Distribution
GENERAL
TD/B/WG.2/6/Add.1/Part I
24 September 1993
Original: English
TRADE AND DEVELOPMENT BOARD
Ad Hoc Working Group on Trade Efficiency
Second Session
Geneva, 15 November 1993
Item 2 of the provisional agenda
FACILITATING TRADE
DRAFT GUIDELINES ON BETTER TRADE PRACTICES
Report prepared by
SITPRO, the Simpler Trade Procedures Board of the United Kingdom *
* SITPRO is the United Kingdom's trade facilitation body. It
was established by H.M. Government in 1970 to "guide, stimulate and
assist the rationalisation of international trade procedures and
documentation and the information flows associated with them". The
views expressed in this report are those of the authors and do not
necessarily reflect the views of UNCTAD or any other part of the
United Nations system. The report is reproduced as received and
the designations are those of the authors. The designations used
do not imply the expression of any opinion whatsoever on the part
of the UNCTAD secretariat concerning the legal status of any
country, area or territory, or of its authorities, or concerning
the delimitations of its frontiers.
DRAFT GUIDELINES ON BETTER TRADE PRACTICES
For technical reasons, the document is issued in two parts:
PART I: (enclosed)
Executive summary
A. Strategic overview
B. Best practice for traders
PART II: (to be issued later)
C. Best practice for governments and their agencies
D. Best practice for international trade services
Appendix 1 - Aligned Series of documents
Appendix 2 - EDI
SITPRO
August, 1993
CONTENTS
EXECUTIVE SUMMARY
PART A : STRATEGIC OVERVIEW
1. Trade Policy and the Role of Trade Efficiency
2. Trade Efficiency
3. Trade Efficiency and Trade Facilitation
3.1 Background
3.2 The Problem
3.3 The Result of Inefficiencies
3.4 How to Facilitate International Trade
4. Better Business Practice
4.1 The Need
4.2 The Benefits
4.3 Achieving Best Practice
PART B : BEST PRACTICE FOR TRADERS
9. The Role of Traders
10. Export Strategy
11. Researching and Entering Markets
12. Arranging the Contract
13. Getting the Goods to the Market
14. Documentation and Export Administration
15. Getting Paid
16. The Customer
PART C : BEST PRACTICE FOR GOVERNMENTS AND THEIR AGENCIES
5. The Role of Government
6. Facilitation at the National Level
6.1 Trade and Transport Policy
6.2 National Co-ordination
6.3 Facilitation Policy
6.4 Representation
7. Administrative Operations
7.1 Principles
7.2 Licensing
7.3 Exchange Control
7.4 Consular Formalities
7.5 Origin Statements
7.6 Pre-shipment Inspection
7.7 Dangerous Goods
7.8 Customs and other Official Procedures
7.9 Statistics
8. Government as a Business
PART D : BEST PRACTICE FOR INTERNATIONAL TRADE SERVICES
17. The Role of International Trade Services
18. Transport Services
19. Financial Services
20. Communications Services
Appendix 1 - Aligned series of documents
Appendix 2 - EDI
EXECUTIVE SUMMARY
1.This paper sets out guidelines on the best business practices
to be used in all aspects of international trade. It covers
three broad areas:-
-governments and their agencies
- traders
- international trade services.
2.It identifies that achieving growth in foreign trade and
obtaining new market opportunities requires not only the
maintenance of free trade principles, but also substantial
improvements in the efficiency of the overall trading
process. Trade efficiency can be achieved as a result of
combined three activities; trade facilitation, improving
access to better marketing information and the adoption of
new business concepts such as "just-in-time" purchasing and
production.
3.Significant benefits can be expected from these improvements.
They might go furthe than the estimate of 75 billion USD
savings initially made.
4.In the context of this report "better practices" encompass
any information processing in the international trade
process, using the latest techniques and international
standards.
5.Besides best practices being necessary for each component of
international trade, the individual components needs to be
co-ordinated so that the trade practice operates as a
cohesive whole. This is true both at the level of countries
and individual companies.
6.Guidelines have therefore concentrated on how to achieve
effective co-ordination; at the national, local and company
level; as well as setting out individual guidelines for
governments, traders and international trade services.
7.The benefits of using best practice are broadly the same for
countries and companies, namely:-
- greater trading efficiency
-better management control
- lower costs
- better customer service
- the ability to introduce new business strategies
PART A : STRATEGIC OVERVIEW
1 Trade policy and the role of trade efficiency
1.1Developing foreign trade, and the identification of new
market opportunities are amongst the highest priorities in
all countries.
1.2Achieving this growth not only requires the maintenance of
the principles of free trade, but also a substantial
improvement in the efficiency of the overall trading process.
1.3For individual countries and enterprises to compete
successfully in the global market place they need to:-
-ensure an open and efficient trading process
-exploit it to their advantage and to strengthen their
relationships with their trading partners
-co-ordinate all aspects of the trade transaction use best
practice, especially international standards
-reduce costs
1.4Significant reductions in procedures, time and costs can be
achieved. UNCTAD estimates potential savings of up to 75
billion USD per year. But it can go further than that; new
practices, properly harnessing both modern transport links
and information technology can mean that new markets can be
supplied.
1.5At the level of the individual company savings can be 2-3% of
the arrived price of the goods, (perhaps a 20-30% increase in
the exporter's profit). Conversely bad practice, especially
for smaller traders with low value consignments, can wipe
away profits at a stroke.
1.6Historically, unlike manufacturing cost, international trade
administration was widely perceived as a relatively
unimportant low cost activity. By definition it was not of
interest to senior management. This perception remained
although it was never true, however, four recent developments
are beginning to change this situation. In-house integration
of company business applications, global sourcing of
components and materials, the advent of electronic trading
techniques and the changing role of governments (from
excessive control to recognising the national need to
facilitate trade).
1.7These developments are leading to a review of the total
trading process. Both commercial and administrative
management are becoming more aware of the increased
efficiency, reduced costs and better customer service that
can be obtained from adopting common, integrated internal and
external practices using international standards.
2 TRADE EFFICIENCY
2.1The objective in any country must be to help local
enterprises compete successfully in the global market place
and improve their profitability and customer service by-:
-working for an open and efficient trading process
-assisting them to exploit it to their advantage
-encouraging them to use best practice
2.2For this objective to be achieved there has to be:-
-understanding of the key elements of the international
trade and payment process by the analysis and
identification of constraints
-knowledge of the opportunities available to improve
business practice including how to harness relevant
information technology
-a balanced view of all parties to the trade transaction
represented in the appropriate national, regional and
international negotiations
2.6Once work has started, the question "when is the trading
process efficient" has to be answered. Standards and
guidelines exist as targets for most of the elements; overall
however there is no set norm. However, at the company level,
it will be possible to see if relationships with trading
partners have been strengthened and the quality of customer
support improved Other measures are whether the transaction
is being completed as effectively as a domestic one and that
all the participants have the information they require, at
the time when they need it.
3. TRADE EFFICIENCY AND TRADE FACILITATION
3.1 Background
3.1.1The main objective of the UNCTAD Special Programme for
Trade Efficiency (UNCTAD SPTE) initiative is to open
international trade to new participants, especially smaller
countries and enterprises, by simplifying and harmonising
trade procedures worldwide and giving governments and
traders access to advanced technologies and information
networks.
3.1.2Trade efficiency can be achieved as a result of combining
three activities; trade facilitation, improving access to
better market information and the adoption of new business
concepts such as 'just-in-time' purchasing and production.
3.1.3Trade facilitation is the systematic rationalisation of
procedures, information flows and documentation.
3.1.4Trade procedures are activities, practices and formalities
involved in collecting, presenting, communicating and
processing data required for the movement of goods and
associated payment.
3.1.5The main objectives of the facilitation of trade procedures
may be summarised as to:-
-ease the information flow
-eliminate errors
-relate procedures more fully to current requirements
-limit information requirements to essential data, and
-minimise the delays caused by unavoidable official controls
3.1.6In respect of trade facilitation the key international
organisations are the United Nations (UN) and the
International Organisation for Standardisation (ISO). The
UN facilitation work is focused through the UN Economic
Commission for Europe's Working Party on the Facilitation
of International Trade Procedures (UN/ECE WP4) and its
procedural and EDI technical groups.
3.1.7Market intelligence on markets, trade contacts and
goods/services is provided both the public and private
sectors. At an international level work is undertaken by
the UNCTAD/GATT International Trade Centre.
3.1.8New business concepts are, naturally, primarily developed
in the private sector, but are equally applicable to the
public sector when it carries out "business", eg the
purchase of goods and services.
3.2The Problem
3.2.1Lord Thorneycroft, the first Chairman of SITPRO said in his
introduction to the 1970 SITPRO Report, "Looked at as a
problem, there is nothing inherently too complicated in the
systems and procedures for selling goods from one country
to another. The difficulties arise in part from the sheer
scale of the operations and in part from the vast number
of people, interests, nations and languages involved. What
may appear as a most elegant solution in one part of this
network can often create havoc in another".
3.2.2Those not closely involved in international trade tend to
think only of its physical aspects - the movement of goods,
containers, vehicles, ships and aircraft. Underlying,
controlling and regulating the whole of this movement,
however, is an invisible infrastructure of information
handling and exchange manifested by a great variety of
documents or their electronic equivalents.
3.2.3The purpose of the information flow is not merely to
provide essential data. There is the associated and vital
element of timing. The best quality information in the
world, which arrives days after the cargo, will still cause
acute problems.
3.2.4Such delays can be caused by poorly designed documents, by
complex processing or bad management "up-stream" (no one
told the clerk holding up the documents what impact this
might have), or by poor or badly managed communications.
3.2.5Paper has been the main medium for carrying business
information for over 2500 years. Unquestionably, as many
authoritative surveys have shown, today's paper world is
inefficient and costly. The costs arise because of the
fundamental inefficiency of the system and through error
rates and associated delays in the movement of goods and
payment for them.
3.2.6The problem is serious in national trade; it is acute in
international trade. A minimum of 12 participants are
involved in the simplest international trade transaction.
All want information about what is being moved or paid for
and the core of that information is the same. Vast amounts
of time and resources are spent transferring the
information from one document to another. Errors occur
frequently; for example 123 becomes 213, 'car parts'
becomes 'car ports'. Error rates in excess of 50% have
been consistently recorded in Letters of Credit. Error
rates of 30% are not uncommon in manual processing of
Customs entries. (123 to 213 sounds a small problem.
However, if a ship or aircraft manifest, based on an
inaccurate waybill, contains wrong information, time and
money would be spent looking for the missing 90 packages;
probably claims letters and repudiations would have been
sent before the mistake was realised).
3.2.7Computers can help. They have already streamlined internal
processing within many enterprises and public sector
agencies. However, when it comes to communicating with
external parties or suppliers, paper documents are still
the main medium, even if the computer has originally
produced them. We then often seriously compound the
problem of information transfer by normally relying on the
traditional postal system as transfer medium. 5-7 days
between despatch and receipt for international mail is the
norm - 2 days is normal domestically.
3.2.8Then after the document carrying vital business data is
received at its destination it is often in-put straight
into another computer for processing, giving further
opportunities for errors and delay. Digital, the US
computer company, estimates that 70% of the output of one
computer is immediately in-put into another computer.
3.2.9So whilst computers help improve internal efficiency they
have not yet radically altered inter or intra-company
communications. Until electronic trading techniques are
used (see Appendix 2) the costs and inefficiencies
associated with the paper world will remain.
3.2.10Finally, there is an assumption that "controls" are only
carried out by governments. Everyone has controls to
operate, however, and most relate - in the end - to money.
For example, in a port the customs authorities operate
controls to protect state and collect the taxes; the port
authority/stevedore to manage the cargo movement and ensure
they are paid for their services; the carrier to manage the
shipping operation and ensure they are paid freight
charges etc.
3.2.11There is no reason for public sector controls to be more
"bureaucratic" then those of anyone else, nor should
governments use anything other than sound commercial best
practice when operating as a business (such as when buying
goods! see section 8).
3.2.12After all it doesn't matter to the traders who gets their
procedures out of phase. The result will be the same; the
customer will not get the goods when expected - at least
without excessive additional charges that were not built
in to either the buyer's or seller's price calculations.
3.3The Result of Inefficiencies
3.3.1The most frequent result of inefficiencies in international
trade is delay, which can be critical. Heavy investment
in logistical systems is wasted if goods sit idle waiting
for the right piece of paper or information. Ports may
spend money on new physical facilities if the existing ones
are congested - when to change practice to cut delays would
have more far -reaching effect.
3.3.2Payments get delayed. UK research has indicated that over
50% of the documents lodged in respect of documentary
credits contained errors which delayed settlement by at
least two weeks, with the result that exporters lost œ70
million per annum. Research in other countries shows a
similar situation.
3.3.3There is no more irate customer than the one who knows that
the goods he has ordered are nearby, but the paperwork
isn't. In fact, with the growing trend towards purchasing
"just-in-time", delays are likely to mean lost business.
If 'local' suppliers can make goods and deliver in a
certain time, the 'remote' supplier must compete - or have
significant advantages on price, quality or uniqueness.
3.3.4So trade procedures and related information handling have
a decisive effect on the speed, efficiency and reliability
of delivery of goods to the buyer and payment to the
seller. Complexities and inefficiencies in them create a
formidable "invisible barrier" to improved export
performance. This problem is seriously under-estimated in
most countries and requires more attention by traders,
service industries and governments.
3.3.5Constant additional costs on transactions to represent the
buyer (and their national economies) higher 'arrived'
prices of goods; to the seller, at the least, repeated
arguments with his customer and loss of profit; in the end
probably loss of business.
3.4How to Facilitate International Trade
3.4.1The concept of trade facilitation is very simple. You will
not get the right goods in the contracted place at the
correct time unless you have the right information FIRST.
3.4.2Then it has to be recognised that the whole transaction has
to be managed as a whole; an import is just an arrived
export not another separate activity. This means, even if
a trader sells FOB (and the clerk says our responsibility
ends when the goods are loaded) that although legal
responsibility has ended, a supplier needs to ensure he has
a satisfied customer.
3.4.3Each party to each part of the transaction has
responsibilities - this is true for both public and private
participants. The essence of the technical task is to move
the minimum information with maximum efficiency and process
it rapidly. The criterion is the minimum information
necessary to service the transaction, and not the maximum
that people would like to collect for other purposes.
3.4.4Traders have always sought to have standard and simple
procedures to follow in dealing with administrations and
service suppliers such as carriers, banks and insurers.
This would allow traders to have to train staff and
install systems to deal with common procedures only, not
a different set of procedures for each port, carrier, bank
or government agency used. But they also have the
responsibility of providing all concerned with accurate
timely information.
3.4.5To improve the trading process, and each public or private
participants' interaction with it, requires a series of
actions to identify problems, develop solutions and achieve
use of the new 'best practices'. The use of effective best
practices can only be achieved by co-ordination between the
relevant participants at company, national or international
level. These actions are to:-
-identify constraints in the trading and payment process
-identify solutions including the use of latest
technology
-develop best practice in the simplification and
integration of the total trading process
-promote the benefits to traders (especially small and
medium sized enterprises), government agencies and
business service suppliers
4 BETTTER BUSINESS PRACTICE
4.1 The Need
4.1.1"Better business practice" is any technique that proves to
be beneficial to the users. In the context of this report
it covers any information processing by governments and
their agencies, traders and the trade and transport service
industries. Identifying and using best practice is not
just a question of what data and what information
technology, but also when to process and - most importantly
- do you need to do it at all.
4.1.2Using the simplest practices is necessary for each
individual component of the trading process. A number has
been developed in recent years; for example:-
-internationally recognised terms of trade
-traders doing away with detailed invoices (and the need
to check each manually against purchase orders)
-central banks simplifying exchange control rules
-ports co-ordinating all the port activities
-shipowner, cargo handling, inland carriers, customs and
other formalities, into a single co-ordinated process
and;
-customs getting rid of consignment based clearance
documents.
International standards for all trade documents and their
electronic equivalents are readily available.
4.1.3Furthermore the individual elements needed to be co-
ordinated so that the trade practice operates as a cohesive
whole.
4.1.4One point has to be stressed; facilitating trade is NOT the
enemy of control. All of the above examples have at least
maintained the quality of the controls required by that
participant - in many cases the quality has been improved.
4.2Benefits
4.2.1The benefits of using best practice are broadly the same
for countries and companies
-greater trading efficiency
-better management control
-lower costs
-better customer service
-the ability to introduce new business strategies
4.2.2At the national level it means the opportunity to increase
one's share of world trade; for the company, greater
efficiency, improved customer service and profitability.
4.3 Achieving Best Practice
4.3.1In achieving the use of best practice it is not only
necessary to identify constraints in the current trading
process, develop solutions and simplified practice, but it
is also necessary to promote the benefits to participation
- both public and private sector - especially small and
medium sized traders.
PART B : BEST PRACTICE FOR TRADERS
5 THE ROLE OF TRADERS
5.1In a domestic transaction the buyer will expect that goods
purchased will be delivered to his factory or warehouse. The
supplier is responsible for delivering the goods and the
buyer for receiving them and paying for them.
5.2A straightforward operation has both parties responsibilities
and obligations clearly defined. An uncomplicated
transaction with transport often owned by the supplier,
insurance based on annual premiums, payment arranged in local
currency on open account, no customs frontiers to cross and,
the same legal jurisdiction if things go wrong.
5.3International trade is more complex in two ways. Firstly
there are more parties to each transactions, (see 3.4) some
12-15 in most transactions. Secondly the delivery of the
goods can be at factory or customer's gate or at 11
intermediate points.
5.4This added layer of complexity increases the responsibilities
on both the seller (exporter) and buyer (importer).
5.5The seller now has two responsibilities:-
-to deliver the goods to the buyer in good condition at the
contracted place, at the right time and for the correct
price
-to supply accurate, timely information to all of the other
parties in the transaction in order for the goods to be
transported and payment to be returned by the due date.
5.6The buyer also has two responsibilities, even if he buys on
terms "Delivered Duty Paid" (see Section 12).
-to complete the obligations required in international trade
practice
-to pay for the goods
5.7These additional responsibilities highlight why trade terms
are so important; they tell traders what to do with respect
to:-
-carriage of the goods from the seller to buyer, and
-export and import clearance
They also explain the division of costs and risks between the
parties, according to the terms used.
5.8Since 1936 the most widely recognised trade terms have been
INCOTERMS, issued by the International Chamber of Commerce
(ICC). The latest version, INCOTERMS 1990, came into force
on 1 July 1990 to cope with changes in trade practice and the
growing trend to replace documents by electronic messages or,
as it is known, electronic data interchange (EDI).
5.9To meet both responsibilities the exporter must plan his
export operations carefully. An export strategy is required.
This should cover:-
-researching the markets
-arranging the contract
-getting the goods to the market
-documentation and export administration getting paid, and
-customer service
5.10The importer must also play his part, especially if the goods
are sold on trade terms where "delivery" is short of the
ultimate destination, for example INCOTERMS 1990, CIF (Cost,
Insurance, Freight), named port of destination. In this
example the importer must accept delivery of the goods upon
shipment and receive the goods from the carrier at the named
port of destination. The importer will have to obtain import
clearance from customs, pay port charges not included in the
freight and collect the goods.
5.11General principles of international trade best practice are
therefore common to exporters and importers in all countries,
whatever their economic structure. This is also true of the
basic documents.
5.12The detail of procedures, who does what and the terminology
used, can, however, vary greatly. The following six sections
therefore set out broad guidelines to best practice for
traders.
6 EXPORT STRATEGY
6.1When preparing to export it is important, no matter how large
or small the company, to have a strategy. The following
strategy is a guide for small, medium or large enterprises.
-Research countries to which you may be interested in
exporting. If you already export successfully, look at
other areas. For the new exporter, plan to export to one
country at a time.
-Do not generalise or try to penetrate several markets at
once.
-Assess the markets. Take account of a country's cultural
needs and how your product and its packaging may have to
be adapted, for instance to avoid politically sensitive
colours or religiously sensitive animal products. Also
investigate technical standards as your product may have
to be adapted at the production stage. It is also
important at this stage to begin to evaluate costs.
-Develop the presentation and marketing material for your
product. For example, if exporting to France, ensure that
any literature is translated into French. If this material
includes pictures, ensure that the buyer can relate to
them.
-Consider how you intend to get the goods to the market,
whether you intend organising everything yourself,
including transport and documentation, or using a freight
forwarder. Consider what terms of payment you would like
to use and how flexible you can be with these with the
buyer.
-Train staff who will be involved in the everyday export
operation and ideally employ someone with a previous
knowledge of export documentation and methods of payment.
(Or use an export administration company).
-Co-ordinate export operations closely with production sales
and finance to plan and to meet timescales and
product/service quality. In exporting this area is far
more critical than when selling at home and should be
carefully considered.
-Cost all the above and any other 'outgoings' which may be
incurred. These include bank charges, which for certain
methods of payment can be quite high, transportation and
shipping costs, credit insurance and insurance of the goods
in transit. All these costs should be included in the sale
price or should clearly be shown as for the buyer's account
and should not unexpectedly reduce an exporter's profits.
Guidelines: Prepare a suitable export strategy.
7RESEARCHING AND ENTERING MARKETS
7.1The decision to enter a new market cannot be taken lightly.
Does the product need amendment? Are packaging and pricing
policies correct? What extra demands will the new business
impose on production capacity? Can the existing sales force
cover the new outlets?
7.2No company would expect to win business in its home market
without properly understanding its customers' needs and then
setting out to meet those needs more effectively than its
competitors. Commitment from top management is essential for
success. There must be a realistic appreciation of the level
of investment required and the length of time which will
elapse before results are achieved. The benefits to be
derived from exporting should include:
1 Increased profitability in the longer term;
2 Better utilisation of production capacity;
3 A wider customer base;
4Increased security by spreading risk over a variety of
markets;
5Sharper marketing skills through exposure to competition
in international markets.
7.3For the company new to export, the first question must be
'Where do we start?' Even companies which have been
exporting for some years should carry out a regular appraisal
of the markets in which they are currently working, as well
as those which may offer even more attractive possibilities.
However, very few exporters would claim that they have
entered every one of their markets as the result of careful
research and logical reasoning. Often, it is chance events
which create opportunities.
7.4For most new exporters, drawing up a short-list of overseas
markets is largely a matter of common sense. They are likely
to avoid countries which are politically unstable, or where
there is considerable risk that one will not be paid. There
are also markets with a high level of discrimination against
imports which may manifest itself in embargoes, quotas,
tariffs, technical approval and health certificates and
excessive labelling requirements. The willingness and
ability to overcome such problems often distinguishes the
successful exporter from its competitors, as does persistence
and a determination to succeed.
7.5Positive market attributes would include the frequency and
regularity of shipping links, remembering that distance
increases cost in every aspect of exporting. The ability to
conduct business in the language of the country will also be
a significant advantage.
7.6Companies providing products or services which are highly
specialised may find it necessary to generate sales in a
number of market simultaneously, since no one market would be
large enough to sustain the necessary investment. This may
also be true if a company is at the leading edge of
technology, with innovative products which quickly become
outdated.
7.7With these exceptions, it is always better to short-list two
or three markets where the product is likely to find
acceptance and then select one market in which to concentrate
effort and resources. In arriving at the short-list, ask the
following questions:
- Which industries currently use your products?
- In which countries are these industries to be found?
- Which countries have significant imports of this product?
-To what international standards does your product conform?
-Which countries accept these standards?
-What restrictions are placed on imports?
-Is the business environment likely to remain stable?
-Are there adequate shipping facilities?
-Do social or business customs differ greatly from yours?
- Which languages are used for business?
7.8Having made an initial selection, compare one market with
another. This can be done, initially, by desk research. At
a later stage, it will be necessary to undertake field
research in which each market is visited so as to check out
the facts and examine the current situation at first hand.
Guidelines:
1Don't spend time examining too many markets; concentrate
on a few.
2Select a market which has sufficient potential.
3Remember, a small market may still have a significant niche
and less competition.
4Select a market where your product has some competitive
advantage, for example; design, performance, quality or
price - but do not rely exclusively on price.
5Visit the market yourself before commissioning a detailed
field study. Talking to leading buyers or visiting an
exhibition can help you to identify key questions.
6Use the services of export promotion, facilitation body,
banks, Chambers of Commerce, trade associations and any
other contacts you may have.
7.9 One mistake which many companies make is to underestimate
the total cost necessary to enter a new market. Research
expenditure is only the first small step. The real costs
start when products and packaging have to be changed to
meet customer requirements, and samples and sales aids
provided to the selected distributor who then looks to the
exporter for continuous marketing and service support.
7.10When the research has been completed and the market
offering the greatest immediate potential identified, it
will be essential to secure commitment from top management
and allocate production capacity, based on the anticipated
level of demand - with a built-in safety margin so as to
be able to support success. It is also essential that, at
the outset, a marketing plan is drawn up and a budget made
available; not just for the first year but for the first
three years. A large part of the research will have been
concerned with identifying how best to enter the market by
looking at the available channels of distribution. Only
when this decision has been made, will it be possible to
assess the financial viability of the project and carry out
pricing calculations.
7.11For each market it will be necessary to set specific
objectives. Since every company has finite resources, it
must define these objectives clearly and realistically.
A written marketing plan encourages systematic thinking and
provides the means by which performance can be evaluated.
It should include sales forecasts for each product and
market segment, together with the costs necessary to
achieve these sales and the required contribution to
profit.
7.12Entering a market is usually achieved in one of four ways:
-Selling direct to users;
-Appointing a commission agent;
-Appointing a distributor;
-Working with a non-competitive manufacturer.
Guidelines:
1Identify the appropriate market segment for the product.
2Ensure that the distribution channels used match this
segment.
3Set specific objectives for each product and market
segment.
4Allocate adequate resources.
5Prepare a marketing plan.
6Monitor progress.
8 ARRANGING THE CONTRACT
8.1All buyers and sellers want to complete their business
quickly and efficiently. In order to make this possible it
is important that the contract is clear and leaves no doubt
as to responsibility and costs. Two very important areas of
a contract for consideration are trade and payment terms.
8.2When arranging any sales contract it is very important to
ensure there is no confusion over who is delivering and
paying for what and what each party's responsibilities are.
Confusion will only lead to delay, loss of profit and can
create unnecessary problems between the trading partners.
8.3An exporter needs to know terms of trade before preparing a
contract, quotation or pro-forma invoice. "INCOTERMS 1990"
is produced by the International Chamber of Commerce (ICC).
There are thirteen Incoterms.
Guidelines: Train staff to use ICC's INCOTERMS 1990, e.g.
EXW - Ex Works
FCA - Free Carrier (named place)
FOB - Free on Board (named port of shipment)
CIF - Cost, Insurance and Freight (named port of destination)
DDP - Delivered Duty Paid (named place of destination)
8.4Some transport terms get confused with INCOTERMS such as FIO
- Free in and out (loading/discharging not charged to ship).
If your buyer asks you to use these or any non standard terms
please get professional advice (eg. forwarder, Chamber of
Commerce) on what they mean. If you use them you will not
have the protection of INCOTERMS.
A misuse or misunderstanding of INCOTERMS could prevent an
exporter from meeting contractual obligations, or even make
the exporter responsible for unexpected costs. It is,
therefore, very important to understand and quote the correct
INCOTERM.
8.5Terms of payment define the conditions under which the
importer (buyer) and exporter (seller) have agreed to settle
the financial balance. The basic elements of the terms of
payment include:
-the method of payment
-the amount
-the date of payment
-the place of payment
-remittance of funds
-costs related to the payment eg. banking commission
-security given by the creditor for due fulfilment of his
obligations.
8.6There are several basic methods of getting paid, depending on
the amount of trust the exporter has in the buyer's ability
to pay. Individually tailored terms of payment are sometimes
arranged if certain conditions are to be met. The following
basic methods are listed in order of security for the
exporter.
1Cash in advance
2Letter of credit
3Bank documentary collections
4Open account
8.7More detailed information is contained in Section 11 "Getting
Paid".
8.8Which is most appropriate to any contract depends on a number
of issues including the financial standing of the buyer and
custom and practice. Delays in payment are costly and bad
debts more so.
Guidelines:Investigate payment options including comparative
cost and risks. Take advice of an international
bank specialist.
9. GETTING THE GOODS TO THE MARKET
9.1The main options when considering how to get goods to the
market are sea, road or combined sea/road transport, air
freight, post, especially air parcel post, or express
deliveries, courier services and rail freight. The decision
on which of the above to use must be based on a combination
of four requirements:
- product requirements
- speed
- reliability, and
- cost
9.2For all modes, except post and possibly some express parcels
or courier services, a freight forwarder will advise.
Remember to include the total costs of each method in the
quotation linked, where appropriate, to your responsibilities
under the agreed INCOTERM including packaging, storage,
inventory and, of course, freight costs.
9.3Besides planning the movement of routine shipments, also have
plans ready to cope with 'special' shipments of spare parts,
goods returned for repair etc. In the latter case give
customer clear instructions on how (and to whom) to consign
the goods and get them to fax information once shipped so
the consignment can be progress chased.
Guidelines:For all methods except post, it is sensible to use
a carefully chosen freight forwarder, or export
administration company, who can obtain comparative
quotations for your products and can arrange
transport, insurance, official documentation and
customs clearance. At a later stage, once regular
markets are established, the exporter might deal
directly with chosen transport operators.
9.4Sea transport services come in many shapes and sizes and
offer a range of competitive rates, so it is important to
'shop around' and obtain several quotes. These are three
basic types of sea carriers, regular services carrying
either containerised or break-bulk cargo (or both); regular
ferry services primarily carrying road vehicles loaded with
cargo and 'tramps', the latter like taxis plying for
business to make individual voyages generally carrying bulk
cargoes such as grain, coal and oil.
9.5The rating of sea freight can vary between a specific
commodity rate, FAK rates (freight all kinds) or a rate for
a containerload. Freight is usually charged on weight or
measurement, whichever is the greater. Container rates can
be FCL - full container load; LCL - less than full load or
groupage.
9.6On most major trade routes there is considerable choice for
the exporters. Questions of routing, costs, selection of
carriers etc are complex issues that should be dealt with
by skilled staff - or by your forwarder.
9.7As with sea transport, road transport rates can be agreed
based on full container loads (FCL), less that full
container loads (LCL), groupage etc, and the method chosen
is reflected in the cost. Rates can also be based on
whether a vehicle is driver accompanied for the sea leg or
driver unaccompanied.
9.8'Trailers', as they are sometimes called, are very flexible
and it is important, especially when using container
traffic, to request the correct type. Trailers tend to
come in lengths varying between 20 to 40 feet and are
constrained to a maximum legal weight. For guidance on
maximum legal weights and the type of vehicle to use either
consult your forwarder or contact the national road
transport association.
9.9Rates for the air freight industry are based on weight and
volume. The size of the consignment is far more sensitive
in relation to the costs than in other modes and tends to
restrict air freight to smaller consignments. There are
possibilities of chartering an aircraft for larger
consignments but this should only be considered through an
approved air freight forwarder/carrier.
9.10Airfreight has the benefit of speed, especially for longer
distances. If using a letter of credit, however, ensure
that an Airway Bill is acceptable, and that transhipment
(the aircraft having to refuel on route) is permitted.
9.11This particular mode of transport is also more sensitive
than most to hazardous or dangerous goods restrictions and
strict compliance to the International Air Transport
Association's (IATA) regulations must be carried out. (All
modes have specific rules for dangerous cargoes which must
be pre-booked and are usually specially documented). If
in doubt consult the air forwarder or carrier at an early
stage.
9.12In some parts of the world air parcel post is becoming
increasingly popular. It gives rapid delivery, usually
door to door, for a competitive all-in rate and with simple
documentation. Large parcels up to 20 kilograms (and
sometimes more) can be carried to almost anywhere in the
world. Other facilities such as insurance, cash on
delivery (C.O.D) and prepayment of customs duty are often
available. Dangerous goods cannot be carried.
9.13Express or Courier services are applicable, as their name
suggests, for fast and/or secure delivery services. They
offer door-to-door rates and are gaining in popularity with
more companies using just-in-time systems. The cost of
using an express freight company is reflective of the speed
and treatment of the goods and it is best to obtain several
quotes before proceeding.
9.14It is impossible to generalise on how much it will cost to
deliver to the market as costs vary considerably with
destination, weight, bulk, value and quality of service.
Other delivery costs, including insurance and related
indirect costs such as inventory costs, will vary with
value. A quotation should be obtained to cover carriage,
fees, and insurance up to the point at which the goods are
handed over. It is the only safe way.
9.15It is essential to find out how long delivery will take,
before giving any undertaking to the importer. Remember
to include the time necessary for all the steps up to the
point the goods are handed over. For some markets it also
depends on the frequency of sailings; the importer,
however, will only be interested in the date he receives
the goods - not the despatch date.
9.16Insurance of some type will always be required, even if
"sellers interest" only. Most delivery terms require the
exporter to cover against damage or loss to the goods in
transit, with marine insurance. Carriers do have certain
levels of liability but all modes can limit their
liability, usually under international convention, and
these levels usually fall well below the actual value of
the goods. Your forwarder or an experienced marine
insurance broker can advise you.
10 DOCUMENTATION AND EXPORT ADMINISTRATION
10.1When talking to experienced traders the first thing that
they will stress is the need to make sure you have all the
documentation in order. Documents are the foundation upon
which the whole export transaction chain sits. If there
is an error, missing data or no document at all, the
consequences can be catastrophic. So ensure it is right!
10.2Make sure to tell the customer what has been done with the
documents as well as the goods; in fact ask him beforehand
if he has any special documentary requirements that you can
help with.
10.3In many countries documents physically have to arrive -
through the post, by courier, through the banking system
or via the carrier - before clearance procedures can be
completed and your customer gets the goods. There is
nothing more disconcerting to an importer than seeing the
goods he has paid for in the transit shed, but not be able
to get them because of one or more missing documents.
Guidelines:
Documents and their electronic equivalents should follow
international standards and the national aligned system.
A system compatible with requirements should be installed;
this can vary from multi-part sets, through the use of
overlays and photocopiers/duplicators, to PC or main frame
computer system. (See Appendices 1 & 2).
Careful attention should be paid to providing accurate,
timely information to the customer, customs and other
official bodies and to those providing services to the
exporter eg. forwarders, ports, carriers, insurers and
banks.
Document systems should be reviewed periodically, in order
to use up-to-date technology and eliminate redundant forms
and copies.
11 GETTING PAID
11.1When considering how to get paid the exporter should take
account of several factors, such as credit worthiness of
the buyer, consignment value, bank charges and what method
the buyer has requested (if any). It is a good rule to
study how established exports get paid in your trade. (For
example, up to 70% of trade from the UK is based on open
account terms; but it is important to remember that 60% of
UK trade is with the other European Community member
states).
Letters of Credit/Documentary Credit
11.1.1A letter of credit can be described simply as a written
undertaking given by a bank on behalf of the buyer, to pay
the seller an amount of money within a specified time,
provided the seller present documents strictly in
accordance with the terms laid down in the letter of
credit.
11.1.2A more formal definition is "a conditional undertaking of
the issuing bank that settlement will be made by a bank
nominated in the credit (paying bank) and in the manner
specified in the credit, if the seller (beneficiary)
presents to that bank documents as stipulated in the credit
and complies with the terms and conditions thereof. The
issuing bank is ultimately responsible for settlement if
the nominated bank does not honour such compliant
documents".
11.1.3If used correctly a letter of credit (L/C) provides
substantial security. However, it does involve a level of
expertise in the preparation of the required documents and
surveys show considerable errors in documents lodged
against credits.
Guidelines:
L/C transactions should be carefully managed.
With the considerable number of errors on in-coming credits
a pro-forma credit should be sent to the buyer at an early
stage. When the L/C is received by the exporter it should
be checked thoroughly against the instructions (pro-forma)
sent to the buyer to see whether it is acceptable or what
amendment is required.
11.2It is clear that the driving force for the process of
managing export payments must be the exporter. It has to
be recognised that the export or shipping department that
controls this process has a major loss preventing function
within the export company.
Guidelines:
The exporter must plan and manage the export payment
process, selecting the most appropriate payment methods;
maintaining close liaison with the buyer; co-ordinating
internal practices and training staff to ensure the most
efficient and cost effective handling of the whole
transaction.
11.3The main payment options are summarised below:-
Revocable Credits
Irrevocable Credits.
Confirmation
Bank Documentary Collection (Bills of Exchange)
andOpen Account
Other Alternative Methods of Payment include Factoring and
Invoice Discounting and Forfaiting by Banks and other
Specialised Finance Houses
12THE CUSTOMER
12.1The prime objective of any exporter should be to ensure
quality customer service. This should cover not only the
product but also the necessary documents and information
on progress in the despatch and delivery of the product.
12.2Many exporters, especially those selling non-proprietary
goods, such as chemicals, against local competition, have
to show that they can deliver to the customer's factory as
effectively as the competitor on his doorstep. Effective
customer service is essential for survival.
12.3Administration of the transaction is not often a subject
of close liaison, but to be efficient it is essential for
the exporter and importer to get together and identify the
customer's shipping and documentation needs. These
discussions would cover routing, the correct use and
interpretation of trade terms, clearer and simpler shipping
marks, the right type of documentation to us and what can
be simplified or cut out, especially in documentary credit
transactions. Many importers' or sales agents' purchasing
departments are simply following tradition in calling for
certain documents, shipping marks and actions. It is often
evident from the wording of many, if not most, documentary
credits that they are following a set pattern. Even when
some documentary credit requirements stem from government
regulations and not from the normal commercial
considerations of credit control, much can often be done.
12.4The customer, quite rightly, will not be too interested in
hearing about the exporter's difficulties, but will almost
certainly appreciate direct interest in his problems. Many
exporters would be horrified to see what can happen to
their goods in transit or at destination.
12.5A few careful checks when the order is placed, or the
contract drawn up, can save time-consuming problems later.
Perhaps the most obvious precaution is a definite system
for scrutinising documentary credits when they are first
received, including a progress or diary routine to check
that they are opened and received in good time.
12.6It is also wise to arrange and check on routings as soon
as orders are received. Perhaps the routing on which the
original quotation was made is no longer suitable. It may
be necessary to consult at the outset on the co-ordination
or production, packing and despatch or shipping schedules.
12.7On some occasions, the delivery terms quoted may be
impractical, fail to include all the costs which will be
incurred, or be incorrect. Examples abound of quotations
specifying, say, "CIF" without stating the precise place
of delivery, or "C & F" with no arrangements to cover
seller's interest risks, or "Delivered" without saying
where, or what costs will be paid. Extra unplanned costs,
resulting from hastily quoted delivery terms, quickly erode
profit margins. If these terms are put right at the
earliest stage of order processing, or, preferably, quoted
correctly in the first place, these costly mistakes can
be avoided.
12.8Even after the order is received, and acknowledgement made,
the customer will appreciate being kept informed of
progress, and especially of any foreseen delays.
12.9It is important to keep the customer advised by fax or
telex. As soon as possible the despatch advice should be
sent with any documents which are available, especially the
export invoice. It is most helpful to tell the customer
that the goods are on their way and that the remaining
documents will follow shortly. Pre-advice assists the
customer to plan his own import routines to avoid delays
when the goods arrive.
Guidelines:
The exporter and importer should liaise about their
administrative requirements. The exporter should provide
customer service before and after the despatch of the
goods.
The importer needs to ensure that his purchasing practices
are up-to-date and realistic and that he can carry out
import clearance as soon as the goods arrive.
Distribution
GENERAL
TD/B/WG.2/6/Add.1/Part II
Original: English*
TRADE AND DEVELOPMENT BOARD
Ad Hoc Working Group on Trade Efficiency
Third Session
Geneva
FACILITATING TRADE
DRAFT GUIDELINES ON BETTER TRADE PRACTICES
Report prepared by
SITPRO, the Simpler Trade Procedures Board of the United Kingdom**
** SITPRO is the United Kingdom's trade facilitation body. It
was established by H.M. Government in 1970 to "guide, stimulate and
assist the rationalisation of international trade procedures and
documentation and the information flows associated with them". The
views expressed in this report are those of the authors and do not
necessarily reflect the views of UNCTAD or any other part of the
United Nations system. The report is reproduced as received and
the designations are those of the authors. The designations used
do not imply the expression of any opinion whatsoever on the part
of the UNCTAD secretariat concerning the legal status of any
country, area or territory, or of its authorities, or concerning
the delimitations of its frontiers.
* Due to technical reasons this part of the document has been made
available in english only, and will be issued in all languages for
the third session of the Ad Hoc Working Group
DRAFT GUIDELINES ON BETTER TRADE PRACTICES
For technical reasons, the document is issued in two parts:
PART I:
Executive summary
A. Strategic overview
B. Best practice for traders
PART II:
C. Best practice for governments and their agencies
D. Best practice for international trade services
Appendix 1 - Aligned Series of documents
Appendix 2 - EDI
SITPRO
PART C : BEST PRACTICE FOR GOVERNMENTS AND THEIR AGENCIES
13THE ROLE OF GOVERNMENT
13.1 Government's Three Roles
13.1.1Governments, whether they have privatised much of their
country's infrastructure or the latter is still run by the
public sector, have three roles in ensuring an open and
efficient trading process.
-running, planning and developing a national economy,
-operating official controls on a day-to-day basis, and
-running a large business, which buys and sells goods and
services.
13.1.2The relative importance of each of these three components
will vary from country to country, just as the amount of
simplification already achieved will vary considerably. So
it is not possible to propose a set of standard actions.
It is, however, possible to give broad guidelines that can
be refined and targeted once set against the actual
situation in any country. These guidelines are set out in
sections 6-8.
13.1.3The objective for any government in any of these roles is
quite clear - be effective, be efficient and be economic.
There is a growing realisation that governments have
customers, just as businesses do. Customer satisfaction
is a high priority. In managing the national economy and
operating controls effectiveness, efficiency and economy
have to be considered in the overall framework, not just
the individual cost elements to government.
14. FACILITATION AT THE NATIONAL LEVEL
Any government that wants to develop its country's foreign
trade and see a substantial improvement in the efficiency
of the trading process needs to take three policy
decisions:-
-to consider trade facilitation issues when formulating
trade and transport policy
-to ensure that trade facilitation work is co-ordinated
at the national level and that government agencies play
a pro-active role
-to participate in international work on international
standards and trade facilitation
14.1Trade and Transport Policy
14.1.1Ignoring trade facilitation when developing national trade
and transport policies can be expensive. Setting trade
promotion priorities for countries when there are
inadequate transport links or financial services is
inefficient. Having a policy to attract inward investment
without offering the simplified formalities that go with
these activities is a waste of national resources and time.
Keeping port/airport storage charges at low levels may well
congest ports with imports and make the shipment of the
countries exports more difficult and expensive. Building
new port facilities to relieve congestion when the actual
constraint is poor port practices is a waste of money.
Guideline:Governments should ensure that trade facilitation
issues are taken into account when formulating
trade and transport policies
14.2 National Co-ordination
14.2.1To achieve substantial improvements in the overall trading
process requires a co-ordinated approach at national level.
All significant participants in the trading process, public
and private sector need to participate.
14.2.2Customs and other relevant government agencies, central
banks, inspection agencies, exporters, importers,
forwarders, carriers of all modes, port/airport operators,
bankers and insurers should all be represented.
14.2.3UN/ECE/WP4's Recommendation 4 recommends that national
committees on the facilitation of international trade
procedures (FALPROs) should be established. A number are
already in existence, especially in Europe.
14.2.4For such committees to be successful, it is essential that
they:-
-have senior governmental backing
-have adequate human and financial resources
-are independent to avoid the group being either
dominated by one sector or being simply a pressure
group
-use international standards already available (and
take part in their development and maintenance)
14.2.5Trade Points being developed under the UNCTAD Trade
Efficiency Special Programme are invaluable laboratories
where the practical functioning of international trade
procedures and commercial practices may be examined and
assessed. They should therefore work closely with the
national facilitation committee.
Guideline:It is recommended that national committees
(FALPROs) are set up, where not already in
existence, with a clear remit,
-to eliminate red tape, in both public and private
sectors,
-to encourage the use of best practice including
information technology throughout the trading,
distribution and payment processes, following
international standards and
-to help to develop the skills of the people
involved.
14.3 Facilitation Policy
14.3.1A FALPRO's policy should be to work nationally, regionally
and internationally to identify procedural bottlenecks in
the international trade, transport and payment processes
which affect its traders, and to analyse the issues and
propose solutions based on advanced techniques.
Increasingly achieving these goals requires a move from the
current transaction-based procedural environment to one
which is generally audit based. (Control based on periodic
inspection of traders' records rather than on individual
detailed consignment documents). Countries not yet at this
stage will need to understand the implications of this new
concept so as to ensure that any intermediate changes allow
them to develop such control in the future.
14.3.2It also requires the use of the appropriate international
standards for information exchange so that the required
business and administrative data can be supplied in an
efficient, standard way.
14.3.3For countries still basing control on individual
transaction documents there are two objectives. Besides
planning to move to audit based controls at some stage in
the future, attention should be placed on getting traders
to link their external documents with their in-house
applications, such as sales order processing and accounts.
The in-house use of computers and the external use of EDI
makes this progressively simpler to achieve. These are all
linked steps as countries and companies develop.
14.3.4Communications is also an important issue. Is there an
adequate range of communications media available, mail,
telex, facsimile, courier services, E-mail and EDI? If
not, what are the constraints? - lack of facilities,
inefficiency, restrictive government telecommunications
policy, purchasing etc. In 1919 a UK coal exporter used an
aircraft to fly ships manifest to mainland Europe because
of major delays to his coal ships caused by the poor
communications left after the First World War. (Eventually
the aircraft carried passengers as well - to fill the empty
seats and reduce costs!).
14.3.5Any country, however short of resources, can make immediate
use of EDI. Communicating ship/aircraft manifests by EDI,
in a format, acceptable to both public and private sectors,
can provide immediate advantages. Lack of telecoms
equipment can make this difficult. As mentioned in section
3.3 the objective of trade facilitation is to get the
information to the importing country before the goods.
Fax, telex and E-mail can do that as well as EDI, but not
in a processable form without re-keying into another
system, which will cost time and lead to increased errors.
14.3.6It is becoming increasingly apparent that legal and
commercial practices are not well adapted to the use of
EDI. The implementation of the best practice principles
of trade facilitation and the use of information technology
will be constrained unless these existing legal and
commercial constraints are revised to take account of
current developments, eg. acceptance of paperless trading,
electronic payments and authentication.
14.3.7A further key issue that needs to be dealt with as a
national co-ordinated activity is the question of whether
national practices have been adopted to cope with container
and trailer transport. This is not only a question of
official controls but also the associated commercial
practices. For example, it is pointless to sell goods FOB
(free on board) named port, when the goods are loaded into
a container at an inland depot, because a tally will no
longer take place on loading on board ship.
14.3.8In order to obtain the maximum benefit from container and
trailer transport three things are needed:-
-the ability to carry out customs clearance at the
place where the transport unit is loaded/unloaded,
ie. the factory/warehouse for full loads or
approved inland depots for part loads,
-transport operators, who provide traders with the
required services; factory to factory; depot to
depot; port to port etc under one contract of
carriage; and
-a document and procedures system to match the
above.
14.3.9This is a very important subject, which has transport
policy implications, and government may wish to review
its national transport policy before bodies, such as a
national FALPRO, deal with further individual elements.
14.3.10It is natural that the emphasis on simplification should
be on export procedures and documents. One of the prime
roles of the exporter is to provide accurate, timely
information for the trade, transport and financial
service suppliers used, so that they can provide the
services they have been contracted to supply. The
exporter also needs to ensure that all necessary
official controls have been carried out.
14.3.11There are, however, two significant reasons to look at
import processing changes as well. One is congestion at
ports and airports - a problem not necessarily solved by
modern techniques, the other the need to provide
simplified procedures to match policy plans, such as
inward investment.
14.3.12The most obvious symptom of information inefficiency is
port/airport congestion. Sometimes the prime cause of
congestion can be the lack of physical facilities but
far too often it is simply a physical reflection of the
inability of the information systems to cope. Shed and
container park congestion are invariably caused by
problems with imports. In turn this will delay exports
or a least create excessive extra handling charges.
14.3.13On container and ferry trade congestion is often caused
because clearance practices have not been updated from
the old, leisurely, cargo liner days when a ship could
take 10 days to discharge, allowing the paperwork to
catch up. In the majority of cases, however, the
paperwork is not available to start the clearance
processes especially if controls can only be carried out
when the original documents arrive.
14.3.14The growth in global sourcing means that many components
or materials for an export product have to be imported
first for use in the production process. Simplified
procedures for temporary importation need to be
developed to save unnecessary complexity in this link
between importation (with deferred duty payment) and re-
export.
14.3.15Many countries are trying to increase their exports, in
some cases by making manufactured or semi-manufactured
goods for export. These, unlike raw material, generally
move in small consignments or by container, road trailer
or general cargo liner vessels. The exporter will have
to compete on speed and reliability of delivery as well
as price and quality. In practice exporters,
particularly those making goods to order such as
textiles and footwear, will want the consignment to
catch the next available departure, and commercial and
official procedures must be streamlined to allow such
quicker movements.
14.3.16In the export part of any international transaction a
good deal of the information for the whole of the
communication chain between seller and buyer has to be
generated by the exporter and fed into the system before
the goods in question can leave the country of origin.
14.3.17Some information is necessary to book and pass the goods
to the carrier and secure movement to the port.
Consular authentication, quality inspection, and export
licensing will be needed before this stage, together
perhaps with a certificate of origin from the
appropriate Chamber of Commerce. Certain documents will
be necessary to secure entry for the goods into the
port, to pass through any intermediate warehousing, to
direct the goods to the right vessel, to secure custom
clearance to validate the necessary insurance
arrangements and to pay various charges.
14.3.18All these requirements will have to be met before the
goods can be loaded. In an increasing proportion of
world trading the time interval available between the
allocation of the goods in a factory to a particular
transaction and the physical point of acceptance onto
the chosen vessel is very short indeed. Yet this time
often has to accommodate some very complex documentation
and procedures.
Guidelines:Traders can be assisted in carrying out this part
of their work in two ways:
-simplifying, co-ordinating and standardising port
management, shipping lines, customs reception and
release procedures and documents between the various
ports/airports/container depots in a country so that
they can develop one basic set of export procedures for
all exports by sea and air and will only have to train
staff to understand and operate one system; and
-developing an aligned export document system, for both
paper documents and their electronic equivalents.
14.4Representation
14.4.1In dealing with procedural bottlenecks that affect a
country's traders, national action is often not sufficient
and regional and international work is also necessary.
Besides the appropriate regional bodies, the two key
international organisations are the United Nations (UN) and
International Organisation for Standardisation (ISO). The
UN work has been focused through the UN Economic Commission
for Europe's Working Party on the Facilitation of
International Trade (UN/ECE/WP4) and the UNCTAD
Facilitation Unit (FALPRO) now part of SPTE. Since
Cartegena UNCTAD's work is now concentrated on its Special
Programme for Trade Efficiency (UNCTAD/SPTE). Other
significant international activities include the Customs
Co-operation Council (CCC), the International Chamber of
Commerce (ICC) and various commercial and transport
organisations.
14.4.2National policy should be to represent national
facilitation interests, with the support of government, in
bilateral, regional and international negotiations.
15ADMINISTRATIVE OPERATIONS
15 Principles
15.1.1Government needs to ensure that all its departments and
agencies take a pro-active role in facilitating trade. It
may be worthwhile to hold briefing seminars to ensure all
are aware of the need for improving the efficiency of the
overall process.
15.1.2It might be appropriate for the overall management of these
activities to be undertaken within the Trade Ministry.
Some countries have placed overall control in the Prime
Minister's Office. A national plan should be developed
with objectives and performance targets.
15.1.3Each department/agency should ensure its plans reflect
trade facilitation objectives, as well as those on control.
15.1.4The basic objective of all government operations (including
Central Bank) should be that necessary controls should have
the minimum impact on the trading process. In most cases
control should be undertaken before or after the physical
movement of the goods rather than during transit. The use
of audit techniques should be encouraged so that controls
can be carried out by periodic inspections, or audits, of
traders records.
15.1.5Where controls are undertaken during the movement of the
goods maximum use should be made of commercial documents
rather than requiring the creation of separate official
forms, and any physical controls should be undertaken where
the goods are being handled for commercial purposes.
Therefore break-bulk and bulk goods should be controlled
at the port/airport; groupage goods where the groupage
transport unit is loaded/unloaded (inland depot or groupage
operators premises) and full container loads at traders'
premises.
15.1.6Controls undertaken should follow the appropriate
international standards.
15.1.7All documentary requirements should follow the national
aligned system when developed, the FALPRO organisation
being given the responsibility to check conformance of each
document/electronic message against the national system.
15.1.8The rest of this section deals with individual aspects of
official control. Key points in terms of recommended best
practice are highlighted.
15.1.9More detail is contained in UN/ECE/WP4 Recommendation No
18 - "Facilitation measures related to international trade
procedures (ECE/TRADE/141/Rev 1 September 1982, in twenty
two other UN/ECE/WP4 Recommendations addressed to
governments, to international governmental and non-
governmental organisations and those involved in
international trade operations, and in a wide range of
international Conventions, Recommendations, Standards,
Recommended Practices and Guidelines developed by
various inter-governmental and non-governmental
organisations.
15.1.10A 'Compendium of Trade Facilitation Recommendations' is
being prepared by UN/ECE/WP4, to cover the above, in co-
operation with the UNCTAD Special Programme on Trade
Efficiency, for submission to the United Nations
International Symposium on Trade Efficiency to be held
in October 1994.
15.1.11The subjects covered below are:-
-Licensing
-Exchange control
-Consular formalities
-Origin statements
-Pre-shipment inspection
-Dangerous goods
-Customs and other official procedures
-Statistics
15.1.12In some countries activities such as marine insurance
and port operations may be carried out in the public
sector. Guidelines on these activities are set out in
Part D "Guidelines on Better Business Practice -
Business Services".
15.1.13Any country's policy on standards should be to give
priority to the development, use and maintenance of a
national series of aligned export document based on the
UN Layout Key for Trade Documents (see Appendix 1) and
of the global Electronic Data Interchange (EDI) standard
UN/EDIFACT (see Appendix 2).
15.1.14Priorities in procedural improvements should be
identified by a study to identify:-
-where bottlenecks to efficient trading are
-what causes them.
15.1.15Care must be taken to find the real cause of
bottlenecks, not that necessarily recounted by local
participants. In a study several years ago inward
congestion was blamed on "customs clearance". In fact,
whilst the customs procedures had been outdated by
transport developments, and were slow, they were not the
prime cause. This was the inefficiency of state import
agencies and high import duties, which meant commercial
importers did not submit the customs entry until they
had sold the goods. Congestion led to excessive amounts
of stored goods and increased pilferage. This was
'rectified' by increased 'controls', which led to more
confusion, cost etc.
15.2 Licensing
15.2.1Most countries require export licences to be issued for
some restricted or sensitive goods before they can be
shipped. In these cases an export licence application has
to be prepared, submitted and processed and an export
licence issued. This licence is then checked by customs
when processing the export customs entry.
Guideline:It should be a straightforward process for
exporters to obtain licences for acceptable exports
of such products. Once a licence is issued control
should be linked to routine export controls (eg.
customs clearance).
15.3Exchange Control
15.3.1Many countries operate exchange control procedures on
exports to ensure that moneys due to exporters for their
goods are remitted to that country in accordance with its
exchange control regulations. Similar procedures are
operated with import transactions. The need for such
controls generally is part of fiscal policy. Copies of
these forms are generally processed by customs, the Central
Bank and the commercial bank. Most countries set minimum
value levels under which no approval is required. Exchange
control procedures can be very complex and time consuming.
Although such procedures do not generally affect port
operations - except where booked cargo does not arrive
because of unexpected delays - they can affect efficient
exporting.
15.3.2In some countries it is compulsory for payment of exports
to be effected through documentary credit, as a means of
ensuring receipt of foreign export earnings through the
intermediary of the banks involved. With the changing
pattern of payment arrangements, this requirement tends to
preserve the use of documentary credits where other methods
of payment could more sensibly be employed. Where possible
other, cheaper and more effective, methods of payment
should be used.
15.3.3The need for exchange controls does not mean that the
current rules in place are necessarily in the best
interests of the country concerned. All too often exchange
control regulations stipulate rules that pre-date the
latest container and other transport developments and build
in delays, the cost of which is ultimately paid by the
buyer. There are notable examples of countries
rationalising their exchange control rules in line with
modern trade and transport without weakening their ability
to defend the country's financial resources.
Guideline:Exchange control practices should be brought up to
date and simplified. Control should be carried out
by the commercial bank (on behalf of the Central
Bank) on the basis of commercial documents.
Minimum value levels should be realistic.
15.4 Consular Formalities
15.4.1Consular invoices are required by a few remaining importing
countries and are authenticated by their consular officials
in the country of export. A consular invoice usually
confirms that the exporting company is a bona fida foreign
trade enterprise and that statements concerning the
commodity, price, total invoice amount, insured value (if
any), place of despatch, number of packages and weight of
the goods are correct. If satisfied, the Consulate adds
its visa and charges a fee to be paid by the exporter.
15.4.2Most of the details of a Consular invoice may already be
found in the Commercial Invoice and the intervention of a
Consulate therefore has little justification; it creates
delays and extra costs which are eventually reflected in
the price paid by the consumer in the importing country.
The elimination of such Consular invoices would lead to a
significant reduction in the cost of imports.
15.4.3With the increased pace of international trade it is
increasingly difficult to carry out the necessary
procedures before goods arrive at destination. Delays can
therefore occur and financial penalties can be imposed.
Guideline:Consular invoices, consular visa requirements and
consular fees should be abolished.
15.5 Origin Statements
15.5.1Declarations or certifications of origin on commercial
invoices or on specific forms should be required only where
this is essential for the proper application of trade
policy measures or for the prevention of fraud. When such
declarations or certificates are deemed indispensable, the
competent authority should apply a simple measure that
provides the minimum of control considered as sufficient
for the particular case. Preferably, an exporter's
declaration of origin on the Commercial invoice should be
accepted. If a separate form for Certificate of origin is
required, it should be based on defined criteria and
designed in accordance with the model contained in Annex
D.2 of the Kyoto Convention. It should be permitted to
produce certificates on plain paper in a one-run system
using a photocopier; printing of forms on security paper
should not be required.
Guideline:Where they are deemed necessary, controls of origin
should be carried on the basis of the relevant
commercial documents.
15.6 Pre-Shipment Inspection
15.6.1Exporters often face a number of pre-shipment inspections
where the quality, quantity, and sometimes the value of the
goods are checked. These can be carried out for such
purposes as excise control, customs control, inter-state
and national border controls, government quality inspection
(perhaps linked with export incentives) and overseas
government requirements. If these inspections are not
reduced where possible, simplified and co-ordinated
considerable delays occur and exporters find it difficult
to match production and sailing schedules and to quote
competitive shipment dates to their customers.
Guidelines:The practice of pre-shipment inspection, carried
out on behalf of the importing country, should be
discouraged. Where carried out, governments should
seek to simplify them. Random sampling techniques
and periodic inspections for regular, approved
exporters should be used.
15.7Dangerous Goods
15.7.1Procedures relating to the movement of dangerous cargoes
are naturally more stringent than those for ordinary
consignments. In nearly all cases carriers require prior
notification from the exporter or carrier before they will
accept certain classes of dangerous goods.
15.7.2When dangerous goods are received by shipping companies
they are checked and the necessary authority to receive the
cargo (eg. port authority) and to load it (eg. shipping
company) obtained. The exporter or his agent is then
advised of the time and place at which the goods are to be
delivered.
15.7.3One problem with dangerous cargo is often the checking of
the documentation of groupage trailers and containers to
ensure that all dangerous cargoes and their contents had
been declared.
15.7.4Another problem is that the regulations for the carriage
of dangerous goods are developed on a different basis in
some countries, using different numbering systems and
declarations. Add to this the fact that in many cases each
interest in the goods movement asks for his own dangerous
goods declaration to be completed and one can see that the
exporter has some difficulties in establishing the correct
procedures for documenting and handling these cargoes.
15.7.5Attention is drawn to UN/ECE/WP4 Recommendation 11, which
sets out methods of documentation and of providing
transport emergency information for dangerous goods.
Guideline:National regulations should conform to the relevant
international standards. Wherever possible the
dangerous declaration should be incorporated in, or
combined with, an existing commercial document;
which should be part of the national aligned
document system.
15.8Customs and other Official Procedures
15.8.1Government requirements, and the documentation and
procedures which stem from them, have various aims and the
facilitation of trade is probably not their primary
purpose. All government documents and procedures should
therefore be kept under regular review. This in no way
questions the validity of the fiscal, protective, trade
control and health control necessary for government to
carry out its business.
15.8.2Customs administrations tend to be responsible for
operating a wide variety of measures on behalf of other
governmental departments. Besides collecting duties and
taxes they may enforce exchange control regulations and
import and export prohibitions; apply provisions to
imported goods; ensure compliance with certain public
health regulations; compile overseas trade statistics and,
may collect certain agricultural levies.
15.8.3Acceptance by customs of the need to facilitate trade in
no way relieves traders of their obligation to make
accurate declarations for goods. They still need to meet
the necessary detailed customs requirements for information
and documents. In many countries customs are now willing
to accept electronic, telex or faxed information, and will
release imported goods accordingly. Nevertheless, errors
by importers continually hinder the swift clearance of
goods. Errors include omissions of essential information,
incorrect statistical classification, and failure to
produce supporting documents. Full use of aligned
systems and EDI should ensure reduced error rates.
15.8.4Customs objective should for both export and import
clearance to increasingly be undertaken at the trader's
premises, subject to movement and 'approved' trader status.
Existing or simpler customs documentation linked to audit
based controls give the opportunity to examine radically
how official procedures can be changed.
15.8.5The Harmonised System was created to meet a vital and
pressing need for single classification system which would
respond to the basic commodity description and coding
requirements of the entire international trade community.
60 countries and 1 customs or economic union currently use
the H.S for official customs purposes, which accounts for
over 85% of world trade. However, one of the basic
objectives of the H.S, with its multi-purpose features, is
to apply the classification code outside the customs
environment and ensure its wider application, ie. not only
by customs or statisticians but also by trade interests
such as traders, carriers and producers.
Guideline:Customs authorities should simplify their
requirements for export, transit and import
procedures in line with the International
Convention on the Simplification and Harmonisation
of customs procedures (Kyoto Convention of the
Customs Co-operation Council). This should be
undertaken with national trade and transport
interests to ensure full co-ordination of carrier,
port and customs controls.
Customs authorities should ensure that:-
-their forms are aligned to any national system of
aligned export documents;
-the data content is kept to the minimum essential with
their then current requirements;
-the number of different formats of shipping bill is
reduced to the minimum possible;
-they accept copies of commercial documents to provide
proof of export and for other pre-shipment controls
(particularly where the main function is to provide
trade statistics), collecting statistics after the goods
have been loaded by customs entry or periodically
submitted paper or computer or EDI produced customs
schedules;
-they and port/airport interests accept copies of
commercial documents - or EDI messages - from shipping
and airlines rather than requiring the information to be
transcribed onto their own forms. (eg, following IMO
and ICAO facilitation conventions).
15.9 Statistics
15.9.1A certain level of statistics is acknowledged as necessary
in both public and private sectors. In too many cases,
however, statistical demands are over detailed, duplicated
and sought at an inappropriate time. On occasion it
appears that the statistics become more important that the
actual trade transaction.
15.9.2The need for traders and their service providers to have
to prepare separate detailed statistical forms, and the
timing of this requirement, can delay the movement of
goods. Whilst transaction based documents are required,
either commercial documents or the customs entry, should
be used. Some countries, especially on exports, operate
system where statistics are collected after shipment.
15.9.3The use of periodic schedules for approved traders, either
on paper or preferably by EDI, speeds up both traders' and
customs/statistical office processing. Experience also
shows that scheduling greatly reduces errors - dropping
from 30% to about 2%.
Guidelines:International trade statistical requirements should
be reviewed periodically in order to restrict the
information called for to a minimum and to ensure
it is collected at a time that causes the minimum
delay to goods movements. Periodic scheduled
returns should be used where possible, preferably
via EDI.
Government should operate a simple interface with
traders, ensuring that statistical demands are not
repeated by different departments/agencies.
16 GOVERNMENT AS A BUSINESS
16.1Where government acts as a business, buying or selling
goods or services, it should act like a commercial
operation. Its objectives will be to provide goods and
services to the satisfaction of the "customer" and to
purchase efficiently at the minimum overall cost.
16.2In providing goods and services, operations should be
developed to meet user needs in terms of quality, speed and
price.
16.3In purchasing, the minimum stock should be held.
16.4In both cases normal standard commercial sales and
purchasing procedures and documents should be used. The
use of EDI should be developed at the same time, changing
practice as the opportunity exists. (For example, a major
UK store and overseas clothing manufacturer have revised
procedures, introduced EDI and reduced the order-make-
deliver cycle from 20 to 10 days - thus reducing stock
holding with significant savings. Most governments are
major purchasers).
Guideline:In buying or selling goods and services government
departments should use commercial best practice to
maximise their efficiency. Standard commercial
documents, EDI messages and procedures should be
used wherever possible.
PART D : BEST PRACTICE FOR INTERNATIONAL TRADE SERVICES
17 THE ROLE OF INTERNATIONAL TRADE SERVICES
17.1The prime function of international trade services is to
supply services to their clients, mainly to the exporter
and importer, but sometimes to each other. The services
provided should be effective, efficient and economic.
17.2As indicated in section 2, if enterprises are to compete
successfully in the global market place they have, amongst
other things, to strengthen their relationships with their
trading partners. International trade services are the
cement that can help join buyers and seller into closer
relationships. Especially where new companies or less
developed countries are moving into international trade.
17.3In these cases either experienced service operators can
provide significant expertise or, will need to be developed
and operated, with the added requirement of staff training.
17.4In the real world of international trade most traders will
use several ports, airports, banks, shipping and airlines,
road/rail operators. In some cases the decisions of which
service to use may be taken by each customer.
17.5Therefore one of the main responsibilities of international
trade service providers is to follow international or
national standards, especially with documents, so that the
traders only have to train staff to operate a single set
of common procedures. This still leaves service operators
to compete with each other on the quality, speed,
reliability and price for the services. (A concept well
recognised by airlines for many years).
Guidelines:
All companies supplying international trade services
should simplify their services as far as possible and
use international standard practices and information
standards such as the UN Layout Key for Trade Documents
and UN/EDIFACT EDI standards. Where appropriate,
national standards should also be followed so that their
documents can be part of national aligned systems. (See
Appendix 1, Annex 2 to see an example of the range of
documents within a national system).
17.6It is impossible to draw up a definitive list of services
provided by international trade service suppliers. They
can, however, broadly be dealt with in three groups;
advisory services, transport services and financial
services. Even here there is some overlap as, for example,
one of the key roles of banks is to provide advice on
financing and paying for international trade.
17.7Other examples of advisory services include government
departments such as those providing export promotion
services and trade statistics; Chambers of Commerce, export
groups, training institutes, trade associations and
facilitation bodies.
Guidelines:Advisory services to traders should be co-ordinated
to avoid duplication and increase effectiveness.
17.8'Transport' services covers an enormous area and
includes road haulage operators, container bases,
airports, port authorities and services and
international carriers of all modes. They also include
official interventions in the movement of goods such as
customs and health administrations. Here the main
consideration in making the trade process more
efficient, besides the use of international standards,
is to ensure that 'transport' services are properly co-
ordinated at the key 'nodes' of trade such as ports,
airports, container bases and frontier posts.
Guidelines:co-ordinate all 'transport' service activities as
set out in section 6.3.
17.9The third group of services are financial. These range
from companies providing credit status reports, through
banks and other financial institutions, to export credit
and maritime/air insurers.
17.10Besides using international standards in their documentary
links with their customers, financial service suppliers
need to ensure that the services they supply continue to
meet the ever-changing needs of international trade. This
is not easy, especially when older trade practices prevail,
but banks, like customs administrations, have the ability
to set new standards and should do so wherever possible.
Guidelines:Financial services should be reviewed periodically
to ensure use of current best practices.
17.11A final point to be made at the overall level is about
public service provision of those international trade
services more commonly associated with the private sector,
such as ports, transport services and insurance.
17.12It may be that embryo services are being developed in the
public sector, protected from international competition.
Experience sometimes shows that such protected operations
are relatively inefficient, either providing limited
services or charging higher prices.
17.13At the level of trade and transport policy government will
often have to decide what is more important nationally,
developing an open and efficiency trading process to help
local enterprises compete successful in the global market
place, or maintaining protected services.
Guideline:International trade services provided by the public
sector should provide competitive customer services
and be effective, efficient and economic.
17.14The final two sections of this paper look at transport and
financial services to international trade in more detail.
18 TRANSPORT SERVICES
Two of the key 'transport' documents at the start of an
international trade transaction are the consignment (or
shipping) instruction and the shipping note. The former
starts the process of both goods movement and document
creation by telling the recipient (freight forwarder or
carrier) what is to happen to the goods, what processes
should be covered and what documentation raised. The
latter provides full information about the goods, their
handling and routing when delivering goods to an inland
depot, port or airport.
18.2Both these documents should be multi-functional and
suitable for all modes of transport. This allows the
exporter only to have to produce two standard external
documents if he is leaving other transport and official
documents to be prepared by a freight forwarder or carrier.
The use of standard documents also improves the efficiency
and quality of port/airport and related services.
18.3The consignment instructions should follow UN/ECE/WP4
recommendation 22 "Layout Key for Standard Consignment
Instructions" and cover the functions of:-
-movement and handling of goods
-customs clearance and duty payment
-distribution of documents
-allocation of freight and other charges
-special instructions eg. insurance, dangerous goods etc.
18.4The shipping note (and its dangerous goods equivalent) can
be used as a document on which information is built up as
the goods are received, stored and re-loaded for export.
Thus it can cover functions required by the
-road carriers
-port authority
-shed/container terminal operator covering both condition
of goods upon receipt and despatch and charges
-international carrier
Guidelines:Multi-purpose shipping notes and consignment
instructions should be developed as part of
national aligned systems.
18.5In maritime transport one of the most important best
practices developed in the last twenty years has been the
concept of offering traders non-negotiable waybills as
alternatives to negotiable bills of lading. This concept
started when European/Scandinavian carriers discovered,
with the advent of container ships, that the containers
arrived up to a week before the bill of lading, the
original(s) of which had to be handed back to the carrier
at the discharging port before the goods could be released.
Switching concepts is not entirely straight forward as
historically the bill of lading original has acted as the
control document with letters of credit. However non-
negotiable maritime documents are now acceptable under the
latest ICC rules (and in any case most of the world's trade
is not handled by letter of credit).
Guidelines:
Shipping lines should offer traders non-negotiable
documents, as an alternative to negotiable bills of lading,
based on UN/ECE/Recommendation 13 : Maritime transport
documents.
18.6To make maximum use of the latest transport technologies
and best practices, it is obvious that all relevant
procedures and documents have to be reviewed and revised.
Traders often clamour for official controls to be amended,
to be able to do customs clearance inland on sealed
containers and trailers. The service provided by the
'transport' industry has to change too.
18.7Combined (multi-modal-) transport services needs to be
developed and offered; services need to be able to operate
under combined transport conditions, government procedures
on national transit and temporary importation of transport
units and vehicles needs to be updated etc. The old
transport industry structure of many services, all
providing a single service to the trader, needs to change
as much as official practices.
Guidelines:Commercial and official practices need to be
revised as countries develop container and trailer
transport services.
19FINANCIAL SERVICES
19.1The role of banks in trade facilitation falls under at
least four different categories:
-the contractual framework - the development by the ICC
of common rules for letters of credit, documents sent
for collection,
-the provision of credit information on potential
customers and updating this information regularly on
continuing trading partners
-the provision of finance on a cost effective and
flexible basis, often linked to export credit insurance
cover
-the provision of international cash management services
to speed the payment of sales proceeds to the required
account in the specified currency.
19.2International cash management services include:
-the planned location of accounts for international money
transfer and currency bookings
-the choice of efficient international money transfer
methods depending on the amounts, currency and costs
involved
-the use of collection accounts for the regular receipt
of proceeds from a number of customers in anyone country
-direct collections of trade documents
-means of managing the exporter's foreign exchange risks.
19.3Part of the decision on methods to be used is the speed at
which money can move through the banking system for the
exporter to obtain prompt receipt of export proceeds.
19.4Methods of payment are often inefficient because of
government imposed exchange control regulations, because
traders are trying to over protect the payment or because
traders are not fully conversant with the implications of
each method.
19.5This is particularly true with letters of credit. A recent
UK survey "Exporters' Problems with Commercial Letters of
Credit" showed that nearly half of the credits studied in
the survey contained serious defects or errors.
19.6The report concluded that the letter of credit process was
complex and potentially expensive - especially with low
value consignments, particularly if not properly planned,
managed and operated by the commercial parties. This was
not considered surprising, with the high reliance on manual
processing by all parties and the number of times data can
be rewritten or rekeyed at separate states in the process.
19.7One finding is worth repeating
"Not only did issuing banks (the buyer's bank) appear to
change or add conditions to the credit, usually without
advising the applicant, some banks, especially in less
developed countries, persist in out-of-date restrictions
on documents and procedures which have been commonly
accepted elsewhere for some time. Combined, in some cases,
with badly designed forms and the lack of international
standards it is not surprising that the survey showed that
the bulk of defects and errors originated at the stage of
processing the applicant's application for the credit and
issuing the credit document itself".
Guidelines:
Commercial payment procedures associated with letters of
credit and documentary collections should be reviewed to
ensure that they follow current trade/transport
requirements and use best practice. The objective is to
be that processes do not hold up the efficient movement of
goods or payment.
Express money transfer systems, which reduce payment 'float
time' to the minimum, should be introduced and encouraged.
19.8Insurance for goods moving in international trade normally
involves the notification to an insurer of the consignment
and its insured value and the issue of an insurance
certificate and/or an insurance policy. Insurance can
either be arranged on a consignment basis, or for period
of time under so-called "Open cover policies".
19.9Cover provided can vary between "minimum cover" or "all
risks cover". The best known examples of cover are the
Institute Cargo Clauses drafted by the Institute of London
Underwriters. Clause A on "all risks" and Clauses B and
C on less extended cover).
19.10According to the ICC, in 1991 seller or buyers in more than
40 countries could be compelled to take out insurance in
their own country to minimise expenditure in foreign
currency and/or support a domestic insurance industry.
19.11Insurance documents should be included in national aligned
systems.
19.12Marine insurance is a complex business, traders should seek
assistance from professional advisers to ensure they are
adequately covered as reasonable cost.
Guidelines:
Cargo insurance procedures should be simplified. The 'open
cover' concept should be used whenever possible. Insurance
certificates and policies (when issued for individual
shipments) and insurance declarations under open cover
should be part of the national aligned document system.
20COMMUNICATIONS SERVICES
20.1A wide range of communications media are now available
including letter post, air parcel, courier services,
telecommunications, facsimile, and telex.
20.2For the purposes of EDI value-added network services (VANs)
are third-party network providers. Other options are
dedicated telecommunications connections (ideal if high
volumes of EDI with a single trading partner); and private
networks.
20.3VANs provide
-an electronic postal service based on 'store and
forward' (for EDI and E-mail)
-security and audit facilities
-support for the major communications protocols
-24 hour service
-groups of EDI users
-national and international coverage
20.4Because of the number of participants in international
trade, and because it is international, participants will
almost certainly be using different VANs. To achieve full
commercial links with customers and suppliers users will
require VANs to interconnect with each other. They will
expect service suppliers to provide the security levels and
end-to-end audit capability required.
Guidelines:VANs need to interconnect, so that traders can
contact all their customer/suppliers. Levels of
security and end-to-end audit should be provided to
meet commercial requirements.
APPENDIX 1
National Aligned Series of Export Trade Documents
Introduction
The purpose of this paper is to explain the benefits of using
aligned systems to produce export documents. Aligned forms are a
series of forms so designed that items of information common to all
forms appear in the same relative positions on each system.
Aligned systems are national series of commercial, transport,
financial and official export documents developed to be produced
from a single master document. The system is based on the UN
Layout Key for Trade Documents.
How the System Works
Individual groups of forms can be produced in simple one typing
sets using NCR (no carbon required) technology. Only a single
typing has to be checked before shipment.
The full range of documents can be produced from a Master Document
(which specifies the position to be occupied by individual items
of information on each aligned form). As much information as
possible can be added to the Master Document for each consignment
and carefully checked. See UK example in Annex 1.
The information, and the forms, can then be prepared mechanically
using a photocopier and overlays, or as computer output to laser
printers on EDI messages.
The great benefit is that all systems, from the simple multi-part
form to sophisticated laser or EDI output, uses the same standard
building blocks or data elements. The system is therefore usable
by small and large traders as a stand-alone operation or integrated
into in-company order processing, stock control and accounting
programs.
With overlay systems each overlay represents and produces a
specific export document. It is a transparent plastic folder
printed with individual export document designs and solid white
masking areas where applicable.
The completed Master Document is inserted into the overlay. Using
a plain paper copier will now produce the completed document.
Using different overlays the exporter can produce all his export
forms. The current list of documents in the UK system are shown in
Annex 2.
The next option is a computer software package to process
information relating to export shipments. Documents can then be
printed onto continuous stationery, onto cut sheets or sets or via
a suitable laser printer. Ideally such packages provide links
allowing shipment data to be transferred to or from other
applications. Data should also be able to be output to an EDI
module which can produce standard UN/EDIFACT messages.
The Benefits of an Aligned System
The main benefits are:-
-cuts costs
-increased accuracy
-greater efficiency
On costs studies in the UK showed saving of about 50% of traders
costs in document preparation (savings of around œ40 per
consignment) when using the overlay systems. Interestingly the
savings for smaller firms (up to 200 employees) were higher than
for larger firms. Computer systems are significantly more cost
effective.
An aligned system reduced error because only one document is
prepared, in a single operation, and multiple forms checking is
eliminated. Increased accuracy means all documents provide
identical shipment details, with fewer misunderstandings and
delays.
Greater efficiency is possible because such systems save time,
allow easier training of staff and produce quality documents to
agreed international guidelines.