6 Preferential treatment for authorized traders: extract from the Revised Kyoto Convention

Partnerships



Risk management for border agencies sets control

levels according to perceived degrees of risk. It distinguishes between trusted and less trusted traders,

and among shipments with higher and lower compliance risk, rather than enforcing blanket controls at

set quotas (for example, 100, 50, or 5 percent of all

traffic). Reducing inspections for traders with good

compliance records, and giving businesses a strong

incentive to boost compliance capabilities, risk

management—like audit based control—can free

up government resources. It also can cut the indirect transaction costs that traders incur because of

delays at the border and the resulting loss of business.

(Risk management is discussed further in chapter 6.)



Partnerships in border management usually arise

when border agencies seek to extend control beyond

their authority or competence. Well designed voluntary partnerships—being less expensive than more

prescriptive, legislative enforcement—can benefit

traders and border agencies alike.

For example, voluntary partnerships are common in supply chain security, where agencies seek

to identify security risks before goods are shipped.

Countries adopt supply chain security programs

that impose conditions on firms seeking certification—in practice also imposing conditions on firms

that seek to do business with certified companies.

Such partnerships seek to extend security and control across the supply chain in exchange for operational or commercial incentives—for example, in

simplified procedures, fast track border clearance,

and reduced operational interference at the border.

Examples of security driven partnership programs include the United States Customs-Trade

Partnership Against Terrorism (US CBP 2004) and

the European Union’s security amendment introducing the authorized economic operator concept

into its customs code (European Parliament and

Council of the European Union 2005). The underlying principles of these programs are echoed in the

World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade (the

SAFE Framework; see WCO 2007) and are partly

captured in the International Organization for Standardization’s specifications for supply chain security

management systems (ISO 28000).7

A less formal partnership vehicle, the memorandum of understanding, gives some structure to

business-government arrangements while avoiding

the expense of writing and defining laws. It also allows greater operational flexibility than narrowly

defined legislation does. Memorandums of understanding between border agencies and key private

sector actors—such as carriers and port operators—

can govern issues as diverse as safety procedures (for

example, when inspection staff must wear hard hats

and high visibility jackets), codes of conduct (for example, agencies will inspect vehicles where they will

disrupt operations as little as possible), and information sharing for criminal investigations (for example,

businesses will give customs officers necessary access



Licensing trade in restricted goods



Restricted goods may be highly sensitive (military

equipment, national treasures). They may require

special control to prevent diversion for unregulated

use (medicines, ingredients in illegal drugs). Or they

may be prohibited entirely, with the exception of certain legal uses (narcotics, waste). By licensing trade

in restricted goods, government agencies can set

strict conditions on traders—and can hold traders

accountable for meeting them.

Licensed traders normally are required to invest

heavily in their control and compliance capabilities.

A well managed licensing regime also allows regulators to access sensitive control information as early as

possible. And licensing that is supported by formal

or informal partnership arrangements gives regulators access to further information about parties up

or down the supply chain from the licensed trader—

effectively extending control beyond the border.

Licensing conditions normally are specific to the

type of goods and trade. For example, licenses for

firms trading in medicines could include very stringent requirements that the distribution of the goods

be controlled by medical professionals. Companies

supplying military equipment, or equipment with

military applications, could be compelled to seek

special permission from the defense or trade ministry and provide assurances that goods do not fall

into the wrong hands. And companies dealing in

waste could be required to conduct checks verifying

that the recipients of the waste are suitably qualified

to dispose of it safely and ethically.



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Risk management



169



to computer systems). Memorandums of understanding also can be used to engage trade associations—for

example, to provide tipoff procedures in campaigns

against crime, ensuring that whistleblowers can

speak anonymously through such associations and

that their information reaches the right people.

Private sector organizations often choose to self

regulate or to develop their own standardized procedures. The public sector, rather than developing new

controls and procedures, can aim to draw on synergies. For example, security measures developed with

the insurance industry or with a sector specific trade

association often reflect the same motives that have

driven officially developed controls and procedures

to prevent crime. Similarly, commercial document

standards developed to help share information between contracting businesses—such as for transport

and shipping documents—can also be used to collate information for official control purposes. Other

Box 10.7



areas in which synergies between private sector practice and regulatory requirements can be found include quality standards, security seals, commercial

contracts (such as the Incoterms; see ICC 1999), and

electronic data standards (such as XML and Electronic Data Interchange [EDI]).

Contracting



The private sector is not merely a stakeholder with an

interest in operational efficiency. Some private sector

companies specialize in supplying their services to

border agencies. For example, private sector companies may be used to run offices and facilities, support

operational tasks, and cater to an agency’s need for

more specialist tasks (box 10.7). The extent to which

they are so used will vary by country and by agency.

Private companies that are stimulated by competition and by innovations in technology and



Services supplied by private sector businesses to border management agencies



Types of service that the private sector can supply to border agencies include the provision of offices and facilities,

the completion of operational tasks, and the supply of specialist services. Examples of each type are listed below.

Providing offices and facilities:

• Land, buildings, inspection facilities

• Utilities (water, electricity, and other energy supply).

• Electronic infrastructure, office equipment, information and communications technology (ICT) equipment

• Other equipment and tools (cars, uniforms, telephones, office stationery, inspection equipment)

Completing operational tasks:

• Preshipment inspection

• Destination inspections

• Independent certification and verification

• Moving cargo to and from inspection facilities

• Unpacking and repackaging inspected cargo

• Managing and maintaining electronic infrastructure

• Independent analysis and testing (laboratory services)

• Supplying permanent and temporary support staff (skilled and unskilled)



The role of the private sector in

border management reform



10



Supplying specialist services:

• Staff training

• Printing and publication services

• Catering and hospitality services

• Electronic infrastructure development

• Staff insurance, pension, and health services

• Building, equipment, and infrastructure maintenance

• Donor funded capacity building projects delivered by private contractors



170



B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N



gathering exercises to assistance with operations, active management of border controls, the implementation of good governance practices, and long term

training commitments.

Less comprehensive arrangements between

agencies and commercial suppliers include the

maintenance of pools of experts, consultants, and

contractors who can be brought in at short notice.

Their expertise is usually specialized—for example,

in training, research, development, ICT systems,

and regulatory impact assessment. Such pools enable

border agencies to ensure access to critical expertise

when it is needed, without incurring the expense of

permanent staffing. And reform projects often do require expertise beyond that of regular staff.

Governments occasionally contract private services for frontline control and enforcement. For

example, in many countries governments contract

preshipment inspection companies to increase

revenue—and as a stopgap measure where border

management integrity problems arise. Under preshipment inspection contracts, the contractor:

• Inspects cargo for export before shipment.

• Verifies relevant commercial documents for

accuracy.

• Instructs the importer through an inspection certificate or a report of finding on correct duties and

taxes—on which basis the importer pays duties.

Using preshipment inspection companies for

clearance is controversial, however. It introduces an

additional layer of control—often with significant

operational disruptions—which the more developed

countries (with good border management practices)

do not require.



10

The role of the private sector in

border management reform



management can complement evolving border

agency requirements. Used well, vendor services

enable border agencies to focus on core functions

such as control and enforcement. The private sector

can also help introduce new skills and capabilities,

overcome temporary resource limitations, and offer

service enhancements that benefit the wider trade

community.

To ensure that control and enforcement objectives are served as well as possible, activities should

be reviewed continually—to identify core and noncore activities, and to distinguish those that should

be outsourced from those that are best conducted

in-house. The best choices for organizational performance are seldom easy to identify. Sound cost-benefit analyses are needed.

To illustrate the decisions about private sector

suppliers that a border agency may have to make,

consider the dissemination of customs tariff information. Traditionally such information is printed by

in-house publishers, often reaching several hundred

pages, and then sold to traders. Yet private publishers—and specialist government publishers—usually

have better economies of scale for printing and distribution. If such third parties can disseminate the

information at a lower cost, outsourcing the job to

them makes good business sense (contractual arrangements aside). Online publication is even more

cost effective, radically reducing distribution costs:

traders can print only the pages they need. And if

customs administrations lack the ability to host and

update online publications, they can procure commercial off the shelf solutions, which may be much

cheaper than in-house solutions.

Carefully procured private services can also

improve a border agency’s technological capacity.

When agencies adopt new technology, simply purchasing new equipment usually is not enough. Staff

require instruction in its use, and management practices need adjustment to ensure that it is applied in

the best manner possible. For example, a procurement strategy for modern X-ray scanners should

include operations research, advisory services, and

training. If these are managed well, the agency will

internalize the new skills. Another example of vendor services is the help that private sector companies

can provide to border agencies recovering from civil

conflict. Services can range from initial requirement



Vehicles for contracting with

private organizations



There are three principal contracting vehicles for

bringing in private sector services: through public

procurement, through regulated fee structures or

revenue sharing models, and through conditions

specified in business authorizations.

Public procurement rules and procedures,

which vary by country, are often set by a dedicated

public procurement office or specified by departmental procedures and public auditors. When

funds are provided by donor agencies further criteria are likely to apply. 8 Any large expense will

B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N



171



usually require a cost-benefit evaluation—though

practices vary with institutional arrangements and

with the amounts at issue. In addition, good practice normally dictates that private service procurement is subject to tender, ensuring that the government—and the economy at large—receives the best

value for its money.

Contractual arrangements governed by regulated fee structures—for example, to conduct a laboratory test—normally are also put to tender and are

subject to similar procurement rules. The same is

true for contractual arrangements governed by revenue sharing models—for example, where companies

that help collect duties and taxes take a percentage

(as some preshipment inspection companies and providers of electronic customs infrastructure do), The

defining feature of regulated fee structures and revenue sharing models is that the expense for investment is recovered from the traders rather than from

the border agencies. Th is approach to contracting

can be attractive where agency resources are tight—

but, if inefficiently managed, it risks becoming a tax

on trade.

Finally, business authorizations may set conditions for the provision of services to border agencies wherever certain private operators are required

by law to be authorized by the government. In the

United Kingdom, for example, the customs authorization for port and airport operators handling overseas cargo includes conditions that specify requirements for suitable offices and inspection facilities

as well as provision for working inventory systems.

Similarly, veterinary and quarantine authorities can

set their own conditions for dedicated border inspection posts, while further conditions frequently

apply to the handling of dangerous and hazardous

goods.

Management challenges in engaging

private sector suppliers



The role of the private sector in

border management reform



172



Conclusion



Private vendors can complement efficient border agency operations. They can crucially support

reform by supplementing available resources and

capabilities. In return, however, they expect to be

able to make a profit. The fact that their interests

are primarily commercial need not confl ict with

reform objectives—so long as those interests are well

managed.



10



The poor management of private commercial interests can enable private rentseeking. For example,

if a procurement contract for ICT does not specify

international standards, the vendor may build a system using its own standards, forcing traders to procure special soft ware. Some less scrupulous vendors

may even make heavily discounted offers to government, expecting to recover the resulting losses

through excessive profits from traders’ purchases of

additional products or services.

Another challenge can be the fragmentation of

border institutions in many countries. The many

government stakeholders with an interest in border management and operations (see box 10.1) are

likely to have diverse spending criteria and different

preferred vendors. Those criteria and preferences

can clash severely when services must be procured

jointly, as for a single window system. Customs may

be authorized to spend money only on private services to improve customs procedures—not on services to improve the trade environment more generally. And conservative customs officers may hesitate

to approve spending on services that benefit other

agencies. Even when such interdepartmental tensions can be resolved, differing supplier preferences

can pose further obstacles. Major political support

may be needed to meet such institutional challenges.

Despite the great benefits that private suppliers

can offer border agencies, procurement officers must

approach each decision critically, asking whether

particular suppliers have the skills and capabilities

they need. Damage from failed projects can be severe, especially when it affects the wider trading

community—likely causing severe losses, not just to

certain firms, but throughout the economy. The cost

of fi xing what has failed adds to total border management costs.



The private sector has two roles in border management, as a stakeholder and as a service supplier. As a

stakeholder it generates a demand for reform and can

help border agencies ensure that control objectives

are met. As a service supplier it can help border agencies focus on core activities while providing access

to new skills and capabilities. Both roles put private

companies at the heart of any border management



B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N



reform program—as drivers, as partners, and as

suppliers.

Policymakers should recognize the private sector’s

diversity, and they should carefully consider how and

when to approach particular communities within it.

The interests of such communities vary and are not

always aligned. Balancing them can be difficult for

policymakers pursuing border management reform.

Guidance from dedicated trade facilitation committees, often with government sponsorship, can help

identify the best solutions and help put them in place.

And better substantiated research—surveys, questionnaires, case studies, pilot programs, interview series, open consultations, and cost-benefit analyses—

can further help to fine tune reform programs.

Notes



References



European Commission. 2007. “Electronic Customs

Multi-Annual Strategic Plan, 2007 Yearly Revision (MASP Rev 8).” Working document

TAXUD/477/2004–Rev. 8–EN, European

Commission, Brussels.

European Parliament and Council of the European

Union. 2005. “Regulation (EC) No 648/2005

of the European Parliament and of the Council

of 13 April 2005 amending Council Regulation

(EEC) No 2913/92 establishing the Community Customs Code.” Official Journal of the European Union, April 5: L 117/13–19.

Grainger, A. 2007. “Trade Facilitation and Supply

Chain Management: A Case Study at the Interface Between Business and Government.” PhD

diss., Birkbeck, University of London.

———. 2008a. “Customs and Trade Facilitation:

From Concepts to Implementation.” World Customs Journal 2 (1): 17–30.

———. 2008b. “Trade Facilitation and Import-Export Procedures in the EU: Striking the Right

Balance for International Trade.” Briefing paper

EP/EXPO/B/INTA/2008/06, European Parliament, Brussels.

ICC (International Chamber of Commerce). 1999.

Incoterms 2000: ICC Official Rules for the Interpretation of Trade Terms. Paris: International

Chamber of Commerce.

OECD (Organisation for Economic Co-operation

and Development) and WTO (World Trade

Organization). 2007. Aid for Trade at a Glance

2007: 1st Global Review. N.p.: OECD and WTO..

OGC (United Kingdom Office of Government

Commerce). 2005. Managing Successful Projects

With Prince2. London: TSO.

Raven, J. 2001. Trade and Transport Facilitation: A

Toolkit for Audit, Analysis and Remedial Action.

Washington, DC: The World Bank.

B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N



10

The role of the private sector in

border management reform



1. See “United Nations Centre for Trade Facilitation and Electronic Business Trade Facilitation Recommendations,” United Nations

Economic Commission for Europe, http://

www.unece.org/cefact/recommendations/

rec_index.htm.

2. See “United Nations Centre for Trade Facilitation and Electronic Business: List of

National Trade Facilitation Bodies/Committees,” United Nations Economic Commission for Europe, http://www.unece.org/

cefact/nat_bodies.htm.

3. For the rule see “Chatham House Rule,”

Royal Institute of International Affairs,

http://www.chathamhouse.org.uk/about/

chathamhouserule/.

4. Between 2002 and 2005 donors committed an average $21 billion annually to narrowly defined aid for trade projects (OECD

and WTO 2007). From 2001 through 2006

grants and loans to trade facilitation projects

increased from $101 million to $391 million

(http://tcbdb.wto.org/category _ project.

aspx?cat=33121).

5. See “Agreement to Establish and Implement

the ASEAN Single Window, Kuala Lumpur,

9 December 2005,” Association of Southeast Asian Nations (ASEAN), http://www.

aseansec.org/18005.htm.

6. Also known as hauliers.



7. See “ISO 28000:2007,” International Organization for Standardization, http://www.

iso.org/iso/iso_catalogue/catalogue_ics/

catalogue_detail_ics.htm?csnumber=44641.

8. See for example “Procurement Policies

and Procedures,” The World Bank, http://

go.worldbank.org/YZVQ9VQ490.



173



———. 2005. A Trade and Transport Facilitation

Toolkit: Audit, Analysis and Remedial Action.

Washington, DC: The World Bank.

SITPRO and A. Grainger. 2008. A UK Review

of Security Initiatives in International Trade.

London: SITPRO. http://www.sitpro.org.uk/

policy/security/initiatives0108.pdf.

UNECE (United Nations Economic Commission

for Europe). 2000. “Creating an Efficient Environment for Trade and Transport: Guidelines to Recommendation No. 4—National

Trade Facilitation Bodies.” Publication ECE/

TRADE/256, United Nations, Geneva.

———. 2001. “National Trade Facilitation Bodies:

Recommendation No. 4, Second Edition, Adopted by the United Nations Centre for Trade

Facilitation and Electronic Business (UN/

CEFACT).” Publication ECE/TRADE/242,

United Nations, Geneva.

UN ESCAP (United Nations Economic and Social

Commission for Asia and the Pacific). 2004.

ESCAP Trade Facilitation Framework: A Guiding Tool. New York: United Nations.

US CBP (United States Customs and Border Protection). 2004. Securing the Global Supply Chain:



The role of the private sector in

border management reform



10



174



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Customs-Trade Partnership Against Terrorism

(C-TPAT) Strategic Plan. US CBP, Washington, DC.

WCO (World Customs Organization). 1999. International Convention on the Simplification

and Harmonisation of Customs Procedures

(As Amended). Brussels: WCO. http://www.

wcoomd.org/Kyoto_New/Content/Body_

Gen%20Annex%20and%20Specific%20

Annexes.pdf.

———. 2007. SAFE Framework of Standards to Secure and Facilitate Global Trade. Brussels: WCO.

World Bank. 2010. Trade and Transport Facilitation

Assessment: A Practical Toolkit for Implementation. Washington, DC: The World Bank.

World Bank and D. Widdowson. 2007. “WTO Negotiations on Trade Facilitation Self Assessment

Guide.” World Trade Organization Document

TN/TF/W/143, World Trade Organization,

Geneva.

WTO (World Trade Organization) 2009. “WTO

Negotiations on Trade Facilitation: Compilation of members’ textual proposals.” Document

TN/TF/W/43/Rev.19, Negotiating Group on

Trade Facilitation, WTO, Geneva.



CHAPTER



11



Reform instruments, tools,

and best practice approaches

Robert Ireland and Tadatsugu Matsudaira



In addition to the critical considerations for border management modernization discussed in other chapters of this book, three dimensions

of modernization should be addressed: sector specific modernization,

interagency coordination, and cross border harmonization. Looking at

these three dimensions, this chapter explains how international instruments, tools, and best practice approaches—hereafter referred to collectively as international instruments—can be most useful to countries.

The chapter presents a typology of the international instruments and

discusses how countries can work toward adopting each. An annex briefly describes many of the key international instruments, tools and best

practice approaches currently available to reformers.



Sector specific modernization



Interagency coordination



As border agencies face the continuous

challenge of improving their business

processes, either to identify efficiencies

in the traditional operational and procedural fields or to meet a changing policy

or global environment, sector specific

modernization is commonly observed

in border reform efforts. Because the

regulatory framework of a sector is often

formulated on an agency basis, a sector

specific approach is often seen as an

agency specific approach. For example, a

customs administration can improve its

own risk management system without

consideration of other border agencies’



To deliver an optimal industry level

solution, alignment and cooperation

with other national stakeholders is necessary. Forms of interagency coordination vary widely in scope and include

activities such as increased data sharing,

harmonization of data requirements

and coding, delegation of authority,

joint operational activity (such as joint

customs and quarantine inspections),

and the use of a single window for border clearance processes. Interagency

coordination may enable multiple agencies to share a single noncompliance

database or see one agency conduct risk

B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N



Reform instruments, tools, and best practice approaches



Discussed in this section are three

dimensions of border management

reform: sector specific modernization,

interagency coordination, and cross border harmonization.



mandates or trading partners’ practices,

and equally, other border agencies can

also improve their own risk management systems in isolation. While this

may create definite improvements at the

agency level, it will not deliver an optimized process for the end user.



Three dimensions of reform



175



management activities on behalf of other border

agencies. A true interagency approach will enable

the development of a single access point for the border clearance process (a single window) rather than a

sector specific approach that, while improving individual processes, will still require the trading community to deal with multiple points of access to complete regulatory requirements.

Cross border harmonization



The third dimension of border management reform

is cross border harmonization. The need to consider

cross border harmonization comes directly from the

fact that international trade is, by definition, a cross

border transaction. Cross border harmonization

increasingly draws policymakers’ attention because of

evolving regional integration initiatives and is of great

interest particularly to landlocked countries, whose

competitiveness is partly governed by the performance of neighboring countries. The export process

in one country relates directly to an import process

in another country and, with increased integration of

trade supply chains, opportunities exist to create efficiencies through harmonization efforts that can treat

both the import and export procedures as part of the

same clearance process. Targeted areas could include

harmonization of data requirements and procedures,

coding harmonization, delegation of authority, synchronization of working hours, joint inspection processes, sharing of facilities (juxtaposed offices, one

stop border posts), and regional single windows.



11

Reform instruments, tools, and best practice approaches



The need for coordination



Interagency coordination and cross border harmonization will require modification in one or more

agency’s systems, and this raises issues of jurisdiction

and demarcation. A regulatory framework is traditionally based upon an individual agency’s requirements within a sovereign country. For example,

customs laws may prescribe how a customs administration operates—but not how other agencies should

undertake their regulatory responsibilities. Equally,

one country’s customs laws cannot dictate the roles

and responsibilities performed by another country’s

customs administration.

The impact of an interagency approach may be

significant. Regulatory requirements on data and

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documents, including formatting and coding, may

need to be consolidated between agencies, and information and communications technology (ICT) systems may require extensive modification or complete

redevelopment to enable integration and systems

compatibility—raising the questions of who changes

what and who pays. In addition to these technical

issues, the question of who leads the changes and

who bears the burden can result in a situation where

individual agencies may agree with the concept of

an interagency approach, but gaining consensus on

how these changes should be implemented becomes

problematic. For example, consider the situation

where all key border agencies have their own ICT

systems which are not interoperable and they discuss

implementation of a single window. In such a situation, when one agency states that the single window

should be based on its system, it is not difficult to

imagine that the other agencies would counterargue and prefer a single window based on their own

agency specific systems. Sustainable high level political commitments, such as decisions at the ministerial

or cabinet level, would help to resolve such issues—

but ministers need an appropriate guide.

The role of international instruments



International instruments can range from legally

binding requirements, such as those incorporated

in World Trade Organization (WTO) agreements,

through to recommended best practices and guidelines. Usually they are developed and negotiated by

countries in specialized multilateral organizations.

As international instruments are generally agreed

and ratified at the political level, they can be a persuasive driver of change—with high level political

commitment, interagency conflicts over leadership

and ownership can be managed across agencies.

Change based on international instruments can

also bring clarity to overall change objectives, thus

increasing engagement with industry stakeholders

(including donor community stakeholders, private

sector stakeholders, and government employees). International instruments are not generally standalone

texts, and usually they are supported by implementation guidelines to help countries make the necessary

changes to their systems and procedures. Furthermore, certain international instruments function



as benchmarks of change by providing monitoring

indices (discussed further in the following sections).

Because international instruments are international public goods, countries and agencies can expect more expert assistance to be available through

specialized international agencies and developed

countries that have already adopted such instruments. Also, with international experience and lessons learned from other countries (including developing countries facing similar situations—for

example, landlocked countries), donor assistance

may be more achievable when a country places emphasis on international instruments rather than on

its own unique solutions.

Finally, adherence to international instruments,

when it is announced to stakeholders and the general

public, provides higher predictability and transparency for the trading community and investors. It creates a favorable environment for international trade

and direct investment, and it shows the clear willingness of the country to adopt international standards

and provide services and a regulatory framework at

the global level.



Box 11.1



Sponsors of international

instruments



Intergovernmental organizations

• CODEX: Codex Alimentarius Commission (a joint

subsidiary body of the Food and Agriculture Organization of the United Nations [FAO] and the

World Health Organization [WHO])

• ICAO: International Civil Aviation Organization

• IMO: International Maritime Organization

• OIE: Office International des Epizooties (officially

the World Organization for Animal Health)

• UN/CEFACT: United Nations Centre for Trade Facilitation and Electronic Business (a subsidiary

body of the United Nations Economic Commission for Europe [UNECE])

• UNECE: United Nations Economic Commission

for Europe (a regional body of the United Nations)

• WCO: World Customs Organization (officially the

Customs Co-operation Council)

• The World Bank (officially the International Bank

for Reconstruction and Development [IBRD])

Others (not intergovernmental bodies)

• IATA: International Air Transport Association

• ISO: International Organization for Standardization



Sponsors of international instruments



Typology of international instruments



Countries might use and refer to international

instruments in their border management modernization efforts. These instruments may be categorized in the following areas:

1. Standardized cataloging of commodities crossing borders.

2. Standardized cataloging of identifiers of consignments crossing borders.

3. Standardized methods of transmitting information related to the consignments.



4. Standardized regulatory procedures for consignments crossing borders.

5. Border agency information management systems for consignment data processing.

6. Needs assessment to identify the gaps between

current border management practices and anticipated levels.

7. Performance indicators to measure modernization progress and to identify bottlenecks.

This section will give a detailed explanation of

each type of instrument. It will also refer to a number of specific international instruments. These instruments are discussed in more detail in annex 11A.

(For the full names of concepts, instruments, and

organizations to which this section refers using only

initials, acronyms, or other abbreviations, see notes

to table 11A.1, in the annex to this chapter.)



11

Reform instruments, tools, and best practice approaches



Numerous specialized international bodies develop

and maintain trade related instruments. Some of the

more widely known organizations and associations are

listed in box 11.1. The list is indicative only—it should

not be regarded as exhaustive. For example, WTO

agreements also provide an international harmonization framework in certain areas of trade formalities,

and ongoing multilateral negotiations on trade facilitation1 will likely produce a new WTO agreement following the completion of the negotiations.



Standardized cataloging of commodities crossing

borders means a harmonized description of the commodity and its sharing among stakeholders. As duty

rates and many regulations are based on commodity type, it is imperative to have a coding system for

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177



identifying and describing goods. In reality the goods

classification system of one agency could be different

from that of another agency: for example, if the customs goods classification system is different from the

quarantine goods classification system, such a difference undermines interagency coordination. Another

example is in a single window environment, where

the trader needs to input data only once for multiple

regulatory purposes. If the customs and quarantine

goods classification systems are different, the trader

would need two goods description data inputs to satisfy both regulatory requirements. The internationally adopted instrument for goods classification is the

WCO’s Harmonized Commodity Description and

Coding System (HS Convention; see annex).

Standardized cataloging of identifiers of consignments

crossing borders enables multiple stakeholders to identify specific consignments within the supply chain and

create linkages between the physical consignment

and its associated information. The ability to track

and trace individual consignments supports trade

facilitation and security as well as food and product

safety and logistics quality. Illustrative cataloging

references are the Unique Consignment Reference

(UCR) and Unique Shipment Reference (USR): for

example, ISO 17364 and ISO 17365.

Standardized methods of transmitting information

related to the consignments enables seamless data

sharing and data flow among the stakeholders within

a country and across a border. Traditionally this was

done in the form of paper, but increasingly it is done

electronically. In a paper format, the UN Layout

Key provides a base format for multiregulatory purposes. The concept of Single Administrative Document (SAD), originally developed in the EU and

based on the UN Layout Key, is now in wide use.

These instruments not only standardize the paper

format but also prescribe what sort of information

is required for the formalities. UNTDED provides

countries with standardized definition of such data

requirements. Added to this, certain international

instruments provide standardized description of

data requirements besides goods description. Such

areas include coding on location, country name, and

means of transport. For electronic data transmission the UN has developed UN/EDIFACT and the



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United Nations electronic Trade Documents Project (UNeDocs). In the customs domain, the WCO’s

Data Model guides standardized data requirements

and their definition and the application of codes for

electronic transmission. IATA’s standardized electronic messages on air cargo operations (for example,

freight manifest) are widely used in the industry.

Standardized regulatory procedures for consignments

crossing borders are provided by specialized international organizations. They are developed through

a series of consultations and negotiations focusing

on achieving both trade facilitation objectives and

appropriate levels of control. In the customs arena

the key instrument is the WCO’s International Convention on the Harmonization and Simplification

of Customs Procedures, also known as the Revised

Kyoto Convention (WCO 1999). Th is convention and its associated guidelines provide customs

administrations with guiding principles on managing an internationally harmonized border clearance

process. Similar guidelines are provided by conventions in the areas of road traffic, ship and port management, and air transportation. 2 In addition, certificate and technical conformity procedures for the

importation of certain types of goods are provided

by instruments of CODEX (for foods) and OIE (for

animals and animal products).

Border agency information management systems for

consignment data processing guide countries on how to

construct the ICT platform for their clearance processes.

In the WCO’s Revised Kyoto Convention (WCO

1999), chapter 7—titled “Application of Information Technology”—and its associated guidelines

provide valuable information to countries introducing a customs ICT system. UN/CEFACT Recommendation 33 (UNECE 2005) gives guidance on

establishing a single window. Also, its Single Window Repository (UNECE 2006) provides information on other countries’ single window systems.

Needs assessment to identify the gaps between current

border management practices and anticipated levels

is increasingly used when a country or agency would

like to modify its systems in order to meet certain targeted situations. Originally developed as a model to

measure the difference between expected service



levels and delivered or perceived service levels, gap

analysis is a method useful in comparing an organization’s existing performance with its desired performance based on recognized norms (Parasuraman,

Zeithaml, and Berry 1985). The World Bank’s Trade

and Transport Facilitation Audit (TTFA), for initial

diagnosis, has been used in more than 40 countries

(see Raven 2005; the recently revised version, retitled

Trade and Transport Facilitation Assessment, is now

available in World Bank 2010). The World Bank,

together with the IMF, OECD, UNCTAD, and

WCO, has also produced a needs assessment guide

(World Bank 2008) for the WTO Trade Facilitation Negotiations, which has been used by more

than 80 WTO members. The WCO also developed

the Customs Capacity Building Diagnostic Framework and has used it to identify customs needs in

more than 100 countries.



The hierarchy of international

instruments



Th is section describes four legal categories of international instruments, from those with binding force

to those with a strictly informational function.3 It

provides a general overview of these four categories.

Conventions are instruments with legal binding force

on the contracting parties.4 To become a contracting

party, a national ratification process is often necessary



Recommendations are unilateral acts with no binding legal force—they simply propose a given behavior to countries. The purpose of such recommendations is to examine the technical aspects of national

systems, as well as related economic factors, with a

view to proposing to the countries practical means of

attaining the highest possible degree of harmonization and uniformity. No penalty is incurred in case

of nonconformity by the sponsoring party. Nevertheless, to increase international accountability, certain recommendations contain an acceptance procedure. In such cases a country needs to deposit its

acceptance instrument at the repository. Examples

are UN/CEFACT recommendations.

Guidelines and guides are nonbinding instruments

and tools whose purpose is to provide interested

national agencies with information on a particular

technical matter and to encourage them to take the

appropriate measures as an aid to decisionmaking.

They frequently follow intentions of political will

and include declarations such as the WCO’s revised

Arusha Declaration on integrity in customs (WCO

2003b). There is no acceptance mechanism for them.

Examples are the WCO’s Time Release Study (WCO

2002a) and the World Bank’s Trade and Transport

Facilitation Audit approach (Raven 2005).



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Performance indicators to measure modernization

progress and to identify bottlenecks are valuable tools

to monitor the modification and, in certain cases, to

fine tune modernization efforts. In many instances,

border management modernization emphasizes

streamlined procedures and the reduction of dwell

and processing times. The WCO’s Time Release

Study (WCO 2002a) is one such tool, providing

stakeholders with data and information to identify

the current situation, identify bottlenecks, and to

monitor the effects of modernization. Any national

effort also needs to be reflected in the behavior of

international traders and investors. The World

Bank’s Logistics Performance Index (LPI) reflects

private sector perceptions of the country’s performance in trade facilitation and modernization

(Arvis and others 2007; Arvis and others 2010).



(for the party to indicate high level commitment to

adherence to the convention provisions). The accession instrument has to be deposited at the depository.

Contracting parties are given incentives to eliminate

noncompliance situations—for example, by peer pressure, by the driving force of the market, with technical assistance and capacity building support, through

a dispute settlement mechanism, and, in a few cases,

through sanctions. Examples are WTO agreements,

the WCO’s HS Convention (WCO 1999, 2008b),

and the IMO’s FAL Convention (IMO 1965).



Compilations, case studies, and best practices are compilations of foreign experiences whose purpose is to provide interested national agencies with cases for a particular technical matter and to deepen understanding

of the issues as an aid to decisionmaking. Examples

are UN/CEFACT’s Single Window Repository

(UNECE 2006) and the World Bank’s Customs

Modernization Initiatives.

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