A relevant tool to facilitate trade
With the pace of modern business accelerating day by day, the demand for faster delivery of consignments increases considerably. The needs of traders for expeditious clearance can no longer be met by traditional paper-based customs procedures. The volume of trade continues to increase, while the resources available to customs authorities have remained static. Therefore, modernisation of customs procedures through automation and risk-based selectivity are inevitable to expedite the release of goods. With this approach customs and border agencies change their strategy from full physical cargo inspection towards targeted inspections based on risk and information management.
One shipment – many data
Within any given international trade transaction, the relevant data for a particular shipment starts to be generated with the purchase order, sometimes even before the goods are being manufactured. This data is complemented by the commercial invoice issued by the seller or supplier of the goods and by relevant transport documentation (e.g. the bill of lading). All this information is available electronically at the time when these commercial and transport contracts are concluded. Hence, long before the actual importation of the goods in the destination country. These commercial documents are being supplemented by any relevant official document such as licenses, health certificates or certificates of origin. Many of these documents are also by now available in electronic form, or where that is not the case can be submitted electronically as a scan copy.
All these data can already be used by the importer to prepare the import declaration. The carrier or freight forwarder for his/her part can start preparing the relevant cargo declaration, which is required prior to arrival.
Definition and relevance of Pre-Arrival Processing
Pre-Arrival Processing (PAP) involves the (electronic) submission of the relevant goods and/or cargo declaration data to the relevant authorities prior to the arrival of goods. It enables automated processing of data, screening through risk management and release upon arrival of low-risk consignments. It is an important tool to facilitate trade. Traders profit from faster delivery, customs authorities can allocate resources more effectively and the economy of the country is strengthened.
PAP is particularly important for certain groups of goods being very sensitive to the earliest possible release from customs. These may be for example shipments with a high value and/or with a critical delivery time. They cover urgent consignments of spare parts, production inputs, medicines, perishable goods, samples for testing etc. The COVID-19 pandemic has demonstrated how essential the express delivery industry is for the cross-border supply of critical items such as medicines, vaccines, personal protective equipment and food. The express delivery channel remained the only available supply option for those necessary goods in many countries.
The express channel is also highly relevant for businesses: to meet document filing deadlines, to export faster and to keep pace with competition, to quickly import parts and to keep machinery operational when parts and other inputs are sourced from a range of third countries.
Implementation of the Trade Facilitation Agreement on Pre-Arrival Processing
The Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO) has made risk-based pre-arrival processing (PAP) in Art. 7.1 in combination with Art. 7.4 an obligatory commitment on all its members. As per TFA the overall scope of PAP is focused on the arrival in the country of importation. However, best practice examples in some customs administrations show that the scope could be changed to mean processing of all relevant formalities including risk assessment prior to the arrival of the goods at the customs office of entry or exit. This means the arrival is not defined as arrival in the country, but as arrival at the customs office of entry or exit for release purposes.
As such the objective of PAP can be determined as to perform risk assessment as well as verification and validation of advance electronic information as contained in the cargo and customs declaration and the supporting documents. Thus, the assessment whether the shipment is regarded to be of low, medium or high risk is made by customs and all relevant border agencies prior to the shipment arriving at the customs office of entry/exit.
In the case of outbound PAP, the aim is to perform risk assessment and other forms of verification at the time when the export goods are still at the premises of the exporter. The outbound PAP can also be defined as pre-departure processing (PDP). This way, the physical examination (if so decided) can be performed prior to the goods being loaded into the container or onto the means of transport. This will help to avoid disruptions in the transport chain and help maintain the integrity of the shipment.
PDP would enable to release shipments assessed as low risk upon arrival and thereby reduce the time required for importation and exportation, hence reducing the costs and increasing the overall competitiveness of the export country.
The German Alliance for Trade Facilitation has different projects on the introduction of PAP in its portfolio – either already successfully closed or currently in implementation.
Projects in implementation:
Are you interested to learn more about digital tools in trade facilitation? Check out our factsheet:
Author: Dietmar Jost, Consultant, Dietmar Jost Consulting
Editor: Pia-Christine Binder, Specialist for Communication, German Alliance for Trade Facilitation
Bildquelle: TimeStopper – stock.adobe.com