Harmonising border procedures in the ESA region To facilitate trade

ESA BMO Network Position Paper November 2010

Summary & key recommendations

The establishment of the regional trade blocks presents premise for fostering regional trade, however intraregional trade in ESA member countries is hampered by differences in border procedures across the region. Consequently, business and consumers pay a heavy price for trading. Surveys and interviews carried out among members of the ESA BMO Network reveals that companies on average experience delays of approximately 3 days when crossing border post in the ESA region. These delays in time translate into monetary costs in terms of extra transport costs and loss of production. The root of the problem is found in the different national legislation governing cross-border trade between the ten Eastern and Southern African countries. More specifically, all countries have their own country specific agencies represented at border posts, national requirements for documentation, and individual use of ICT-systems. ESA BMO Network calls on Governments in the ten countries to harmonize border procedures across the region to facilitate trade by establishing and operationalizing One Stop Border Posts (OSBP) across the region as well as fast-track the implementation of the National Single Window System (NSWS).

1. A call from the private sector

International trade is essential for spurring economic growth and development. In Eastern and Southern Africa, intraregional trade has the potential to lift millions out of poverty and increase the standards of living for even more people. Unfortunately, while the establishment of the regional trade blocks presents premise for fostering regional trade, intraregional trade in ESA member countries is hampered by amongst others differences in border procedures across the region. Consequently, business and consumers pay a heavy price for trading. Border formalities are necessary in the movement of goods across borders and uphold state security. However, bureaucracy at border posts becomes twice as big when similar formalities must be carried out on both sides of the same border. This translates into increased costs due to delays, informal costs and loss of business, which ultimately are passed on to the consumer. The challenge of burdensome border procedures is not a new phenomenon and Eastern and Southern African Governments have to some extent worked hard to eliminate the problem for the benefit of business and consumers. However, research carried out by the ESA BMO Network 1 clearly shows that the problem still exists. The root of the problem is found in the different national legislation governing cross-border trade between the ten Eastern and Southern African countries, namely; Botswana, Burundi, Kenya, Mozambique, Rwanda, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. All these countries enjoy different rules and regulation for the specific border procedures related to importing or exporting goods. More specifically, all countries have their own country specific agencies represented at border posts, national requirements for documentation, and individual use of ICTsystems. The ESA BMO Network is greatly concerned with the many, varied and lengthy border procedures and the numerous documentation requirements at border posts, which contribute to the high costs facing business in the region and are barriers to the efficient flow of trade. For this reason the Network has researched the issue in depth. A mixture of questionnaires, interviews with members, border agents and officials as well as desk research form the qualified background on which the ESA BMO Network calls on Governments in the ten countries to harmonize border procedures across the region to facilitate trade. The best way to ensure harmonization is through a three-step phase where agencies are coordinated, documentation is streamlined and ICT-systems are interfaced:

Coordinating the relationship between border agencies on both sides of the border will decrease clearing times and set the stage for streamlining documents and interface ICT-systems with the other sides border agencies. This will ultimately facilitate the establishment of more one-stop border posts across major routes in the region and the implementation of the National Single Window System across the region which can enhance the harmonization and hence efficiency of border procedures.

The ESA BMO Network, the Eastern and Southern African Business Membership Organisation Network, represent the private sector in ten ESA countries: Botswana, Burundi, Kenya, Mozambique, Rwanda, South Africa, Tanzania, Uganda, Zambia and Zimbabwe.
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2. Three key challenges

When studying the barrier of different border procedures in the ESA region from a business perspective, three key challenges stand out: Multiple and uncoordinated agencies represented at border posts, differences in documentation requirements, and lack of interface between ICT-systems on both sides of the borders.

2.1 Uncoordinated agencies

A key impediment to cross border and intraregional trade in the ESA region is the multiplicity of government agencies on both sides of different borders. All government agencies enforce different types of legislation and have legal powers to detain goods and people if any transgression against any of the specific pieces of legislation is flouted. The most common or standard agencies across borders within the region include: Revenue Authority (customs), 2 Immigration, Security (Police), Ministry of Agriculture, Ministry of Health, and Bureau of Standards. Generally there is lack of a centralized coordination mechanism among border agencies. Each agency captures their information for their own needs, possibly in different formats, thus reducing the potential of sharing the information and by so doing affect border post operating efficiency. This therefore, makes it almost impossible to share information in a timely manner even if they were to cooperate. There is need to establish a coordinated and standardized operations of agencies within each country. Once this is set, harmonization across countries can then be improved. Harmonization internally and across borders will have a number of benefits. However, for this to efficiently happen there is need for integration of processes, infrastructure, and training of officers. The following recommendations by the ESA BMO Network are designed to reduce border delays, enhance efficiency and coordination amongst border agencies. ESA BMO Network recommendations Review all the border agencies with a view to reduce them and locate them within the Customs processing area Delegate authority to perform document check to Customs, i.e. by giving Customs the mandate and responsibility to perform document checks on behalf of other border agencies using Memoranda of Understanding Delegate authority to perform verification/inspection of imports and exports to Customs, i.e. by giving Customs the necessary HS codes as well as the responsibility for writing the inspection report Introduce an electronic information sharing mechanism, which links all border agencies to one system, and allows for joint inspections and shared risk management Introduce joint payment procedures, where all payments (inspection fees, customs duty, etc.) are made at a single cashier The successful implementation of these mechanisms will depend on Customs being given authority at each border post to play a lead role. As such, there is a need for Memoranda of Understandings between Customs and the border agencies who are responsible for clearing goods.

For a full overview of the different border agencies in the ESA region see annex 1
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2.2 So many different documents to fill

In the ESA region, different countries have varying documentation requirements for cross border trade. Growing security concerns have also caused most countries to require rigorous and complicated documentation systems. The document requirements also vary according to the type of products moving in and out of a country. This is particularly burdensome when it comes to products such as agriculture and animal products which require different permits and certificates in order to move across borders. There is also lack of a standardized and efficient procedure for securing clearances and facilitation of the importation and exportation of particular products. Research carried out by the ESA BMO Network shows, that the required documents include customs declaration forms, invoices, freight documentations, licenses (where applicable), as well as official documents exchanged between the parties to the transaction. On average it requires seven (7) documents to move goods across borders in the ESA region.3 Though the various documentation required at different country borders are instituted for various reasons such as revenue collection and security concerns they lead to delays, increase costs, open avenues for corruption and therefore a hindrance to intraregional trade. ESA BMO Network recommendations Review current documentation requirements with the view of streamlining and reducing the documentation across the region Establish an efficient pre-clearance process that allows one to put all documents together. Physical checks should only be carried out to ascertain that the goods carried correspond to the documentation Incorporate modern customs risk management such as the Authorized Economic Operator accreditation There is a need to consider the standardization of procedures for securing clearances and facilitation of the importation and exportation of agricultural and livestock products

2.3 The ICT-systems

Research carried out by the ESA BMO shows that ASYCUDA++ version is the most prominent ICT-system used in the region. However, the systems are not necessarily compatible as they are tailor-made to suit each countrys specific needs.

Country Kenya Rwanda Zimbabwe Mozambique Zambia Botswana

ICT system SIMBA ASYCUDA ++ ASYCUDA ++ ASYCUDA ++ ASYCUDA ++ ASYCUDA ++

A full list of required documents are enclosed as annex 2

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Beside the lack of interface between existing ICT-systems, the majority of the systems are not robust enough, there are frequent network disruptions and also a number of smaller border posts are challenged by not having any ICT-systems at all. Naturally, this is adding to delays and hence increasing the costs of doing business in the region. Fortunately, ICT solutions are today available to enhance compatibility or ensure harmonization between border post systems, e.g. through the RADDEx (Revenue Authorities Digital Data Exchange) a system developed to facilitate exchange of Customs data between two or more countries. The RADDEx solution enables customs data to be communicated instantly from the point of transit origin, through all points of transit, to the point of destination. This advance notification facilitates streamlined processing of goods, increased transparency, increased accuracy in goods verification and risk assessment and enhances overall efficiency including the avoidance of duplicate data capture at border posts. This data exchange also reduces customs clearance time thus benefiting both the private sector and revenue authorities alike.

ESA BMO Network recommendations National governments must provide the necessary support to promote the use of RADDEx (Revenue Authorities Digital Data Exchange) throughout the ESA region Increase the capacity of the systems (bandwidth) to withstand the massive processing at the border posts and the exchange of data within the countries. Use of web-based systems to enable private sector to access the network 24-hrs, 7 days a week. There is need to upgrade the systems to enable users work offline (document processing ) and transmit online Use alternative sources of energy, e.g. automatic generators and solar power should be installed at the border posts for continuity during power outages

3. Business and society pay the price

The problems arising from the different border procedures typically translate to additional costs of doing business. The hassle of random inspection by various agencies, collecting the required documentation, and lack of information sharing and communication through interfaced ICT systems all lead to delays for companies trading good across borders. The table below shows the average number of days a consignment takes to cross one (1) border and the average cost incurred per day per consignment for delays by business in the ESA BMO Network.4 Country Zimbabwe Zambia Mozambique Kenya Rwanda Average Average no. of days to cross one (1) border 1-7 3 3 1-3 2-3 2,8 Average cost pr. day for delays (US$) 200 183,76 100 125 316 185

The ESA BMO Network has carried out research in 5 member countries: Kenya, Mozambique, Rwanda, Zambia, and Zimbabwe. A total of 50 companies contributed to the findings. 5

Surveys and interviews carried out among members of the ESA BMO Network revealed that it is in fact quite expensive for companies to trade in the region due to differences in border procedures. From the survey carried out, indications are that companies on average experience delays of approximately 3 days when crossing border 5 post in the ESA region. These delays in time translate into monetary costs in terms of extra transport costs and loss of production.6 In addition companies revealed that they also incur extra costs in form of informal fees to speed up the process of clearing cargo through the various border agencies and officials. This is a delicate issue but companies report that they spend 20-200 US$ on informal fees for each border crossing. Hence, there clearly seem to be a challenge of business ethics in both public and private sector at the border posts. Case: If a truck is transporting cargo from Zambia through Zimbabwe into Mozambique, it can be expected that the company will spend a total of 6 days crossing the two borders amounting to $555 just in transport costs. Imagine that the driver is also forced to pay informal fees at approximately $80 per crossing. This translates to another additional $160 to the cost for moving cargo across the border lines in the ESA region and hence, a total of $715 is incurred. This becomes quite expensive if a company on average moves cargo 10 times per year per truck: $7,150 per year. These added costs are hurting the competitiveness of ESA businesses. Consequences of the differences in border procedures in terms of delays and additional costs are hampering intra regional trade. And ultimately the costs are passed on to consumers. As long as these challenges are not addressed properly by Governments in the ESA region, there will be less economic development, less job creation and ultimately less poverty reduction in the 10 countries.

4. What to do
The problem and negative consequences of having different border procedures in the ESA region can in fact be reduced significantly. Best practices from the South East Asian region shows, that transnational harmonization of border procedure will increase the effective and efficient clearance of goods, boost the participation of national industries in the global marketplace, contribute significantly to the economic competitiveness of nations, encourage investment and development of industry and increase the participation of small and medium enterprises in international trade.7 There is an overall need to harmonize border procedures throughout the three phases: coordinating agencies, streamlining documentation and interfacing ICT-systems across all ESA member countries to make border transactions more efficient and effective. In addition to the issue specific recommendations presented under each section above coordinating agencies, streamlining documentation and interfacing ICT-systems the ESA BMO Network has the following overall recommendations to facilitate the harmonisation.
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Transport costs cover costs per truck passing the border including costs for driver, hire of truck, and cargo storage. Production costs cover costs in respect to loss of production time, run out of stock, company may become an unreliable supplier, and risk of losing markets, e.g. Zimbabwean companies report of an 12,000 US$ loss of production per day of delay at border posts. 7 Proceedings of the Eastern Asia Society for Transportation Studies, Vol. 5, pp. 1728 - 1741, 2005
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ESA BMO Network Recommendations

Establish and improve One-Stop Border Posts An internationally recognized mechanism to increase the efficiency in border procedures and consequently time spent on crossing borders is a One-Stop Border Post (OSBP). The OSBP model aims at reducing the duplication caused by dealing with two sets of agencies on either side of the border. OSBPs have already been introduced in the region. One example is the Gatuna OSBP between Rwanda and Uganda that was launched in March 2010. All goods moving across this border are cleared jointly by officials from both countries. Already the clearing processes are moving faster as there is no duplication and the incidents of corruption have been reduced as the both Ugandan and Rwandan officials are seated in one office. Other OSBPs are the Chirundu OSBP between Zambia and Zimbabwe and Malaba between Kenya and Uganda. The ESA BMO Network recommends that all ESA countries establish OSBPs on all major routes going in and out of their country To establish more one-stop border posts in the region the ESA BMO Network calls on all Governments in the region to negotiate bilateral cooperation agreements with their neighbors to legalize the transfer of authority to one common entity the OSBP. The ESA BMO Network also recommends that operations at existing OSBPs be improved in accordance with best practices. To enhance operations of existing OSBPs, the ESA BMO Network calls on governments in the region to implement recommended global best practices under the World Trade Organization (WTO), World Customs Organization (WCO) and the United Nations Conference on Trade and Development (UNCTAD) as well as best practices from well functioning OSBPs in other regions. Implementation of the National Single Window System The National Single Window System (NSWS) is recognized as a major trade facilitation tool and is promoted by several world organisations that are concerned with trade facilitation. Among these are the United Nations Economic Commission for Europe (UNECE), and its Centre for Trade Facilitation and Electronic Business (UN/CEFACT), and the World Customs Organization (WCO). The NSWS can enable parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements. The ESA BMO Network recommends that governments in the region fast track the establishment and operationalisation of the NSWS to reduce delays and lower costs associated with clearance of goods at the borders, while maintaining the requisite controls and collection of duties and taxes, where applicable, on goods imported or exported. Harmonisation of the border procedures in the ESA region In order to facilitate trade in the region, the governments of ESA should review the entire border procedures in the region with a view to make them common across the region.

Other Recommendations
The ESA BMO network also recommends the following; Reduce the number of documents The governments in the ESA region should work towards reducing the number of documents used for trading goods across the border Reduce the number of agencies operating at the borders The governments in the ESA region should review the agencies represented at the borders with a view to reduce the number of agencies at the border so as to increase the speed of clearance at the border 24 hour limit Governments must set targets for speeding up the process of crossing borders to reduce the average time of 3 days. Hence the ESA BMO Network recommends that national and/or regional targets should be not exceed 24 hours inclusive of obtaining all documents, during inspections, electronic registration processes. Awareness of requirements There should be clear communication and greater awareness of all the border procedures and specific requirements to allow companies to be more informed and be adequately prepared. This awareness could be by way of internet, pamphlets, posters, clients charter etc. Harmonizing opening hours Increasing common opening hours will shorten the time that cargo spends on crossing borders and this allows the borders to meet the target of spending no more than 24 hours. Reducing informal costs The additional informal costs incurred by business indicate that there is widespread mentality among border officials that encourage corruption. To tackle this menace it is recommended that national governments should consider; reducing human handling of documents by computerizing the border clearance processes; improving border staff competence; installing a regional or national hotline to report suspected incidents of corruption and establishing punitive penalties to those issuing and receiving informal fees.

Annex 1: Border agencies in the ESA region

Country Common agencies Unique agencies

Kenya

Mozambique

Zambia

Zimbabwe

Rwanda

Botswana

Kenya Revenue Authority Kenya Bureau of Standards Kenya Plant Health Inspectorate Services Immigration Police Department of Veterinary Services Alfandegas (Customs) MIPS Intertek Zambia Revenue Authority Immigration Zambia Bureau of Standards Ministry of Agriculture Plant and Phyto sanitary services Ministry of Livestock and Fisheries Ministry of Health Police Zimbabwe Revenue Authority Immigration Police Ministry of Agriculture Ministry of Health Customs Immigration Police Agriculture Customs Immigration Ministry of Agriculture Botswana Bureau of Standards

Pharmacy & Poisons Board Office of the President (NSIS) CID

Road Transport and Safety Agency Ministry of Works and Supplys Road Development Agency Drug Enforcement Commission

Annex 2: Border documents in the ESA region

Common export documents Bill of lading Certificate of origin Commercial invoice Customs export declaration Common import documents Bill of lading Cargo release order Certificate of origin Commercial invoice Customs import declaration Packing list Common documents Certificate of origin Import Declaration Form Original Suppliers Invoices Packing list Transit documents (Movement certificate, SPS certificate) Certificate of Origin Transit Document Invoices Unique documents Certificate of Conformity Customs Import / Export Entry Sales Contract Other special documents depending on the products

Country Kenya

Mozambique

M14 DUC Bill of Lading Memorandum Quality Certificates depending the product Permits and licenses Cargo Manifest

Zambia

Customs Declaration Bill of Lading Commercial Invoice Certificates of Origin Transit Document Customs Declaration Bill of Lading Licenses Certificates of Origin Transit Document Customs Declaration Bill of Lading Commercial Invoice Certificates of Origin Transit Document Packing List

Zimbabwe

Invoice permits Cargo Manifest

Rwanda

Receipt of OCIR Permits and licenses Cargo Manifest

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