Agricultural Trade Facilitation for Bangladesh and

Agricultural Trade Facilitation for Bangladesh and
Findings from Business Process Analysis (BPA) Study
Khan Salehin
Trade and Investment Division, ESCAP
Dhaka, 7 April 2014
OUTLINE
§ Agriculture trade in Asia-Pacific and Bangladesh
§ What is Trade Facilitation for Agriculture and Food
Products?
§ Main challenges for facilitating trade in agro-food
products
§ Findings from Business Process Analysis (BPA) study
for Bangladesh’s export of Jute hessian bags and
import of wheat
Agriculture trade in Asia Pacific
§ Agriculture accounts for a quarter of the gross domestic product
(GDP) of Asia‐Pacific’s developing countries and employs about
60% of the region’s working population (ESCAP 2008).
§ Improving agricultural productivity could pull 218 million people
out of poverty in this region (ESCAP 2008).
§ It can bring investment opportunities for the private sector, and be
a driver for boosting agriculture related industries.
§ The World Bank estimates that GDP growth originating in
agriculture is at least twice as effective in reducing poverty as GDP
growth originating outside agriculture.
Agricultural Trade in Asia-Pacific
Source: FAO 2009
34%
Source: FAO 2009
4
Agricultural Import Growth - Stronger in Asia-Pacific
Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the
Pacific, Studies in Trade and Investment No. 74
5
Asia-Pacific Agro-Exports share by Major Destinations
Intra-Regional Trade in the Asia-Pacific Region
Source: COMTRADE 2011
6
Key Drivers of Agricultural Trade
Trade Facilitation
§ What is Trade Facilitation?
Any measure that reduce barriers to the movement of
goods between buyers and sellers throughout the
international supply chains (ESCAP 2010)
– Simply any measure that facilitate and simplify
movement of goods and information along the supply
chains
- i.e. TF reduces time, cost and complexity of trade
transactions
–
§ What is agricultural trade facilitation?
Trade facilitation of agricultural products
- For example, facilitating development of product
standards; improving certification procedures,
improving storage facilities, reducing paperwork for
agro trade
-
Source: ESCAP-World Bank Trade Cost Database, updated August 2013
Cambodia
Lao PDR
Bangladesh
Nepal
Pakistan
Iran (Islamic Rep. of)
Maldives
Fiji
600
Turkey
700
France
Russian Federation
India
Sri Lanka
Malaysia
Germany
United Kingdom
Indonesia
Philippines
Australia
New Zealand
China
Vietnam
Thailand
United States
Rep. of Korea
Tariff-equivalent trade costs (percent)
Comprehensive Trade Costs (excluding tariff) for
Agricultural Goods with Japan (2000-2005, 2006-2011)
800
Agriculture (2000-2005)
Agriculture (2006-2011)
500
Manufact uring (2006-2011)
400
300
200
100
0
Benefits of Trade Facilitation
GDP gains from 25% reduction in time to export/Import, GMS and China
Source: Strutt, Stone, and Minor (2008) simulations
Why Facilitating Agricultural Trade is Crucial?
Long Term Impact of Agricultural Trade Facilitation :
- Poverty Reduction and Food Security
- Improves overall environment for agro-trade (domestic too)
- Opportunity for integration of smallholders into agri supply chains
- Upgrading of small farmers in terms of production practices or capacities
Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74
11
Trade Facilitation for Agro food Products
What is so unique about it?
§ Perishability – time and temperature sensitive
§ Product and Process Standards,
Technical Regulation (SPS, private standards)
§ Logistics (warehousing)
and infrastructure – special requirements
§ Financing is difficult
§ Cost of trading is higher than manufactured goods
Trade Facilitation for Agro-food Goods: Challenges
13
Trade Procedures: A Generic Agricultural Product Supply
Chain Structure
Information,
documents,
procedures
Wholesalers
Information,
documents,
procedures
Exporter
Regulatory Agencies
Information,
documents,
procedures
Export Customs
Transport
Producer
Information,
documents,
procedures
Bank
Consumer
Retailers
Importer
Source: Sirimanne 2011
Import Customs
Import Agent
14
Product Standards
Ensuring product standards for international trade of
agricultural products is a complex topic and It
encompasses:
vInstitutions.
vInfrastructure.
vLogistics.
vAdministrative Issues.
15
Trade Logistics
Poor Trade Related Infrastructure
and Transportation System
Share of Transport Costs as percentage
of transaction cost in Central Asia
Transport and Handling Cost as percentage
of transaction cost in South Asia
Source: Business Process Analysis Studies ESCAP 2010-11
Source: ADB 2006
16
Trade Logistics (contd.)
Spoilage during Post-harvest Handling: Absence of warehousing facility,
inappropriate goods vehicles or trucks, long distance from nearby railways or
inland waterways stations and so on.
v FAO (1994): Total loss of agro-products during storage and transport could be
as high as 16%.
v World Bank in India shows that the lack of adequate storage and marketing
infrastructure can be as high as 20-40 % of the total production (ESCAP 2009).
v IFC estimated the wastage caused by poor transportation and logistics system
at $13 billion per year there (2010).
v Thai fresh produce exports of fruits and vegetables, producers and exporters
lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor
storage.
17
Trade Finance
is
It is the most difficult bottleneck to overcome for agricultural trade
Reasons for not increasing lending in this sector
Inability of producers
to meet the big
collateral guarantees
Lenders’ Lack of
Understanding
Knowledge Gap of
SMEs/producers
Stringent terms of
trade
18
Business Process Analysis (BPA) of
Bangladesh’s Export of Jute Bags and
Import of Wheat
Why conduct a Business Process Analysis?
Business Process Analysis is a practical study
o to understand attributes of business processes,
and their relationships
Who
involved
Procedures
and Documents
required
Related Rules
and Regulations
Some
quantitative
indicators
20
Use Case: Export of Jute from Bangladesh
3. Ship
Local Supplier
3.1) Prepare Consignment
CCI&E
DAE
Jute Goods
Laboratory
3.2) Prepare Export Documents
1. Buy
MCCI
1.1 Conclude
Sales
Contract
EPB
3.3) Arrange Transport
Importer
2. Pay
Exporter (or
Representative)
Transport
Company
3.4) Arrange for Customs
Declaration
2.1 Receive Payment
through CAD
C&F Agent
Importer’s
Bank
Exporter’s
Bank
3.5) Get Customs
Inspection & Clearance
Bangladesh Customs
3.6) Arrange for Border Crossing
Indian Land Port
Authority
Benapole Land Port Authority
Time Chart: Export of Jute Hessian Bags from
Bangladesh by land
Process
Time required (in
Days)
1.1
Conclude Sales Contract
2
2.1
Receive Payment through CAD
2
3.1
Prepare Consignment
4
3.2
Prepare Export Documents
3.3
Arrange Transport
3.4
Arrange for Customs Declaration
3.5
Get Customs Inspection & Clearance
0.325
3.6
Arrange Border Crossing
0.075
1
0.1
Documents Required
Sl.
Processes
Documents
Required
Details Documents List
1.1
Conclude Sales Contract
3
Proforma Invoice, Purchase Order, Sales Contract
2.1
Receive Payment through CAD
4
Application for CAD, Proforma Invoice, Sales Contract,
Hard copy of CAD
3.1
Prepare Consignment
2
Sales Contract, Requisition Slip for Raw Materials
3.2
Prepare Export Documents
15
Application Form, Trade License, Membership
Documents of Business Chamber, Original Chalan, Copy
of Registration Fee, ERC, Undertaking Letter, Association
Membership Letter, Proforma Invoice, Packing List, Copy
of CAD,SAPTA Certificate, COO, Organization Request
Letter, Oil Content Certificate, Phytosanitary Certificate
3.3
Arrange Transport
1
Commercial Invoice
3.4
Arrange for Customs Declaration
6
Bill of Entry Form, Certificate of Origin, Invoice of
Transportation, Copy of Sales Contract, Packing List,
Chalan Receipt Copy
3.5
Get Customs Inspection &
Clearance
6
Declaration Rejection, Attested Documents same as 3.4.
3.6
Arrange Border Crossing
6
Attested Documents same as 3.4,Gate Pass
Use Case: Import of Wheat from India
Time Chart: Import of Wheat in Bangladesh by Sea
Process
Time required (in
Days)
1.1
Conclude Sales Contract
5
2.1
Prepare Documents
3
2.2
Open L/C
2.3
Get Berthing Permission
2.4
Obtain Quarantine Certificate
2.5
Transship the Consignment
0.25
2.6
Arrange for Customs Declaration
0.50
2.7
Get Customs Clearance
2.8
Get Port Clearance
2.9
Arrange Transport to Importer’s Premises
1
3.1
Negotiate Concession on Price
3
3.2
Arrange Payment
2
2
Process Costs (Documents) for Import of Wheat from
India by Sea
Sl.
Procedures
Total
1.1
Conclude Sales Contract
2.1
Prepare Documents
US$ 25.64 (Tk.2000)
2.2
Open L/C
US$ 19.23 (Tk.1500)
2.3
Get Berthing Permission
2.3.1
Bulk Cargo (River Dues)
2.3.2
Literage Costs
US$ 3.20 (Tk. 250) Per Metric Ton
2.3.3
Literage Labor Costs
US$ 2.82 (Tk. 220) Per Metric Ton
2.4
Obtain Quarantine Certificate
2.5
Transship the Consignment
2.5.1
Dockyard Labor (Bulk)
2.5.2
Dockyard Labor (Container)
2.5.3
Weight Charges
US$ 1.15 (Tk. 90) Per Metric Ton
2.6
Arrange for Customs Declaration
US$ 0.08 (Tk.7.00) Per Metric Ton
2.7
Get Customs Clearance
2.8
Get Port Clearance
2.8.1
Port Security Guard
US$ 57.69 (Tk.4500)
2.9
Transport to Importer’s Premises
US$ 38.46 (Tk. 3000)
3.1
Negotiate Concession on Price
3.2
Arrange Payment
Nil
US$ 0.44 Tk. 34 +15%VAT Per Metric Ton
US$ 25.64 (Tk. 2000)
Tk. 1.00 Per Metric Ton
20 ft TEU/40 ft TEU US$ 20.25 (Tk. 1580)/ US$ 25.64 (Tk.2000)
US$ 13.20 (Tk.1030)
Specific Recommendations for Simplifying Export of
Jute Hessian Bags
• The use and acceptance of hard copy of the CAD should be abolished.
Instead, the traders and the associated bankers can use scanned copy of the
CAD or wire transfer in the financial transaction.
• Currently the copies of the ERC and the CAD are required by the EPB and
the MCCI to obtain the SAPTA and COO respectively. Similarly, copy of the
COO is required by the DAE to issue the phytosanitary certificate. At least
these documentary requirements need to be removed for ease of
transaction. The preferred and bold step would be to remove the COO as
the SAPTA certificate serves the same purpose.
• If the suggested reductions of documents are successful, a total of 1.5
days could be saved with little change in the costs.
• Since ASYCUDA++ exists at the Benapole land Port, electronic transmission
of documents and information should be introduced for ease of transaction.
Specific Recommendations for Simplifying Import of
Wheat
§ Currently hard copy of the L/C details and IRC are required in opening L/C.
The process can be simplified if scanned copies of the details are accepted
by the banks.
§ Business Process Analysis: Export of Jute Hessian Bags and Import of
Wheat in Bangladesh
§ Further, banks should ask for the IP but not the IRC as the former is
product specific whereas the latter is general.
§ Currently a copy of the IRC is required is obtaining a quarantine
certificate. This is redundant information in issuing quarantine certificate
and hence needs to be removed.
§ The use of the insurance is required between the traders and the
shippers. Thus, this documentary requirement needs to be removed from
the Customs declaration process.
§ If the suggested reductions of documents are successful, a total of 0.5
days could be saved with little change in the costs.
Business (trade) process analysis findings among
South/Southeast Asian Countries
Cambodia
(Maize/Ca
ssava
export to
China)*
Lao PDR
(Maize
export to
Thailand)
*
Myanmar
(Rice
export via
Yangon
port)*
Bangladesh
(Jute bag
export to
India)*
Bangladesh
(shrimp
export to
Japan)**
Thailand
(rice export
to
Europe)***
Number
of days
19/20
16
19-23
10
33
12
Cost
USD 1250
-1360
USD 735
USD 425
USD 500
USD 700
Number
of actors
involved
15
11
20
14
15
15
* source: ESCAP BPA Study Reports 2013-14, available at:
http://unnext.unescap.org/tools/business_process.asp
** source: http://artnet.unescap.org/pub/wp9311.pdf
*** source: http://unnext.unescap.org/tools/business_process.asp
Obtaining Phyto Sanitary Certificates for agro-food
products in South and Southeast Asian Countries
Number of
Days
Required
Documents
Required
Bangladesh
Cambodia
Lao PDR
Myanmar
Nepal
4 days
2-5 days
At least 2 days
1-2 days
0.5 day
(i)
(i)
(i) Packing list,
(ii) Import license,
(iii) Commercial
contract among
importer and
exporter;
(iv) Request for
import of animal
feed;
(v) Pro-forma
invoice;
(i) Shipping instructions
(ii) National Registration
Card
(iii) Sealed case file from
Customs head office
o Export
Declaration
o Export License
o Invoice
o Packing list
(i)
Proforma
invoice
(ii) packing list,
(iii) oil content
certificate,
(iv) COO
(ii)
(iii)
(iv)
(v)
Phyto
sanitary
certificate
application
Commercial
invoice
Packing lists
Release
container,
Fumigation
certificate
• Exporter (or
• Exporter
Stakeholders
representative) • MAFF/GDA
Involved
• Department of
Agricultural
Extension
(DAE)
• Clearing and
Forwarding
(C&F) Agent
• Exporter
or • Ministry of agriculture
representative
• Exporter
• Vientiane
Capital
Agriculture Division Agriculture
Quarantine Section
(ii)
(iii)
(iv)
(v)
Letter from
Customs to Food
Quarantine Office
Commercial
Invoice
Packing List
Customs
Declaration Form
Sample
• Clearing agent
• Food Quarantine
Office
• Customs Office
TF Measures by Cambodia
Rice Export Policy: Enhancing trade facilitation, reducing informal fees and
eliminating check points
Measure 1: “MEF/General Department of Customs and Excise (GDCE), MAFF and
MoC/General Department of CAMCONTROL and relevant agencies shall: develop
a specific strategy to identify and streamline export processing procedures
including inspection, documentation requirements, fees and time required to
process export applications; define clear and publicly transparent division of
responsibilities among export regulating ministries/agencies; consider milled rice
export as a top priority in order to reduce to a minimum informal payments and
time required to export by extending “special treatment” similar to the garment
sector.”
Measures by Cambodia (Contd.)
Measure 2: Implement a single-stop service for export processing:
MEF/GDCE, MAFF and MoC/ CAMCONTROL and relevant agencies
shall set up a Single Stop Service for export processing and issuing
certificates for SPS, fumigation, grading and quality, quantity and weight,
and customs declaration.
Business Process Analysis (BPA) Studies for Five
Countries in South and Southeast Asia
Bangladesh
Business (Trade) Process Analysis (BPA) for
Export of Jute Bags to India and Import of Wheat
from India
Cambodia
BPA for Export of Maize and Cassava to China
Lao PDR
BPA for Export of Maize to Thailand and Import of
Animal Feed from Thailand
Myanmar
BPA for Export of Mango and Rice to China, Import
of Palm Oil from Malaysia
Nepal
BPA for Export of Cardamom to India and Import of
Rice from India
Available at: http://unnext.unescap.org/pub/bpa-cam.pdf
Publication
“Facilitating Agricultural
Trade in Asia and the
Pacific”
Overview, TF issues, Good
practices
Available at:
http://www.unescap.org/publicat
ions/detail.asp?id=1480
THANK YOU!
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