

interchanges

for

the

authorization

of

arrival

and

departure of vessels.

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I.2.5. International Chamber of Commerce (ICC)

The International Chamber of Commerce (ICC) is an organization charged with protecting the businesses of the different countries of the world in matters of commercial operations abroad. The mission of the ICC is also to promote trade and investment between the businesses of the world in the various productive sectors and services, as well as helping them face each of the challenges and opportunities presented in the present globalization context. To achieve this mission, the ICC has a broad group of members and businesses from almost 130 countries that engage in international operations and business organizations such as the Chambers of Commerce of the different countries.

The ICC was created in 1919 in Paris, France, and given corporate personality and the juridical nature of an association. It should be mentioned that the International Chamber of Commerce is the only business organization with the status of a consultative agency to the United Nations and its specialized agencies.

The International Chamber of Commerce prepares rules, norms, standards and tools oriented to the promotion and facilitation of international trade. Although voluntary, ICC rules take on the force of law when incorporated to trade contracts as a result of their indispensable nature as harmonizing and facilitating instruments in international procedures and contracts:

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Single Window for Foreign Trade

•

ICC/UNCTAD

Rules

Module 2

are

the

only

standard

for

intermodal

transportation documents accepted at the world level. As a matter of fact, they are widely utilized in the preparation of national legislation in many countries. These rules offer a uniform legal regime for the formalization of private transportation contracts, facilitating and simplifying the documentation and procedures involved.

I.2.6. Inter-American Development Bank (IDB)

The IDB is the principal source of multilateral financing and expertise for the sustainable economic, social and institutional development of Latin America and the Caribbean.

The idea of an institution for the development of Latin America and the Caribbean first came up during the initial activities that led to the creation of an Inter-American system on the occasion of the First Pan-American Conference of 1890. The Bank was officially founded in 1959,

when

the

Organization

American

States

drafted

the

Constitutive Convention of the Inter-American Development Bank.

Over of the years, the IDB has added new member countries and increased its capital nine times. These actions have allowed the IDB to increase its assistance to the alleviation of poverty and to development programs that have helped to transform Latin America and the Caribbean. While much remains to be done, the region’s social indicators have improved notably in various aspects, such as literacy, nutrition and life expectancy.

The IDB Group consists of the Inter-American Development Bank, the Inter-American Investment Corporation (IIC) and the Multilateral Investment

Fund

(FOMIN).

The

IIC

is

principally

devoted

to 30

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supporting small and medium business, and FOMIN promotes the growth of the private sector by means of donations and investment, with emphasis on microbusiness.

The IDB has the following priority action areas to aid the region in attaining greater economic and social progress: •

The reduction of poverty and social inequality;

•

Dealing with the necessities of the small, vulnerable countries;

•

Promoting development by the private sector;

•

Dealing

with

climate

change,

renewable

energy

and

environmental sustainability; and •

Encouraging regional cooperation and integration.

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Unit summary

The international framework that establishes the bases for the definition and construction of Single Windows is made up of recommendations, standards and codes developed by the principal international organizations dedicated to the facilitation of international trade. The following are the most relevant provisions: Economic Commission of the United Nations for Europe (UNECE).

•

Recommendation No. 4 – National Trade Facilitation Bodies.

•

Recommendation No. 18 – Facilitation Measures Related to International Trade Procedures.

•

Recommendation No. 33 – Guidelines on Establishing a Single Window.

•

Recommendation No. 34 – Data Standardization for International Trade.

•

Recommendation No. 35 – Establishing a Legal Framework for an International Trade Single Window.

Simplification

and

World Customs Organization (WCO).

•

WCO Revised Kyoto Convention.

•

WCO Data Model.

•

WCO Unique Consignment Reference (UCR).

•

WCO SAFE Framework of Standards to Secure and Facilitate Global Trade.

•

WCO Compendium on How to Construct a Single Window Environment.

International Maritime Organization (IMO).

•

Convention on Facilitation of International Maritime Traffic, 1965.

•

IMO Compendium on Facilitation and Electronic Business.

International Chamber of Commerce (ICC) •

ICC/UNCTAD Rules for Multimodal Transport Documents.

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Unit

II.

Basic

Module 2

pillars

established

by

the

WCO

for

the

construction of Single Windows

II.1. Learning objectives •

To discover the SAFE Framework of Standards established by the WCO.

•

To gain a deeper understanding of the basic pillars established by the WCO for the construction of a Single Window.

•

To discover and understand the aim, objectives and pillars that underpin the SAFE Framework of Standards as an international set

of

standards

so

as

to

ensure

secure

and

efficient

transactions.

II.2. Introduction This Unit introduces the basic pillars established by the World Customs Organization, which are aimed, on the one hand, at providing the appropriate framework to facilitate trade between nations and, on the other, at achieving a greater level of integration between the supply and transportation chains. Moreover, these pillars are aimed at increasing the security and reliability of such chains as well as simplifying the amount of administrative paperwork entailed in international trade and transportation of goods. This instrument, which encompasses these objectives and provides the tools needed to meet them, is referred to as the SAFE Framework of Standards.

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II.3. Objectives of the SAFE framework of standards

The WCO unanimously adopted the so-called SAFE Framework of Standards in June 2005. This agreement not only means that a unique international instrument was adopted to improve the security and efficiency of international trade transactions, but that the bases of a new framework were established that affects the functioning of customs and the relationship between customs administrations and business.

The commitment WCO members have shown in implementing the SAFE Framework of Standards clearly demonstrates their intention to continue developing measures and instruments to help facilitate international trade, especially in the present economic and financial crisis situation

The objectives of the SAFE Framework of Standards are the following: •

To establish standards to provide supply chain security and increase reliability and predictability levels in transportation operations.

•

To allow integrated supply chain management, including all modes of transportation.

•

To empower the role, functions and capacities of Customs to respond to present challenges and opportunities.

•

To strengthen cooperation between Customs and administrations to detect those trade and transportation transactions with risk to the security of persons or other merchandise.

•

To strengthen the cooperation between Customs and businesses.

•

To promote and facilitate the movement of merchandise through secure and reliable international logistical chains.

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II.4. Basic pillars of the safe framework of standards

The SAFE Framework of Standards is made up of four principal elements: •

Harmonization of electronic information related to exported, imported and transported merchandise.

•

Commitment on the part of all countries adhering to the SAFE Framework of Standards to perform risk analyses that allow the identification of threats to supply, logistics and transportation chains.

•

Establishing the necessary means, depending on the level of risk evaluated in each country that adheres to the SAFE Framework

of

merchandise

Standards, inspection,

to

carry

out

preferably

container

using

and

non-intrusive

inspection methods such as X–ray detection.

•

The SAFE Framework of Standards defines certain benefits Customs

grant

compliance

agents

with

and

specific

operators security

who

and

accredit protection

requirements while implementing good practices in their internal procedures and in the logistic chains in which they operate.

These four premises rest on two basic pillars called the Network of Agreements between Customs Authorities and the Partnership of Customs and Trade. These pillars represent a group of consolidated

standards

that

guarantee

common

understanding

between countries, customs administrations and businesses, while implementing the SAFE Framework of Standards.

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Implementing the SAFE Framework of Standards requires that the framework be constructed in various phases because integration of the two pillars is complex and requires the commitment of all the agents that intervene in the supply chains. The aforementioned implementation will therefore take place gradually with the standards and instruments represented in the SAFE Framework of Standards going through different stages of maturation in accordance with the capacity of individual customs administrations to implement the standards.

II.4.1. Pillar 1: Network of agreements between customs authorities

Customs

administrations

must

work

together

under

common

standards with the objective of improving conditions associated with international

transportation,

facilitating

its

development

and

guaranteeing security levels acceptable to all participants in the logistics

and

transportation

chains.

Pillar

1

–

Network

of

agreements between Customs attempts to respond to these challenges and necessities by providing adequate mechanisms to increase the efficiency and security of international trade.

Traditionally, customs administrations inspect merchandise after it is unloaded at destination ports. The present geopolitical situation and the globalization of such phenomena as traffic in drugs and arms, however, make it necessary to perform inspections of certain merchandise (containerized, for example) before it arrives at its destination.

Under

present

conditions,

the

role

of

customs

administrations is fundamental to attaining successful compliance with new exigencies.

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Electronic information interchange systems that allow electronic information to be sent and received utilizing common standards (such as EDI messages) are therefore necessary to facilitate integration and interoperability.

Additionally, all of these communications have to be accomplished rapidly and efficiently in order not to staunch the flow of merchandise through the logistics and transportation chains. For that reason customs administrations must have modern systems that speed and facilitate customs procedures and inspections.

These factors gain special relevance in the protection and security of logistic chains, since certain merchandise flows, such as containerized merchandise, present inherent risks due to transportation conditions, generating the necessity to have arrangements and technologies capable of inspecting the merchandise within a reasonable time and with the minimum possible intrusion (radiography and Gamma inspections, or radioactive substance detectors for example). With all these efforts, the intention is to preserve the integrity of the logistics chain

and

to

neutralize

threats

that

could

provoke

serious

consequences should they materialize.

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•

Module 2

Integrated Supply Chain Management: Customs administrations

must ensure the integrated procedures recognized in the WCO Customs Guidelines on Integrated Supply Chain Management, ISCM Guidelines.

•

Authority to Inspect Merchandise: Customs administrations must

have the authority to inspect merchandise that enters, leaves, is in transit (including loading) or is crossing the border.

•

Modern Technology for the Inspection of Equipment:

Non-

intrusive inspection and detection arrangements must exist and be available in accordance with the level of risk in each country. This equipment is necessary for inspecting containers susceptible of transporting drugs, arms or radioactive substances, and the inspections must be performed without slowing the normal flow of merchandise through the transportation chain.

•

Risk

Management

Systems:

Customs

administrations

must

establish risk management systems that allow threats to be identified and risks associated with certain trade operations to be evaluated. Such a management system must also serve as a tool to assist in decision making and in the identification of good practices.

•

Containers and High Risk Merchandise: It is necessary to identify

the risk associated with certain merchandise and the way it is transported.

Thus

high

risk

merchandise

or

containers

are

identified as items for which available information is inadequate, as well as material to which the risk management system assigns a high level of risk because of its nature, origin or transportation conditions.

•

Advanced Electronic Information: In order to be able to apply a

correct

risk

analysis

before

merchandise

arrives,

customs

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administrations must have electronic information interchange tools associated with merchandise in transit that allows timely access to information in relation to the merchandise before arrival.

•

Detection and Communication: Customs administrations must

have unified criteria to share and transmit information.

•

Performance Measures: Customs administrations must prepare

periodic statistical reports covering trade transactions carried out and associated risk levels. Statistics may include, for example, the number of high risk transactions, the number and types of inspections (physical, non-intrusive, etc.) undertaken in regard to those transactions and the authorizations issued.

•

Security

Evaluation:

Customs administrations must work in

conjunction with other authorities with jurisdiction to implement security analyses in relation to the transportation of merchandise and to design joint action plans for the purpose of detecting areas for improvement.

•

Integrity of the Workers: Customs administrations must develop

plans geared to ensure the adequate performance by customs workers, to combat fraud and non-professional actions as well as actions that could lead to a breach in the integrity of logistics and transportation chains.

•

Security Inspections on Departure: To the extent possible, if the

importing country should request it, customs administrations should carry out merchandise control of merchandise or containers classified as high risk in the country of origin.

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II.4.2. Pillar 2: Partnership of customs and trade

The second Pillar of the SAFE Framework of Standards is oriented to

the relationship between customs administrations and agents who operate in international trade and transportation. It is very important for Customs administrations to establish instruments to collaborate with the private sector to involve businesses in improving the reliability of the logistics and transportation chains, while increasing the security and efficiency levels of logistics and transportation.

The principal objective of this pillar is to create an international system that recognizes businesses with adequate levels of efficiency and security in their own international trade and transportation activities. These businesses will then receive tangible benefits related to their activities and procedures in cooperation with customs administrations.

The following extract of the document “High Level Guidelines for Cooperation Agreements between Members of the WCO and Private Industry to Increase Supply Chain Security and Facilitate the Flow of International Trade� summarizes the critical importance of the relationship between the customs administrations and the business community,

a

relationship

that

adds

one

more

layer

to

the

international trade protection model:

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“To the extent that the customs administration can rely on the performance of businesses that participate in international trade activities, the risk that the customs administration must face is reduced.

In this manner, businesses that accredit a verifiable commitment to increase supply chain security will thereby benefit themselves in their relationship with customs administrations. Minimizing risk in this manner helps customs carry out its functions and facilitate legitimate international trade�.

This approach is designed to guarantee the security of trade transactions starting at the very beginning of the transportation chain, that is, at the point of origin of the merchandise (for example, at the moment in which a container is loaded with merchandise in the exporter’s warehouse).

The bases to make that possible involve a series of instruments, as mentioned above, including, among others: analyses of risks and threats,

designing

protection

and

communication

plans,

putting procedures into place that allow the detection of irregular transactions not only in merchandise transactions but in associated documents as well, plus the protection of information systems, etc.

The

benefits

that

businesses

committed

to

implement

the

aforementioned instruments can attain are related to greater ease in the movement of merchandise and in associated customs procedures.

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For example, greater rapidity in the dispatch of merchandise classified as “low risk,” improved levels of security, reduction of costs by being able to simplify customs procedures, etc. In addition, there are other external benefits that businesses can obtain such as an improved image and reputation among the other public and private agents and the public in general, creating new business opportunities, etc.

Many businesses that participate in the international logistics and transportation chains already have plans, programs and measures for compliance with the requirements of customs administrations. In order to be considered part of the SAFE Framework of Standards Pillar of Partnership of Customs Administration and Trade, they must accredit sufficient levels of quality and adequate adjustment to customs procedures, especially those that have to do with international trade.

The principal standards that make up Pillar 2, Partnership of Customs Administrations and Trade, are described below: •

Partnership:

Authorized

Economic

Operators

(AEOs)

involved

in

international trade activities must undertake an internal analysis of their procedures and good practices in order to ensure that their internal policies and processes offer the safeguards necessary in foreign trade operations.

•

Security: AEOs must incorporate recognized good practices in their internal business processes.

•

Authorization: Customs administrations, in conjunction with the private agents who make up the supply chain, must design and validate quality procedures that accredit the businesses as meriting Authorized Economic Operator (AEO) incentives and benefits.

•

Technology: The integration of new technologies must be primarily to facilitate the interchange of information and to preserve the integrity of supply chains.

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•

Module 2

Communication: Customs administrations will regularly update their communications programs with private agents and businesses for the purpose of strengthening public-private collaboration, transferring good practices and establishing joint quality and security criteria in the supply chains.

•

Facilitation: Customs administrations will work in conjunction with the AEOs to improve security conditions and facilitate international trade originating or occurring within the limits of each customs territory.

II.4.3. Benefits of Implementing the SAFE framework of standards

The SAFE Framework of Standards provides a consolidated platform that allows the strengthening of international trade, improves the security and reliability of the logistics chains and increases the contribution of customs and other agents to the increased social and economic well-being of nations. Moreover, the Framework attempts to improve the capacity of customs to detect and manage risky trade transactions, as well as to increase the efficiency of government agencies involved in the transportation of merchandise. Adopting the SAFE Framework of Standards provides benefits to the nations, to customs administrations and to businesses.

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Benefits for the Nations As has been mentioned above, one of the principal objectives of the SAFE Framework of Standards is to facilitate international trade as the motor that generates riches and development. The SAFE Framework of Standards provides the instruments necessary to achieve elevated levels of security and reliability in such transactions. One of the most important benefits for nations that adopt

this

agreements

instrument between

is

the

establishment

customs

of

collaborative

administrations

and

other

government agencies that ensure improved integration and performance of their functions and responsibilities.

Customs As previously mentioned, one of the basic pillars of the SAFE Framework of Standards is the establishment of a network between customs administrations (Customs-to-Customs Network) with the objective of achieving greater integration of controls in regard to the interchange of merchandise utilizing secure and efficient logistics chains. Agreements between customs administrations allow the interchange of detailed information, improve control in regard to trade transactions and optimize available resources. The Customsto-Customs

Network

strengthens

cooperation

between

administrations and permits anticipation of user necessities.

For example, the administration of an importing country can use the Customs-to-Customs Network to request information of the exporting country administration in order to carry out its own inspection.

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Businesses From the point of view of businesses, the SAFE Framework of Standards establishes conditions necessary to facilitate international trade between producers, suppliers and clients, taking present industrial production and distribution models into account.

One of the key figures in international trade is the Authorized Economic Operator (AEO), which will be discussed in more detail in unit 6. This figure can obtain important benefits to accelerate the management of customs procedures or even reduce the number of inspections of certain merchandise. The basis for generating these benefits is the adoption of international standards that establish uniformity and predictability, and decrease complexity in the management of transportation documents.

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Single Window for Foreign Trade

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Unit summary

Unit II may be summarized in the following principal ideas: •

•

•

•

•

The SAFE Framework of Standards is a unique international instrument designed to improve the security and efficiency of international trade transactions. It establishes the bases of a new framework for the function of customs in the interrelationships of customs administrations with businesses.

The principal objectives of the SAFE Framework of Standards are the following: -To establish standards that provide security to the supply chain and increase the levels of reliability and predictability in transportation operations.

-To allow integrated management of the supply chains, including all transportation modes.

-To strengthen the role, functions and capacities of customs to respond to present challenges and opportunities.

The two basic pillars on which the SAFE Framework of Standards is built are the Network of Agreements between Customs Administrations and the Partnership of Customs Administration with Trade. These pillars bring together a group of consolidated standards that guarantee common understanding between countries, administrations and businesses, as well as a dynamic implementation of the SAFE Framework of Standards.

Pillar 1, a Network of Agreements between Customs Administrations, establishes that customs administrations must work together under common standards with the objective of improving conditions associated with international transportation, facilitating development and guaranteeing acceptable levels of security by all the members of the logistics and transportation chains.

The second Pillar of the SAFE Framework of Standards, Partnership of Customs Administration with Trade, is oriented to the interrelations between customs administrations and agents who engage in international trade and transportation operations.

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Unit III. The role of the Single Window in the process of modernization of customs and the ports

III.1. Learning objectives •

To discover the strategic management model as an essential tool for efficient customs management, foreign trade regulatory bodies and modern public infrastructure managers.

•

To understand how a Single Window fits in conceptually and methodologically within the context of strategic management.

III.2. Introduction In the previous Units, we saw that customs are recognised around the world for their crucial role in the management of international supply chains, protecting citizens and ensuring that supply chains are efficient and secure. Likewise, customs collect important statistical information that is subsequently used to draft policies that affect international trade.

Over the years, customs, regulatory bodies and public infrastructure managers have efficiently performed their role. However, the new circumstances that came about toward the end of the 20th Century and the beginning of the current one have created new challenges and requirements.

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In light of this, governments must respond to the industry's needs, which have been directly affected by globalization, the huge impact of costs, the increased mobility of transportation flows and the introduction of new trade agreements, among other important factors.

The

industry

is

constantly

growing

and

the

current

established models that regulate trade across borders present appreciable degrees of inefficiency and obsolete practices in some cases. Therefore, governments must provide the tools required to create the circumstances that allow the optimal development of new practices and logistics processes that facilitate transportation and international trade.

Furthermore, governments are becoming aware of the importance of securing and protecting the logistics and supply chains. The global terrorism threat, as well as causing the loss of human lives, may also bring about economic losses because of the domino effect that breaking the transportation chain entails, which affects each link of the chain and the end clients. These factors have created new requirements that must be included when establishing policies that affect international trade.

This Unit introduces the new strategic management model as an essential tool to create customs, foreign trade regulatory bodies and modern public infrastructure managers that are capable of responding to the new challenges we have described. Likewise, we will see how the Single Window Concept fits into this strategic management context.

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III.3. What is strategic management?

Strategic management is defined as a conjunction of actions that allow management to achieve its objectives and goals, creating value for its shareholders, clients and society in general. The strategy of a business is based on its statement of Mission, Vision and Values. Mission is defined as what the organization is dedicated to, the market to which its products and services are directed and the corporate image of that dedication.

Vision describes the status and position the business aspires to achieve in the medium and long term, that is, where it wants to be in a future scenario. Finally, Values constitute the philosophy, principles, beliefs, standards and general rules by which the business functions. Normally, the strategy follows the strategic lines that form the fundamental axes on which the business relies to carry out its Mission and attain its Vision. This management focus must be applied to customs administrations, trade regulatory agencies and public infrastructure managers for these agencies to achieve their strategic objectives and goals, which, as the previous units have shown, are based on establishing the conditions necessary to facilitate international trade and providing instruments and tools that increase the protection levels of logistics and transportation chains, in addition to their traditional functions of collecting imposts, duties and taxes.

This strategy can be rolled out in four principal areas: •

Institutional

Framework:

The

strategic

objective

is

to

strengthen the role of public institutions that participate in foreign trade operations and promote their cooperation, as well as establishing

adequate

communications

mechanisms

with

the

private sector.

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Single Window for Foreign Trade

•

Module 2

Legal Framework and the growth model: In this case the attempt is to develop legal mechanisms that regulate exports, imports, and international merchandise movements in general, with the objective of promoting clarity in the laws that affect trade and define tariff and non-tariff barriers.

•

Control and improvement of logistics and the security of operations: This point covers procedures for sending information electronically, controlling risk, introducing security measures, supervision and the traceability of operations related to trade transactions, exports, imports, transportation, etc.

•

Efficacy of the specific facilitation services and programs: In this case the attempt is to develop instruments that contribute to promoting trade processes and optimizing the resources (human and material) involved in trade; the figure of the Authorized Economic Operator is one of them.

III.4. Relationship between the Single Window and the strategic management of customs

What is the relationship between the Single window and other components of each country’s national strategy and the modernization of customs and trade facilitation?

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The development of Single Windows and an adequate environment for its implementation are elements of vital importance within the framework of modern customs management because the Single Window is the instrument that coordinates and integrates the different trade facilitation initiatives.

Introducing

the

Single

Window

concept

into

the

strategic

management of customs implies evaluating the impact the Single Window can have in regard to the various facilitation policies, the agents involved in trade operations and in the relationships between them.

Given the fact that the Customs administration has the political support,

the

budgetary

authority

and

the

necessary

technical

knowledge, it should have a leadership role in the initiative to introduce Single Windows into its strategic management model.

The Single Windows initiative must be contemplated within a broader strategic

framework

that

includes

all

of

the

country’s

public

participants in international trade operations. Questions as to the definition of functions and Single Window responsibilities must be especially studied.

The making of decisions in relation to the precise role that the customs administration could have in a Single Window project falls into the scope of strategic management as well.

The following figure shows the cycle of continual improvement with the different phases of integration of a strategic management model:

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Figure 3.1. Strategic Management Areas

Initial Diagnosis

Follow Up And Control

Definition of the Mission, Vision and Values

Implementation of the Initiatives

Definition of Strategic Lines Develoment of the Strategic Plan

Source: Valenciaport Foundation. In House Preparation

In accordance with the diagram above, the activities of diagnosing the present situation and developing the strategic plan are part of the strategic management process, which assists executive management to seek a place for the organization in the future (Vision), taking the present environment and the foreseeable future into account. A systematic analysis of present tendencies that influence the organization’s future is required as well.

In order to determine the organization’s strategic position in relation to the development of Single Windows, one of the aspects that must be kept in mind is the correct definition of the present situation in relation to providing administrative services. This diagnosis will have a key impact on the definition of the services that the Single Window attempts to provide.

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Diagnosis of the present situation must also include the present set of standards in effect, thus ensuring regulatory compatibility with the Single Window environment.

Present working procedures and relationship modes between public agencies and businesses must also be utilized as a connective thread in defining future services under a Single Window environment.

Another consideration that must be addressed is the adjustment of the legislative framework.

Does the legislation permit the establishment of Single Windows? Can a government agency legally make valid decisions in regard to information received in the course of a process conducted by a comparable agency in another country? Is data interchange permitted under the national legislation on privacy?

Similarly,

there

are

pertinent

considerations

that

affect

the

interoperability of electronic interchange systems. Many systems currently operating in the different government agencies are legacy systems, with hardware and software networks which do not permit the

present

levels

of

integration

and

connectivity.

Achieving

interoperability by interconnecting systems of this type may allow the breakdown of presently compartmentalized information barriers.

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Analysis of the strategic position of the customs and regulatory agencies and public infrastructure managers is a very useful instrument

to

identify

various

strategic

planning

aspects

that

contribute to their modernization.

The following paragraph covers the strategic aspects of initiatives designed to modernize Customs.

III.5. The modernization of customs. Characteristics of a modern customs administration

If we analyse the path taken by the principal industrial nations in relation to the development of instruments to facilitate trade, it becomes obvious that, historically, the Single Window has not been a key success factor. For many years the majority of the nations defined

as

“developed�,

in

accordance

with

the

World

Bank

classification, either did not have a Single Window solution available or were in the process of developing the system. Paradoxically, these countries

have

been

operating

with

advanced

logistics

and

transportation systems for years in response to the rapid and dynamic

demand

of

merchandise

flows.

Moreover,

they

have

developed modern customs practices such as risk management, postdispatch

merchandise

audits

and

the

development

of

data

transmission systems based on EDI messaging, but these initiatives seldom included the development of a Single Window solution.

Simply by establishing the Single Window concept as an instrument to facilitate international trade, a country can potentially rise in the different development and logistics efficiency rankings such as the World Bank’s Logistics Performance Index.

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Therefore, although the Single Window system is merely one more instrument in improving the efficiency of international trade and its associated logistics, the Single Window is undoubtedly one of the most important.

Governments that have implemented Single Windows only as an

electronic

information

interchange

mechanism

are

gradually incorporating new programs to the system to introduce

risk

management

systems,

post-dispatch

merchandise audits, confidence building programs for agents and businesses as well as more orientation for the client.

This paragraph addresses the characteristics that define a modern customs administration geared to facilitate trade and capable of providing client–oriented services. These characteristics are displayed in the following tables, in check-list mode.

Table 1. Characteristics of a Modern Customs Administration

Characteristics

The dispatch of merchandise is generally accomplished automatically

Description The greater part of the merchandise is dispatched on the basis of the declaration and without regulatory inspection at the time of dispatch.

Inspections in this sense are the exception. Documents associated with the merchandise are not examined at border points, ports, airports, etc. while the cargo is waiting to be dispatched.

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Single Window for Foreign Trade

Simplified Procedures

Simple tariffs and clear regulations

Effective use of risk management

High compliance capacity

Clear orientation to the accredited client

Module 2

Minimum documentation is required to effect dispatch.

The declaration process consists of two stages, the first being sending the documentation necessary for dispatch.

There is a separation between the dispatch and the authorization of the merchandise.

Accelerated dispatch procedures are used for accredited clients and users.

Low variability in types of duties.

Transparent methods of calculation of duties and taxes.

Reduced tariff rates.

Risk management is a process that includes the entire organization with a systematic effort in all levels to put it in practice.

Risk management is an integral part of the organization’s strategic, tactical and operational processes.

The organization’s upper management supports risk management.

Automated, selective systems assist in the evaluation of risk.

The organization routinely maintains client account information current.

The units of organization and of post-dispatch audit follow strategic risk management principles.

The post-dispatch audit is the basis of compliance and measurement follow-up.

There are accredited client (AEO) attention programs.

There are transparent standards for accredited clients based on independent, certifiable criteria.

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Single Window for Foreign Trade

Efficient interchange of information

Utilization of standards in electronic messaging

Supply Chain Support

Progressive accommodation of information

Dependable and orderly delivery of the merchandise

Automated systems for the delivery of merchandise

Module 2

Information interchange systems relate to the agents involved in the logistics chains (suppliers, clients, ports, airports, banks, regulatory agencies, etc.)

Standard messaging systems are implemented to cover most business necessities related to merchandise dispatch and authorization.

The entire community has invested in the tools that facilitate the transparent management of the procedures associated with the declaration and authorization of merchandise, vessels, containers, etc.

The systems do not demand the sending of all documentation at one time.

The obtaining of information is adjusted to the different phases of the logistics and transportation chain Low inactivity time for resources handling the cargo in terminals and warehouses.

Low waiting times for reception and delivery trucks. There are no visible bottlenecks or lines in the loading and unloading installations.

Efficacious communication linkage between the cargo handling units and the dispatch systems.

Provision of information in real time in relation to the occupation, distribution and location of the merchandise in warehouses, port terminals, interior terminals, etc.

Automated systems that facilitate locating merchandise in warehouses, port terminals and interior terminals.

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Single Window for Foreign Trade

Excellence in logistics capacities

Interchange of information in time real between customs and logistics operators

Module 2

Transporters are able to automatically program the delivery and reception of cargo at the airport, port or at an interior merchandise terminal.

Low waiting, loading, and operation times for land transportation.

Transmission in time real of information regarding the status of cargo to the importer, customs and logistics operators.

The foregoing tables describe some of the defining characteristics of a modern

customs

operation.

These

characteristics

can

also

be

described as a network of dependence relationships in which each of these characteristics exerts influence or impacts on the rest, for example: •

Reducing and predicting times of dispatch require a high degree of automation in associated procedures and processes.

•

In relation to the physical handling of the cargo in the merchandise installations and terminals, it is necessary for the cargo to be moved rapidly and reliably. Speeding up dispatches and authorizations is not sensible unless accompanied by efficient handling synchronized with the document processes.

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The following diagram demonstrates this type of relationship.

Figure 1.2. Integration Cycle in the Strategic Management Model

Rapid and Secure Supply Chain

Efficient Operations

Short and Reliable Dispatch Times Distribution and Delivery of Reliable Merchandise

Automatic Dispatch of Merchandise Efficient Exchange of Information

Source: WCO Compendium. How to Build a Single Window Environment. In-House Preparation

The previous diagram demonstrates the interconnection between some of the key characteristics of an advanced authorization system.

It is important to point out the adjectives utilized in the diagram such as: “reliable and ordered”, "efficient", “automatic interchange of information,” etc. If even one of these terms were to be replaced with its opposite, the system would not meet its objectives.

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In fact, this presentation describes how the majority of the industrialized countries of the world have attained high standards in the

management

of

goods

transported

across

borders.

This

demonstrates that, in addition to having a Single Window solution, it is necessary to establish other mechanisms to achieve efficiency in the dispatch of merchandise. The successful management of a Single Window project is vital to achieving these objectives, but so is the existence of other elements that allow trading procedures to be accelerated. A more detailed analysis of these characteristics can provide a clearer picture of the entire customs system and the impact that policies and programs designed to facilitate trade have on the system.

For example, in order to allow the automatic dispatch of goods to proceed rapidly and on a large scale, it has to be accompanied by a reduced number of physical and documentation inspections in order not to impede its flow. On the other hand, reducing the number of inspections cannot be accomplished without the effective and efficient utilization of risk management. High compliance on the part of the clients must be observed. In all these cases, customs must provide a simplification of procedures and affect the dispatch of goods on the basis of minimal documentation.

The following diagram analyses the key aspects of electronic information interchange in relation to merchandise dispatch and authorization. Standardization and simplification of data is the basis for efficiently speeding information flows. To the contrary, if the data is

not

standardized

messages

contribute

to

the

creation

of

information islands and increase the effort and complexity of maintaining

interconnections

between

information

systems.

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Standardized information is also the basis for logical organization of information

that

can

contribute

added

value

and

utility

to

administrations and governments.

Figure 3.3. How to build a Single Window environment (I)

Source: WCO Compendium. How to Build a Single Window Environment. In-House Preparation

•

As the merchandise circulates through the logistics chain, abundant information is generated associated with each stage.

The

principle

of

the

progressive

accumulation

of

information establishes that it becomes necessary to have a certain type of information (not all the information) at each phase of the chain. This principle allows a significant reduction in the time necessary to prepare the documentation required at each phase. Absent the utilization of electronic media the progressive accumulation data generally leads to a “getting all the information together at the last minute� situation, which causes inefficiencies and delays during the different stages or phases of the supply chain and greatly slows information flows.

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The lack of consciousness of the importance of providing adequate information at the proper time during the different stages of the supply chain contributes to impeding the rapid movement of merchandise and the information associated with it.

Finally, the physical and logistical part of trade operations must coincide with the rhythm of information flows and vice versa. It is important to point out the complexity of the relationships during each stage of the supply chain. A great variety of agents and entities intervene in the supply chain, each of them offering various services to the merchandise and to its transportation (trucks, vessels, railroads, etc.). Some of these services could be towing and piloting the

vessels,

managing

the

container

yard

in

port

terminals,

warehouse management, etc. The following diagram shows these interrelationships.

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Figure 3.4. How to build a Single Window environment (II) Reliable and Secure Supply Chain

Efficient Operations

Simplified Procedures Short and Reliable Dispatch Times

Automatic Installations

Excellent Logistical Capacity

Delivery of Reliable Marchandise

Automatic Dispatch of Merchandise

Efficient Interchange of Information

Real Time Interaction With Logistics Operators

Supports the Supply Chain

Efficient Use of Uso Efectivo de Risk Evaluation la Gestiรณn de Riesgos

Prior Submission of Declaration

Standardized and Simplified Data

Progressive Accumulation of Information

Simple, Standard Messaging

Simple and Tramsparent Regulations and Tariffs

Implementation of Controls and Audits

Accredited Clients

High Level of Compliance

Source: WCO Compendium. How to Build a Single Window Environment. In-House Preparation

Where does the Single Window concept fit into the foregoing scheme?

A Single Window project can be utilized as a vehicle to facilitate and/or promote each of the elements in the diagram above. The 63

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Single Window initiative can have a relevant impact on initiatives that attempt to modernize customs administrations, while at the same time

helping

administrations,

to

orient regulatory

the

strategic

agencies

objectives

and

public

of

customs

infrastructure

managers toward the users and clients.

The establishing of clear strategic objectives accepted by government agencies is of vital importance to the construction of Single Windows.

Implementing Single Windows is not merely a case of creating an environment that receives information about imports, exports and goods in transit through a single channel. It represents a strategic response of government agencies for the purpose of complying with their objectives to facilitate trade and strengthen supply chain security, taking maximum advantage of all the resources available.

In this sense, any Single Window project must be put in place as an integral part of the government agencies’ strategies to achieve their objectives of service to their clients efficaciously and efficiently.

Also, as has been pointed out above, a Single Window cannot, by itself, produce the desired results of facilitating trade, but it must form part of an integrated program designed to respond to the necessities of the businesses involved, so that the Single Window becomes a conductive element or catalyst. In this sense, governments must include a broad range of measures that promote coordination between administrations in risk evaluation and control procedures. Some of those measures are the following: •

The preparation and application of international standards that promote the integration of paperless trading.

•

The

improvement

of

coordination

between

administrations,

offering an efficacious balance between protecting the supply 64

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chains, facilitating trade and recognizing certified users who obtain benefits by demonstrating their commitment to the principles explained above. •

Integration of the Single Window and the principal WCO instruments such as the SAFE Framework of Standards, the revised

Kyoto

Convention

and

the

WCO

Data

Model

as

instruments of high strategic value.

A Single Window environment is capable of facilitating trade by improving the speed of international trade transactions, but it must be viewed in the context of a broader push toward the modernization of customs. Being a solution based on information systems, it must be seen, along with other technological innovations, as a means of radically transforming the manner in which the regulatory authorities can exercise control over the supply chain.

III.6. Modernization of the ports. role of information systems

The spectacular development undergone by ports in recent decades has transformed them into strategic infrastructures for the national economies. They have become important nodes of supply chains in which intermodal transfers of merchandise take place. Growth in the complexity of port processes and activities has generated the necessity of having information interchange systems as indispensable tools for the management and control of port operations.

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It is worthwhile to begin this paragraph by taking Europe as an example and analyzing the diversities of port types found there and the approaches that have been followed in the field of information [and communication] technologies (ICT) and trade facilitation activities from the port’s point of view. This approach will also assist in understanding of the strategic vision that European ports can have in the medium term in relation to the development of effective action plans and the application of best practices in maritime transportation and in the ports themselves.

With the purpose of better understanding the European port environment in relation to the application of information systems, we will base ourselves on the review of Port Authority functions by Patrick Verhoeven (Verhoeven 2009, 2010). According to the author, there are presently 116 port authorities in Europe belonging to the 26 countries represented in the European Sea Ports Association (ESPO).

The aforesaid ports are classified by geographic criteria and size in five principal groups: •

Hanseatic:

Iceland,

Norway,

Finland,

Sweden,

Demark,

Germany, Holland and Belgium •

New Hanseatic: Estonia, Latvia, Lithuania and Poland

•

Anglo-Saxon: united Kingdom and Ireland

•

Mediterranean: France, Portugal, Spain, Malta, Italy, Greece and Cyprus

•

New Mediterranean: Slovenia, Croatia, Rumania and Bulgaria

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The difference in size is based on the total annual volume of merchandise

handled

and

the

type

of

presentation

of

the

merchandise (for example bulk liquids and solids, containerized merchandise, general merchandise, etc.). In this manner, according to Verhoeven, European ports are classified as small if they handle a total volume of 10 million tons or less, followed by medium ports if the volume is 50 million tons or less and finally, as large ports if the total volume of merchandise handled is greater than that amount.

Although volume handled is important, the total volume of merchandise handled in a port cannot be taken as the only indicator to characterize it, particularly in relation to the role that information systems and the ICT should play.

For example, it is important to know the type of merchandise handled (containers and roll-on, roll-off [RO-RO], general cargo, bulk solids and liquids) and the type of movement accomplished (imports, exports, transit and transfers). In general, from the logistics and regulatory point of view, ports with a lot of container export and import traffic are usually more active in their search for ICT solutions due to the greater complexity presented by managing this type of traffic.

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III.6.1. Modernization, capacity and level of specialization in the ports

Ports find themselves in continual transformation. Throughout history, each port has developed and improved its infrastructure, its port equipment and its models of organization. To characterize this process, the secretariat of UNCTAD (1992, 1999) has defined the degree of evolution of the ports utilizing the "generation" concept. A classification system has been established considering various factors, such as, among others:

First

•

The type of equipment and infrastructure offered by the port.

•

The model of organization and strategies implemented.

•

The levels of capacity, service and specialization of the port terminals.

generation

ports

are

defined

as

those

ports

whose

installations, comportment and strategy concentrate on offering basic services to vessels, such as nautical services and cargo handling services (general cargo) but without meeting specialization criteria.

In second generation ports, specialization of the ports in port operations is more and more significant, with strategies oriented to the specialization of terminals by type of merchandise (containers and RO-RO, bulk liquids, bulk solids, wheeled cargo, etc.) and by the use of mechanical equipment optimized for each operation. On the other hand, there is an orientation to improving capacity to manage port processes and activities.

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Ports of the third generation are not exclusively focused on the provision of basic services to vessels and cargo, but broaden their scope of services to transform themselves into efficient logistics platforms for trade, including trade activities beyond the physical limits of the port. Their strategy and objectives are also geared to serving the logistics chain, creating of auxiliary services for logistics activity zones and utilizing integrated data collection and processing systems, increasing the efficiency of port and intermodal operations.

Finally, in the ports of fourth generation, one more step has been taken in the consideration of new logistics management aspects: the connectivity between the modes of transport and the principal services of value added to the cargo. A key characteristic that differentiates a fourth generation port is the treatment of information as a distinguishing element in its offer of services. These ports are characterized by the diversification and automation of their activities, their close cooperation with the port community, customs, the regulatory agencies and the public infrastructure managers such as port, maritime and rail authorities, as well as with other ports, with an eye to increasing their competitive advantages and becoming a “port in network,� perfectly integrated to the supply, logistics and international

transportation

chains.

In

this

context,

electronic

information management is the keystone in conjunction with the existence of a Single Window environment and logistics and port collaboration through Port Community Systems (PCS).

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It is important to point out that not all ports must aspire to be a fourth generation port, but that the necessity to do so is determined principally by the socio-economic conditions in which its activities develop. In general, ports specialized in the handling of unitized cargo (containers, RO-RO and vehicles) and with high volumes of cargo flows, loading and unloading require more of the auxiliary services oriented to a fourth generation port.

The following table presents a summary of the principal characteristics that define ports of first, second and third generation.

Table 2. First, Second and Third Generation Ports Characteristics First Generation Period of

Second Generation

Third Generation

Until 1960

1960-1980

Since 1980

General Cargo

General and Bulk Cargo

Unitized and Bulk Cargo

Conservative

Expansionist

Commercial Orientation

Point of

Industrial and commercial

Integrated transportation

connection of

transportation centre

centre and logistics

development Principal Cargo

Development Strategy

modes of

platform for international

transportation

trade

Loading/unloading Warehousing Scope of Activities

Transformation of cargo,

Distribution of cargo and

industrial and commercial

information

services to vessels

Navigation Services

Logistics activities Maritime and terrestrial terminals

Characteristics of Organization

Independent

Closer relationships between

activities

the port and its users

Non-structured

Little structured relationship

the trade and

relationships

between port activities

transportation chain

between the port and its users

Unified port community Integration of the port in

Close relationship between the port and the municipality

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Flow of cargo

Flow of cargo

Simple individual

Transformation of the cargo

services Characteristics of Production

Module 2

Little added value

Combined services Increased added value

Flow of cargo and information Distribution of cargo and information Conjunction of multiple and integrated services High added value

Decisive Factors

Labour/capital

Capital

Technology/knowledge

Source: Monfort et al. Valenciaport Foundation

III.6.2. Information systems as elements modernizing the ports

Information and the technologies that help manage it now play a key role in achieving the objectives of efficiency and protection of merchandise flows in port environments. ICT’s key element is its capacity to interconnect the different agents of the supply chain, allowing greater integration of the logistics and transportation chains. Recent developments in trade and international transportation have led to increased use of ICT in ports. The principal tendencies mandating the use of the information systems in trade are the globalization of production and trade, the evolution of the supply chain into multimodal logistics chains and the expansion of electronic trading.

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As a result, ICT solutions play a growing role in the design and implementation of tools to facilitate trade and transportation.

These applications help reduce port waiting times, improve the security of data dealing with the cargo, simplify procedures with the customs administration and offer transportation operators timely information. The use of ICT in such areas as the automation of customs

and

regulatory

agencies,

electronic

processing

and

documentation and the provision of early logistics information will continue to develop in coming years.

It is important to bear in mind that improvements associated with the use of these tools cannot be achieved without an appropriate regulatory policy and environment. Moreover, it is essential to provide for an adequate institutional framework, a changeoriented management, a redesign of business processes and ongoing coordination with all the agents who participate in supply chains. Finally, and as a basic element, physical infrastructure must be adequate to the demands and necessities of trade.

When all these elements (adequate information and operating technologies, standards and legislative frameworks oriented to facilitate trade, etc.) are coordinated and integrated within an

adequate

framework,

we

will

doubtless

have

an

appropriate environment for establishing and building a Single Window project that will undoubtedly offer the country high added value.

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Unit summary

The unit III presents the following principal ideas: •

Customs, regulatory agencies and public infrastructure managers can develop management strategy focusing on four principal elements: -Instructional framework.

-Legal framework and growth model.

-Control and improvement of the logistics and security of the operations.

-Efficacy of specific facilitation services and programs.

•

The development of Single Windows and of an adequate environment for their implementation is a vitally import element in the context of the modern management of customs because the Single Window is the instrument that coordinates and integrates the different trade facilitation initiatives.

•

In addition to putting the Single Window solution in place, it is necessary to establish other mechanisms to achieve efficiency in dispatching merchandise. Successful Single Window project management is vital to the attainment of these objectives, but it is the existence of the other elements as well that allows the acceleration of trading procedures.

•

A Single Window project must put into place as an integral part of the government agencies’ strategy to attain the strategic objective of efficacious and efficient service to the citizens and to business.

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•

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A port’s degree of growth may be evaluated in accordance with the classification of ports as first, second, third and fourth generation.

•

A key characteristic that differentiates a fourth generation port is the treatment of information as a distinguishing element in its offer of services. Fourth generation ports are characterized by the diversification and automation of their activities, their close cooperation with the port community, customs, the regulatory agencies and public infrastructure managers, as well as with other ports, each with an eye to increasing its competitive advantages

and

becoming

a

“port

in

network,”

perfectly

integrated to the international logistics chains.

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Unit IV. Institutions and agents involved

IV.1. Learning objectives

•

To identify the organizations, entities, companies and agents that are involved in the port-logistics chain, and therefore in foreign trade operations.

•

To discover and understand the AEO process, the advantages of and limitations in the process of ensuring security of the transportation chain and how to accredit the reliability of the operator that is involved in a foreign trade operation.

IV.2. Public agents in the logistics and port environment Port officials differ from country to country due to different government organizations and to the relationship between the agents and those organizations. Those commented on below are the ones acting in Spanish ports, as of the date of drafting this document, and they are undoubtedly similar to officials in other nations.

IV.2.1. The Port Authority The Port Authority is in charge of the planning, organization and management of the port service area. Its landlord duties consist of the administration, maintenance and development of port properties, the provision of infrastructure and installations, as well as the conception and implementing of development policies and strategies connected to the exploitation of port properties and infrastructure. Acting as landlord can be considered the principal function of contemporary port authorities.

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The objectives of port authorities, among other things, are: •

The provision of general port services and the authorization and control of basic port services.

•

Organization of port services and port usages.

•

Planning, designing, construction, conservation and exploitation of port works, services and marine aids to navigation.

•

Management of the public port domain, including marine aids to navigation.

•

Economic management of port patrimony and resources.

•

Promotion of industrial and commercial activities related to maritime or port traffic.

•

Coordination of the operations of the distinct modalities of transportation in the port area.

In addition to the landlord function, port authorities also exercise such functions as: •

Regulatory Function: It is an intrinsic function of the Port Authority to control, supervise and secure the port area. The Port Authority, however, is not the only entity that exercises regulatory powers in the port; it must perform this function in collaboration with other State security bodies and forces as well as with other regulatory agencies, including the maritime authority, customs, health agencies, plant health, veterinary authorities, trade agencies and technical product standards agencies. In general, ports act as important boundaries, along with the country’s territorial waters, of national territory and must be guarded by all these security agencies and bodies with the object of protecting the country’s maritime space.

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With the object of facilitating the complex context existing in the ports for compliance with the regulatory function, the concept of a Single Window appears as an ideal philosophy of governance in which the government offers trade and transportation services through a simple interface and a single point of entry that provides greater efficiency and reduces the costs associated with regulatory compliance. •

Operator Function: The operator function of the Port Authority is, in general, gradually decreasing as it surrenders its operating space to the private sector, generally through concessions. The Authority’s activities

operator in

function

connection

with

includes

modal

merchandise

interchange

and

passenger

transfers, technical and navigational services to vessels, auxiliary warehousing, logistics, ship provisioning and waste disposal services. Outsourcing the operator function to different private businesses through concessions does cause a loss of control and of port intelligence as information is directly managed by private businesses and that may result in uncoordinated, inefficient actions.

It

therefore

becomes

necessary

to

articulate

mechanisms of governance and interoperability within the port cluster to attain reliable and harmonized information transfers by the public and private sector so that each can effectively comply with their commitments. This is the origin of the community management function described below. •

Community Management Function: As has been described above, the operator function of the Port Authority has evolved toward a property management and regulatory function that has adopted a community focus.

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The management function centres on coordinating all the members of the port community such as terminals, ship owners, steamship

lines,

freight

consolidators,

land

transportation

operators, railroads, logistics operators, forwarders, customs agencies,

and

finally,

stevedores,

longshoremen

and

dockworkers, while collaborating and cooperating with the customs, regulatory and trade control agencies, and other State authorities and security bodies.

One of the central objectives of the community management function is to resolve existing problems, not only in the port but also in the port’s relationship to the environment and to promoting the efficiency and competitive stance of port.

IV.2.2. The Maritime Authority

Examples of this community management function are found in the elimination of bottlenecks, the facilitation of administrative procedures, training activities, the education and specialization of human resources, the introduction of ICTs, reengineering process activities, the creation of new, more efficacious organizational structures, the promotion and marketing activities, the implementation of support systems in compliance with regulations related to security, the environment, protection and security, promoting better connections and infrastructure integrated with the hinterland, the introduction of collaborative systems such as community port systems or Single Windows, the promotion of investigation and innovation activities, etc.

The Maritime Authority has jurisdiction over maritime traffic in national territorial waters, maritime security and the environmental aspects of the sea.

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Along those lines, the scheduling and authorization of vessels to enter and exit the port is issued in coordination with two administrations: the Capitรกn Maritime [Naval Commander] who operates within the National Maritime Authority and the Comisario [Harbour Police] of the Port Authority.

This assignment consists of planning pier and dock space occupation sufficiently in advance of arrivals (dates and times of docking and casting off) in function of information received by consignees and by merchandise terminals. Depending upon the country studied, the jurisdiction and functions of the Port Authorities may be more or less than those of the Maritime Authority.

This fact affects which of these public agencies has a greater capacity to promote ICT innovation in the formalities of authorizing vessels to enter and depart the port.

IV.2.3. Customs

Customs is an official government agency with the principal mission of ensuring licit commerce, collecting the taxes and duties

that

apply

to

the

merchandise

and

authorizing

temporary or definitive imports and exports, as well as merchandise in transit. In recent years the customs mission has been broadened to exercise greater control of merchandise in order to improve and guarantee the security and protection of merchandise in circulation. To this effect, the administration carries out the customs dispatch process on the basis of information received from customs agents (through customs declarations), which, in the territory of the European Union, are formalized in what is known as a single administrative document (SAD). In addition to the dispatch, 79

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without the authorization of which the merchandise cannot be loaded (in the case of exports, transfers and transportation) or exit from the customs holding area (in the case of imports and transportation), Customs imposes and collects duties and other taxes, such as the Value Added Tax (VAT). In some countries, the entire service zone of the ports are customs holding areas and in order to perform its control function, Customs utilizes the assistance of a specialized group from law enforcement, whose mission is see that merchandise does not leave customs facilities without having all the documentation in order.

IV.2.4. Regulatory and Trade Control Agencies

The purpose of regulatory and trade control agencies is to verify the compliance

of

the

merchandise

transported

with

all

exigent

requirements, not only for entering national territory but for leaving, and to issue the corresponding certificates.

Various agencies in Spanish ports exercise the right to inspect merchandise that travels aboard vessels. The European Union, after the disappearance of interior borders, defined exigent conditions for compliance by the agencies known as Border Inspection Posts (BIP).

Given their significance in the logistics chain of the merchandise and their impact on the time of passage through the port, these BIPs are exerting important efforts to speed coordination with each other and to incorporate new technologies that allow them to offer a higher quality of service.

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Figure 4.1. Regulatory and Trade Control Organisms in Spain

Source: Valenciaport Foundation

IV.3. Private agents in the logistics and port environment

Many of the private agents involved in port activities are also closely tied to maritime transportation activities and international trade.

Although many of these agents are found in all ports, their names may differ so that the same agents may combine operations that may be implemented separately by other agents in other places and they may even be given different names in the same port, which may, on occasion, make it difficult to identify and characterize them.

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IV.3.1. The Ship Operator

The ship operator is the operator who outfits and supplies or leases a ship utilized in trade or fishing, supplying it with appropriate

apparatus

and

equipment.

The

ship

operator

is

sometimes the owner of the vessel, sometimes the owner of a shipping line and sometimes a renter. So the operator may be the vessel owner, or have leased it for exploitation on his own account.

IV.3.2. The Shipping Owner

The shipping owner is the owner of a maritime transportation business, who may also be the owner or the operator of the vessel.

If the owner and the operator are distinct, their relationship is defined by a charter. A charter may be for time or voyage, and may include the crew or may not (bare hull charter).

The shipping owner is normally represented by a maritime agent, called the vessel consignor, in each port.

IV.3.3. The Carrier

The carrier or maritime line operator, is an operator who acquires responsibility for transporting cargo for another party (can also be called the transporter). The carrier may or may not be a shipping owner, if not; the carrier needs to contract the services of another agent to operate the vessel or vessels. On many occasions more than one line operator may be transporting cargo on the same vessel.

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In such cases, called joint services, usually only one of the carriers is a shipping owner.

Just as happens with shipping owners, carriers are represented by a maritime agent it each port, known in this case as the merchandise transportation consignee.

IV.3.4. The Maritime Agent

All shipping owners tend to have an office representing them in each of the ports where they operate. Such offices may belong to the shipping owner or to independent agents who act in representation of the shipping owner in that port when such representation is needed at the port authority, customs, etc. The ship’s maritime consignee agent represents the shipping owner’s shipment, but he may also represent the merchandise that it transports as carrier in other vessels, in which case he is known as merchandise transportation consignee. The functions of a maritime agent are the following:

•

Contracting and supervision of stevedores, loading and unloading, reception and delivery, storage, transfers, etc., of the consigned merchandise.

•

Complementary management of transportation related to the principal transportation of the consigned vessel.

•

Preparation of the documentation necessary for such purposes.

•

Other acts in the port that, being the responsibility of the shipping owner or the captain, must be performed by the agent.

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IV.3.5. The Customs Agent or Broker

The customs agent is the person or company duly authorized by the respective customs authorities, who acts before the agencies of jurisdiction (customs, ministries, and other private or public entities) in the name, and on behalf, of a third party who contracts such services and grants permanent, authenticated powers to act in importing, exporting or transit operations procedures. In many legislative environments the customs agent is constituted as an auxiliary of the customs administration.

IV.3.6. The Forwarder

A freight forwarder or forwarding agent is a person or company that provides

international

merchandise

transportation

services.

The

forwarder is an intermediary between the exporter or importer and the companies that provide transportation.

Forwarders are mediators in international transportation operations utilizing any means of transport (sea, river, air, rail, highway or multimodal transportation). The forwarder organizes the give-andtake between various transporters and assures the continuity of the transportation of merchandise utilizing various means of transport.

Forwarders are also responsible for administrative operations related to international transportation, as well as customs procedures, financial management, credit documents, insurance contracts, fiscal representation, etc.

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The forwarder acts in a manner similar to transportation agencies; he represents the shipper’s position to the transporter, and the transporter’s position to the shipper. The fundamental difference between a forwarding agency and a transportation agency is that forwarders cannot undertake in-country transportation except as a service to complement international transportation.

The freight forwarder is regulated in most countries and freight forwarder functions are defined within of the scope of international trade.

IV.3.7. The Warehouser

The warehouser or storage agent is a person or company that performs the storage of merchandise or transportation equipment in a storage area. The warehouse operator has a special relevance to customs when the storage area is temporary or in a customs warehouse, in which case the warehouser becomes responsible to customs for the merchandise. An important element that can characterize

the

function

of

a

port

is

who

the

merchandise

warehouser is in terminals located within the port area. Along those lines, and depending on the country, the warehouse agent in a port terminal may be the maritime agent representing the steamship line operator and the ship owner, or the customs agent or forwarder who represents the shipper or receiver of the merchandise.

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IV.3.8. The Trustee

The trustee or receiver is a person or company that operates a bonded warehouse. The trustee is responsible to the warehouser for the custody of the elements stored (merchandise and transportation materials).

Also, the trustee has a special relevance to customs when the storage area is temporary or in a customs warehouse, in which case the trustee becomes responsible to customs for the custody of the merchandise and requires a special customs authorization to be able to exercise this function.

IV.3.9. The Pilot

The harbour pilot is the agent who provides a service that consists of assisting the captain of the vessel in the operations of entering and departure from the port.

IV.3.10. The Longshoremen

Longshoremen, or dockworkers in British usage, are land-based agents who assist embarkation in docking and casting off.

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IV.3.11. The Port Tugboat Service

The port tugboat service is a service that consists of assisting the movements and manoeuvres of the vessel in port waters by means of one or more tugboats attached to the vessel by cables. Apart from harbour tugs, there are also ocean-going tugboats that assist disabled vessels on the high seas.

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Unit summary

Unit IV briefly describes some of the principal figures that intervene in the logistics and port chains, realizing control functions, providing of services and facilitating trade.

The principal public agents in the logistics and port environment are: •

The Port Authority.

•

The Maritime Authority.

•

The Customs Authority.

•

The Regulatory and Trade Control Agencies.

Some of the agents that intervene in logistics and port activities are: •

The Ship operator.

•

The Shipping owner.

•

The Carrier.

•

The Maritime Agent.

•

The Customs Agent or Broker.

•

The Forwarder.

•

The Warehouser.

•

The Trustee.

•

The Pilot.

•

The Longshoremen.

•

The Tugboat Service.

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Unit V. The authorized economic operator (AEO)

V.1. Learning objectives •

To understand the meaning of the Authorized Economic Operator, its benefits and advantages.

•

To know some programs already implemented and projects underway to include Authorized Economic Operator figure in different countries.

•

To know some Procedures for obtaining AEO certificates.

V.2. Introduction and contents This unit emphasizes the figure of the Authorized Economic Operator (AEO), the objective of which is to guarantee security in the transportation chain and accredit the reliability of the operator that participates in foreign trade operations.

An Authorized Economic Operator (AEO) is a person, either an individual or a company (a manufacturer, importer, exporter, agent, transporter, intermediary, port, airport, warehouse, distributor or other entity), that plays a part in the international movement of merchandise, to whom the customs administration has granted a status of confidence in the processing of its customs operations, granting benefits in the form of a series of privileges.

The motives that cause States, and even international organizations, to offer such privileges to AEOs are fundamentally the struggle against the terrorist threat and organized crime, and to protect individuals and defend the environment.

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As a result of the September 11 attacks against the USA a world climate has developed with enormous concern for security in general and, particularly, concern for the security of the international transportation

of

merchandise

and

passengers.

Such

security

concerns affect all modes of transportation, air, sea, land and, specifically, multimodal transportation.

As a consequence of those events, governments around the world are committed to establishing standards to facilitate control of the entire transportation chain, from the factory that sends out the merchandise through the exporter until the merchandise arrives at its final destination.

The United States pioneered the application of such standards, including among its security measures the emplacement of scanners for non-intrusive inspection of merchandise that enters, leaves or transits its national territory. At the same time, more strict procedural measures were established than those in effect at that time, strict procedural measures that obliged any economic operation to tighten its rules in order to carry out commercial operations in the U.S. When we speak of the merchandise logistics chain, historically we refer to the operation or set of operations that allows a product to arrive at the expected location, on time, in the manner agreed to and at the lowest possible cost. Reliability, time and manner of delivery must be conjoined to define a correct logistics operation.

At the present time, logistics chains present a series of essential characteristics. One of those characteristics is dynamism, since logistics chains and transportation flows change day to day, adjusting to the reality of trade, to the price of fuel or to the development of new production processes or new techniques to manage storage.

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A second element characteristic of modern logistic chains is the elevated number of businesses and operators involved each with distinct

and

complementary

functions.

All

share

the

common

objective of getting products to market so they can be acquired by final consumers.

Another relevant characteristic of trade is its transborder nature.

Every time merchandise crosses a border it goes through customs whose fundamental mission throughout history has been to control the nature and quantity of merchandise entering and leaving a country or a specific economic zone.

The role of customs in the twenty-first century is moving away from the simple labour of collecting customs duties and focusing on the application of non-tariff measures such as, for example, relationships with

security

and

protection,

the

struggle

against

counterfeit

merchandise, money laundering, fighting against drug trafficking and implementing health and environmental controls, in addition to the charging of various taxes. As an introduction to the concept of Authorized Economic Operator, this unit presents the experience developed in the European Union, which may be extrapolated to other experiences that have been or are being developed in other countries. The following are the contents of the present unit:

The Figure of the AEO in the SAFE Framework of Standards.

AEO Programs in the World and Mutual Recognition.

Procedures for Obtaining of AEO Certificates.

Benefits and Advantages of the AEO.

Summary.

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V.3. The figure of the AEO in the safe framework of standards

As seen in unit 2 of this module, Pillar 2, of the SAFE Framework of Standards, is directed toward establishing a cooperative network between customs and private agents connected with international trade and the chains of supply. The principal idea underlying this cooperation is the following: “Businesses that demonstrate a verifiable will to improve the security of the supply chain will be able to obtain benefits. In this manner it is possible to minimize the risks associated with processes linked to international trade, thus assisting customs administrations in the performance of their security functions in facilitating legitimate trade�.1 In this manner, customs is able to focus on, and dedicate more resources to, the control of high risk trade, while it facilitates and encourages legitimate international trade.

The figure of the AEO has its origin in the Kyoto Convention, which defines standards in regard to what it calls "authorized persons," and various national programs. Thus, the SAFE Framework of Standards defines the Authorized Economic Operator in this manner: "An Authorized Economic Operator (AEO) is a person, either an individual or a company (manufacturer, importer, exporter, agent, transporter, intermediary, port, airport, warehouse, distributor or other), that intervenes in the international movement

of

merchandise,

to

whom

the

customs

administration has granted a status of confidence in the processing of its customs operations that allows it to benefit from a series of privileges.�

1

WCO SAFE Framework of Standards

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Therefore, the SAFE Framework of Standards objective in establishing of the AEO figure is to bring in all the economic operators with the intention of improving security at all the points of the supply chain and throughout international trade activities.

V.4. World AEO programs and mutual recognition

This paragraph briefly presents programs already implemented and projects underway to include Authorized Economic Operator figure in different countries.

The Asia-Pacific region has six AEO programs operating: China, Japan, Korea, Malaysia, New Zealand and Singapore.

There are presently five Western Hemisphere countries that have implemented

AEO

programs:

Argentina,

Canada,

Costa

Rica,

Guatemala and the United States.

In Europe, the European Union AEO is a common program for all 27 EU member states and serves as a general focus for such countries as Croatia, Norway and Switzerland. In the case of the Commonwealth of

Independent

States

(CIS)

there

have

been

some

initial

developments toward recognizing the figure of the AEO. Moreover, some countries such as Kazakhstan, Russia, Ukraine and Uzbekistan are developing laws at the national level to regulate the AEO figure in those countries.

In the Middle East, Jordan is the only country that recognizes the figure of the AEO, while Tunis and Turkey plan to launch AEO programs soon.

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Africa is in an early developmental stage, although steps have begun in the first countries, Botswana, Namibia, South Africa, Burundi, Kenya, Rwanda, Tanzania and Uganda.

Mutual recognition of AEO programs is an important objective for customs administrations since that is the key to ensuring greater coordination between countries and facilitating global trade.

In this context, it is important for national governments to have the instruments to formally recognize the AEO programs of other countries, and therefore to concede the benefits established to the AEO businesses of such countries. Initially, mutual recognition of AEO programs has been accomplished bilaterally. However, advances are expected toward recognition at the regional level in which multiple countries participate.

V.5. Procedures for obtaining AEO certificates

Article 14 bis of the December 18, 2006 Regulation (CE) 1875/2006 recognizes the procedures for the obtaining of AEO Certificates, stating that “without prejudice to the use of other simplifications established by customs standards, Customs Authorities may issue the following Authorized Economic Operator certificates, after being requested by an economic operator and in conformity with Article 5 bis of the Codeâ€?: •

AEO Certificate for customs simplification. To economic operators that request the benefits of simplifications established in conformity with customs standards and who comply with the conditions established in Articles 14h, 14i and 14j.

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•

An

AEO

economic

Module 2

Certificate operators

of that

protection request

and the

security

benefits

of

for the

facilitation of custom controls related to protection and security when the merchandise enters or leaves the Customs Territory of the Community and who comply with the conditions established in Articles 14h to 14k. •

An AEO Certificate of customs/protection and security simplification for economic operators that request the benefits of the simplifications mentioned in the first point and the facilitations mentioned in the second point and who comply with the conditions established in Articles 14h to 14k.

V.6. Benefits and advantages of the AEO

The appearance of the AEO allows those who obtain the Authorization to go through bureaucratic procedures with fewer obstacles and controls related to their professional activity and suffer fewer controls on their merchandise. Traffic will

therefore

run

more

smoothly

as

the

responsibility

for

merchandise control is transferred from customs to AEOs. The apparent advantage of the figure of the AEO is a two-edged sword, however, because, on the one hand, the AEOs are responsible for controlling merchandise that is not theirs and, on the other, the Customs Administration can prosecute the operator and withdraw authorization for irregularities committed by the owner of the merchandise, including after the export and import operation has been realized.

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In regard to the benefits or advantages of be AEO, they are the following: •

If the owner of an AEO customs simplification certificate requests one or more new simplifications from among those contemplated in the Customs Code application regulations (including, for example, procedures,

simplified passive

declaration improvement

procedures,

domiciliation

simplifications,

authorized

regular maritime services, authorized issuance of documents that accredit the community nature of merchandise, simplifications of the transportation regime, etc.), the Customs Authorities will not have to re-examine conditions that have already been accredited to concede the AEO certificate. •

When the owner of an AEO certificate of protection and security presents a summary declaration of entry, the customs unit with jurisdiction will inform the AEO before arrival of the merchandise whether the shipment, as a consequence of an analysis of the risks of protection and security, has been or selected for additional physical controls or not. That communication will be issued only if it does not make the control that has to be realized more difficult. It will not be an obstacle for Member States to carry out physical controls, even when the AEO has not been informed of the selection of the shipment for such controls before of the arrival of the merchandise. This possibility will be equally applicable to cases in which the merchandise is slated to leave.

•

Owners of AEO security certificates who import or export merchandise, and transporters, forwarders or customs agents holding AEO certificates who operate on their account may present summary declarations of entrance and departure with reduced requirements to furnish data.

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•

Module 2

The owner of an AEO certificate will be subject to fewer physical and document controls than other economic operators. This is without prejudice to possible concrete acts due to specific threats or control obligations contained in other Community legislation.

•

If, after the analysis of risks, the customs authority with jurisdiction decides that a shipment covered by a summary declaration of entry or departure or a customs declaration presented by an AEO must be submitted to an additional examination, the necessary controls will be executed in a priority mode. If the AEO so requests and the customs authority agrees, such controls may be realized in a place other than that established by the corresponding customs unit.

•

The AEO certificate will be recognized in all the Member States.

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Unit summary

The principal ideas collected in unit V are the following: •

The principal requirements for requesting AEO accreditation are: -A satisfactory history of compliance with customs requirements.

-An adequate management system for commercial registries and, as the case may require, for transport registries that allow appropriate customs control.

-As the case may require, accredited financial solvency, and if appropriate, adequate security levels.

•

The AEO certificates with which a specific operator economic can be accredited are: -AEO Certificate for customs simplifications.

-AEO Certificate of protection and security.

-An AEO Certificate for customs simplifications/protection and security.

-The

appearance

of

the

AEO

allows

those

who

obtain

Authorization to be an AEO to go through the bureaucratic procedures with fewer obstacles and controls related to their professional

activity

and

suffer

fewer

controls

on

their

merchandise. Traffic will therefore run more smoothly as the responsibility

for

merchandise

control

is

transferred

from

customs to AEOs.

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Bibliography

The

following

is

the

bibliography

and

support

documentation

consulted in the preparation of this Module: •

World Customs Organization (2011). WCO Compendium. How to Build to Single Window Environment, chapter 3.

•

World Customs Organization (2011). WCO Compendium of Authorized Economic Operator Programs.

•

Monfort A. et. al (2011). La Terminal Portuaria de Contenedores como Sistema Nodal en la Cadena Logística. [The Container Terminal Port Nodal System in the Logistics Chain]. Cátedra Port of Valencia.

•

García Lorján J., Iborra Gómez S. (2009). El Agente de Aduanas en España: Figura Clave en el Comercio Internacional. The Customs Agent in Spain: Key Figure in International Trade.

•

World

Customs

Organization

(2007).

SAFE

Framework

of

Standards.

•

Economic commission of the United Nations for Europe (2005).

UN Recommendation No. 33. Guidelines on Establishing to Single Window, Annex D.

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