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Digital Solutions for Trade Facilitation

By Wilfried Deudjui Mbouwé
01 Jul 2020
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Digital Solutions for Trade Facilitation

Introduction

Since 1947, states of the world have been working to liberalize international trade by reducing tariffs, under the General Agreement on Tariffs and Trade, and since 1995 under the World Trade Organisation (WTO) Agreements. The main focus initially was to reduce tariffs. However, it has become increasingly clear that tariffs are not the only impediments, and perhaps not even the most important impediments, to the movement of goods across borders. The multiplicity of border agencies and the documents they require, as well as many other non-tariff barriers are significant trade barriers contributing to significantly increase costs and delays to move goods across borders. In many cases they dwarf the impact of reducing tariffs. Thus, trade facilitation has become more important over years and in 2017, a multilateral agreement was adopted by the WTO members states to address this issue: the pdf Trade Facilitation Agreement (TFA) (150 KB) .

Several definitions have been given to Trade Facilitation, but in a broad sense, the aim of Trade Facilitation is to reduce the cost of transactions as well as the time it takes to ship/receive a good from the moment the economic operator intends to export or import. This is done by simplifying and harmonizing formalities and procedures as well as making them transparent.

The latest developments in ICTs have brought great change and facilitated improvements in many areas of the economy and society, and international trade is no exception. ICTs offer enormous possibilities in the implementation of trade facilitation measures. Indeed, some provisions of the Trade Facilitation Agreement call on Members to use ICT for their implementation.

The applications of ICT to facilitate trade today are many and varied. Here, we review some of the commonly used digital solutions that contribute to trade facilitation.

The Trade Information Portal

When someone wants to export/import, there are some basic questions that come into mind:

  • From which international partner can I acquire a given product or which international partner might be interested in the product I’m selling?

  • How do I ship my product to a customer or how do I get a product from a particular supplier to me? Where do I start? Who do I need to contact?

  • How much would it cost to receive or ship a particular product?

  • What are the new provisions or restrictions to comply with during the Covid-19 pandemic?

Having answers to these questions in just few clicks, from a single source, provides a potential importer/exporter with considerable time savings (in the order of several days). This is precisely the role of a trade information portal.

In the World Bank’s Developing a Trade Information Portal guide,[1] a Trade Information Portal is defined as a resource (web application) provided by governments to traders in order to obtain, from one single source, all the information that importers or exporters in a given country may require in order to comply with their regulatory obligations in relation to all the government agencies that control export, import or transit business.

This particular tool enables Member States to comply with the requirements of Article 1 of the Trade Facilitation Agreement.

The development of an information portal involves a business process analysis which very often highlights unnecessary bottlenecks and redundancies. This is beneficial, as it ultimately leads to procedures simplification.

Trade portals differs one from another in terms of the specific features they have, from basically describing what the procedures are to having some intelligence modules to find attractive markets.

Two recent tralac publications reviewed some Trade Information Portals and considered how Africa could leverage the trade information dividend to enhance trade performance.[2]

As part of the implementation of the AFCFTA, the AU plans to launch the African Trade Observatory which is a trade information portal at the continental level.[3]

The Single Window

Once the economic operator knows what is required to complete a commercial transaction, certain documentation must be provided (usually concerning the goods, the sender and the consignee) to the numerous border agencies involved in the process. Although customs are considered the focal point, technical administrations are also responsible for carrying out certain checks before authorizing the cross-border movement of a good. These include health services, agriculture, the environment, standards, etc. Having to interact with each of these agencies, one at the time, providing sometimes the same documents can be very tedious and time consuming. The situation is more critical when the processing of information is still manual and that the agencies are not physically grouped at the same place.

The solution to this situation is the single window. The single window allows the user the submit all the required documentation to a single interface and is responsible for dispatching to each agency the information it needs to qualify the goods to cross the borders.

The single window is an information system that facilitates the exchange of information between the various parties involved in the process, and greatly contribute to border agency cooperation and thus speeds up the movement of goods across borders.

There is extensive documentation on single windows, including UN/CEFACT recommendations[4] and the African Alliance for e-Commerce single window implementation guide.[5]

In Africa, several countries (Senegal, Tunisia, Congo or Cameroon) have proven their ability to implement Single Windows.

Automated customs

Customs clearance is usually the last administrative step that allows a good to cross borders. With manual processing of incoming files, customs officers can easily be overwhelmed and it could take several days to clear them. In almost every country in the world, Customs relies on a more or less complex IT system to release goods. There are several automated Customs solutions, among which the most known is certainly ASYCUDA developed by UNCTAD. But there are also solutions developed by States themselves or by private companies.

Customs automation also greatly facilitates engagement between customs agencies – the exchange of information is instantaneous, thus speeding the movement of goods across borders.

Unfortunately, it seems that some African countries are still struggling to trust their local human resources enough to develop their own customs systems, perhaps for political reasons. But experience with single windows shows that establishing such initiatives, is within their reach.

The Port Community System

While the documentary check for compliance of the goods is being established by the various border agencies, the goods are at the same time taken care of in the logistic circuit of shipment or delivery. Private operators generally intervene in close collaboration with the port authority, for example when it is a maritime shipment: shipping agents, shipping lines, terminal managers, etc. Here, the movement of goods depends on the information exchanged between these different parties from the moment the goods are entrusted to the agent in charge of the shipment: particularly dates of arrival/departure of the vessel, the state of the terminals, weight and type goods, etc...

It goes without saying that the logistic performance of these private operators considerably impacts the time spent at the borders and the cost involved.

This is where the port information system comes into play. The port information system facilitates the flow of information between private logistics operators and government agencies in charge of the trade infrastructure and consequently the speed of the process.

E-Payment Solutions

While completing the administrative formalities, the exporter/importer has some taxes, fees and charges he must pay. Having to make payment to each of these administrations in cash, is not without risk and can be very tedious.

E-Payment solutions help solve this problem. In some cases, they are implemented in such a way that all fees, taxes and charges are grouped together at the end of the process and the shipper only has to make a single payment.

When implemented at the regional level, electronic payment solutions can significantly reduce transaction costs. The cost of international payments reflects the fact that money is transferred through several banks from the buyer’s bank to the seller’s bank. Interesting initiatives exist and regional payment systems are being developed. Examples include SADC (SADC Payment Integration System) and EAC (EAC Payment and Settlement Systems Integration Project), and more recently also at the continental level the Pan-African Payment and Settlement System (PAPSS) within the framework of the AFCFTA.

The development of mobile payment solutions are also being adapted by some countries and are being implemented to settle some foreign trade procedures payment.

Other digital solutions

Among digital solutions to facilitate trade, there are also solutions related to technical administration at border posts. For example, we can mention the following:

  • The electronic phyto-sanitary certificate: agriculture services;

  • The electronic sanitary and veterinary certificate: health services;

  • The electronic certificate of conformity: standard agencies;

  • The electronic certificate of origin: chamber of commerce or a designated agency, sometimes a particular service of a ministry when sensible goods are concerned (timber, cocoa and coffee);

  • Electronic cargo tracking systems: usually used by customs to track goods in transit, or shippers council to inform shipper of the position of their good. This solution particularly helps to anticipate procedures before goods arrival, thus saves time to clear them.

Measuring Trade Facilitation

Implementing all the above mentioned digital solutions is not an end in itself, but they are all means to make international trade easier for economic operators. This is why it is important to verify whether they actually contribute to reducing costs and transit times. To this end, several trade facilitation indicators have been developed by bodies such as the OECD[6] and the World Bank. Monitoring these indicators provides answers that will help governments to adjust their approach to trade facilitation. For example, they provide answers to questions such as:

  • Which indicators have the greatest impact on facilitation?

  • Which type of goods face the most difficulties crossing borders and why?

  • What is the profile of shippers who have the most difficulty in carrying out their operations and why?

  • Which period of the year is busiest for certain types of shipments?

  • What logistics infrastructure is best suited to the shipment of particular goods?

This is where data science can be very useful.

As stated by Stuart, ‘Data science’ refers to a growing body of knowledge around the acquisition, manipulation, visualisation, analysis and reporting.[7] Data science applied to the analysis of international trade can be used to develop models that allow us to anticipate the future. A publication by tralac shows how data science techniques could be used to measure trade facilitation.[8]

Conclusion

Economists say that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to $1 trillion per year, with the biggest gains in the poorest countries.[9] For African countries the issue is much more critical, especially at a time when we are preparing for trade under AFCFTA in the near future.

It is widely recognized that digital solutions can be used to great advantage in implementing trade facilitation measures. Well-known solutions exist and can be implemented, but it must be kept in mind that they are means and not an end. They are not relevant if they do not help economic operators to trade more easily.

Africa has competent and skilled resources to implement them, and it should take advantage of them.


[1] World Bank. 2012. Developing a Trade Information Portal. Washington, DC.

[2] Stuart, J. 2019a. Initial Assessments of Africa’s New Trade Information Portals. tralac Trade Brief and Stuart, J. 2019b. Leveraging the Trade Information Dividend for Africa. tralac Blog.

[3] See African Union. 2019. Operational phase of the African Continental Free Trade Area launched at Niger Summit of the African Union and ITC: The African Trade Observatory.

[4] UN/CEFACT. 2005. Recommendation and Guidelines on establishing a Single Window to enhance the efficient exchange of information between trade and government. New York and Geneva.

[5] AACE. 2017. Practical Implementation Guide of Single Windows for Foreign Trade. Dakar.

[6] ESCAP-OECD. 2017. Indicators for Trade Facilitation: A Handbook. Paris.

[7] Stuart, J. 2019c. Introducing Data Science Techniques for Trade Analysis: With Applications in Knime. tralac Working Paper.

[8] Stuart, J. 2018. Trade Facilitation in Africa: Progress, Performance and Potential. tralac Trade Brief.

[9] WTO. Trade Facilitation: Benefits of the TFA.

About the Author(s)

Wilfried Deudjui Mbouwé

Wilfried Deudjui Mbouwé

Wilfried Deudjui Mbouwé is a software engineer with extensive experience in building web applications and software components especially related to cross-border trade and logistics. Working at Cameroon National Shippers Council, he has been involved in trade facilitation and has worked as research officer in charge of information systems for 3 years at the National Trade Facilitation Committee. A tralac alumnus, he is passionate about Africa’s economic growth and development and applies its IT skills to achieve that goal.

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