Agricultural Trade Facilitation : An Overview and Regional Experience Khan Salehin

Agricultural Trade Facilitation : An Overview
and Regional Experience
Khan Salehin
Trade and Investment Division, ESCAP
Hotel Namgay Heritage, 16 June 2014
OUTLINE
 Agriculture trade in Asia-Pacific
 What is Trade Facilitation for Agriculture and Food
Products?
 Main challenges for facilitating trade in agro-food
products
 Findings from Business Process Analysis (BPA) studies
in South and Southeast Asia
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.
60
50
40
30
20
10
0
Source: FAO 2009
Nepal
Myanmar
Mongolia
Malaysia
Lao PDR
Korea, Rep
Kazakhstan
Japan
Indonesia
India
China
Cambodia
Bangladesh
Australia
Vietnam
Thailand
Sri Lanka
Philippines
Pakistan
Nepal
Lao PDR
Myanmar
Cambodia
Bhutan
Viet Nam
Afghanistan
China
India
Bangladesh
Pakistan
Sri Lanka
Thailand
Indonesia
Philippines
Iran
Mongolia
Kazakhstan
Malaysia
New Zealand
Rep. of Korea
Australia
Japan
0
New Zealand
Percentage 2007
Percentage 2006
Agricultural Trade in Asia-Pacific
Agricultural Population as Share of Total Population in
Selected Asia-Pacific Countries
100
50
Contribution of Agriculture to GDP in
Selected Asia-Pacific Countries
Source: FAO 2009
34%
Bhutan’s agriculture share
of GDP is around 20 percent
4
Key Drivers of Agricultural Trade
Population
Growth
Change in
Dietary
Practices
Increased
Disposable
Income
Agricultural
Trade
Growth
Change in
Commodity
Prices
Other Factors
(export
policy,
capacity etc.)
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 or implementation of e-traceability
-
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
Manufacturing (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
Trade Facilitation
Measures Applied in
Agricultural Supply
Chains/Sectors
Improved Trade Policies,
Efficient Trade Processes
Reduced Transaction Cost,
Improved Trading
Environment
Greater Income for Poor
Greater integration of
MSMEs including
Producers
Improved Trade
Competitiveness
Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74
9
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
There are significant constraints to Trade Facilitation in agriculture which eventually
impact trade competitiveness.
These constraints can be divided into four main categories:
Trade Procedures
Product Standards
Trade Logistics
Trade Finance
11
Trade Procedures: A Generic Agricultural Product Supply
Chain Structure
Information,
documents,
procedures
Information,
documents,
procedures
Information,
documents,
procedures
Information,
documents,
procedures
Building 2
Wholesalers
Exporter
Regulatory Agencies
Export Customs
Transport
Producer
Bank
Consumer
Retailers
Importer
Source: Sirimanne 2011
Import Customs
Import Agent
12
Product Standards
Standard
“A document established by
consensus and approved by a
recognized body that provides for
common and repeated use, rules,
guidelines, or characteristics for
activities or their results, aimed at
the achievements of the optimum
degree of order in a given context.”
ISO (2004)
Ensuring product standards for international trade of
agricultural products is a complex topic and It
encompasses:
Institutions.
Infrastructure.
Logistics.
Administrative Issues.
13
Trade Logistics
Poor Trade Related Infrastructure
and Transportation System
Infrastructure
and
Transportation
Services
Share of Transport Costs as percentage
of transaction cost in Central Asia
Border
Procedures
Transport and Handling Cost as percentage
of transaction cost in South Asia
Export
Import
Kazakhstan
10%
8%
Kyrgyzstan
13%
10%
Tajikistan
14%
10%
Uzbekistan
12%
8%
Source: ADB 2006
Agro-products
Export From
Export To
Transport & Handling Cost
(% of transaction cost)
Frozen Shrimp
Bangladesh
Japan
29
Cotton Yarn
India
Bangladesh
31
Hydrogenated Veg. Oil
Nepal
India
80
Tea
Sri Lanka
Japan
22
Source: Business Process Analysis Studies ESCAP 2010-11
14
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.
 FAO (1994): Total loss of agro-products during storage and transport could be
as high as 16%.
 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).
 IFC estimated the wastage caused by poor transportation and logistics system
at $13 billion per year there (2010).
 Thai fresh produce exports of fruits and vegetables, producers and exporters
lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor
storage.
15
Trade Finance
Trade Finance
is
’financing of
imports and
exports’’
It is the most difficult bottleneck to overcome for agricultural trade
Risk of
spoilage
Poor storage
facilities
Price volatility
Weather
conditions
Seasonality of
production
Varied quality
of products
Reasons for not increasing lending in this sector
Inability of producers
to meet the big
collateral guarantees
Lenders’ Lack of
Understanding
Knowledge Gap of
SMEs/producers
Stringent terms of
trade
16
Business Process Analysis (BPA) of
Agro products in South and
Southeast Asia
Why conduct a Business Process Analysis?
Business Process Analysis is a practical study
 to understand attributes of business processes,
and their relationships
Who
involved
Procedures
and Documents
required
Related Rules
and Regulations
Some
quantitative
indicators
18
Business Process Analysis (BPA) Studies for Five
Countries in South and Southeast Asia
Bangladesh
Business (Trade) Process Analysis (BPA) for
Export of Jute Bags to India and Import of Wheat
from India
Cambodia
BPA for Export of Maize and Cassava to China
Lao PDR
BPA for Export of Maize to Thailand and Import of
Animal Feed from Thailand
Myanmar
BPA for Export of Mango and Rice to China, Import
of Palm Oil from Malaysia
Nepal
BPA for Export of Cardamom to India and Import of
Rice from India
Available at: http://unnext.unescap.org/pub/bpa-cam.pdf
Key Findings: Business Process Analysis Studies
Export
country and
product
Destination No. of
days
No. of
actors
involved
No. of
processes
No & type of
documents
required
Cost ($)
Cambodia –
Maize
China
20
15
13
22
12501360
Lao PDR Maize
Thailand
16
11
8
21
735
Myanmar –
Rice
West Africa
19-23
20
10
>25
425
BangladeshJute bag
India
10
15
12
24
-
Nepal Cardamom
India
15
11
9
14
1213
Source: ESCAP BPA Study Reports 2013-14, available at:
http://unnext.unescap.org/tools/business_process.asp
Findings: Key problems

Additional Time: The first and obvious bottleneck is the additional time
needed to complete the trade transaction. Obtaining SPS or Quarantine
certificate can take from 1 day to 5 days in the countries studied. This may
or may not include the time required for fumigation, which is usually another
day or two. The exporters need to wait for completion of this process before
moving to the next process for export.

Additional Cost: The direct cost for these processes is usually not very
high, hovering around USD 10-50. However, the indirect cost of delays and
spoilage of perishable products caused by the complexity of such processes
can be very costly. Nevertheless, direct cost can be very costly in some
instances. For example, fumigation certificate can cost up to USD 700 in
Cambodia for maize export. It can range from USD 10 to USD 700
depending on the trading partner.

Additional paperwork: All additional processes require additional
documents. Department of agriculture or testing laboratories are usually one
of the least integrated entities with so called trade agencies (e.g.
department of trade, customs). So, there is less coordination between these
agencies too. This situation can create confusions over what documentation
is required for a particular export or import process. If the process of
laboratory tests fails, the entire process needs to restart.
Obtaining Sanitary and Phyto-sanitary Certificate for export of
agro-food products
Trading
Partner
and
Export
Products
Number of
Days
Required
Documents (i)
Required
(ii)
iii)
iv)
Stakeholde
rs Involved
Direct
Costs
Bangladesh
Cambodia
Lao PDR
Myanmar
Nepal
India,
Jute Bags
China,
Maize
Thailand,
Maize
West Africa,
Rice
India,
Cardamom
4
2-5
2
2
1
Proforma
invoice
packing list,
oil content
certificate,
Certificate of
Origin (COO)
• Exporter (or
representative)
• Department of
Agricultural
Extension
(DAE)
• Clearing and
Forwarding
(C&F) Agent
USD 10
(i) Phyto sanitary
certificate
application
(ii) Commercial
invoice
(iii) Packing lists
(iv) Release
container,
(v) Fumigation
certificate
•
•
(i) Phytosanitary
application form
(ii) Packing list,
(iii) Export license
(iv) Customs
certification
(v) Business license
from Vientiane
Capital
Agriculture
Department
(vi) Commercial
contract among
importer and
exporter
(vii) Pro-forma
invoice
Exporter
• Exporter or
representative
Ministry of
Agriculture
• Vientiane
Forestry and
Capital
Fisheries
Agriculture
(General
Division Directorate of
Agriculture
Agriculture)
Quarantine
Section
$730 or $58
(Fumigation 28
Fumigation/
CCIC 700
Inspection 30)
(i)
(ii)
(iii)
?
?
?
?
•
•
Shipping
instructions
National
Registration
Card
Sealed case
file from
Customs head
office Export
Declaration
Export
License
Invoice
Packing list
Exporter
Ministry of
agriculture
More than USD 300
(i)
(ii)
(iii)
(iv)
(v)
Letter from
Customs to
Food
Quarantine
Office
Commercial
Invoice
Packing List
Customs
Declaration
Form
Sample
• Exporter
• Clearing agent
• Food Quarantine
Office
• Customs Office
USD 5
BPA Outputs: Use Case Diagram of Rice Import from India to
Nepal
Broker
3. Ship
1.Buy
3.1 Obtain Inspect entry permit
Importer Bank
Exporter
•Buy
2.Pay
3.2 Prepare and collect required document
3.3 Appoint clearing Agent and handover
document
1.1 Conclude trade term
Courier
Plant Quarantine company
Office
Bank
Transport Company
3.4 Arrange transportation
CHA
Importer
FoodQuarantine office
3.5 Obtain Food Quarantine
Certificate
2. Pay
Exporter
Bank
2.1 Advance payment
3.6 ObtainRelease order
Customs
Bank
2.2Balance Payment
3.7 Customs Clearance at importer Border
Importer customs office
Process: Obtaining Food Quarantine Certificate
CHA/Clearing Agent
Food Quarantine Office
3.5.2 Issue letter to
Food Quarantine Office
3.5.1 Applies for letter to Food
Quarantine Office
3.5.4 Submits documents with
sample and fee
Customs Letter
3.5.3 Receive letter to Food
Quarantine Office
3.5.5 Receive document
and sample
Commercial/ Export invoice
3.5.6 Examine the sample
Packing list
Customs Declaration Form
Filled in prescribed application
3.5.8 Receive Quarantine
Certificate
Customs
3.5.7 Issue Quarantine
Certificate
Documents Required for Import of Rice from India
S.N
Type
No of
document
1
Application
3
2
Pro forma Invoice
2
3
Firm/Company
registration certificate
5
4
PAN/VAT certificate
5
5
6
7
Purchase order
Customs letter
Commercial/Export
Invoice
1
1
4
8
Packing List
2
9
Customs Declaration
Form
3
10
Foreign Exchange
Declaration Form
Appointment letter to
CHA
Food Quarantine
Certificate
Release order letter
Evidence of payment
3
11
12
13
14
Total
1
1
1
1
33
How document is
Where to submit
to submitted
Manual
Bank, Plant Quarantine
Office
Manual
Bank, Plant Quarantine
Office
Manual
Bank, Plant Quarantine
Office Importer
Customs
Manual
Bank, Plant Quarantine
Office Importer
Customs
Manual
Bank
Manual
Food Quarantine Office
Manual
Food Quarantine
Office, Plant
Quarantine Office,
Importer Customs and
Bank
Manual
Food Quarantine Office
and Importer Customs.
Electronically/Ma Importer Customs,
nual
Bank and Food
Quarantine Office
Manual
Bank and Importer
Customs
Manual
Importer Border
Customs
Manual
Importer Customs
Manual
Manual
Importer Customs
Importer Customs
Cost of Importing Rice
Activity
NPR
USD
1. Conclude trade term
50
0.6
2. Receive Pro forma invoice and send purchase order
100
1.2
3.Obtain entry permit (fee)
200
2.4
74460.0
35360.0
39100.0
908.0
431.2
474.0
5. Load / unload
6120 (18 per
quintal)
74.6
6. Broker commission
1700 (Rs. 10
per quintal)
20.7
7. Fund transfer cost
1500
18.3
8. Document collection and preparation
300
3.7
9. Clearing agent fee
400
4.9
10. Obtain Food Quarantine certificate (fee)
400
4.9
11.Import service charge
500
6.1
3000
36.6
88730.0
1082.1
4. Freight from exporter's factory to importer's
warehouse
-Exporter factory to importer boarder
- Importer boarder to Kathmandu
11. Other cost (cost incurred in different check points,
Customs entry yard charge, district entry, currier cost etc.)
Total
Time-Procedure Chart: Export of Maize from Lao to Thailand
Export Procedures
No of Days
Proposed reduction of days
1. Concluded export (buying) contract and trade terms
2
2
2. Phytosanitary certification
2
2
3. Fumigation certification
2
2
4. Arrange transportation (trucks)
4
0 - at same time of step 2
5. Provide Customs declaration for export of goods
2
1
6. Prepare Maize certificate of origin
2
0- Together with step 3
7. Establish payment guarantee
2
2
8. Claim the payment for goods
1
1
17 days
10 days
Total number of days for completing one export transaction
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.
Processes
Recommendations
High transport cost due to road condition
and syndicate system
•Enforce Competition Promotion and Market
Protection Act effectively
Burden of levy of export fee by DDC (local •Remove export fee in conformity with the policy of
authorities)
making export tax free
Myanmar – Export of
Rice
Country
Nepal – Export of
Cardamom
Recommendations – Export (1)
Customs related offices are scattered
•Locate all Customs related offices within Customs
premises
Customs do not accept electronic copies
of documents except Customs
Declaration Form
• Accept electronic copies of all documents by the
Customs
•Develop system of electronic submission of
documents
- Introduce e-banking to facilitate payment
- Reduce administrative requirements in payment
procedures e.g.
• Eliminate unnecessary forms (application letter,
export letter with bank seal)
• Reduce process steps
• Eliminate hard copies
•Eliminate this process step unless buyer requests a
tested sample
Make advance payment
Arrange pre-inspection
Recommendations – Export (2)
Bangladesh- Lao PDR – Export Cambodia- Export
Export of
of Maize
of Maize/Cassava
Jute Bags
Country Processes
Recommendations
Apply for Phytosanitary Certificate
Reduce activity 2.2 apply for Phytosanitary
Certificate from 5-day to 3-day.
Apply for Certificate of Origin (COO)
Reduce activity 2.7 apply for Certificate of
Origin from 2-day to 1-day.
All container goes through rigorous
security check and scanning at the Port
of entry.
Customs should use risks based assessment
coupled with exporter and freight forwarder
profile for selective scanning. Waive mandatory
scanning for export.
The process of application and issuance of COO
should be initiated simultaneously with the
application for Phytosanitary and/or fumigation
certification.
Automation of overall export system is very
essential. It will reduce the time taken to travel
from one place to another for submission of
documents.
Submission of Export Registration Certificate
(ERC) should be removed.
Submission of Certificate of Origin (COO) should
be dropped
One of them should be dropped as both serves
the same purpose (showing country of origin)
Issuance of Certificate of origin (COO)
can be processed after or
simultaneously with the phytosanitary
and fumigation certification process.
Submission of documents in processes.
Obtaining SAPTA certificate
Obtaining Phytosanitary certificate
Obtaining both COO and SAPTA
certificates
Recommendations – Import (1)
Lao PDR –
Import of Animal Feed
Nepal – Import of
Animal Feed
Country Processes
Electronic copies of documents except
Customs Declaration Form are not
accepted by the Customs
Customs related offices are scattered
Inspection of the importer's site by
VCFD, VCTD and other concerns
Inspection of all the consignments by
Customs and Quarantine officers at the
border checkpoint are conducted
separately.
Recommendations
Accept electronic copies of all documents by
the Customs
Develop electronic submission system of
documents
In selected surveyed Customs points, related
offices particularly Plant Quarantine Office and
Food Quarantine Offices were found to be
located outside of the Customs area. If these
offices are located within Customs premises it
can save time and document.
The accompanying by the Vientiane Capital
Trade Division during the site visit should be
dropped and the brief of importer/farm's site
visit by VCLFD should be shared instead for
acknowledgement; in this way, the site visit will
be shorter and efficient
It can be organized at one time. The report of
inspection can be simplified into one single set
of reports that will consist of the following main
finding: customs declaration, goods inspection,
certification of products in terms of quarantine
rule and technical procedures
Recommendations – Import (2)
BangladeshImport of
Wheat
Country Processes
Issuance of
Quarantine
Certificate
Opening Letter
of Credit (L/C)
Recommendations
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.
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.
BPA Study Reports 2013-14, available at:
http://unnext.unescap.org/tools/business_process.asp
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!
[email protected]
unnext.unescap.org
www.satnetasia.org