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Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 2
1. World Trade Organisation (WTO) Trade facilitation agreement (TFA) 3
2. Authorised economic operator
• Tool for roll-out of trade facilitation 16
3. WCO / WTO Nudge for transparency in trade data flow
• Advance Cargo Information implementationGuidelines (2018)
• Guidelines on Immediate Release (2018)
• Pre-arrival processing of import customs declaration (2017) 24
4. Trade data flow harmonisation
• Case for Blockchain adoption 30
Contents
Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 3
World Trade Organisation (WTO) Trade Facilitation Agreement (TFA)
Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 4
Trade Facilitation Agreement (TFA)
Streamlining, harmonising, and modernizing customs processes
Expediting movement, release and clearance of goods during Import, Export and Transit
Reduction in trade costs (administrative costs and inefficient border procedures)
1
2
3
Focus areas
“You could say that [TFA] is global trade's equivalent of the shift from dial-up internet access to broadband,”
“Trade costs in developing countries are equivalent to applying a 219 percent ad valorem tariff on international trade. Even in high-income countries, the same product would face an ad valorem equivalent of 134 percent in trade cost,”
“Full implementation of the TFA could slash members’ trade costs by an average of 14.3 percent”
A few quotes from WTO Director-General Roberto Azevêdo:
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Journey so far—Trade facilitation
Discussion phase RatificationImplementation—Category A, B
& C
1994
GATT gave way to WTO
Talks began—Singapore Ministerial Conference
Agreement to launch TF negotiations
Bali Ministerial conference—in-principle agreement
110 member of WTO ratified
145 WTO members ratified
Realising the Vision of TFA
2004 2017 …
2013 20191996
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Business to government partnership as facilitator of trade
TFA—Trigger for changing role of Customs
Tariff and border control
(traditional role of customs)
Trade facilitation
(Evolving role of customs)
• WCO SAFE Framework (2005)—Authorised Economic Operator (AEO)
• Revised Kyoto Protocol (2006)—Authorised Persons
• WTO Trade Facilitation Agreement (2017)—Authorised Operator—Article 7.7 of the TFA (Article 7—Release and clearance of goods)
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TFA—A broad framework
Government
Government + Enterprise
Enterprise
Publication and Information
Opportunity to comment
Advance Ruling
Procedure for appeal and review
Measures to enhance impartiality, non-discrimination and
Transparency
Disciplines on fees and charges and Penalties
(w.r.t. imp/exp)
Release and clearance of goods
Border Agency Cooperation
Movement of goods intended for import under Customs
control
Formalities—import, export and transit
Freedom of transit
Customs cooperation
TFA Framework
Art. 1
Art. 2
Art. 3
Art. 4
Art. 5
Art. 6
Art. 7Art. 8
Art. 10
Art. 11
Art. 12
Art. 9
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TFA—Tools of trade facilitation
1
Pre-arrival
processing
E-payment
Separation of Release from final
determination of duties etc.
Risk Management
Post-clearance Audit
Authorised Operator
Expedited Shipments
91
Perishable goodsAdvance
cargo intimation
Risk based facilitation and interdiction
To expedite release of goods while ensuring compliances
Trusted partner in trade
Expedited release at air cargo facilities
Priority in customs clearance
Payment of Customs duty
and fees
Time Release Study
Publication of average release time
6
7
8
5
Speedy and safe release & clearance of goods
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TFA customs processes—Trade automation and single window
Temporary admissionof goods
Formalities and documentation requirement
Acceptance of copies
Use of international standards
Single window
Pre-shipment inspection
Use of customs brokers
Rejected goods
Simplification, harmonisation and modernisation of customs processes
8 1
2
3
45
6
7
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Region-wise—Time and Cost to Export (2019)
Source: Doing Business Report, 2019 :Trading Across Borders
Border and Documentary compliance-15 MT of non-containerised cargo
Time to Export (hours) Cost to Export (USD)
170.1
137
125.9
114.4
112.3
46.4 14.9
Sub-Saharan Africa South Asia
Middle East & North Africa Latin America & Caribbean
East Asia & Pacific Europe & Central Asia
OECD high income
774.6
687
640.2
507.5
491.6
255.4174.3
Sub-Saharan Africa Middle East & North Africa
Latin America & Caribbean South Asia
East Asia & Pacific Europe & Central Asia
OECD high income
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Region-wise—Time and Cost to Import (2019)
Source: Doing Business Report, 2019 :Trading Across Borders
Border and Documentary compliance-15 MT of containerised cargo
Time to import (hours) Cost to import (USD)
224
196.6
180.9
141.7
126.2
45.8 11.9
Sub-Saharan Africa South Asia
Middle East & North Africa Latin America & Caribbean
East Asia & Pacific Europe & Central Asia
OECD high income
967.8
805
781.3
763.5
525.3
256.2125.1
Sub-Saharan Africa Middle East & North Africa
South Asia Latin America & Caribbean
East Asia & Pacific Europe & Central Asia
OECD high income
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ASEAN – Time and Cost to Export (2019)
Source: Doing Business Report, 2019 :Trading Across Borders
Border and Documentary compliance-15 MT of non-containerised cargo
Time to Export (hours) Cost to Export (USD)
286
272
180
115
105
78
69
55 38 12
Myanmar Brunei Cambodia Indonesia Vietnam
Philippines Lao PDR Thailand Malaysia Singapore
572
509
475
430429
393
375
372
320
248
Myanmar Philippines Cambodia Brunei Vietnam
Indonesia Lao PDR Singapore Thailand Malaysia
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ASEAN – Time and Cost to Import (2019)
Source: Doing Business Report, 2019 :Trading Across Borders
Border and Documentary compliance-15 MT of containerised cargo
Time to import (hours) Cost to import (USD)
278
216
206180
140
132
71
5443 36
Myanmar Philippines Indonesia Brunei Cambodia
Vietnam Lao PDR Thailand Malaysia Singapore
667
630
556
547
445
360
339
276
273
260
Myanmar Philippines Vietnam Indonesia Brunei
Cambodia Lao PDR Thailand Malaysia Singapore
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Import of Auto Components (Heading 8708) from South Korea—2019
Case study—India
Successive reduction in time release of goods by using various facilitation tools
16
(62.03)
14
(58.17)
9
(30.11)
4
(33.01)
3
(23.44)
Total Bills of Entry
Advance Bills of Entry
Advance Facilitated Bills of Entry
Advance Facilitated DPD Bills of Entry
Advance Facilitated DPD Bills of Entry – AEO
() Release time in hours
Source: Time release Study 2019, a Report by Jawaharlal Nehru Customs House, CBIC, India.
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TFA for time and cost reduction – What organisation should do
As-is statusassessment
Planning & implementation
Monitoring & deliveringefficiency
1. Identify key performance indicator
in global trade
2. Quantify and measure current
performance like average release
time, average non-tariff costs,
relevant proportions and
percentages of cost and time with
volume and value of trade
3. Quantify and measure linkages of
trade performance indicators with
cost, profit and working capital
requirement for business
1. Identifying goals and objectives
based on As-Is assessment
2. Preparation of multi-year action plan
for roll-out of TFA benefit realisation
plan
3. Setting-up governance structure and
detailing out work plan
4. Listing out potential TFA linked
benefits and efficiencies; prioritising
early wins
5. Scheduling annual progress review
meetings
1. Developing real-time dashboards for
MIS purposes
2. Monitoring the TFA linked benefits
and assessing the efficiencies
3. Introducing course correction
measures, if required
4. Project Handover on achieving the
estimated/ targeted benefits/
efficiencies
• TFA roll-out is likely to have a very dynamic and evolving relationship with business performance
• Identifying the linkages between various TFA tools and business performance is the first step towards identifying the potential gains from TFA program to business
• Setting up TFA benefits monitoring and control framework can lead to sustained realisation of efficiency
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Authorised Economic Operator (AEO)Tool for roll-out of trade facilitation
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Tool for roll-out of trade facilitation
AEO
• TFA benefits to unfold and evolve over a period of time
• TFA/ AEO can be a strategic tool for driving efficiency and cost reduction in international supply chain
Streamlines and simplifies global Trade
Processes
Reduces Non Tariff transaction costs
Increased velocity and efficiency of trade
TFA
AEO
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Industry participation in India
AEO certified entities
651
423
42588
AEO LO
AEO T2
AEO T3
AEO T1
AEO Circular—July 2016
June 2018
950 2,110
December 2018
3,666
July 2019
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Tool for roll-out of trade facilitation
AEO
Key drivers for AEO certification
• deferred payment of duties, taxes, fees, and charges—leading to working capital efficiency
• use of comprehensive or reduced guarantees – leading to reduction in transaction cost
• a single customs declaration
• clearance of goods at the premises of the authorised operator
• opportunity for automation and improved controls
• low documentary and data requirements
• low rate of physical inspections and examinations
• rapid release time
Global objective to facilitate legitimate trade
AEO certification is evolving into an industry standard of good governance
AEO certification issued to importers, exporters and service providers in the international supply chain
01
02
03
Financial BenefitsBusiness process
efficiencyFacilitation at
Customs
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Industry: Key questions
Why should we apply for AEO and when?
Who should be the organisational sponsor for this transformation?
How should the benefits be quantified and monitored?
What more should be expected from the Government?
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Industry Challenges—AEO for business
Benchmark/ Case
studies• Availability of India specific benchmarks, studies and experience sharing
Business • Identifying direct linkages to revenue, cost and profit
People • Crossing the hurdle of behavioral reluctance to change
Skillset • Integrating cross-functional skill set for transaction cost identification, optimisation and monitoring
Responsibility • Identifying the sponsor and project owner for leading the change
Decision making • Finding internal success stories/ proof of concepts in global operations before implementing the change in
India
System and
process • Institutionalising the AEO program through change in systems and process
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AEO Program—Linkages with business performance matrix
Key statistics and trends
1. Average release time, per TEU
2. Average non-tariff cost in global trade, per TEU
3. Average working capital deployed, per TEU
4. Non-tariff cost as a percentage of value of traded goods
• AEO is a dynamic trade facilitation program; it will continue to evolve over a period of time
• Business should be able to identify direct linkages between AEO program and business performance parameters
• Business should develop TFA benefits monitoring and control system for realising targeted efficiency
Aggregate quantum of trade
1. Volume of trade, in terms of TEU
2. Value of global trade
3. Working capital deployed on global trade transactions
4. Non-tariff costs in global trade
5. Top five non-tariff costs in global trade identified for driving efficiency
Targeted efficiency
1. Average release time
2. Average transaction cost
3. Working capital deployed
4. Non-tariff cost as a % of value of traded goods
5. Quick wins in identified non-tariff cost heads
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AEO certification—How organisation should plan
• Confirm scope of work
and governance
structure
• Identify activities and
work plan to be
undertaken for AEO
certification
• Perform As Is assessment
• Hold half day ‘Status
Assessment workshop’
• Validate existing operations and
processes against AEO
requirements
• Identify gaps and prepare
remediation plan
• Standardise trade process
across business units
• Writing /updating of SOP
• Run mock run of self
assessment to identify operating
gap and remediation steps
• Preparation of AEO
application
• Submission of AEO
application
• Tracking the progress of
application and follow-up
• AEO knowledge sharing
sessions to key process
owners
• Training of diverse
stakeholders
• Assist in answering to any
queries from customs
• Assist during on-site visit by
Customs, if any
• Provide On-site support
during verification by the
customs authorities
• Assist in monitoring andfollow up with Customs
• Assist on remediation of any
adverse findings and
submission to Customs
• Project plan and
schedule
• Project Management
Team
• Process and system gaps and
remediation road map
• Operational gaps in
implementation and adoption of
relevant processes
• AEO application
• Revised SOP if any
• Awareness building with
business process owners
• Status update report
• Document strategic intent
& outcomes for AEO
certification
• Gap assessment and remediation
• Submit valid AEO application
• Build internal competencies
• Sensitise all the stakeholder
for potential interview by
Customs
Project and Quality Management Team
Acti
vit
ies
Ob
jecti
ve
Deli
verab
les
Readiness AssessmentPlanning Follow up with
Customs
Application preparation
and submission
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World Customs organisation(WCO)/WTO nudge for transparency in trade data flow
Driving harmonisation
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WCO/WTO nudge—SAFE and Facilitated Cargo
• TFA benefits to unfold and evolve over a period of time
• TFA strategic tool for driving efficiency and cost reduction in international supply chain
Immediate release guidelines (2018)
Pre-arrival processing of import customs declaration (2017)
Advance cargo information implementation guideline (2018)
Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 26
• Invoice
• Packing list
• Buyer / Sellers
• Terms of supply
Commercial data
• Classification
• Valuation
• Licensing / controls
• Country of origin
Customs dataDeparture/Arrival
manifest
• Commercial data
• Shipping data
• Customs data
• Other data
• Port of loading / discharge
• Date of departure / arrival
• Shipping details
Shipping data
Risk assessment and pre-arrival
Trade data flow—Single pipeline, multiple stakeholders
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WCO Guidelines—Advance Cargo Information (ACI)
Information from Bill of Lading
• Process flow of ACI data set and Customs decision making detailed in the next slide
• ACI paves the way for smarter border controls-reduced inspections, storage and time delay related costs. Business to provide quality data for ACI and Customs
• ACI is an aid to deliver the vision of WCO SAFE Framework
• ACI data set can help to identify high-risk cargo prior to loading and/or arrival.
• ACI allows Customs intervention prior to loading / arrival.
• Customs Risk management system analyses ACI data set to categorise shipments as document, non-dutiable, low value and high value
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Interdiction before departure or arrival
WCO Advance Cargo Information (ACI)—Typical workflow
Port of Origin
Carrier files ACI-
data drawn from Bill
of Lading
Containers marked
with? Do not Load?
Message is
segregated
Containers cleared
from Risk are loaded
on vessel for port of
destination
Carrier may amend
ACI data submitted
Carrier files Arrival
notification
Customs receives
ACI Data
Customs conduct
Risk Assessment
If positive risk
found-customs issue
? Control at
discharge?
notification
Custom do not allow
Amendment of ACI,
If container is
selected for
inspection
Carriers presents
the container for
customs inspection
Customs retrieves
risk results
Customs inspects
container wherever
required
Container with Risk
is stored separately,
before a Bill of Entry
is filed by importer
Importer files Bill of
Entry for clearance
of shipment
Cargo inspected
basis the Risk
identified before
release of shipment
to importer
Port of Destination
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Enable immediate release of shipments from customs
WCO—Guidelines on Immediate Release of shipments
Category 4
• High value consignments (full declaration)
Streamline and expedite the handling of the
consignments upon arrival
Category 2
• Low value consignments—no duties (De-
minimus)
Category 1
• Correspondence and documents (Documents)
Facilitate the pre-arrival processing and risk management
based on advance cargo information
Categorisation of shipments and immediate release
procedures are same for export and imp[ort
Consignments presented for immediate release
divided into four categories
Category 3
• Low value dutiable consignments (simplified
declaration)
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Enabling facilitation and fraud detection
Trade Data Flow harmonisation—case for blockchain adoption
Data embedded in trade documents are converted into easily analyzable
structured and harmonised data.
Provides opportunity for data analytics to detect anomalies and fraud in
shipments.
Agencies verify origin of goods, trace goods in supply chains and detect
anomalies and fraudulent patterns.
Machine learning can be a powerful complement to blockchain in border
agencies’ risk management and fraud prevention
Blockchain can reduce the number of steps and processes among the network in one trade transaction
As a distributed ledger technology (DLT), blockchain can slash the number of bilateral communications and informational linkages and leakages
Facilitation and fraud detection
1
2
3
4
5
6
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ABC
ABC
ABC
ABC
ABC
ABC
A network of computers, connected via the Internet, in which users at any
one computer can receive or send peer to peer:
Value
Identity
Data
What is blockchain?
A decentralised, distributed ledger that provides a way for information to be recorded, shared and maintained by a community.
Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 33
Transactions recorded chronologically and cannot be
changed once added to the chain
For blocks to be added to the blockchain, it must be
achieved through Consensus
############# ##########################
#############
Each block can contain transactions, data and a reference to the previous blockchain (creating the chain)
What is blockchain?
A blockchain is a series of interconnected blocks, with new blocks added on the end of the ever lengthening chain.
Trade facilitation and blockchain© 2019 Deloitte & Touche LLP 34
What is not blockchain?
Common misconceptions about blockchain continue to pose a challenge in enterprise adoption
Blockchain is not an Enterprise Database
• Vast amounts of information that require absolute privacy within a single organisation is meant to be stored in an accessible location for viewing / querying (i.e. an enterprise database)
• Blockchain is designed to record specific transactions meant to be shared across a network of parties with a need for transparency and collaboration
Blockchainsecurity does not mean inherent data privacy
• The identity of the submitter is captured through private-public digital keys but Blockchain’s real secure characteristic is the relationship with all historical blocks in the chain
• This interrelation means that tampering historical data requires altering every subsequent block across every distributed node simultaneously
Blockchain is not Bitcoin
• Bitcoin is a type of cryptocurrency that uses Blockchain cryptography technology to securely record monetary transactions
• Blockchain properties provide the underlying technology that has enabled bitcoin and other cryptocurrencies to rise in popularity
Blockchain is not always public
• A public Blockchain is available for anyone to participate in the consensus process—it is permissionless
• A private Blockchain contains permissions stipulating the ability to view data, add to the chain, and participate in the consensus process
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