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ICT application in trade facilitation

ICT application in trade facilitation

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Published by ICTdocs
UNESCAP: ICT application in trade facilitation. http://www.unescap.org
UNESCAP: ICT application in trade facilitation. http://www.unescap.org

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ICT application in trade facilitation
ICT applications in trade facilitation refers to activities,processes and procedures that have adopted somedegree of information and communication technology(ICT) in order to facilitate trade transactions, particularly
in the elds of Customs formalities, trade documentation
flow and trade security. In other words, it is an ICT-
enabled simplication, harmonization, and automation of administrative and trade procedures towards efcient and
effective trade facilitation.ICT is the engine which facilitates exchange of information in such a manner as to ensure that trade
ows in a timely manner, with the absolute minimum of 
administrative impediments, while reducing a number of physical impediments. This is the fundamental rationalebehind the WTO and GATT articles.
United Nations Economic and Social Commission for Asia and the Pacic
United NationsE S C A P
POLICY BRIEF ON ICT APPLICATIONSIN THE KNOWLEDGE ECONOMY
I S S U E N O . 2 D E C E M B E R 2 0 0 6
Why does it matter?
Trade currently represents 30 per cent of world GDPand it is estimated that it will grow to 50 per cent by2020 and beyond (SWEPRO, 2002). Against thisbackground, ICT-enabled international trade facilitationbecomes absolutely essential due to increased volumes
of international trade transactions and the inefciency of 
traditional paper-based trade facilitation systems to copewith the rising amount of trade transactions.
The time wasted by inefcient trade procedure is one of 
the non-physical barriers on trade transactions and eachday saved is equivalent to half a per cent of trade tariff and seven per cent of value of international trade is thecost of administration of trade logistics (UNCTAD, 2006).Generally, seven to ten per cent of value of today’sinternational trade is spent on Customs formalitiesand a typical trade transaction involves 30 parties, 40documents, 200 data elements – 60 per cent of whichneed to be retyped at least once (ESCAP, 2002).The lack of transparency and duplicated trade proceduresin paper-based traditional trade facilitation (TF)significantly increases Government expenditures and
places additional nancial burdens on many developing
countries. According to UNCTAD (2006), US$ 100 millioncould be saved each year through the application of ICTin international trade transactions and operations andin some cases, even more. For example, it is estimatedthat the savings achieved after the introduction of theTradeNet system in Singapore amounted to US$ 1 billionper year (EJISDC, 2006).ICT application not only enhances TF, but also changesthe concept of trade-related government services throughthe introduction of various ICT-enabled techniques andservices, such as paperless trade documentation andreal-time information sharing among stakeholders withinand across national boundaries.In addition, there are three factors that have been forcingdecision- and policymakers, as well as the stakeholders,to seriously consider ICT integration in trade facilitation,
and more specically, the establishment of a simplied
and automated paperless Single Window TF system asthe way forward. These factors are: (1) Technologicaladvances; (2) Development of e-commerce; and (3)WTO accession and integration into the networked globaleconomy.The advancement of technologies, in particular information technology, together with the expansion andadoption of e-commerce, have dramatically reducedcosts and increased productivity. The WTO accessionprocess also requires member States to comply withrelevant GATT articles, such as the publication andadministration of trade regulations, which all require theapplication of ICT.
Stakeholders and players
Many stakeholders or players are involved in internationaltrade, they range from: exporters and importers topermit issuing authorities (PIAs); and from suppliersto intermediaries, including the transport or freightforwarders and shipping agents. In the absence of ICT
The role of ICT applications intrade facilitation
 
2application interconnection among those stakeholdersadds an additional layer of complexity in tradetransactions.The existence of various stakeholders means thattraders are faced with a huge number of differentregulations and documental requirements, includingseveral signatures needed from various PIAs.Participants at the WTO Symposium on Trade
Facilitation held in March 1998 identied the following
important issues concerning the inefficient trade
facilitation, as summarized below:
Excessive data and documentation requirements;
Lack of transparency and use of pre-rulingsystems, as well as unclear and unspecifiedimport and export requirements;
Inadequate procedures and a lack of audit-basedcontrols and risk-assessment techniques;
High degree of unpredictability and lack of automation and significant use of informationtechnology; and
Lack of modernization, and cooperation among,
Customs and other Government agencies, whichthwarts efforts to deal effectively with increased
trade ow (SWEPRO, 2002).
Some – mostly developed – countries have takenmeasures to address these issues, but measuresstill need to be taken in many developing countriesto overcome these barriers through ICT-enabled TFsystems.
Single Window
To achieve efcient TF, it is important for a country to
learn about the role of ICT in the modern trading worldas it begins to tackle the trade regime reform agenda.Therefore, any ICT application for TF should be setagainst the broader context of a country’s ICT policyand strategy.
The benets of establishing a Single Windows model to
facilitate trade in modern trading world are now widely
recognized. Single Windows forge a single connection
between all stakeholders in the trading community,which allows them, from a single point of entry, totransmit, and receive a specific data set, whenever and in whatever quantity or extent they wanted, as well
as in any data standard and format they need to fulll
requirements for import, export and transit regulationsand clearance. In other words, Single Windows
expedite and simplify information ows between trading
community and the Government.A truly integrated Single Window TF system shouldinclude various stakeholders participating in the
transition or migration process (gure 1). If the system
is not reflected in the national ICT policy and plansand regarded as a stand-alone initiative, integrationand collaboration with other government agencies and
private sector might prove difcult. ICT infrastructure
and human resource requirements of TF should also
be reected in the national ICT strategy, because they
require a much broader intervention from authoritiesresponsible for ICT capacity building and infrastructure(ESCAP, 2006).It may be easier to establish a Single Window indeveloping countries as it may be easier to set up anintegrated mechanism from scratch rather than attemptto overhaul an existing system into an integratedmechanism. For many developing countries, accessto such innovative technologies and their associated
benets is not a straightforward exercise as they facecapacity and nancial constraints. In terms of nancial
constraints, the set-up costs for implementing a SingleWindow are higher than operating costs. However, it isimportant to note that the long-term savings are muchhigher than the cost of setting up and operating SingleWindow.
Implementation of paperlesstrade facilitation system
One of the objectives for adopting ICT in tradefacilitation may be to reduce paper-based informationand documentation through the increased use of electronic versions of this information.
Figure 1
The electronic Single Window: connecting all stakeholdersSource:
Guidelines on ICT application for trade and transport 
facilitation in landlocked countries in the Asian and Pacic 
region,
ESCAP, 2006
Sypply ChainPIAApplicationsData BaseApplicationsData BaseApplicationsData BaseApplicationsData Base
Transport andLogisticsTradeProfessionalsPorts andHarboursTheElectronic SingleWindow
ApplicationsData BaseCustomsApplicationsData Base
 
3In this respect, the fundamental question should be“where to start?” The degree of ICT application for TF would depend on each country’s ICT capacities,including ICT infrastructure. In addition, the successof any implementation would depend on whether the paper-based system itself had been properlystreamlined and simplified sufficiently to ensureconversion into an electronic format.One of the important basic principles is “never toautomate present processes: that merely makes anunsatisfactory system faster” (ESCAP, 2006).There are many parallel steps involved in theimplementation of a paperless system as part of thesuccess factors. They include, among others:
Institutional arrangements, such as assigning thelead agency;
Mapping stakeholders, inuencers and potential
partners;
Assessment on the ICT awareness-level of keystakeholders;
Simplication and standardization of documents
and procedures;
A review of existing ICT-related legal andregulatory frameworks;
Mapping existing transaction processes anddocuments;
Risk assessment and management;
Examining the system designs and specications;
Extensive capacity-building initiatives;
Greater cooperation and partnerships with allinterested parties; and
Setting up monitoring mechanisms.Preparations needs to be made ahead of each phaseof the transition or migration procedure, from a paper-based to a simplified, automated, paperless tradingsystem. Clearly, this does not happen overnight, evenin the best case scenarios. It can take years to migrate
from one system to another (gure 2). Some countries
are far more advanced in adopting of ICT for TF than
others. As described in gure 2, TF systems (portals)
have evolved in stages over the years and countriesare at various stages through both national and regional
initiatives (gure 3).
Some of the factors contributing to the successfulimplementation of ICT-enabled TF systems include:
Commitment and political will from the highestlevels of Government;
Gradual phased implementation through variousconcurrent processes, involving all stakeholders,including Government agencies, private sector and other players in trade transactions andoperations;
Simplification and harmonization of trade
procedures and re-engineering of inefficientprocesses and documentation;
Introduction of international conventions,standards, codes and other instruments (e.g.,UN/CEFACT, WCO data models, etc.);
Transparent collaboration among variousstakeholders, both within the country and acrossborders, at all phases of the implementation;
Adoption of legal and regulatory frameworks for electronic processing and signature; and
The existence of basic ICT infrastructure.
Figure 2
Evolution of trade portals: towards a Single Windowglobal trade portalSource:
The Electronic Journal on Information Systems ineveloping Countries, 2006,
vol. 26, issue 3, pages 1-27.
Figure 3
Stages of the evolution of trade facilitation portals and
corresponding selected cases in the Asia-Pacic Region
Source:
The Electronic Journal on Information Systems inDeveloping Countries, 2006,
vol. 26, issue 3, pages 1-27.
StageGeographicScopeCases
Pre-singleWindowportalsNational
Eighty-ve plus countries (world wide)
have adopted UNCTAD’s ASYCUDAplatformSingleWindowportalsNationalAustralia (Tradegate), Hong Kong,China (DTTN), Japan (NACCS),Republic of Korea (KTNet), Malaysia(Dagong Net), Singapore (TradeNet),Thailand (TradeSiam)Regional,multinationalportalsMultinational,regionalASEAN Single Window initiativeGlobal portalGlobalBolero.net (a precursor)
<1980s
Pre-internetStage 1: Pre-SWe-Trade FacilitationStage 2: National SWStage 3: Regional,Multi-national PortalStage 4: IntegratedGlobal Trade Portal
>1981>1995
>2008>2010s?
ValueAddedTime and Scope of Integration

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