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PAKISTAN TRADE AND TRANSPORT FACILITATION PROJECT

(Trade Transactions Analysis)

PROJECT REPORT DECEMBER 06, 2004

Masood Aziz Associates (Consultants) Trade and Transport Facilitation Project

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TABLE OF CONTENTS

ABBREVIATIONS _____________________________________________________04

TASK DESCRIPTION__________________________________________________05

INTRODUCTION _____________________________________________________06

METHODOLGY ______________________________________________________08

EXECUTIVE SUMMARY _______________________________________________09

OVERVIEW OF EXTERNAL TRADE PROCESSES ________________________12

KEY TO READING THE PROCESS CHARTS_____________________________15

INTEGRATED FLOW CHART FOR TEXTILE EXPORTS__________________17

INTEGRATED FLOW CHART FOR MANGO EXPORTS___________________20

COMPARATIVE TRADE TRANSACTION ANALYSIS GRID________________22

AVERAGE TIME RANGES FOR SUB-PROCESSES ________________________23

INTRODUCTION TO BUSINESS PROCESSES ___________________________25

Exporters Bank 25 Clearing Agent 31 Export Facilitation Center 34 Karachi Port Trust 37 Pakistan Customs 39 Shipping Company 46 Export Promotion Bureau 49 Karachi Chamber of Commerce & Industry 51

BUSINESS PROCESSES DESCRIPTIONS AND FLOW CHARTS ____________52

Customer Interface 53 Importers' Bank 56 Exporters' Bank 62 All Pakistan Textile Manufacturers Association 65 Export Promotion Bureau 67 Clearing Agent (Temporary Imports) 71 Clearing Agent (Exports) 73 Insurance Company 77 Karachi Chamber of Commerce & Industry 80 Karachi Port Trust - Delivery 83 Karachi Port Trust - Pass-in 86 Shipping Company 88


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Pakistan Customs - Customer Service Center 91 Pakistan Customs - Temporary Imports 96 Pakistan Customs - Manufacturing Bond (Bonded Warehouse) 100 Pakistan Customs - Manufacturing Bond (Custom House) 104 Pakistan Customs - Bank Guarantee (Deposit) 108 Export Facilitation Center - M. I. Yard 111 Export Facilitation Center - Air Freight Unit 115 Pakistan Customs - Goods Pass-in 117 Pakistan Customs - Examination 120 Pakistan Customs - Bank Guarantee Release 124 Pakistan Customs - Duty Drawback 128

ILLUSTRATED ANALYSIS - TOOLKIT _________________________________132

Process Re-engineering Framework 132 Problem Diagnosis (with reference to export of mangoes) 134 Proposed Trade Portal for exchange of e-documents and information 140

PROPOSALS / RECOMMENDATIONS _________________________________145

STATISTICS _________________________________________________________ 151

Statistical Data of overall Export Supply Chain 151 Statistical Data - Customs segregated from external organizations 152 Graphical Representations 153

ANNEXURE_________________________________________________________158 Electronic UCP 158 Good practice in trade facilitation: Lessons from Tunisia 163


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LIST OF ABBREVIATIONS ACN Air Consignment Note ACP Automated Clearance Procedure APTMA All Pakistan Textile Manufacturers Association ATC Agreement on Textile and Clothing B/L Bill of Lading CAD Cash/Collection against Document CARE Customs Administrative Reforms CBR Central Board of Revenue CGO Customs General Order CoO Certificate of Origin DA Document against Acceptance DP Document against Payment EASY Electronic Assessment System EDIFACT Electronic Data Interchange for Administration, Commerce and Transport EFC Export Facilitation Center EFT Electronic Funds Transfer EPB Export Promotion Bureau eUCP Electronic Uniform Customs and Practices for Documentary Credit FOB Free on Board GD Goods Declaration GoP Government of Pakistan GSP Generalized System of Preferences IT Information Technology KCCI Karachi Chamber of Commerce and Industry KICT Karachi International Container Terminal KPT Karachi Port Trust L/C Letter of Credit MFA Multi Fiber Agreement MR Mate Receipt NBP National Bank of Pakistan NOC No Objection Certificate NTN National Tax Number NTTFC National Trade and Transport Facilitation Committee PDC Post Dated Cheque PIN Personal Identification Number PO Payment Order PRAL Pakistan Revenue Automation Limited Rs Rupees SBP State Bank of Pakistan SPO Senior Preventive Officer SRO Statutory Regulatory Order UCP Uniform Customs and Practices for Documentary Credit UNCTAD United Nations Conference on Trade and Development URC Uniform Rules for Collection WTO World Trade Organization


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TASK DESCRIPTION (TERMS OF REFERENCE) Masood Aziz Associates were assigned the task of mapping external business processes

relating to export transactions by UNCTAD. The project was to be undertaken in liaison

with NTTFC. For this purpose textile sector was selected for carrying out detailed analysis.

The scope of the project was defined as follows:

• To map the processes on ‘as is’ basis

• Analyze and breakdown the processes into singular activities and tasks;

• Plot each activity (sub-process) in the form of a process (flow) chart;

• Prepare an integrated flow chart providing linkages and interdependencies of each sub process;

• Conduct an analysis of the processes and make indicative recommendations for simplification and standardization;

• Prepare indicative criteria for articulating modifications in the ‘as is’ scenario involving IT/E-commerce intervention

• To translate the outcome of the assignment into generic approach.


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INTRODUCTION Trade facilitation in the context of international trade refers to all components of trade

transactions namely physical, procedural and administrative. Singapore Declaration and

Doha Development Round of WTO Ministerial conferences have identified trade facilitation

as an essential component for the economic growth of member countries. Effective trade

facilitation should lead to an increase in competitiveness and in turn raise the quantum of

business activity. Any effort to address constraining factors in the context of trade

facilitation would require revisiting the entire spectrum of trade environment of a country

with a view to making its trade industry competitive in the global market. Important aspects

of international trade environment include: trade policy, trade logistics, documents and

business processes. The Government of Pakistan recognized the importance of this issue

and took a major initiative by setting up a Task Force in the year 2000 to analyze the entire

gamut of Customs business processes. Based on the recommendations of the Task Force a

comprehensive strategy was developed for initiating Customs reforms programme to

facilitate international trade. The Central Board Revenue set up an organization namely, the

Customs Administrative Reforms Cell (CARE) for implementing the reforms programme

approved by the Government.

Simultaneously, the National Trade and Transport Facilitation Committee (NTFFC), which

operates under the aegis of the Ministry of Commerce, has been engaged in analyzing trade

documents, processes, laws and institutional setup to address the various constraints that

affect Pakistan’s international trade.

This project is an extension of the initiative of the NTFFC with reference to simplification

of documents and procedures related to international trade transactions. NTFFC has already

successfully implemented the Goods Declaration and Ship Clearance forms besides

developing an inventory of trade documents. This project essentially focuses on analyzing

the series of steps involved in the external trade transactions, with a special focus on export

trade. For this purpose, the textile sector was identified as a prototype for analyzing

international trade transactions in a manner that could be adopted for different


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industries/sectors. The analysis encompasses all steps involved from the point of production

of goods until the receipt of payment (export proceeds). This study identifies agents, number

of steps and average time consumed in the completion of various processes pertaining to the

export trade transactions. This will provide the various stakeholders with an opportunity to

rationalize the processes to enhance the competitiveness of Pakistan’s exports. Besides,

export trade transaction in respect of mangoes was also studied to draw comparison between

the two. This report includes a brief analysis to highlight the points of convergence and

variation with reference to processes impacting export of the two export products.


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METHODOLOGY

The project followed a preconceived path. We began with developing a conceptual model on

trade facilitation from the perspective of external trade processes. This was followed by

physical observation of the processes in action. Simultaneously, the various functionaries in

each process were identified and interviewed for clarity and conceptual understanding of

various activities in a particular process. On the basis of our physical observations and

discussions, process description and charts were developed. Subsequently, the process

descriptions and flow charts were taken to a senior person in each department (process) for

his review and validation. The processes are analyzed from various dimensions, such as

number of steps involved, number of persons involved, type and nature of tasks / activities

involved, and average time taken to complete each process. The processes were further

analyzed to understand the value-significance of each process on the export supply chain

with a view to identifying factors, which tend to slow down the processes.


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EXECUTIVE SUMMARY For carrying out this study, the following processes were identified for mapping the steps

involved in the export supply chain of textile goods:

• Opening of L/c

• Processing of Goods Declaration

• Pass-in of Export Consignments

• Examination of Goods

• Issuance of Export Visa by EPB for quota items

• Insurance of Goods

• Issuance of Certificate of Origin

• Issuance of Bill of Lading

• Sanctioning of Duty Drawback

• Temporary Importation

• Manufacturing Bond

Result of the study depicted in the flow charts revealed that the processes are predominantly

manual, involve excessive/frequent interface of functionaries and clients and that there is a

lack of facilitative/enabling environment for efficient performance of individual tasks. For

instance, the process of temporary imports is completed in eighteen steps under ideal

conditions. The documents move back and forth fifteen times and require signatures of

concerned authorities at seven different occasions.

Of all the business reports mapped, Customs clearance of goods is perhaps the most critical

/ important in the export supply chain considering the regulations/procedures that need to

be followed to dispatch the export consignment to the buyers abroad.

Fortunately, considerable effort has already gone into revamping the Customs Business

Processes. Customs Administrative Reforms (CARE) organization is in an advanced stage of

implementation of automated solutions to the existing manual-cum-computerized system at


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Customs, which involves a fairly large number of steps. For example the GD at Export

Facilitation Center is processed in sixteen steps and include intervention of seven persons.

A pilot project covering all imports and exports through KICT is likely to be operative by

March 2005. The hallmark of the proposed prototype project would be:

• Customs would function in a paperless environment;

• Goods Declaration would be lodged and processed electronically;

• System would work based on a comprehensive Risk Management criteria;

• There will be virtually no physical interfacing with the Customs clients; and

• Data would be interchanged with the major stakeholders through (EDIFACT)

Subsequent to shipment of goods comes the point of negotiating documents with the bank.

This process is equally critical, for a successful and timely negotiation would enable the

exporter to realize his proceeds at an appropriate point in time. The usual reason for delay is

incomplete and/or incorrect document submission by the exporter. It is imperative to

mention that quite a few documents need to be issued by an external organization, such

Certificate of Origin, Visa, GSP etc. It is ironical to point out that in theory little time is

required for the issuance of these documents. However, in practice it is observed that the

delay in issuance of these documents sometimes exceeds a week.

Upon successful shipment of goods and negotiation of documents at the bank counter, the

exporter initiates his claim for the payment of duty draw back and sales tax return on the

exported goods. The claims are critical for the exporter in the context of maintaining

competitiveness and capping his cost of funds. Duty draw back and sales tax return are also

usually taken away from the export prices to make the products even more competitive.

However, if these claims are not settled in timely manner it results in loss to the exporter.

For instance, the standard settlement time for duty draw back is from 24 hours to one

month for Gold, Silver and Others categories, respectively. Stakeholders, however, inform

that sometimes it takes much longer.


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An analysis of other processes viz. opening of L/c, issuance of Bill of Lading, Form E, and

Certificate of Origin, etc. indicates that IT based solutions could be dovetailed with the

CARE project both as a short and medium term solutions. Simultaneously, stakeholders may

work out simplified/reengineered processes by deleting unnecessary steps and rationalizing

the existing procedures.

The recommendations incorporated in the report essentially aim at finding IT based

solutions viz. electronic customs declaration/ processing as envisaged in CARE project,

development of a portal system for data interchange between various stakeholders and

modernization of relevant banking procedures in terms of ICC’s proposed electronic

document submission.

This will, however, require a holistic and coordinated effort in consultation with all the

stakeholders


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OVERVIEW OF EXTERNAL EXPORT PROCESSES (AS IS BASIS)

Export supply chain of a typical textile fabric export is analyzed with a view to presenting a

comprehensive perspective on various intervening processes involved. A dual level analysis

has been done in this regard. The primary level analysis focused on capturing the tasks and

activities that make up each process on ‘as-is basis’. Secondary level analysis is done from the

holistic orientation, wherein each primary level process is integrated with the other to

highlight the inter-dependencies of primary level processes and to portray the resulting

complexity of the export supply chain. A diagrammatic illustration of the above is portrayed

in the following Integrated Process Chart.

The primary level processes are split into four clusters, namely;

• Order prospecting,

• Temporary Imports,

• Documentation and goods dispatch, and

• Post dispatch processes.

1. Order prospecting process captures tasks involved in selling to a foreign buyer. This

includes sampling, negotiation, and contracting. This process is relatively simple and

flexible, for the seller and buyer mostly control the activities according to their

convenience.

2. Temporary Imports refer to acquisition (import) of requisite raw materials, including tags

and labels from the buyers. This process is rather cumbersome, for most of the tasks in

this process are controlled by a third party other than buyer or seller. For instance, bank

procedures are controlled by the exchange control regulations in force, custom processes

are regulated by the Trade Policy, Customs Act and other regulatory procedures notified

by the CBR. These activities are complex and cut across multiple external organizations.

Moreover, the tasks here are also linked with the processes at post-exportation stage,


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such as claiming of duty draw back etc. Due to the inherent complexity and external

interdependencies the processes here are prone to dysfunctional influences leading to

unwarranted delays.

3. Documentation and dispatch of goods represents the third cluster of activities, which

begin with dispatch of goods from factory for shipment. The goods go through a host of

intermediaries before these are shipped on board, such as Forwarding Agents, Customs,

Terminal Operators, Port Authorities, etc. The most critical interaction occurs with

Customs authorities, who by virtue of their statutory role and responsibility are supposed

to clear the goods for shipment. The underlying rationales of Customs control are: to

ensure if the physical goods conform to the declared description, especially on Customs

documents. Secondly, the customs also ensures if no contra band as per trade policy and

other regulations or hazardous or destructive goods are exported from the country.

The procedures in vogues at Customs were put in place many years ago when neither the

trade traffic was so voluminous nor time efficiency standards were so high. However, as

of today the scenario has changed paradigmatically. International trade has increased

manifolds both in terms of volume and value. Similarly, time has become extremely

critical in view of competition in the international markets. The procedures in vogue

become a bottle-neck in the supply chain unless extensive use of Information

Technology (IT) is done at all levels by all stakeholders tinkering with the manual

procedures would at best result only in marginal improvement. Further, there is a need

for a shift from the strictly “Control Orientation” to “Facilitative Orientation” whereby

legitimate traders are given due recognition and their goods are cleared through simpler

processes in lesser time.

Subsequent to the shipment of goods comes the point of negotiating documents with

the bank. This process is equally critical, for a successful and timely negotiation would

enable the exporter to realize his proceeds at an appropriate point in time. Conversely,

any delay here could stretch the time horizon for realizing the proceeds and hence export

asset conversion cycle. As cited in the following report, the usual reason for delay is


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incomplete and/or incorrect document submission by the exporter. It is imperative to

mention that quite a few documents need to be issued by an external organization, such

as Certificate of Origin, Visa, GSP etc. It is ironical to point out that in theory little time

is required for the issuance of these documents. However, in practice it is observed that

the delay in issuance of these documents sometimes exceeds a week.

4. Upon successful shipment of goods and negotiation of documents at the bank counter,

the exporter initiates his claim for the payment of duty draw back and sales tax return on

the exported goods. The claims are critical for the exporter in the context of maintaining

competitiveness and capping his cost of funds. The exporter competes in the

international markets by quoting as low price as he could manage. Duty draw back and

sales tax return are also usually taken away from the export prices to make the products

even more competitive. However, if these claims are not settled in timely manner, it

results in loss to the exporter. For instance, the standard settlement time for duty draw

back varies from 24 hours to one month for Gold, Silver and Others categories,

respectively. However, the payments sometimes are not released for much longer period

of time.

In nutshell the external processes along the export supply chain need immediate

rationalization to redress the issues of process inefficiencies, redundancies, susceptibility to

corruption, and high cost of execution. To achieve this, it is imperative that a cooperative

partnership of Government and Industry is forged based on mutual trust and to create an

enabling environment characterized by transparency, information sharing and speed.

The respective processes appear in the following pages, for a detailed review in the format of

flow charts.


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KEY TO READING THE PROCESS CHARTS

1. Name(s) of Stakeholder(s):

These are the name(s) of the stakeholder(s) who are involved in the process. The processes mentioned in front of each name shows that these activities are performed by the said person. In the diagram above, five persons are involved namely Counter Clerk, Dealing Officer, Computer Official, Deputy Director and Auditor.

2. Off-Page Connector These capsule-shaped images are called off-page connectors. They show that the flow is shifted to another process from this point to another different activity whose reference number is mentioned therein. Please refer to Serial No. 6 below (Process/Flow Chart reference Number) for more details.

3. Process Box Each box represents a single task performed by any person.

4. Task/Serial Number

This small sub-box shows the task/serial number of the processes. In order to read the description detailed description of any process box, note the serial number of sub-box in it and read the details available in the process description sheet against that number.

5. Process Description

This description explains the type of process/flow chart. For instance, the above process chart is that of Export Promotion Bureau (EPB).

2

1

3

4

6

8

5

7


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6. Process/Flow Chart Reference Number

This number represents the reference of a process/flow chart. Each chart has been assigned a unique reference number. It may be seen in the above diagram (in the first row, the capsule-shaped box known as off-page connector), the flow is shifted from there to another different activity namely ‘APTMA-FC01’ (as mentioned in that (capsule-shaped) off-page connector). In order to review the referred activity (i.e. APTMA-FC01), the readers may look for a flow/process chart having the said reference number

7. Process Flow Arrow

These arrows show the direction of flow of process. 8. On-Page Connector

These circles are the on-page connectors. Each circle has a reference ID (for example A, B, C, etc.). In the diagram above, in the second row, the on-page connector, having reference ID ‘A’ shows that the process has not ended here bit it is in continuation from the sixth (last) row.

Other symbols not available in the example diagram 9. Decision Box

This picture is used at decision-making situations i.e. the situations where there are two options available and only one is to be opted. Usually, the situations are in ‘Yes’ or ‘No’.

10. Either Circle This circle is used where there may be more than one alternative to do the same task and all the alternatives are right.

11. Two-way Communication Arrow

This double-sided arrow is used to represent two-way communication between different stakeholders


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COMPARATIVE TRADE TRANSACTION ANALYSIS GRID

Sr. No. EXTERNAL PROCESS TEXTILES MANGOES 1. Customs Processes 1.1 Temporary Imports:

- GD Processing at PRAL Yes No - Examination and Assessment Yes No - Manufacturing Bond / Indemnity Yes No - Payment of Duties and taxes Yes No

1.2 Export: - GD Processing at CFC (PRAL) Yes Yes - Pass-in Yes Yes - Examination Yes Yes - Drug enforcement cell Yes Yes - Duty Drawback Yes No - Sales Tax Return Yes Yes 2 Port Authorities - Payment of Wharfage Yes Yes - Goods pass-in Yes Yes 3 Shipping Agency - Issuance of container Yes Yes - Shipment Yes Yes - Issuance of Bill of Lading Yes Yes 4 Clearing Agency - Preparation of electronic GD Yes Yes - Submission of GD at PRAL Yes Yes - Arrange for examination of goods at port Yes Yes 5 Export Promotion Bureau - Allocation and issuance of Quota (Visa) Yes No - Issuance of GSP certificate Yes No 6 Local Chamber of Commerce - Issuance of Certificate of Origin Yes Yes 7 Health Department - Issuance of phyto-sanitary-certificate No Yes 8 Anti Narcotics Force - Clearance certificate Yes Yes 9 Importer Bank - Issuance of Import Letter of Credit Yes No - Import Negotiation Yes No - Issuance of Bank Guarantee Yes No - Import financing Yes No

10 Exporter Bank - Advising of Letter of Credit Yes Yes1 - E Form Certification Yes Yes2 - Export Negotiation Yes Yes - Export Financing Yes Yes

1 We understand that in most of the cases fruit exports are made on consignment basis. However, when these are made against L/C, the same procedures as applies to textile goods, shall apply.

2 We have been informed by PHDEB that E Form requirement for fruit exports is suspended currently


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Average Time Ranges for Each Activity in a Typical Export Supply Chain Along with Possible Reasons Causes of Delays

Stage Usual Time Range

Possible reason(s) Possible cause(s)

Processing of Goods Declaration

2-4 Hrs Submission in late hours; Exceptions; Internal process cycle; System bugs such as system slow-down and non-availability of System

Non-availability of necessary documents, esp. packing list and certified copy of E form; Erroneous entry; missing information; Low system reliability

Goods Pass in (KPT – Gate)

Same Day

Non availability of container(s); Delayed dispatch from the factory; Discrepancy in physical goods vs. declared description

Fewer containers relative to demand and/or mismanagement; Goods not ready in time

Customs Clearance

Same Day

Classification disputes; Value disputes; False declaration charges

Split authority; Regulations are prone to multiple interpretations; Functionaries lack relevant knowledge; Misdemeanor on the part of functionaries

Shipment on board

01-07 Days

Non availability of the ship; Non availability of Drug Enforcement clearance; Late arrival of fumigation staff; Occasional mismanagement

Non availability of berth; Lack of facilities and/or lack of coordination; Non standardized practices;

Negotiation and dispatch of documents

02-12 Days

Expiration of the L/C; Non-availability of bill of lading / ACN etc., Visa certificate, and any other commercial document such as counselor’s invoice etc.; Complex internal procedures

Delayed availability of goods ready for dispatch at the factory; Sailing of the ship; Delay at EPB/ other offices; Complex regulatory requirements and/or inefficient bank procedures


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Duty drawback1

- Gold Category - Silver Category - Others

72 Hrs 7 Days 1 Month

Delayed submission; Complex sanctioning procedure

Lack of procedural understanding by the constituent; Revenue biased system; Split authority

Reimbursement of Proceeds

180 days max. as per SBP

Dispatch of documents as cash against documents

Non-availability of L/c, or L/c expires before shipment; Discrepancy in documents

1. Time ranges mentioned for Duty Drawback indicates the minimum time range. In practice however, the sanctioning of Duty Drawback may take longer period of time particularly during May/June of every financial year when Duty Drawback payments are reportedly withheld to meet the annual net Customs revenue targets.


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INTRODUCTION TO BUSINESS PROCESSES

1. Process: Exporter’s Bank 1.1 Key Performance

Areas: Commercial bank has many roles in the Export Value Chain. From the standpoint of this study, these are: 1.1.1 Financial inter-mediation between exporter(s) and the

importer(s) 1.1.2 Export Trade Financing

1.1.3 To ensure compliance of State Bank of Pakistan’s (SBP)

regulations which are aimed primarily at timely realization of foreign exchange proceeds.

1.1.1 Financial Intermediation: It has primarily two manifestations, namely, under Documentary

Credit and/or Collection. In the former, the bank acts as an agent to the importer and is liable by virtue of documentary credit to pay to the exporter on behalf of the importer sale proceeds subsequent to the submission of requisite documents at the bank counters on or before the stipulated date. In the latter, the bank acts as agent to exporter and collects the proceeds against documents from the Importer on behalf of the Exporter. Documentary credit can be made either on ‘Document against Payment’ (DP) basis or ‘Document against Acceptance’ (DA) basis. The term DP refers to the scenario where the importer or the bank, under the Documentary Credit, have agreed to pay as soon as the requisite documents are presented at the Negotiating Bank’s counter. The DA basis refers to the scenario whereby mutual consent of both the importer and exporter, the Documentary Credit permits release of documents on deferred payment basis. In this case, the importer or his bank accepts the annexed bill-of-exchange for payment at a future date, that could be a fixed future date or determinable future date. In either of these two situations, the issuing-bank of the documentary credit is equally liable to pay and/or accept the bill-of-exchange if otherwise in order. These transactions are governed under the Uniform Customs and Practices for Documentary Credits # 500, of International Chamber of Commerce and the local regulations.


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Similarly, the Exporter may approach its bank to arrange collection of the documents at the risk and responsibility of the exporter. Here the bank’s liability is restricted only to the extent of presenting the documents to the importer or his agent(s) in due course. In case the importer or his agent(s) refuses to pay or accept the annexed bill-of-exchange, the bank is not liable in any manner. However, the bank may offer to assist the exporter to find an alternate customer for the consignment, who is also willing to pay or accept the annexed bill-of-exchange. These transactions are governed under the Uniform Rules for Collection, of International Chamber of Commerce and local regulations.

Document(s) Documentary Credits (UCP) Collection (URC) Financial Documents - Bill of Exchange - Cheque, Draft - Trust receipt

Financial Documents - Bill of Exchange - Cheque, Draft - Trust receipt

Title Documents - Negotiable bill-of-lading

Title Documents - Negotiable bill-of-lading

Commercial Documents - Invoice - Certificate of origin - Packing list, etc. Transport Documents - Bill-of-lading (all inclusive) - Air consignment note - Truck receipt, etc.

Commercial Documents - Invoice - Certificate of origin - Packing list, - Bill-of-lading (all inclusive) - Air consignment note - Truck receipt, etc.

Stakeholders:

Documentary Credits (UCP) Collection (URC) Importer / Applicant Exporter / Beneficiary Importer’s / Issuing bank Advising bank Confirming bank (optional) Negotiating bank

Exporter / Drawer Importer / Drawee Exporter’s / collecting bank Presenting bank Remitting bank

Liabilities and Responsibilities:

Documentary Credits (UCP) Collection (URC) Importer / Applicant - To pay / accept bill of

exchange when presented, unless otherwise in order.

Exporter / Drawer - To make arrangement to

present the documents in due course of business


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Exporter / Beneficiary - To make and present the

documents as per the terms and conditions of the documentary credit and unless otherwise in order.

Importer’s / Issuing bank - To reimburse payment to the

negotiating bank upon receipt of documents as per the terms and conditions of the documentary credit and unless otherwise in order.

Advising bank - To convey to the exporter or

his agent that the documentary credit has been established along with all the necessary details therein in due course of business and without loss of time.

Negotiating bank - To accept and/or pay the

annexed bill-of-exchange on behalf of the issuing bank (importer) when the exporter presents stipulated documents as per terms and conditions of the documentary credit and unless otherwise in order.

Confirming bank (optional) - A third bank may at the

request of importer confirms the documentary credit and whereby undertakes to reimburse to the negotiating bank. The liability is contingent upon the issuing bank’s non-performance.

Importer / Drawee - To pay and/or accept the

bill-of-exchange, as the case may be, upon acceptance of the document(s).

Exporter’s / collecting bank - To make arrangement to

present the documents for payment and/or acceptance, as the case may be, on behalf of the exporter and in due course of business.

Presenting bank - To make arrangement to

present the documents for payment and/or acceptance, as the case may be, on behalf of the collecting bank and in due course of business.

Remitting bank - To make arrangement to

remit the funds so collected to the collecting bank in due course of business, after deducting its usual charges or as mutually agreed upon.


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1.1.2 Export Trade Financing:

Another important service that export bank provides is Export Trade Financing. The financing has two manifestations, namely; financing for acquisition of raw materials and/or production, and typically up-front discounting of export documents. The former is known as pre-shipment financing and the latter is known as post shipment financing. SBP provides a refinance to the exporter bank thus affecting the rate of interest to decrease to 2.5% from 11% and so. This provides added advantage to the exporter. However, the finance on subsidized rates is made available to the exporter on the condition that either the export is effected within 180 days from the date of borrowing or export proceeds are received within 180 days of shipment, respectively. In the event of delay in either, the bank reverts back to normal rate of interest for the entire period.

Three variants of export financing are available on

a) Pre-shipment (Part 1) for raw material and production b) Pre-shipment (Part 2) for discounting of export documents c) Post-shipment based on last year’s performance and on the

condition that current year’s performance shall be doubled. It is available in the form of line of credit.

Stakeholders:

a) Exporter b) Authorized Dealer c) State Bank Pakistan


Exporter is liable to utilize the funds towards the purchase of raw materials and production of goods for export purpose only. Moreover, the exporter is obligated to effect shipment or realize proceeds from abroad within 180 days from the date of borrowing or shipment respectively, to avail financing at subsidized rates. Furthermore, in case of post shipment facility, the exporter is required to achieve 100% increase in export earnings over the last year.

The Bank is responsible for arranging subsidized financing through

SBP and for ensuring that the exporter fulfills his/her obligations as envisaged in the scheme.

State Bank of Pakistan is responsible for framing laws to regulate the

export trade financing and for making funds available at subsidized rates to the respective banks. .


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1.1.3 SBP Representative:

In Pakistan the SBP is the legitimate custodian of foreign exchange and regulates its inflow and outflow. Commercial banks, as Authorized Dealers of SBP, are required to exercise vigilance on international trade transactions (on documentary basis alone) to ensure compliance with SBP regulations. Moreover, the banks are also required to monitor realization of export proceeds into Pakistan within the stipulated time period and provide timely information to SBP in either case.

To monitor the inflow of export proceeds into Pakistan, SBP uses Form E as an instrument to account for and monitor the realization of export proceeds into Pakistan. Authorized dealers are required to issue such forms to the Exporter either against confirmed documentary credit or a firm contract in case of Cash/Collection against Documents (CAD), whereby the exporter undertakes to effect remittance into Pakistan within a stipulated time i.e. 180 days. In case of failure on the part of the exporter, the authorized dealer is under obligation to pursue and compel the exporter for the remittance. The remittance into Pakistan under a confirmed documentary credit stands a fairly good chance to be effected in time, because the issuing bank is directly liable to reimburse to the negotiating bank under the documentary credit. However, under CAD transactions this advantage is automatically forfeited, as no bank is otherwise liable for the remittance of proceeds. This poses serious problems for the authorized dealers in tracking the remittance. An effective mechanism is not in place to monitor and ensure timely receipt of export proceeds. Mere undertaking of the exporter on the face of Form E does not provide effective control to the authorized dealer over the envisaged remittance. It does, however, serve as a basis to pursue the exporter to ensure timely inward remittance of foreign exchange proceeds.

Stakeholders:

a) Exporter b) Authorized Dealer c) State Bank Pakistan d) Customs


The Exporter by virtue of the undertaking on Form E is liable to arrange inward remittance of the export proceeds within 180 days from the date of shipment.


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Authorized Dealer by virtue of its obligation arising out of certifying Form E stands at par with the exporter for inward remittance of export proceeds within 180 days from the date of shipment. However, the authorized dealer does exercise direct control over the remittance under CAD transactions.

State Bank of Pakistan is responsible for framing laws to regulate the

legitimate inflow and outflow of country’s foreign exchange. In the event of failure on the part of exporter and/or his bank to bring in the export proceeds into Pakistan within the stipulated time frame, the SBP has to take appropriate action against the failing party and ensure that the remittance is effected on time.

Customs has to certify on Form-E that the goods have been exported

out of Pakistan against the documentary credit and/or firm contract under CAD. A copy of certified Form-E goes to the SBP.

1.2 Analysis/Recommendations:

It is generally observed that some times unnecessary delay occurs in negotiating the documents due to a number of reasons, such as non-availability of complete set of requisite documents, discrepancies in the documents, and delayed dispatch. It is worth noting that the ICC has already presented a draft eUCP version that emphasizes introduction of electronic document submission under documentary credits. Once approved, this will hopefully redress the problem. A copy of draft eUCP is placed at Annex-A for reference.

It has also been observed during discussions with the stakeholders

that tracking of inward remittance into Pakistan under CAD transactions is very difficult. Some alternative procedures have to be developed to address this problem, such as Bank Guarantees to ensure that the exporter is obligated to bring in the export remittance on time for Form E has failed to accomplish the desired objective w.r.t CAD transactions. Moreover, one should also realize that the existence of hundi business is a serious threat to the above.


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2. Process: Clearing Agent 2.1 Key Performance

Areas: The Clearing Agent plays a vital role of linking the exporter with the stakeholders for clearance and shipment of the consignment. His function(s) are identified as follows: 2.1.1 Preparation of Goods Declaration (GD) and its processing at

the Export Facilitation Centres 2.1.2 Liaise with KPT and Customs for pass-in and clearance of

the consignment, respectively

2.1.3 Coordination with shipping companies for loading of the consignments

Stakeholders: a) Exporter b) Export Facilitation Centre c) Pakistan Customs d) Clearing Agent e) Karachi Port Trust f) Shipping Company

2.1.1 GD Preparation

and Processing: The clearing agent is provided with the necessary software to produce GD for the intended export consignments. On behalf of the exporter, the Clearing Agent prepares the GD on the basis of information/documents provided by the exporter and in accordance with the requirements of the regulatory regime in force. The Clearing Agent then submits the GD to the respective Export Facilitation Centre (EFC) for its processing.

Document(s)

Following documents are generated here: a) Goods declaration form (soft copy and hard copy) b) Form E, duly certified from the Authorized Dealer (4 copies) c) Invoice d) Packing list


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The Clearing agent is liable to present Goods Declaration (electronic copy as well as hard copy) along with other necessary documents at the EFC counters during the usual working hours. It is imperative to note that the clearing agent is liable to make correct and complete declaration. The clearing agent is also liable to respond to the queries (exceptions), if any, arising in the course of processing the GD at EFC.

The exporter is liable to provide all the relevant

information/document(s) to the Clearing agent for the purpose of producing and processing GD. The exporter is also liable to provide financial resources to the Clearing agent for the payment of necessary fee/levies.

Export Facilitation Centre is liable to accept the GDs for processing

from the Clearing agents upon payment of requisite fee and unless otherwise found in order.

2.1.2 Liaise with KPT

and Customs: After successful processing of the GD at EFC, the next steps are to bring the goods into port and get Customs clearance.

Liabilities and Responsibilities

The Clearing agent is responsible for paying wharfage and bringing the goods at the KPT gate in order to allow pass-in. Subsequent to the pass-in, the clearing agent is required to un-pack the goods for Customs examination. After the examination, the Clearing agent arranges for the re-packing of the goods for shipment. At present, all consignments are invariably opened for examination by the Customs.

KPT staff is liable to verify the physical contents of the consignment with declaration on GD and Gate pass, and make note in case of short shipment. Pakistan Customs conducts physical examination of the goods and makes a note on the GD, either confirming the contents or highlighting discrepancies, if any. Customs, after recording examination report, allows shipment. In case of any discrepancy, the same is noted usually after drawing samples and shipment is allowed. Occasionally, goods are detained pending a formal decision by senior Customs officials.


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2.1.3 Coordination with Shipping Company

Subsequent to the clearance of consignment from the Customs, the consignment is made available to the shipping company for loading on board.


The Clearing agent is liable to make arrangements to deliver the consignment duly cleared for shipment and pay the usual freight and other charges. Moreover, the clearing agent is also responsible for providing to the shipping company, the specific format of the bill-of-lading on the basis of which the shipping company issues the bill-of-lading.

The Shipping Company is liable to ship the consignment on the vessel already intimated. However, in certain circumstances, mostly due to non-availability of space, the company may resort to shutting-out of the consignment. In this case the company has to convey this information to the Clearing agent / Exporter immediately and also notify what the alternate itinerary of the consignment would be.

2.2 Analysis/Recommendations: Clearing agents are licensed by the Customs and their licenses are renewed annually. There is a need to monitor and review the performance of Clearing Agents from the standpoint of their professional expertise, and compliance with Customs Law and procedure to ensure efficient processing of Customs formalities. An objective criterion to assess their performance needs to be developed and the renewal of their license may be linked thereto.


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3. Process: Export Facilitation Centres 3.1 Key Performance

Areas: The Export Facilitation Centres are responsible for electronic capturing, verifying and processing of customs data pertaining to exports. They have the following roles in the export value chain: 3.1.1 Electronic capturing, verifying and processing of Export

Goods Declarations, thus enhancing the completeness and integrity of the data contained in the GDs.

3.1.2 Generation of Management Information Reports / Statistics

primarily for the Central Board of Revenue, Customs and concerned ministries. It also provides relevant reports to the industry.

3.1.1 Electronic Data

Processing of GD: Goods Declarations initiated by the Exporters and/or their agents are submitted at Export Facilitation Counters prior to physical entry of the export consignment into port (Customs) area. The submission is done on a floppy disk as well as hardcopy. Here the data is processed through the available software for the following checks, namely, Pakistan Customs Tariff, Contra band items, Negative entry against the exporter(s), Negative entry against the clearing agent(s), etc. Subsequent to this, the system automatically determines the Govt. levies if any. Finally, the GD data is electronically submitted via intra-net to Customs, Bank, KPT etc. The hardcopies of processed GDs are stamped / machine numbered along with the certification, “Processed Electronically” and are handed back to the exporter(s) or their agents.

Document(s) Following documents are required/processed at EFC: a) Goods Declaration Form, 07 copies. b) Form E certified by the Authorized Dealer (Bank), 04 copies c) Customs invoice, one copy d) Packing list, one copy

Stakeholders: a) Exporter / Clearing Agent b) Pakistan Revenue Automation Ltd. c) Pakistan Customs d) Karachi Port Trust


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Exporter / Clearing agent is liable to provide bona fide information regarding the goods being exported on the GD and its annexed documents. Moreover, the exporter / clearing agent is also liable to submit the GD prior to scheduled shipment and/or pass-in of the consignment at the EFC counters during the usual working hours and pay prescribed processing fee @ Rs.65/- for normal processing and a surcharge for late processing.

Pakistan Revenue Automation Ltd. (PRAL) is liable to make

necessary arrangement to process the GD submitted within a reasonable time on the same day. It is also required to identify any discrepancy to the exporter / clearing agent at the earliest for necessary rectification.

Pakistan Customs usually accepts the information contained on the

GD in general and conducts the usual scrutiny / physical examination of the consignment on the basis of it. Any discrepancy found shall be notified to the exporter / clearing agent and referred to the concerned senior officer for decision without delay. Shipment is allowed invariably if no major discrepancy is noticed on physical examination of goods.

Karachi Port Trust is liable to confirm the physical goods (number of

packages) against the goods description declared in the GD before allowing pass-in in the port area.

3.1.2 Management

Information Reports: EFC performs yet another important function of generating Management Information Reports for the Central Board of Revenue, Ministries of Commerce and others, Pakistan Customs and Exporters. In doing so, the EFC provides a rational basis for policy evaluation and decision making at various levels.


It is generally observed that at times unwarranted delays occur in processing the GDs. The reasons normally cited in this regard include submission of GD at late hours, input of incorrect/ incomplete data from the exporter / clearing agent end, existing IT system limitations. The problems are mentioned by the frequency of their occurrence.


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Submission of incorrect/ incomplete information by the exporter/clearing agent poses most of the problems. This problem is augmented due to lack of regulatory understanding of the staff of EFC. In view of the above, the following solutions are recommended:

The GD should be processed by Customs officials who are proficient in data entry / use of computer. This will eliminate dual interface by the Clearing Agent with Customs as well as EFC staff. In addition, it will be possible to detect any technical lapse in GD at a preliminary stage. Until the Custom Staff is trained to acquire these skills, there should be a concept of front end and back end work teams at EFC. Personnel in the front end should be Customs specialists while personnel at the back end should be IT specialists. Ideally, the in-charge of each EFC should be an experienced Assistant Collector.

Ultimately the entire declaration for exports should be automated in accordance with the CARE project vision. It is further suggested that export consignment of low risk exporters should be cleared for shipment directly upon processing of GD at EFC, and these consignments should not be subject to examination in general. However, randomly selected consignment may be examined physically to serve as a deterrence mechanism. Similar procedures have been in place for quite some time for imports, such as Electronic Assessment System (EASY), Automated Clearance Procedure (ACP) introduced by the Collectorate of Appraisement, Customs House, Karachi. The recommendation made above will reduce the time taken in the clearance of goods by Customs.


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4. Process: Karachi Port Trust 4.1 Key Performance

Areas: The Karachi Port Trust is a facilitating agency that provides infrastructure facilities for berthing vessels, and uploading or downloading of goods therein. In the context of exports from Pakistan, it primarily provides the following services 4.1.1 Physical verification of goods passing in for export by

respective exporters or their agents. Stakeholders:

a) Exporter/Clearing Agent b) Pakistan Customs c) Shipping Company d) Karachi Port Trust

4.1.1 Pass in of physical

goods into port area: Subsequent to successful processing of the GD at EFC, goods are passed-in into the port area for examination and shipment. At this point the KPT staff verifies the quantity and physical description of the goods with the details given on the GD, and confirms if the goods are passed-in in full or in part thereof.


The Exporter/Clearing agent is liable to pay wharfage and bring the goods at the KPT gate for allowing pass-in. Subsequent to the pass-in the clearing agent is required to un-pack the goods for Customs examination. Subsequent to the examination, the Clearing agent arranges for the re-packing of the goods for shipment.

KPT staff is liable to verify the physical contents of the consignment with declaration on GD and Gate pass, and make note in case of short shipment and subsequently allow pass-in.


It is interesting to note that the goods are allowed pass-in 24 hours a day. However, Jaffar Bros. Staff at M.I. Yard, which has been assigned the task of collecting wharfage fee on behalf of KPT, works between 0900 hrs to 1700 hrs. This poses a problem for the goods coming during late hours, especially from outside Karachi, as the wharfage fee has to be paid before they can be passed-in. This results in unnecessary delay and constitutes risk of theft because the


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containers remain in a public area till the fee is paid and pass-in is allowed.

It is recommended that: A one-window operation should be introduced at KPT: Arrangements should be made for the collection of wharfage fee at the KPT gate 24 hours. Alternatively, Prepaid Challans Electronic Fund Transfer (EFT) may be introduced. (N.B. It is interesting to note that while we were discussing the solutions with the stakeholders, KPT has launched pre-paid cards to redress the issue.)


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5. Process: Pakistan Customs 5.1 Key Performance

Areas: Pakistan Customs operates under the Central Board of Revenue. There are four Collectorates of Customs in Karachi namely Appraisement, Preventive, Export and Port Qasim. The Collectorate of Customs (Export) is exclusively responsible for exports through Karachi port, Airport and Port Qasim. Business Processes of Customs (Exports) are essentially focused on regulating the movement of goofs across international borders. Its functions are identified as follows:

5.1.1 Pakistan Customs (Exports) is responsible for assessment of

exports consignments 5.1.2 Pakistan Customs (Exports) assists in pass-in of export

consignments

5.1.3 Examination of exported goods is carried out by the this organization

5.1.4 It is responsible for sanctioning of Duty Drawbacks

5.1.1 Assessment of

Goods: The leviable duties and taxes (if any) of Goods Declaration processed at Export Facilitation Center (EFC) are assessed by the Appraising Officer of Pakistan Customs, who is positioned in the EFC. The Appraising Officer, after thorough scrutiny of details of export consignment mentioned in a GD, corrects and/or verifies the declaration made therein by the Exporter/Clearing Agent.

Document(s)

Following documents are required at Pakistan Customs a) Goods Declaration Form b) Commercial Invoice c) Form-E

Stakeholders:

a) Exporter / Clearing Agent b) Export Facilitation Center operated by Pakistan Revenue

Automation Limited (PRAL) c) Pakistan Customs


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The Exporter/Clearing Agent has to provide bona fide information regarding the goods being exported declared on the GD and its annexed documents. Moreover, the Exporter/Clearing Agent is also liable to submit GD prior to scheduled shipment and after getting the same processed at EFC during the usual working hours. The Export Facilitation Center is responsible for accepting the GDs for processing from the Clearing Agent upon payment of requisite fee and unless otherwise in order. Appraising Officer, on behalf of Pakistan Customs, is liable to conduct the usual scrutiny of the same. Any discrepancy found shall be notified to the Exporter/Clearing Agent and the same will be rectified by the Appraising Officer.

5.1.2 Pass-in of Export

Consignments

Document(s) Following documents are required at Pakistan Customs a) Goods Declaration Form b) Commercial Invoice c) Packing List d) Form-E

Stakeholders:

a) Exporter / Clearing Agent b) Pakistan Customs


The Exporter/Clearing Agent is liable to get the GD processed and assessed at EFC and thereafter to bring the goods as per the description mentioned in the GD along with requisite documents to the Customs staff positioned at Karachi Port Trust (KPT). The Clearing Agent/Exporter is also liable to respond to any queries that arise in due course of pass-in of export consignment. The concerned staff of Pakistan Customs has to verify the description and quantity of goods as per the declaration on the GD and thereafter facilitate/allow pass-in of goods meant for export.


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5.1.3 Examination of Goods

Document(s)

Following documents are required at Pakistan Customs a) Goods Declaration Form b) Commercial Invoice c) Packing List d) Form-E

Stakeholders:

a) Karachi Port Trust b) Exporter / Clearing Agent c) Pakistan Customs


KPT authorities are responsible for allowing pass-in of goods by verifying the quantity and physical description of the goods with the details mentioned in the GD and on the Gate Pass submitted by the Clearing Agent so that the goods may be placed at the concerned yard for subsequent examination. The Exporter/Clearing Agent has to produce the relevant documents to the Examiner viz. processed GD, Invoice and Packing List. Exporter/Clearing Agent is also liable to respond to any queries which arise in due course of examination of export consignment. Pakistan Customs is liable to conduct physical examination of the goods and make a note on the GD, either confirming the contents or highlighting the discrepancies, if any. Subsequently, either allow shipment and opt to ratify the discrepancy later, or withhold the consignment for ratification of the discrepancy prior to shipment. In most cases, shipment is allowed on priority basis.

5.1.4 Sanctioning of

Duty Drawbacks

Document(s) Following document(s) are required at Pakistan Customs a) Goods Declaration Form

Stakeholders:

a) Karachi Port Trust b) Exporter / Clearing Agent c) Pakistan Customs


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Concerned authorities of Karachi Port Trust are liable to issue a Mate Receipt number on the GD confirming that the goods declared on the GD have been exported. Subsequently, Exporter/Clearing Agent applies for rebate to the Customs authorities.

The Exporter / Clearing Agent shall approach concerned KPT staff to obtain Mate Receipt number confirming that the goods have been exported. Subsequently Exporter / Clearing Agent approaches concerned staff of Pakistan Customs and claim Duty Drawback on the exported goods. Pakistan Customs is liable to facilitate Exporter / Clearing Agent applying for rebate in the process of sanctioning of the said claim.

5.2 Analysis/Recommendations

Customs plays a critical role in the movement of goods across the international borders. Besides collecting duty/taxes, it is responsible for enforcing a wide array of laws and regulations viz. checking movement of illicit goods, enforcement of intellectual property rights, classification and valuation of goods, sanctioning of duty drawbacks and performing security functions. They face the challenge of striking a balance between the imperatives of trade facilitation and effective enforcement of regulations. Fortunately, considerable work has already been accomplished to revamp the Customs regulatory system in Pakistan. Customs Business Processes were extensively reviewed by Task Force on Tax Administration set up by the Government in year 2000. Government had adopted the recommendations of the Task Force for simplifying and automating the business processes of Pakistan Customs. The recommendations included submission and validation of electronic declarations in the Customs Services Centre, automated allocation of GD to Appraising Officers at Processing Section, online linkage to Export Policy Order, Duty Drawback notifications and automated communication of examination instructions to the examining staff. It further included automated allocation of examination to Appraising Officers and automated random selection of package numbers to be examined and recording of examination report with a facility to view it on-screen by senior management. For the purposes of Duty Drawback, it was recommended that there should be no separate submission of duty drawback claims, automated calculation of Duty Drawback amount, Pre-audit of Duty Drawback claims simultaneously by the internal audit section. It also


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included automated remittance of Duty Drawback amount to the bank account of exporter, and facility of application of a selectivity criterion for examination based on profiling system. The Central Board of Revenue prepared a concept and strategy paper on Customs essentially based on the recommendations of the Task Force and set up an exclusive organization named Customs Administrative Reforms (CARE) Cell at Customs House, Karachi to undertake the implementation thereof. This Cell has done an extensive/comprehensive job to initiate the Customs reform program aimed at creating a paperless environment. A model Customs Collectorate has also been set up in the shape of a pilot project at Custom House, Karachi which would deal with all imports and exports through Karachi Int’l Container Terminal (KICT). Salient features of the system designed by CARE are summarized herein below: Person / Department

Task Nature of Task

Basis

Exporter or his agent

Submission of Goods Declaration via internet or intranet, 24 Hrs x 7 days in a week.

Data entry at the Export / Agents End

Access through PIN

System (Custom)

Intimates to the Exporter and/or his agent and simultaneously to the NBP for the payment of requisite charges, if any. The payment can be made through debiting the exporter account at NBP or by depositing P.O.

System generated information

System (Custom)

The GD is allocated to the available officer via system in a sequential order


Officer (Custom)

The officer shall review the GD on his terminal using system-based criteria. Subsequently, either he clears the goods for shipment (let export) or request examination

System generated risk assessment and Physical authentication of the electronic


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information contained in the GD

System The information is then communicated to the followings: - Exporter or his agent - Terminal Operators - Concerned Custom

officials

Auto generated process

Terminal Operators

Receive the container at gate, duly sealed by the exporter or his agent etc at least 12 hours prior to the scheduled time of vessel departure. Prior to pass in the container number and is fed into the system to determine the status of the goods.

Physical movement of goods

Terminal Operators

Either move the goods in the yard for shipment as per loading program, or transfer the container in the examination area as the case may be.


Terminal Operators

Unload the goods in presence of custom officials for examination / withdrawal of samples


Custom officials

Examine the goods or take samples to verify bonafideness of goods for export as per Pakistani laws and regulations. Upon satisfaction, authorizes “let export” via system

Physical examination

Terminal Operators

Reload the goods into the container


Custom Officials

Puts Custom’s Seal confirming examination.

Physical action


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Terminal Operators

Transfer the container to shipping yard for shipment as per loading program


Terminal Operators

Goods are shipped on board and informs custom of the same via system


Shipping Company / agents

Confirm loading of specific cargo and solicit approval for sailing off via system


Custom Officials

Allows sailing off via system

System based approval

Custom Officials

Informs authorizes SBP for refund of applicable duty draw back and/or sales tax via system. For duty drawback purposes, GD shall serve as duty drawback claim.

System generated information / authorization

Custom Officials

Informs to the Export or his agent of the sailing off of the ship


The aforesaid system may be replicated at all other Customs stations after its successful implementation as a pilot project.


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6. Process: Shipping Company 6.1 Key Performance

Areas: The Shipping Company has one of the most critical roles in the export supply chain. Its function(s) are identified as follows: 6.1.1 Physical transportation of the goods from port of origin to

the port of destination 6.1.2 Take possession of the consignment as bailee

6.1.1 Physical

Transportation: The shipping company provides one of the most valuable services in the Export Supply Chain, as they make possible safe, secured and timely delivery of the consignment(s) at port of destination.

Document(s) Following documents are generated here: a) Shipper Bill of Lading b) Shipper Export Manifest

Stakeholders: a) Exporter / Clearing Agent b) Importer / Clearing Agent c) Shipping Company d) Pakistan Customs e) Karachi Port Trust


The Exporter / Clearing agent has to make available the consignment (goods) at the port duly cleared for shipment on board, and pay usual freight and other charges.

Importer / Clearing agent at the port of destination is liable to make

arrangement to obtain the delivery of the consignment (goods) and pay usual levies as per local rules and regulations.

Pakistan Customs is the authority that allows shipment of the

consignment (goods) on board. Karachi Port Trust is responsible for making arrangements for

anchorage of the ship and loading of the consignment (goods) in the due course of business.


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6.1.2 Bailee: Shipping company receives the consignment (goods) in the capacity of a bailee, subsequently it undertakes the liabilities and responsibilities of a bailee of making arrangements for the safe keeping and transportation of the consignment (goods) on behalf of the bailor (consignor) in consideration of freight charges received.

Stakeholder(s)

a) Exporter / Consignor / Bailor b) Shipping Company / Bailee


The Exporter is liable for providing the goods (consignment) in an appropriately packed manner, and pays the usual freight charges to the shipping company.

The Shipping company as bailee is responsible for making

appropriate arrangements for the safe keeping and transportation of goods to the port of destination on behalf of the exporter (consignor) and deliver the consignment to or to the order of a third party, who happens to be the holder of the title document (Bill of Lading) in the due course.


It is the general practice that bill of lading is issued in 24 hours from the date of sailing of the ship. In practice, however, issuance of bill of lading some times takes even longer. Primarily two reasons are cited: firstly, the existence of multiple formats depending on importers’ requirement. Secondly, the manual exchange of documents also increases the time taken to issue Bill of Lading (B/L). Multiple formats requirement entails transmission of the specific format by the exporter to the shipping company on individual consignment basis.

It has been observed that shipping companies issue bills of lading in back date, which is usually prior to the date of sailing. This practice is improper and risky for the law does not permit issuance of the bill-of-lading prior to sailing of the ship. We understand that this practice exists in order to accommodate the exporters who fail to ship their consignments by the dead line prescribed in the documentary credits, therefore they obtain the bill of lading in back date to avoid the repercussions for non-compliance of the terms of documentary credit.


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It is recommended that: a. Initiatives should be taken to develop global template of bill-of –

lading. This would eliminate the unnecessary exchange of documents in addition to enabling automatic generation of bill-of-lading subsequent to sailing of the ship.

b. The shipping companies should switch onto electronic document

exchange and automate the issuance via an on line system. This will not only expedite the process but would also enable processing to continue 24 hours a day, seven days a week.

c. With regard to issuance of bill-of-lading from the back date,

shipping companies and their agents should be persuaded to stop this illegal practice forthwith.


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7. Process: Export Promotion Bureau (EPB) 7.1 Key Performance

Areas: The Export Promotion Bureau is the custodian of textile export quota. By virtue of its role under the quota regime, it is required to administer quotas i.e. allocate and/or sell quotas to the exporters, issue visas and maintain records. It is essential to note that the Export Promotion Bureau also issues certificates of origin in respect of textile exports under quota restrictions. Its function(s) are identified as follows: 7.1.1 Selling/Allocation of quota 7.1.2 Issuance of visa 7.1.3 Certification and issuance of Certificate-of-Origin for quota

items

Stakeholders: a) Exporter (Exporters’ Association), and b) Export Promotion Bureau

7.1.1 Allocation of Quota:

Textile export quota is allocated to different exporters on the basis of following criteria: a) Last year’s export performance (in respective category) b) Open auction. c) Residue allocation on first come first served basis.

7.1.2 Issuance of Visa:

Visa is a document issued by EPB authorizing export of textile products against allocated quota. Visa is issued against each export on the following criteria: - Availability of quota balance, as per entry in the category

passbook of the respective exporter. - Submission of visa application along with the following

document(s) a) Bill of lading (original) b) Form E (duplicate copy) c) Goods declaration (fourth copy) d) Short shipment notice, if applicable.


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7.1.3 Certificate of Origin: CoO (GSP certificate) in respect of quota items exported from Pakistan is issued on submission of the following documents: a) Application b) Bill of lading (copy) c) Commercial invoice d) Visa (copy)


The exporter (exporters’ association) has to apply to the EPB for the issuance of Export Visa and CoO, and provide bona fide details of and proof of the goods exported via bill of lading or other documents such as Airway bill, Truck receipt etc. confirming that the goods have been exported from Pakistan and pay fee @ Rs.250/- per request.

The EPB is liable to issue Export Visa and Certificate of Origin in

the due course, when demanded for and fee is paid by the exporter.

7.2 Analysis/Recommendations: Consequent to the WTO Agreement on Textile and Clothing (ATC) superceding the Multi-Fiber Agreement, the quota restrictions shall become void from Jan 2005. Hence, the requirement for Export visa shall not exist.

In view of the above, it is recommended that issuance of CoO may

be assigned at the Chamber of Commerce and Industry (KCCI) in respect of quota items, which was hitherto issued by the EPB as well. However, some alternative arrangement could be made to compile data in respect of export of textile products for informed decision making.


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8. Process: Karachi Chamber of Commerce and Industry

8.1 Key Performance Areas:

The Karachi Chamber of Commerce and Industry is authorized by the Ministry of Commerce to award / issue certificate of origin in respect of exports from Pakistan This certificate is required by various importing countries. The Export Promotion Bureau issues certificates of origin in respect of textile exports under quota restrictions. Its function(s) are identified as follows: 8.1.1 Certification and issuance of Certificate-of-Origin

Stakeholders: a) Exporter, and b) Karachi Chamber of Commerce and Industry

8.1.1 Certificate of

Origin: Certificate of origin is a document issued by KCCI on behalf of Ministry of Commerce, Govt. of Pakistan. It certifies that the country of origin in respect of the export consignment(s) is Pakistan. It is a mandatory requirement for quite a few importing countries particularly those meant for GSP purposes.

Document(s)

a) Commercial Invoice issued by the Exporter (Xerox copy] b) Bill of lading (Xerox copy] c) Certificate of Origin


The exporter is liable to apply to the KCCI for the issuance of CoO and provide bona fide details of goods exported and proof of the goods exported via bill of lading or other documents confirming that the goods have been exported from Pakistan and pay a fee @ Rs.250/- per request.

The Karachi Chamber of Commerce is liable to issue Certificate of

Origin in the due course, when demanded for and the exporter pays the fee.

8.2 Analysis/Recommendations: The certificate is generally issued within one to two hours of submission of the requisite documents. Apparently, no problem exists in the process.


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BUSINESS PROCESSES DESCRIPTIONS AND FLOW CHARTS

LIST OF PROCESSES Ref. No. Processes)

IEC 01 Integrated Process (External Export Supply Chain)

CST 01 Customer Interface

BNK 01 (a) Bank Interface (Opening of L/c and payment against import

documents)

BNK 01(b) Bank Interface (Advising of L/c and negotiation of export

documents)

CAG 01 (a) Clearing Agent (Assistance in clearance of imports)

CAG 01 (b) Clearing Agent (Assistance in clearance of exports)

PCS 01 (a) Pakistan Customs (CSC Import GD Processing)

PCS 01 (b) Pakistan Customs (Temporary Imports)

PCS 01 (c) Pakistan Customs (Import under Manufacturing Bond)

PCS 01 (d) Pakistan Customs (Bank Guarantee – deposit)

PCS 01 (e) Pakistan Customs (EFC Export GD Processing)

PCS 01 (f) Pakistan Customs (Pass in of Export Goods)

PCS 01 (g) Pakistan Customs (Export Examination)

PCS 01 (h) Pakistan Customs (Bank Guarantee – release)

PCS 01 (i) Pakistan Customs (Duty Drawback Sanctioning)

KPT 01 (a) Release of imported goods

KPT 01 (b) Pass in of Goods for Export

SCO 01 Shipment of goods and issuance of bill of lading

EVI 01 (a) APTMA (Assistance in Visa issuance)

EVI 01 (b) EPB (Issuance of Visa)

KCC 01 Karachi Chamber of Commerce (Issuance of Certificate of Origin)

INS 01 Insurance Company (Issuance of Insurance Policy)


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CUSTOMER INTERFACE - “PROSPECTING, SAMPLING, DELIVERY AND PAYMENT” (CST-01)

S. No

Task Description Nature of Task Criteria

01 Customer approaches respective sales person with or without (in case of repeat orders) a sample fabric and demands: • Quantity, • Quote, • Delivery time, • Other terms and conditions

Sale Prospecting References, Prior relationship

01 Alternatively, customer is approached by the respective sales person of the exporter and popular fabric samples are presented for sale

Sales Prospecting

Prior relationship Market knowledge

02 Customer negotiates on prices, quality, quantity, delivery time, and payment terms.

Document Negotiation

Competitor prices, quality and quantity involved

03 Customer countersigns sales contract

Manual Activity Agreed terms

04 Customer approaches his bank to establish documentary credit and/or sends advance payment via bank draft in favor of the exporter

Manual Activity/ Cash Transaction

Sales contract, bank policies and Govt. regulations

05 Prior to delivery, customer receives Ex-mill advice subsequent to dispatch of consignment.

Physical Document Exchange

Dispatch / shipment of the consignment

06 Customer receives intimation from the local designated bank that the consignment documents are received at the bank counters

Information Exchange

Receipt of documents at the bank counters

07 Customer approaches the local designated bank for release of documents on either of the following basis: • Against acceptance and / or payment of

the attached bill of exchange (as the case may be).

• Or receives the documents instantly if payment was already made in advance.

Physical Document Exchange / Cash Transaction

Sales contract, L/C terms and Govt. regulations

07 Customer alternatively, declines to release the documents and/or releases them

Verification Discrepancy in documents


54

conditionally if the documents are not presented in line with the terms and conditions as per sales contract and/or L/C

and/or delayed receipt

08 Upon acceptance and release of the documents, the customer gets the title document (usually bill of lading) endorsed in his name


Financial settlement as per terms

09 Subsequently, the customer (importer) obtains clearance of the goods from the customs / port of destination

Physical Goods Movement

Presentation of title document and completion of customs formalities

10 In case of nonconformance of the physical goods either due to quality, quantity, dimensions etc the customer either demands compensation or returns the consignment, as the case may be

Document Negotiation/ Physical Goods Movement

Non conformity of the physical goods with sales contract

11 Payment of the usance bill of exchange at a determinable future date at the designated bank counters

Cash Transaction

Acceptance of the bill of exchange at the time of releasing the title documents

Statistical Data:

S. No. Task Description Task Occurrence

01 Sale Prospecting 02 02 Document Negotiation 02 03 Physical Document Exchange 03 04 Manual Activity 02 05 Verification 01 06 Information Exchange 01 07 Physical Goods Movement 01 08 Cash Transaction 03 09 Usual Number of Steps 11 10 Persons Involved 03


55


56

IMPORTERS’ BANK INTERFACE – “FINANCIAL INTERMEDIATION” (BNK-01A) Step Task Description Nature of Trans Criteria

01 L/C Officer Receive application for opening documentary credit (L/C) from the applicant duly stamped (The application it self also serves as the charge document – IB 08)

Manual Document Exchange

02 L/C Officer forwards the application to Deposit Department for signature verification

Physical Document Movement

03 Deposit Officer verifies applicant’s signature and also of the guarantor (if any) and returns the application back to the L/C department

Manual Activity

04 L/C Officer scrutinizes the application on the following dimensions: - Checks if the subject commodity is permissible

for import and considers its potential market realizable value

- Checks if the proposed L/C value is in line with the value mentioned in the indent / proforma invoice

- Checks if the proposed validity of the L/C is in line with the terms of the indent / invoice

- Confirms that full names and addresses of the importer and exporter are available

- Checks for the proposed tenor of the draft and whether it is on sight basis or usance basis as per indent / p. invoice

- Checks for the currency with that mentioned in the indent or P. invoice

- Checks if partshipment and/or transshipment is permitted in the indent / P.invoce

- Checks if the bank charges are to be on importer’s account or exporter’s account

- Checks if the cushion is available in the pre approved L/C limit (optional)

- Checks if the commodity is permissible in the pre approved L/C limit (optional)

-

Manual Cognitive Activity

05 L/C Officer request the Credit Report of the applicant (importer) from Head Office / SBP or from a private Credit Rating Agency. (This step is eliminated in case of relationship customers)


57

06 L/C Officer receives the Credit Report of the importer (This step is eliminated in case of relationship customers)

07

L/C Officer requests its Correspondent Bank in the Exporter’s Country for the Credit Report of the Exporter if the value of the requested L/C. exceeds SBP limit. (Optional)


08 L/C Officer receives the Credit Report from the Correspondent Bank (Optional)

09 L/C Officer prepares L/C proposal keeping in view the following considerations: - Importer maintain deposit account with the

bank - Importer has good credit standing - Characteristics of the subject commodity - Whether credit facility would be required - Bank’s existing exposure with the importer - Credit rating of the importer and of the

exporter, if also required. (This step is eliminated if Pre Approved limit with adequate cushion is available)


08 L/C Officer forwards the proposal for second signature of the Department in Charge or Branch Manager (This step is eliminated if Pre Approved limit with adequate cushion is available)


09 Department in Charge or Branch Manager signs and returns back the proposal to L/C Officer (This step is eliminated if Pre Approved limit with adequate cushion is available)


10 L/C Officer forwards the proposal to the Regional / Head Office for approval. Authority level to approve is usually contingent upon the value of proposed L/C. In certain cases the Branch Manager is authorized, in others the proposal needs to be reviewed at the senior cadres (This step is eliminated if Pre Approved limit with adequate cushion is available)



58

11 L/C Officer receives back the approved proposal from the Regional / Head Office (This step is eliminated if Pre Approved limit with adequate cushion is available)


12 L/C Officer allots Bank reference no. and enters the particulars in the L/C. register

Physical Activity

13 L/C Officer allocates Advising, Negotiating and Reimbursing banks, respectively.

Physical Activity

14 L/C Officer obtains margin and bank charges from the importer and provide forward cover (optional)

Financial Transaction

15 L/C Officer assigns to his clerk to type the L/C. on the prescribed format, incase of hard copy transmission. However, currently most of the L/Cs are transmitted via SWIFT Msg.

Verbal Instructions

16 L/C Clerk types the L/C. on the prescribed format and returns to the L/C Officer

Manual Activity

17 L/C Officer signs the L/C. (provided s/he is authorized to sign) Alternatively, some other officer signs the L/C. and then forward the same to Department in Charge or Branch Manager for second signature. (In case of SWIFT messages signatures are replaced by PIN codes.

Document Formalization

18 Department in Charge / Manager signs the L/C. and returns to the L/C Officer

Document Formalization

19 L/C Officer forwards the L/C. (or SWIFT message) to the followings: - Advising bank (original) - Negotiating bank - Reimbursing bank - Applicant

Physical and/or electronic transmission of documents

20 L/C Officer retains the original application (IB 8), approved proposal and L/C. in a separately identifiable file

Manual Activity

21 PAD Officer receives the documents against L/C. from the Negotiating Bank


59

22 PAD Officer scrutinizes the documents from following dimensions: - Whether complete documents are available as

per L/C. covenants. - Whether shipment and negotiation is made

within the stipulated time frame - Whether the value of B/Exchange is within

the value of L/C. and is properly stamped / noted / endorsed

- Whether clean bill of lading is available along with the confirmation of goods being shipped on board and freight is prepaid

- Whether the packing list conforms with the quantity and dimensions as per L/C. (If short shipment is made, whether it is permissible in the L/C.)

- Whether other documents such as Certificate of Origin etc if required are available


23 PAD Officer upon confirming the conformity of documents, lodge the documents in PAD and pass necessary accounting entries. OR

Manual Activity

23 (a)

In case of discrepancy in documents, the PAD Officer informs to the Negotiating bank via quickest channel and within reasonable time as prescribed under UCP 500 and holds the documents at the disposal of the negotiating bank

External Communication via telephone, fax, email, SWIFT. Etc.

24 PAD Officer informs the Importer (customer) arrival of the documents and advises to arrange retirement of the document

External Communication via telephone, fax, email, SWIFT. Etc.

25 Upon payment or acceptance of the B/Exchange by the Importer, as the case may be, the PAD Officer endorses the documents to the importer in the due course.

Financial Transaction

26 Subsequently, the PAD Officer pass necessary accounting entries to reflect the transaction

Manual Activity

Note: Variations have been noted in the accounting procedures. Some banks are still using manual procedures to post vouchers. Others have totally integrated IT based accounting systems. Few others are using a combination of IT based ledgers cum manual accounting procedures.

In certain scenarios where the bank deems fit, it may also obtain collateral securities via pledge or mortgage in addition to retaining margin.


60


61


62

EXPORTERS’ BANK INTERFACE – “FINANCIAL INTERMEDIATION” (BNK-01B)

S. No

Task Description Nature of

Task Criteria /

Basis 01 Bank Officer receives documentary credit from

importers’ bank


None

02 Bank Officer advises documentary credit to the beneficiary (exporter)

Facsimile Transmission

None

03 Bank Officer receives copies of Form-E for verification purposes from the exporter


None

04 Bank Officer verifies Form-E on the basis of Letter of Credit

Verification L/c

05 Bank Officer, after verification, returns four copies to the exporter


None

06 Subsequent to shipment Bank Officer receives

following documents from the exporter for negotiation: • Bill of Lading • Bill of Exchange • Commercial Invoice • Other documents


None

07 Bank Officer scrutinizes documents as per Letter of Credit and Exchange Control Regulations

Verification L/c Terms/ Exchange Control Regulations

08 Bank Officer highlights discrepancies in the documents and return those to exporter for rectification purposes – OR –

Verification / Physical Document Exchange

L/c Terms/ Exchange Control Regulations

Bank Officer negotiate documents with the exporter

Document Negotiation

L/c Terms/ Exchange Control Regulations

09 Bank Officer prepare necessary vouchers

Manual Activity Negotiation of documents

10 Bank Officer forwards the voucher to Accounts Department

Internal Document Movement

Negotiation of documents


63

11 Assistant Officer posts the voucher in respective ledger

Manual Activity /Electronic Data Entry

None

12 Bank Officer prepares covering schedule

Manual Activity None

13 Bank Officer compiles documents as per the requirement of Letter of Credit and assigns Bank Reference Number


14 Bank Officer couriers documents to the importer’s bank in multiple set as per L/c requirement, separately


None

15 Bank Officer prepares necessary voucher

Cash Transaction / Manual Activity

None

16 Bank Officer forwards voucher to accounts department


None

17 Accounts Officer posts the voucher Manual Activity /Electronic Documentation

Successful completion of prior steps

Statistical Data:


01 Physical Document Exchange 06 02 Facsimile Transmission 01 03 Document Negotiation 01 04 Manual Activity 06 05 Internal Document Movement 02 06 Verification 03 07 Electronic Data Entry 01 08 Cash Transaction 01 09 Usual Number of Steps 17 10 Persons Involved 03


64


65

APTMA INTERFACE – “ASSISTANCE IN ISSUANCE OF EXPORT LICENSE/VISA’ (EVI-01A)

S. No


Task Criteria / Basis

01 Counter Clerk receives the visa documents from the respective exporter(s) and verifies if these are in order and hand them over to the Association officer


Completeness of the documents as per EPB requirements

02 The Association Officer checks the Visa Form

Verification Completeness of the documents as per EPB requirements, and availability of quota balance

03 The Association Officer records the requisite particulars in the Category Pass Book

Manual Data Entry

Availability of quota balance

04 Association Officer gives the Visa Form to the outdoor clerk for submission to EPB


Documents found complete for submission

05 Outdoor clerk submits the Visa Form to the Export Promotion Bureau for the issuance of visa


None

06 The outdoor clerk receives visa from the EPB for onward delivery to the respective Exporter(s)


None

Statistical Data:


01 Physical Document Exchange 04 02 Verification 01 03 Manual Data Entry 01 04 Number of Steps 06 05 Persons Involved 02

Source: Mr. Pervez Akhtar, Secretary (International Trade), All Pakistan Textile Mills Association, Karachi.


66


67

EPB INTERFACE - “ISSUANCE OF EXPORT LICENSE” (EVI-01B)

S. No.


Task Criteria

01 Counter Clerk receives1 Quota/Non-Quota papers/Visa Application from the outdoor clerk of APTMA/ Exporter and verifies if the documents are complete


Completeness of the documents as per EPB requirements

02 Counter Clerk records receipt of the documents in his inward mail diary

Manual Data Entry

None

03 Counter Clerk forwards the documents to the respective Dealing-Officer (Textile and Clothing Division, EPB/Licensing Section)


None

04 Dealing-Officer scrutinizes the Visa Application Form and ensures that: • Visa Form is filled/prepared correctly • Visa Application is accompanied with the

requisite documents viz. Bill of Lading (Original) Form-‘E’ (Duplicate) Goods Declaration Form (Forth Copy) /

Undertaking Short Shipment Notice (in case short

shipment has occurred)

Preliminary Scrutiny

EPB requirement of documents for the issuance of visa

05 Dealing-Officer reconciles the information contained in the visa documents with the entries made in the Category Pass Book by the Association

Verification Quota entries in category pass book

06 Dealing-Officer upon ensuring the validity of information contained in the visa documents, sends the same to the Computer Section


None

07 Computer Operator enters the relevant data in the computer database and subsequently generates a “Serial Number”.

Electronic Data Entry

None

1 Timing of Export Promotion Bureau for receiving documents is 0900 hours to 1330 hours on Saturdays and Monday to Thursdays. Timings for Fridays are from 0900 hours to 1130 hours.


68

08 Computer Operator returns the documents to the Dealing Officer


Successful completion of data entry and generation of “Serial No.”

09 Dealing-Officer affixes Serial Number on Visa Application Form as well as the rubber stamp of EPB. Same number is written in the category pass book

Manual Activity

Availability of computer generated “Serial No.”

10 Dealing Officer sends these documents to the Deputy Director for authentication purposes (counter signing)


Successful completion of the prior steps

11 Deputy Director after verification, that all the documents are in order, sign the Visa Application Form and affix his rubber stamp

Signature Legitimacy of the information contained in the documents, availability of the quota and completion of all prior steps

12 Deputy Director returns these documents to the Dealing Officer


Issuance of the Visa and/or requirement of additional information/doc

13 Dealing-Officer sends the documents to the Counter Clerk for delivery



14 Counter Clerk delivers2 visa to the representative of APTMA / Exporter and retains the category pass book and other requisite documents



15 Category pass book is forwarded to auditors along with other documents


None

16 Auditor verifies entries in category pass book Audit Visa Utilization/ Balance

17 Auditor delivers the category pass book and other documents at EPB


None

2 Delivery time is restricted to 1430 hours to 1630 hours weekdays; Same day for Air-shipment


69

18 Category Pass Book is returned to the Association and other documents are filed


None

Statistical Data:


01 Physical Document Exchange 05 02 Audit 01 03 Verification 01 04 Signature 01 05 Electronic Data Entry 01 06 Manual Data Entry 01 07 Manual Activity 01 08 Internal Document Movement 06 09 Preliminary Scrutiny 01 10 Number of Steps 18 11 Persons Involved 04

Source: Mr. Amir Jan, Director, Export Promotion Bureau, Karachi.


70


71

CLEARING AGENT – TEMPORARY IMPORTS (CAG-01A)

Step Task Description Nature of

Task Criteria

1 Clearing agent receives following consignment documents from the importer: 1.1 Endorsed bill of lading 1.2 Invoice 1.3 Packing list

Manual Document Exchange

Subsequent to endorsement/release of documents from the importer’s bank

2. Prepare goods declaration form on electronic document format

Data entry Information as per documents and regulations in force

3. Submit electronic and hard copies of the GD form in Customer Service Center (PRAL) for processing

Physical document / data exchange

None

4. Receive back the GD duly processed by the PRAL

Physical document exchange

Clearance by PRAL in respect of Importer, C.A., and PCT code etc.

5. Deposit duties and taxes (if any) in National Bank Branch

Manual Financial Transaction

Assessment order passed by the PA

6. Proceed to examination shed for examination and assessment of the consignment

Manual activity

GD marked processed electronically by PRAL

7. Arrange Indemnity Bond or Bank Guarantee through the Importer

Manual Transaction

Assessment order passed by PA

8. Submit Bank Guarantee in the manufacturing bond section, Customs House

Manual submission of documents


9. Alternatively submit Indemnity bond in the bond section, Customs House

Manual submission of documents


10. Upon clearance from the manufacturing bond or bond sections, as the case may be, submit consignment documents to Bank Guarantee Department. Subsequently, goods are transferred to bond area.

Manual submission of documents and physical transfer of goods

Clearance / Acceptance of I/B or B/G by the respective sections


72


73

CLEARING AGENT INTERFACE – “ASSISTANCE IN CLEARANCE OF EXPORT GOODS’ (CAG-01B)

S. No.

Task Description Nature of Task Criteria /

Basis 01 Clearing Agent receives export documents3

from the respective exporter


N/A

02 Clearing Agent prepares GD Form as per the documents received from the exporter

Computerized Process

N/A

03 Clearing Agent prepares request to obtain Loading Program and fax the same to the Shipping Company and receive confirmation thereof through return-fax


N/A

04 Clearing Agent submits GD Form along with respective documents at Receiving Counter of EFC upon acquiring a coupon4

Physical Document Exchange along with Electronic copy

Completeness of the documents as per Customs requirements

05 Clearing Agent deposits applicable duty, if any, at the bank counter located in EFC5

Cash Transaction

Dutiable Goods

06 Clearing Agent deposits Wharfage Charges at KPT Counter at EFC5

Cash Transaction

Number of Containers

07 Clearing Agent receives Machine Numbered GD Form from Delivery Counter – OR –


Successful verification of data and allotment / generation of ‘Machine Number’

07 In case of any errors, Clearing Agent approaches Exception Officer for removal of any ambiguities and after correction thereof receives Machine Numbered GD Form from Delivery Counter

Physical Documentary Verification

PCT Classification; typographical error;

3 Copy of Letter of Credit, Original and Duplicate Form-E and Invoice 4 Cost of Coupon is Rs 65.00 from 0900 hours to 1500 hours. Coupon Fee is charged @ Rs 300/- being late fee from 1300 hours to 1700 hours 5 Information based on study conducted at EFC, M. I. Yard, KPT, Karachi


74

08 Clearing Agent takes the GD along with other documents to ‘Out of Charge’ Counter where the Customs Staff detaches:

• Original Form-E • Original and Statistical Copy of GD

Form


09 In case of short shipment, Clearing Agent submits a Short Shipment Notice and deposit Short Shipment Fee6 at the Bank Counter

Manual Activity Quantity of Goods being exported at the moment

10 On confirmation from factory, Clearing Agent contact local transporter to bring the goods from factory to the relevant yard


Availability of manufactured/ ready-to-export goods

11 Clearing Agent approaches KPT Gate along with relevant documents7 and requests KPT and Customs staff (SPO) to allow Pass-In of goods

Authorization Completeness of documents as per Customs requirements and payment of relevant charges

12 Clearing Agent hires labors to ground the goods at concerned yard8


None

13 Clearing Agent submits the following documents to Clerk Gate (Customs)

• GD Form • Packing List • Invoice

Physical Documents Exchange


14 Clearing Agent receives back the documents from the clerk

Physical Documents Exchange


15 Clearing Agent approaches Appraiser who assigns an examiner and returns the documents to the Agent

Assignment Successful completion of the prior steps

16 Clearing Agent approaches the examiner who physically examines the goods

Physical Examination

Approval by the Appraiser

6 Short Shipment Fee is Rs 100.00 per consignment 7 Gate Pass to be presented to KPT staff to allow entrance into port area; copies of Wharfage to be presented to KPT staff; copy of GD Form and Packing List to be presented to Customs staff for verification of quantity etc. of goods 8 At Karachi International Container Terminal (KICT), the grounding is done by their own workers


75

17 Clearing Agent approaches Appraiser who verifies the examination report

Verification Examination by the examiner

18 Clearing Agent approaches Principal Appraiser who countersigns the examination report

Verification Verification by the Appraiser

19 Clearing Agent submits duplicate GD Form to Shipping Company after the shipment is allowed by the PA subsequent to examination so as to confirm that the goods been allowed to be loaded on the vessel


Customs Authorization

20 Clearing Agent submits quadruplicate GD Form to Senior Preventive Officer (Gate) for Mate Receipt endorsement in case export rebate is applicable

Endorsement Post Sailing

Statistical Data:

S. No.

Task Description Task Occurrence

01 Physical Document Exchange 06 02 Facsimile Transmission 01 03 Manual Activity 02 04 Computerized Process 01 05 Cash Transaction 02 06 Authorization 01 07 Verification 02 08 Assignment 01 09 Physical Examination 01 10 Endorsement 01 11 Physical Goods Movement 02 12 Number of Steps 20 13 Persons Involved 01

Source: Mr. Sheikh Farid, Assistant General Manager, Import and Export, M/s Ryan Agencies (Pvt.) Limited Karachi


76


77

INSURANCE COMPANY INTERFACE – ‘INSURANCE OF GOODS’ (INS-01)

S. No

Task Description Nature of Task Criteria / Basis

01 Insurance Company’s clerk receive fax from the respective exporter


Requirement of L/c

02 Insurance Company’s clerk calculate the premium after verifying exchange rate from the Shipping Companies Magazine

Manual Calculation / Computation

Requisition letter containing information of consignment

03 Insurance Company’s clerk confirms the premium amount to the exporter verbally


None

04 Insurance Company’s clerk enters the relevant data into computer database


Agreement/ authorization by the exporter

05 Insurance Company’s clerk take a printout of the policy and deliver the same to his officer

System Generated Document

None

06 Officer verifies the policy with the requisition letter received from the exporter

Verification Legitimacy and correctness of the information contained in the document

07 Officer returns the policy document to the clerk


Issuance of the policy and/or requirement of additional information / documents

08 Clerk glues the revenue tickets on the policy

Manual Activity As per policy value

09 Clerk returns the policy to the officer


None

10 Officer signs the policy and return the same to the clerk for onward delivery to the exporter

Authorization If otherwise in order

11 Clerk couriers the policy the relevant exporter


None


78

Statistical Data:


01 Facsimile Transmission 01 02 Manual Calculation /Computation 01 03 Information Exchange 01 04 Electronic Data Entry 01 05 Physical Document Exchange 03 06 Manual Activity 01 07 Authorization 01 08 Verification 01 09 System Generated Document 01 10 Number of Steps 11 11 Persons Involved 02


79


80

KCCI INTERFACE - “ISSUANCE OF CERTIFICATE OF ORIGIN” (KCC-01)

S. No.

Task Description Nature of Task Criteria

01 Counter Clerk receives draft Certificate of Origin (06 copies) from the Exporter along with the following documents: • Commercial Invoice (Photocopy) • Bill of Lading (Photocopy)

Physical document exchange

None

02 Counter clerk checks that the draft Certificate of Origin is correctly filled-in and requisite documents are attached therewith

Verification Completeness of the documents as per KCCI requirements

03 Subsequently, counter clerk collects verification fee9 from the Exporter

Cash Transaction As per KCCI verification tariff in force

04 Counter Clerk affixes a Machine-number on the draft Certificate of Origin

Manual Activity In the sequence of receipt of documents

05 Counter Clerk sends these documents to Measurement Officer


In the sequence of receipt of documents

06 Upon his satisfaction about the correctness of the information contained in the draft Certificate of Origin and invoice, the Measurement Officer signs and issues the Certificate. In addition to his signature, he also affixes his rubber stamp

Signature Completeness and validity of the information

07 Subsequently, the Measurement Officer returns these documents to Counter Clerk for necessary stamping


None

08 Counter Clerk endorses the stamp of Karachi Chamber of Commerce and Industry on the Certificate of Origin

Embossing Signing of the certificate by the Measurement Officer

09 Counter Clerk returns the documents including the Certificate (if issued) to the respective Exporter


None

9 Verification Fee is Rs 250/-


81

Statistical Data:


01 Physical Document Exchange 02 02 Internal Document Movement 02 03 Verification 01 04 Cash Transaction 01 05 Manual Activity 01 06 Signature 01 07 Embossing 01 08 Number of Steps 09 09 Persons Involved 02

Source: Mr. Syed Wasim Ahmed, Measurement Officer, Karachi Chamber of Commerce and Industry, Karachi.


82


83

KPT INTERFACE - DELIVERY (KPT-01A) No. Description

Clearing Agent submits following documents: • Bill of Entry • Wharfage Form • Appraisement Slip

1. KPT Clerk (Shed) receives Wharfage Form with documents from Clearing Agent and calculates wharfage.

2. KPT Clerk (Shed) verifies calculated wharfage with form values. In case of any discrepancy, documents are returned to Clearing Agent for necessary correction.

3. KPT Clerk (Shed) after verification affixes stamp on original copy of Wharfage Form.

4. KPT Clerk (Shed) prepares Sub Delivery Order. He keeps one copy of Wharfage Form and Appraisement Slip in record and returns three copies of Sub Delivery Order and Bill of Entry to Clearing Agent in order that Wharfage Payment is made.

5. KPT Clerk (Shed) receives Wharfage Form when wharfage payment has been made, issues Temporary Gate Pass to allow goods loading from Shed.

6. KPT Clerk (Examination Hall) receives Wharfage Form from Clearing Agent, issues Temporary Gate Pass to allow goods loading from Examination Hall.

7. Upper Division Clerk (Gate) receives documents from Clearing Agent and verifies Bill of Entry. In case of any discrepancy he returns Bill of Entry to Clearing Agent for necessary correction.

8. Upper Division Clerk (Gate) records Bill of Entry details in Register.

9. Upper Division Clerk (Gate) writes Serial Number and date on Bill of Entry.

10. Upper Division Clerk (Gate) notes down and stamps on quantity delivered and quantity in balance.

11. Upper Division Clerk (Gate) makes Gate Pass.


84

No. Description 12. Preventive Officer signs Bill of Entry and Gate Pass.

13. Preventive Officer records Duplicate copy of Bill of Entry and

Temporary Gate Pass.

14. Preventive Officer returns Triplicate copy of Bill of Entry and Gate Pass to Clearing Agent. Clearing Agent can now carry away consignment from KPT.

15. Sepoy receives Gate Pass from Clearing Agent and checks consignment accordingly.

16. Sepoy keeps Gate Pass on record.

17. Sepoy allows exit of consignment from KPT.


85


86

KPT INTERFACE – “ASSISTANCE IN PASS-IN OF EXPORT CONSIGNMENT’ (KPT-01B)

S. No.



01 Receive Wharfage fee from Clearing agent at E.F.C, M. I. Yard

Cash Transaction

Quantity/No. of containers

02 Clerk (Gate) obtains original copy of Wharfage receipt10 and KPT Gate Pass from the Clearing Agent


Processing of GD and payment of Wharfage

03 Clerk (Gate) physically checks the quantity of goods as per the Gate Pass

Verification Quantity of goods

04 KPO retrieves the data by entering Wharfage Identification Number and enter the particulars of gate pass in the computer


Wharfage Payment

05 KPT Officer returns the documents to the Clearing Agent


Verification

Statistical Data:


01 Cash Transaction 01 02 Physical Document Exchange 02 03 Verification 01 04 Electronic Data Entry 01 05 Number of Steps 05 06 Persons Involved 03

10 Wharfage is calculated @ Rs 700 per 20 feet container and Rs 1400 per 40 feet container In case the goods are taken back from the KPT, Shut Out Charges @ Rs 100 per 20 feet container and 200 per 40 feet container are collected by the KPT Source: Mr. Muhammad Amin, In-charge, Export Gate, West Wharf, Karachi


87


88

SHIPPING COMPANY INTERFACE - “GOODS SHIPMENT AND ISSUANCE OF BILL OF LADING” (SCO-01)

S. No

Task Description NATURE OF

TASK Criteria / Basis

01 Receive shipment request from the exporter/Clearing agent via fax, email or phone with tentative dates for dispatch of goods


None

02 Checks the vessel schedule and space availability

Internal Query Vessel schedule and bookings

03 Confirms back the Loading Program to the exporter/Clearing agent


Availability of vessel and space on the tentative dates

04 Subsequent to customs clearance, enter container in the designated shipping yard along with the GD duly cleared by the concerned authorities


Subject to clearance of the authorities

05 Upload the consignment Internal Goods Movement

Subject to clearance of the authorities

06 Confirms to the exporter/Clearing agent that the goods have been shipped on board and/or the vessel has sailed.


Shipment of the consignment on board and departure of the vessel

06 Informs to the importer/Clearing agent that the container is shutout due to logistic reasons and notifies next tentative Loading Program


In case of unloading of the consignment on the designated vessel

07 Subsequent to shipment on-board receipt of the consignment, the counter clerk receives following documents from the Exporter / Clearing Agent • A cheque covering freight charges • Bill of Lading instructions / Proforma • An NOC issued by bank to authorize

shipment against designated importer/bank


Subsequent to sailing of the vessel containing the consignment and payment of freight charges as per agreed rates

08 Counter Clerk enters the Bill of Lading instructions into the computer and prints a Bill of Lading

Computerized Process

Receipt of freight payment


89

09 Counter Clerk delivers the documents along with the printed Bill of Lading to the Shipping Line Manager / Officer for signing


Completion of the formalities mentioned above.

10 Shipping Line Manager signs the Bill of Lading

Signature If otherwise in order

11 Shipping Line Manager returns the Bill of Lading to the clerk for delivery to Export or his Clearing Agent


Subsequent to signature

12 The counter clerk issues Bill of Lading to Exporter or his Clearing Agent


None

Statistical Data:


01 Information Exchange 04 02 Internal Query 01 03 Physical Goods Movement 01 04 Internal Goods Movement 01 05 Physical Document Exchange 02 06 Computerized Process 01 07 Internal Document Movement 01 08 Signature 01 09 Number of Steps 12 10 Persons Involved 05

Source: Manager Operations, M/s Mega In Group, Karachi


90


91

CUSTOMER SERVICE CENTER (PCS-01A) No. Description

Importer submits following import documents to Clearing Agent: • Bill of Lading • Delivery Order • Packing List • Invoice • Copy of Sales Tax Return • Bond Paper (if Importer needs to transfer consignment to Bonded

Warehouse) Clearing Agent prepares GD Form, receives Import General Manifest (IGM) number and Index number from Manifest Clearing department and writes them on GD Form. He attaches documents with GD Form and submits them at Customer Services Center.

1. Counter Clerk-1 (Coupon Sale Counter) receives Rs. 65/- from Clearing Agent. Government and defence sector organizations are exempt from this charge. He enters serial number of Coupon in AS400 and gives it to Clearing Agent

2. Counter Clerk-2 (GD Form Receiving counter) receives documents from Clearing Agent and scrutinizes & verifies the following: • Completeness of documents • Completeness of GD Form He returns documents to Clearing Agent in case of any discrepancy or if documents are incomplete.

3. Counter Clerk-2 generates data entry number and writes the same on GD Form.

4. Counter Clerk-2 prints and issues Token to Clearing Agent.

5. Runner collects GD Form from Counter Clerk's table, reads Data Entry Operator's number and gives it to related Data Entry Operator.

6. Data Entry Operator-1 enters particulars of GD Form in AS400.

7. Data Entry Operator-1 places completed GD Form in document tray.

8. Runner collects GD Form from document tray and delivers it to Printing Section for printing.


92

No. Description

9. Data Entry Operator-2 (Printing Section) enters Token number in AS400 and prints all data, errors and their correction in Error Description Sheet according to PCT (Pakistan Customs Tariff) and IGM department data.

10. Data Entry Operator (Printing Section) attaches printed Error Description Sheet to related GD Form.

11. Runner collects GD Form from Printing Section and submits it to Error Checker.

12. Error Checker compares GD Form with printed document for any data entry errors and corrects them. After error checking, he assigns one of following status to GD Form: • Mark Verified (if GD Form is free of errors) • Verified (if errors in GD Form are ignorable) • Exception (if serious errors are present in GD Form and must be corrected)

13. Runner collects GD Form from Error Corrector and sorts GD Form according to assigned status.

14. Runner verifies status of GD Form. If status is ‘Verified’ or ‘Mark Verified’ then he delivers GD Form to supervisor (Goto 25) and if status is ‘Exception’ then GD Form is delivered at Exception Counter.

15. Exception Coordinator-1 receives GD Form from Runner and Token from Clearing Agent.

16. Exception Coordinator-1 (Exception Counter) attaches Token with Coupon.

17. Exception Coordinator-1 (Exception Counter) keeps Token and Coupon on record and returns GD Form to Clearing Agent for error correction.

18. Exception Coordinator-2 receives documents from Clearing Agent and makes correction in AS400 as per documents.

19. Exception Coordinator-2 returns GD Form to Clearing Agent for amendment of serious errors (if present).

20. Exception Coordinator-2 attaches Coupon with GD Form and returns Token to Clearing Agent, if all serious errors are removed.

21. Exception Coordinator-2 checks whether ignorable errors are still present or not.


93

No. Description

22. Exception Coordinator-2 gives status of ‘Mark Verified’ to GD Form in case of no errors.

23. Exception Coordinator-2 gives status of ‘Verified’ to GD Form in case of ignorable errors.

24. Runner collects GD Form from Exception Counter and submits it to supervisor.

25. Supervisor enters Token number of ‘Verified’ GD Form in AS400, passes GD Form using option of ‘By Force’. It means GD Form has ignorable errors but Supervisor verifies ‘By Force’ for printing Machine Number. However, ‘Mark Verified’ entries are sent for further processing.

26. Runner collects GD Form from Supervisor’s desk and submits it for printing of machine number.

27. Printing Section Clerk receives GD Form from Runner and prints Machine Number on GD Form.

28. Runner collects GD Form from Printing Section Clerk and submits to Returning Counter.

29. Returning Counter Clerk receives Token from Clearing Agent and puts Token with Coupon in record.

30. Returning Counter Clerk returns GD Form to Clearing Agent for Group Appraisement.


94


95


96

PAKISTAN CUSTOMS – TEMPORARY IMPORTS (PCS-01B) S.

No. Task Description Nature of Task Criteria

01 Clearing Agent submits following documents to Upper Division Clerk: • GD Form • Bill of Lading or Airway Bill • Invoice • Indemnity Bond/Bank Guarantee with

Post Dated Cheque (PDC) • Income Tax Certificate


Law / Regulation

02 Upper Division Clerk files documents, allots MFG Number of File and writes its details in Inward Register.

Manual Activity / Manual Data Entry

Completeness of Documents as per Customs requirement.

03 Upper Division Clerk fills details in Proforma and attaches it with File.


04 Appraiser verifies GD Form, and assesses values mentioned in: • Invoice • Examination Report He also checks Indemnity Bond values.

Verification PCT Classification/ Examination Report

05 Appraiser decides upon nature of discrepancy found in submitted documents. If required, documents are returned to Clearing Agent for necessary corrections.


Legitimacy and correctness of information in documents

05 Appraiser himself corrects discrepancy in GD Form, if possible.


06 Appraiser signs verified GD Form and forwards to Principal Appraiser.

Signature/Physical Document Exchange


07 Principal Appraiser further verifies GD Form and Indemnity Bond/Bank Guarantee.

Verification Completeness of Documents as per Customs requirement.


97

08 Principal Appraiser, in case of any

discrepancy, writes his objection on reverse side of GD Form and marks File to Appraiser or Clearing Agent, whoever is responsible for its removal.

Manual Activity/ Physical Document Exchange

Correctness of information in documents

08 Principal Appraiser, if satisfied, signs GD Form and forwards to Assistant Collector.



09 Assistant Collector verifies Indemnity Bond/Bank Guarantee status.


10 Assistant Collector writes objection and returns it to Clearing Agent, if any discrepancy is found in Indemnity Bond/Bank Guarantee.



10 Assistant Collector signs File and forwards it to Additional Collector for his approval.



11 Additional Collector further verifies Indemnity Bond/Bank Guarantee Status.


12 Additional Collector writes his objection and returns File to Clearing Agent in case of any discrepancy.



12 Additional Collector approves Indemnity Bond/ Bank Guarantee. File is then marked to Assistant Collector

Authorization/ Physical Document Exchange


13 Assistant Collector signs File and marks it to Principal Appraiser.

Signature / Physical Document Exchange


14 Principal Appraiser signs File and marks it to Appraiser.


Verification of the Upper Management

15 Appraiser verifies amount of Bank Guarantee with Post Dated Cheque (PDC). File is returned to Clearing Agent.


Value of Bank Guarantee and PDC


98

16 Appraiser signs File after verification and submits it to Principal Appraiser.

Signature/ Physical Document Exchange

Value of Bank Guarantee and PDC

17 Principal Appraiser signs File and marks it to Data Entry Operator.


Verification of value of Bank Guarantee and PDC by Appraiser

18 Data Entry Operator enters particulars in AS400. He returns File to Clearing Agent to enable him to deposit Bank Guarantee/Indemnity Bond in Bank Guarantee Cell.

Electronic Data Entry / Physical Document Exchange

Verification / Approval by the Upper Management

STATISTICAL DATA:


01 Physical Document Exchange 15 02 Manual Activity 06 03 Manual Data Entry 01 04 Verification 05 05 Signature 07 06 Authorization 01 07 Electronic Data Entry 01 08 Usual Number of Steps 18 09 Persons Involved 06


99


100

MANUFACTURING BOND – BONDED WAREHOUSE (PCS-01C) S.


01 Sepoy accompanies goods delivered from Karachi Port Trust or Karachi International Container Terminal to Bonded Warehouse. Triplicate copy of GD Form is also provided.


Clearance of concerned customs officials

02 Bonder writes and signs received quantity on GD Form.

Manual Data Entry Gods received physically

03 Bonder writes information of received goods in Bond Ledger (Into-Bond Portion).

Manual Data Entry Subsequent to receipt of goods in bond

04 Sepoy writes description of items in Indent Card in Bonded Warehouse. Every item has separate card. It has following fields: • GD Form Number • IGM Number • Index Number • Vessel Number • Carton Number • Description of goods • Date of Receipt • Quantity of Into-Bond • Ex Bonded (Indent Number Date

and Quantity) • Quantity in balance • Remarks

Manual Data Entry On the basis of information contained

05 Examiner verifies Bond Ledger through periodic visits.

Verification Reconciliation of records with physical inventory

06 Examiner corrects Into-Bond entries of Bond Ledger, if any discrepancy is found.

Manual Activity Reconciliation of records with physical inventory

07 Examiner signs Bond Ledger (Into-Bond Portion).

Signature All data is found correct

08 Bonder raises a request when goods are required. For this purpose he prepares Indent Form.

Manual Activity Internal requirement


101

09 Sepoy writes quantity, mentioned in Indent Form, in Indent Card and debits quantity in Indent Card. Fields of Indent Form are given below: • Quantity Ex-Bonded • Quantity in Balance

Sepoy releases goods from Bonded Warehouse.

Manual Data Entry As per indent

10 Bonder receives goods of Ex-Bond quantity.


As per indent

11 Examiner verifies that all goods released from Bonded Warehouse have been utilized in production and no quantity is saved or sold to outside party.

Verification Consumption Certificate

12 Examiner corrects Bond Ledger, if there is any discrepancy.

Manual Activity Audit

13 Examiner signs Bond Ledger (Production portion) upon periodic check of production.

Signature Consumption Certificate

14 Bonder prepares monthly Report regarding Manufacturing Bond and submits to Assistant Collector, Manufacturing Bond Export at Customs House. Bonder prepares Analysis Card, for claim of production wastage. Assistant Collector approves wastage up to 2%. Collector approves Wastage up to 5 %.

Manual Activity Actual Consumptions Certificate

15 Bonder pays duty for wastage claims above 5 %.

Cash Transaction Approval of competent auth.

16 Examiner verifies Bond Ledger (Finished Goods portion), before Export, that all goods released from Bonded Warehouse have been utilized in production.

Verification Technical Product Parameter

17 Bonder corrects Bond Ledger, if there is any discrepancy.

Manual Activity Examination report

18 Examiner signs Bond Ledger (Finished Goods portion).

Signature Satisfaction of corrections above


102

19 Bonder submits Shipping Bill for further processing.


Subsequent to verification above

STATISTICAL DATA:


01 Physical Goods Movement 02 02 Manual Activity 05 03 Manual Data Entry 04 04 Verification 03 05 Signature 03 06 Cash Transaction 01 07 Physical Document Exchange 01 08 Number of Steps 19 09 Persons Involved 03


103


104

PAKISTAN CUSTOMS – MANUFACTURING BOND – CUSTOM HOUSE (PCS-01C) S.


01 Clearing Agent submits File with following documents to Upper Division Clerk-1: • GD Form • Bill of Lading or Airway Bill • Invoice • Indemnity Bond • Income Tax Certificate • Sales Tax Return • Bond Paper


Law/ Regulation

02 Upper Division Clerk, files documents, allots MFG Number to File and writes relevant information in Inward Register.

Manual Activity/ Manual Data Entry


03 Upper Division Clerk fills details in Proforma and attaches with File.


04 Appraiser verifies GD Form, and assesses values mentioned in: 1. Invoice 2. Examination Report He also checks Indemnity Bond values.

Verification PCT Classification/ Examination Report

05 Appraiser decides upon nature of discrepancy found in submitted documents. If required, documents are returned to Clearing Agent for necessary corrections.


Legitimacy and correctness of information in documents

05 Appraiser himself removes discrepancy in GD Form, if possible.


06 Appraiser signs verified GD Form and forwards to Principal Appraiser.



07 Principal Appraiser verifies GD Form and Indemnity Bond.



105

08 Principal Appraiser, in case of any

discrepancy, writes his objection on reverse side of GD Form and marks File to Appraiser or Clearing Agent, whoever is responsible for its removal.

Manual Activity / Physical Document Exchange


08 Principal Appraiser, if satisfied, signs GD Form and forwards to Assistant Collector.



09 Assistant Collector verifies Indemnity Bond status.


10 Assistant Collector writes objection and returns it to Clearing Agent, if any discrepancy is found in Indemnity Bond.



10 Assistant Collector signs File and forwards to Additional Collector for approval of Indemnity Bond.



11 Additional Collector verifies Indemnity Bond.


12 Additional Collector, in case of any discrepancy, writes objection and returns it to Clearing Agent.



12 Additional Collector approves Indemnity Bond, then marks File to Assistant Collector.

Authorization/ Physical Document Exchange


13 Assistant Collector signs File and forwards to Principal Appraiser.



14 Principal Appraiser signs File and marks File to Data Entry Operator.


Verification of the Upper Management

15 Data Entry Operator enters particulars in AS400 and File sends to Upper Division Clerk.

Electronic Data Entry/ Physical Document Exchange



106

16 Upper Division Clerk writes particulars in In-Bond Ledger (Into-Bond Ledger portion).

Manual Activity Verification / Approval by the Upper Management

17 Upper Division Clerk detaches Bond paper and Extra copy of GD Form. File returns to Clearing Agent for further processing in Bank Guarantee Cell.



STATISTICAL DATA:


01 Physical Document Exchange 13 02 Manual Activity 08 03 Manual Data Entry 02 04 Verification 04 05 Signature 05 06 Authorization 01 08 Usual Number of Steps 17 09 Persons Involved 06


107


108

BANK GUARANTEE DEPOSIT (PCS-01D) S.


01 Sepoy (Processing/Manufacturing Bond) submits File with Moving Register to Upper Division Clerk-1 (Bank Guarantee).


None

02 Upper Division Clerk-1 (Bank Guarantee) writes in Inward Register. He marks to Assistant Collector (Bank Guarantee).


03 Sepoy (Bank Guarantee) submits File to Assistant Collector.


None

04 Assistant Collector (Bank Guarantee) receives File. He signs File and marks to Principal Appraiser (Bank Guarantee).


Administrative Setup

05 Principal Appraiser (Bank Guarantee) signs File and marks to Appraiser (Bank Guarantee).



06 Appraiser (Bank Guarantee) signs File and marks to Examiner (Bank Guarantee).



07 Examiner (Bank Guarantee) signs Bank Guarantee File and marks to Data Entry Operator (Bank Guarantee).



08 Data Entry Operator (Bank Guarantee) enters all relevant data in AS-400 (Database).


Approval of the Upper Management

09 Data Entry Operator (Bank Guarantee) allots Detachment Number (generated by Computer).


Approval of the Upper Management

10 Data Entry Operator (Bank Guarantee) generates Computer Sheet.


Allotment of Detachment No.


109

11 Data Entry Operator (Bank Guarantee)

detaches Bank Guarantee from File, and returns other documents to Clearing Agent. He forwards Bank Guarantee to Upper Division Clerk-2.

Manual Activity Signed by all concerned authorities

12 Upper Division Clerk-2 maintains Register for record.

Manual Activity Administrative Setup

STATISTICAL DATA:


01 Physical Document Exchange 06 02 Manual Activity 03 03 Signature 04 04 Electronic Data Entry 01 05 System Generated Document 02 06 Usual Number of Steps 12 07 Persons Involved 08


110


111

EXPORT FACILITATION CENTER (M. I. YARD) – ‘ASSISTANCE IN PROCESSING OF GOODS DECLARATION FORM’ (PCS-01E) No Task Description Nature of


1. Counter Clerk-1 (at Receiving Counter) receives documents from Clearing Agent and checks: • Completeness of GD Form • Availability of requisite documents

Prima facie scrutiny

Completeness of documents

2. Counter Clerk-1 returns documents to Clearing Agent in case of any discrepancy or if documents are incomplete


Discrepancy

3. Counter Clerk-1 (at Coupon Sale Counter) receives Rs. 65/- from Clearing Agent being fee11 for GD Processing (Government and defense sector organizations are exempted).

Cash Transaction

None

4. Counter Clerk-1 enters Serial Number of Coupon in AS400 and generate token number which is delivered to the Clearing Agent


Payment of fee and submission of documents

5. Counter Clerk-2 writes coupon number in his register

Manual Data Entry

None

6. Counter Clerk-2 affixes the stamp on Sixth/Office Copy of GD Form.

Manual Activity

None

7. Counter Clerk-2 detaches the Sixth/Office copy of GD Form and Wharfage receipt and handover to the Clearing Agent


None

8. Runner collects GD Form from the table of Counter Clerk-3 and take it to Machine Numbering Section


None

9. Machine Numbering Operator prints machine number on the documents12

Electronic Process

11 Cost of Coupon is Rs 65.00 from 0900 hours to 1500 hours. Coupon Fee is charged @ Rs 300/- being late fee from 1300 hours to 1700 hours 12 Documents include Original, duplicate, triplicate, quadruplicate and Statistical copy of GD Form, Form-E and Original invoice


112

10. Runner collects GD Form from Machine Numbering Section and deliver it to Data Entry Operator-1


None

11. Data Entry Operator-1 enters the token number and other relevant details in the computer


None

12. Runner collects GD Form from document tray and delivers it to Delivery Counter/Exception counter depending upon correctness of the entries declared therein


Successful processing of GD Form or identification of any error

13. Clearing Agent collects the documents from the Exception/Delivery Counter and if error is identified in respect of NTN or Sales Tax registration number, he goes to the Counter Clerk-3 who corrects the same


None

14. Clerk-3 verifies NTN or Sales Tax registration number

Verification against physical documents

None

15. In case of any nominal exception, Clearing Agent removes the same as per the requirements thereof at the Exception Counter

Rectification None

16. Delivery Counter/Exception Counter Clerk returns the documents to the Clearing agent for out of charge and duty, if any


None


113

Statistical Data:


01 Prima Facie Scrutiny 01 02 Physical Document Exchange 04 03 Cash Transacting 01 04 Electronic Data Entry 02 05 Manual Data Entry 01 06 Electronic Process 01 07 Manual Activity 01 08 Internal Document Movement 03 09 Verification 01 10 Rectification 01 11 Number of Steps 16 12 Persons Involved 07

Source: Mr. Khawaja Aqil Ahmed, System Engineer, Pakistan Revenue Automation (Pvt.) Limited (PRAL), M. I. Yard, Karachi


114


115

EXPORT FACILITATION CENTER (AFU) – ‘ASSISTANCE IN PROCESSING OF GOODS DECLARATION FORM’

S. No

Task Description Nature of Task Criteria / Basis

1. Counter Clerk-1 (at Receiving Counter) receives documents from Clearing Agent and scrutinizes & verifies following: • Completeness of GD Form • Availability of requisite documents

Prima Facie Scrutiny


2. Counter Clerk-1 returns documents to Clearing Agent in case of any discrepancy or if documents are incomplete.

Physical document Exchange


3. Counter Clerk-1 (at Coupon Sale Counter) receives Rs. 65/- from Clearing Agent being fee13 for purchasing coupon (Government and defense sector organizations are exempted).

Cash Transaction None

4. Counter Clerk-1 enters Serial Number of Coupon in AS400 and generate token number which is delivered to the Clearing Agent


Payment of fee and submission of documents

5. Runner collects GD Form from Counter Clerk-1 and deliver it to Data Entry Operator-1


None

6. Data Entry Operator-1 enters the token number and other relevant details in the computer database


None

7. Runner collects GD Form from document tray and delivers it to Delivery Counter/Exception Counter depending upon correctness of the entries declared therein


Successful Processing of GD Form or identification of any error

8. Clearing Agent coordinate with Exception/ Delivery Counter Clerk if any error is

Physical Document

None

13 Cost of Coupon is Rs 65.00 from 0900 hours to 1500 hours. Coupon Fee is charged @ Rs 300/- being late fee from 1300 hours to 1700 hours


116

identified in respect of NTN or Sales Tax registration number

Exchange

9. Exception/ Delivery Counter Clerk removes NTN or Sales Tax registration error

Verification against physical documents

None

10. In case of any other nominal exception, Clearing Agent removes the same as per the requirements thereof at the Exception Counter

Rectification None

11. Runner collects GD Form from Delivery Counter/Exception Counter and take it to Machine Numbering Section


None

12. Machine Numbering Operator prints machine number on the documents14

Electronic Process

None

13. Counter Clerk-2 detaches the Sixth/Office copy of GD Form


14. Runner delivers the documents at the Delivery Counter


None

15. Delivery Counter/Exception Counter Clerk returns the documents to the Clearing Agent.


None

Statistical Data:


01 Prima Facie Scrutiny 01 02 Physical Document Exchange 03 03 Internal Document Movement 04 04 Manual Activity 01 05 Verification 01 06 Electronic Data Entry 02 07 Electronic Process 01 08 Cash Transaction 01 09 Rectification 01 10 Number of Steps 15 11 Persons Involved 06

14 Documents include Original, duplicate, triplicate, quadruplicate and Statistical copy of GD Form, Form-E and Original invoice Source: Mr. Syed Farhat Abbas Rizvi, Project Manager, Pakistan Revenue Automation (Pvt.) Limited (PRAL), AFU, Karachi


117

PAKISTAN CUSTOMS – PASS-IN OF GOODS (PCS-01F)

S. No



01 Clearing Agent submits following documents to Gate Clerk (Customs) • Original GD Form • Invoice • Packing List • Gate Pass


GD processed at EFC

02 Gate Clerk checks Machine Number on GD Form. He also checks Seal Number on container with help of Seal Certificate issued by Dry Port (if applicable)

Verification Prima Facie

03 Gate Clerk writes following information in register: • Machine Number of Bill of Export • Description • Exporter Name • Container Number • Destination • EGM Number • Vessel Number

Manual Data Entry

None

04 Gate Clerk stamps GD Form

Manual Activity

None

05 Gate Clerk delivers the GD Form to Preventive Officer


None

06 Preventive Officer writes quantity Passed In, signs GD Form, allows “Pass In” and returns GD Form to the Clearing Agent

Signature Correctness of the information contained in the documents

07 Gatekeeper checks GD Form received from the Clearing Agent, for Preventive officer’s stamp, and allow passing in goods in Yard/Shed.

Let Goods In

Completeness of the documents as per Customs requirements and payment of KPT and Customs charges


118

Statistical Data:


01 Physical Document Exchange 01 02 Manual Activity 01 03 Manual Data Entry 01 04 Internal Document Movement 01 05 Verification 01 06 Signature 01 07 Let Goods In 01 08 Number of Steps 07 09 Persons Involved 03


119


120

PAKISTAN CUSTOMS –EXAMINATION OF EXPORT CONSIGNMENTS (PCS-01G)

S. No

Task Description Nature of Task Criteria /

Basis 01. Clearing Agent submits the following

documents to Upper Division Clerk at Examination Department: • Goods Declaration (Processed at EFC • Packing list • Invoice


None

02. The Upper Division Clerk writes Serial Number of register with quantity, place (where the goods are placed) and concerned Yard on Triplicate copy of Goods Declaration and makes the following entries in two different registers: (one for non-rebatable items and other for rebatable item) and subsequently returns the documents to the Clearing Agent • Serial number • Goods Declaration Number • Goods Declaration Date • Quantity passed in • Value • FOB Pak Rs. Value • Exporter name • Port • Clearing Agent and number

The Upper Division Clerk then returns it to Clearing Agent.

Manual Data Entry / Internal Document Movement

None

03. Appraiser receives documents from Clearing Agent and assigns Examiner

Assignment Statute / CGO

04. Appraiser records examiner name with date in register



121

05. Clearing Agent submits the following documents to the assigned examiner: • Goods Declaration & Examination Order • Invoice • Packing List Examiner verifies the following: • Container number • Carton number • Quantity • Weight • Total sets in carton • PCT


Statute / Regulation

06. The Examiner writes the Examination Report on reverse of Triplicate copy only (if non-rebateable items) and Quadruplicate copy as well (if rebateable items) of GD Form and sends it to Appraiser through Clearing Agent

Observations / Internal Document Movement

Statute / CGO

07. Appraiser, on his satisfaction, sings the Examination Report and sends the GD Form to the Principal Appraiser through Clearing Agent

Counter Assessment

Examination Report

07 If Appraiser is not satisfied with the Examination Report then he may conduct Examination Personally. OR


Statute / CGO

07. Appraiser intimates the Examiner to conduct a re-examination depending upon the nature of the discrepancy in Examination Report.


Statute / CGO

08. If Principal Appraiser is satisfied then he verifies the Examination Report by countersigning the same and returns the documents to the Clearing Agent.


Statute / CGO

08. If Principal Appraiser is not satisfied with the examination report then he decides to either examine goods personally. OR


Statute / CGO

08. Principal Appraiser directs the Appraiser to conduct a re-examination depending upon the nature of the discrepancy in Examination Report.


Statute / CGO


122

Statistical Data:


01 Physical Document Exchange 02 02 Manual Data Entry 01 03 Internal Document Movement 02 04 Assignment 01 05 Manual Activity 01 06 Physical Examination 05 07 Signature 01 08 Usual Number of Steps 08 09 Persons Involved 05

Source: Mr. Muhammad Ahmed, Examination Officer, Pakistan Customs, Karachi


123


124

BANK GUARANTEE RELEASE – (PCS-01H) S.


01 Clearing Agent/Exporter submits following documents to Upper Division Clerk-1: • GD (Import) • GD (Export) • Consumption Certificate (if needed) • Invoice


As per regulatory procedure in vogue

02 Upper Division Clerk-1 verifies submitted documents. If documents are not complete then returns documents to Clearing Agent/Exporter.


Physical verification

02 Upper Division Clerk-1 writes relevant information in Inward Register.

Manual Data Entry None

03 Upper Division Clerk-1 returns receipt Application to Clearing Agent/Exporter and forwards File to Appraiser.


None

04 Appraiser scrutinizes File by using following documents. • Shipping Bill • GD Form • Invoice • Consumption certificate Appraiser also checks expiry date Bank Guarantee.

Verification As per regulatory requirements in vogue

05 Appraiser writes letter to Clearing Agent/Exporter to fulfill requirement in case of any discrepancy.

Manual Activity Discrepancy in documents as per regulatory requirements

05 Appraiser signs Bank Guarantee File if there is no discrepancy. Appraiser forwards File to Principal Appraiser.


If all regulatory requirements are met

06 Principal Appraiser verifies Bank Guarantee File. Principal Appraiser also checks expiry date.

Verification If all regulatory requirements are met


125

06 Principal Appraiser writes objection in File, if he is not satisfied with Appraiser’s scrutiny, and returns File to Appraiser.


Discrepancy in documents as per regulatory requirements

07 Appraiser re-checks File and corrects error (Go to 5).

Manual Activity Rectification of discrepancy

08 Principal Appraiser signs File and forwards to Assistant Collector for allowing Bank Guarantee release, if he is satisfied.


All regulatory requirements are met

09 Assistant Collector verifies Bank Guarantee.

Verification All regulatory requirements are met

09 Assistant Collector marks to Principal Appraiser for correction of any discrepancy in File.


Discrepancy in documents as per regulatory requirements

10 Principal Appraiser re-checks File, corrects File and returns to Assistant Collector (Go to 09).

Manual Activity Rectification of Discrepancy

11 Assistant Collector, if satisfied, allows release of Bank Guarantee.

Authorization As per his satisfaction

11 Assistant Collector marks to Principal Appraiser.


Administrative Set-up

12 Principal Appraiser marks to Appraiser for completing the entry.



13 Appraiser signs File, complete entry, and sends File to Principal Appraiser.



14 Principal Appraiser signs File and completes entry. He forwards to Data Entry Operator.



15 Data Entry Operator enters relevant data in AS400, and closes File in AS400.



16 Data Entry Operator signs File, and closes File physically.

Signature Administrative Set-up

17 Upper Division Clerk-2 writes in Register.

Manual Activity Administrative Set-up


126

18 Upper Division Clerk-2 detaches documents.

Manual Activity Administrative Set-up

19 Upper Division Clerk-2 sends Bank Guarantee to Exporter by courier or by hand.



STATISTICAL DATA:


01 Physical Document Exchange 12 02 Manual Activity 07 03 Signature 05 04 Verification 04 05 Manual Data Entry 01 06 Electronic Data Entry 01 07 Authorization 01 08 Usual Number of Steps 19 09 Persons Involved 06


127


128

PAKISTAN CUSTOMS –SANCTIONING OF DUTY DRAWBACK (PCS-01I) S.

No Task Description Nature of Task Criteria / Basis

01 Clearing Agent submits following documents at Rebate Counter to Upper Division Clerk:

• Application Form • F-3 Form (Affidavit) • Annexure A • Bill of Lading • Rebate Payment Order • Exchange Rate Bulletin • Bank Credit Advice • Custom Certified Advice • Packing List • Calculation Sheet


SRO

02 Upper Division Clerk affixes Receipt Stamp on Application Form.

Physical Acknowledgement

Submission of complete set of documents

03 Upper Division Clerk prepares Rebate Claim File.


None

04 Data Entry Operator enters Survey Rebate Number, value of FOB (Rupees) in AS400. Sends Rebate Claim File to Appraiser.

Electronic Data Entry and Internal Document Movement

None

05 Appraiser verifies Rebate Claim File.

Preliminary Assessment

Completeness of documents and confirmation of goods attracting rebate

05 Appraiser writes objection and returns file to Clearing Agent for corrections if any discrepancies are found or if documents are incomplete


Discrepancy

06 Appraiser reviews documents and affixes stamp. File is sent to Data Entry Operator.

Signature and Internal Document Movement

Completeness of documents and confirmation of goods attracting rebate

07 Data Entry Operator enters particulars of documents in AS-400. Rebate Claim File is sent to Appraiser.

Electronic Data Entry/ Internal Document Movement

None


129

08 Appraiser submits Rebate Claim File to Principal Appraiser.


Validity of Claim

09 Principal Appraiser verifies Rebate Claim File and Calculation sheet. In case of any discrepancy, documents are returned to Clearing Agent, who corrects and submits file to Appraiser.

Verification / Internal Document Movement

Discrepancy

10 Principal Appraiser sanctions claim if amount does not exceed Rs. 25,000.

Authorization Rebate Claim Value

10 If amount is greater than Rs. 25,000, Principal Appraiser sends Rebate Claim File to Assistant Collector.


Rebate Claim Value

11 Assistant Collector sanctions claim. Rebate Claim File is then sent to Principal Appraiser.

Authorization / Internal Document Movement

If otherwise in order and Rebate Value

11 If rebate value is greater than Rs. 200,000, Rebate Claim File is sent to the Additional Collector.


Rebate Claim Value

12 Additional Collector sanctions claim. Rebate Claim File is then sent to Principal Appraiser.



12 If Rebate value is greater than Rs. 1,000,000 Rebate Claim File is sent to the Collector.


Rebate Claim Value

13 Collector sanctions claim if amount is greater than Rs. 1,000,000. Rebate Claim File is then sent to Principal Appraiser.



13 Principal Appraiser returns Rebate Claim File to Clearing Agent for further processing in Accounts Section.


Claim Approved


130

Statistical Data:


01 Physical Document Exchange 03 02 Physical Acknowledgement 01 03 Internal Document Movement 10 04 Preliminary Assessment 01 05 Signature 01 06 Electronic Data Entry 01 07 Verification 01 08 Authorization 04 09 Usual Number of Steps 13 10 Persons Involved 04

Source: Mr. Shamim, Principal Appraiser (Rebate), Custom House, Karachi


131


132

BUSINESS PROCESS RE-ENGINEERING COMPONENT (PROCESS RE-ENGINEERING FRAMEWORK)

1. Scope To analyze the existing external business processes of a typical export value chain and identify opportunities for making these processes short, simple and time efficient.

2. Criteria SHORT: Refers to shortening of the process (activity) by reducing the possible number of steps and persons involved.

SIMPLE: Refers to eliminating complex interdependencies between two processes and/or activities within a process. TIME EFFICIENT: Refers to improving the speed of response i.e. reduction in the process turnaround time.

3. Methodology

The above shall be accomplished through the followings - Identification and elimination of redundant tasks, activities and processes - Identification and merger of duplicate tasks, activities and processes - Identification of potential manual tasks, activities and processes for

automation

4. Dimensions

- Administrative: The tasks, activities and processes are evaluated on the following perspective, namely; number of persons involved (administrative structure), individuals’ value creation i.e. action, responsibility and authority etc.

- Documents (out-put): The tasks, activities and processes are evaluated on the following perspective, namely; value of documents (out-put) i.e. their requirement rationale, usage, cost etc.

- Regulatory (policy): The tasks, activities and processes are evaluated on the following perspective, namely; the rationale, complexity, and possible repercussions of the underlying regulations


133

Example

StakeHolder(s)

Customer

Customer

Customer Interface - " Prospecting, Sampling, Delivery and Payment "

Exporter

Approachessales person

1

Receive samples

1

Obtainclearance of goods

from customs

9

Cust-FCO1

Counter signs& returns sales

contract

3

Negotiation

2

Either

Either Approaches

bank to opendocumentary credit

4Receives ex-mill

advice

5

ConfirmPhys goods?

10

Demandcompensation

or returnconsignement

10

Pay B/E onmatuarity

11

No

CustomerYes

Importer's Bank

Exp

I/B

I/BReceive titledocuments

8

Exp

I/B

Exp Exp

Exp

I/B

I/BI/B Approach

bank for release ofdoc.

7

Alternatively,either decline or

accept doc.conditionally

7

Receivesintimation that doc.

are received atbank

6

Statistics

Stakeholder(s) Documents (output) Underlying Regulations Importer. Exporter. Importer’s Bank.

Sales Contract. Documentary Credit. Bank documents, such as invoice, certificate of origin, bill of exchange, etc. Bank Advice. Ex mill advice.

Local customs regime. Uniform rules for documentary practices. Exchange control regulations.

Recommendations Sales contract could be made on PDF format and preferably transmitted via email Bank advice could be made on PDF format and preferably transmitted via email Ex-mill advice could be made on PDF format and preferably transmitted via email Electronic presentation/transmission of bank documents is already proposed by ICC, which is under consideration by the member countries.


134

PROBLEM DIAGNOSIS (With reference to Export of Mangoes)

Scope of Analysis: Though the problems are complex, we are compelled to remain focused on redressing those bottle necks only that are related to export trade transactions and try to bring about paradigmatic improvements in this specific area. Hopefully other consultants through other projects would be able to address other issues in a more apt manner. Challenge Statement: Pakistan is primarily facing two challenges: Increase mango exports vis-à-vis volume in terms of % of gross available production as well as in terms of its share in the world market vis-à-vis other exporting countries. Increase the average per kg price Cause Effect Analysis: The process flow charts that follow are used as a basis to identify the possible problematic areas in the context of the challenge statement, above. Ideally the problematic areas should be identified in collective brainstorming session of all the stakeholders. However, due to paucity of the time, brainstorming session could not be conducted. Only to highlight the advantage of using these flow charts to diagnose the problem, we have made some preliminary comments on the basis of our personal understanding and inference during the general discussion of the seminar. Respectable readers are requested to refer to the charts, please.


135

The symbol represents Start / End of the overall process

The symbol represents connection between two sub processes (Stages)

The symbol represents singular routine activity

The symbol represents singular optional activity

The symbol represents And / Either action

The symbol represents on page connection between two activities

The symbol represents connection between two activities

The symbol represents connection between two activities, either or both being optional

Legends Used In The Flow Chart


136


137


138


139


140

PROPOSAL FOR THE INTEGRATION OF CRITICAL ORGANIZATIONS VIA

COMMON TRADE PORTAL TO EXCHANGE E-DOCUMENTS AND

INFORMATION

Background

Trade facilitation initiative aims at reducing time delays, cost, and potentials for erroneous

and/or alterations in the external trade transaction processing. Successful trade facilitation

initiatives in other parts of the world1 became possible mainly after achieving the following

landmarks, namely;

1. Rationalization and computerization of trade processes and documents

2. Upgrading of internal IT capabilities to match with the emerging needs

3. Developing electronic linkage between various stakeholders via common Trade Portal

4. Re-regulations to legitimize the above in an amicable manner

Trade bodies, both private and public, have been consistently demonstrating commitment by

making investment for modernizing their processes and systems in order to provide

optimum trade facilitation. Pakistan Customs, Port Operators, Shipping Companies and

State Bank of Pakistan have already taken initiatives in this regard. The common feature of

reforms in all these organizations has been simplification of business processes and

introduction of IT solutions.

Once the modernization plans are tested and put into practice in each organization, these

entities would be able to exchange document or communicate with each other electronically

instead of relying on physical documents movement. However, in the absence of a common

Trade Portal, these entities would be required to develop separate linkages with each other.

Resultantly, a complex communication network will emerge. The need for coordination

between various stakeholders and use of common IT protocols would increase many times.

This would not only complicate the Trade Supply Chain but would also affect its efficacy.

In the light of the above analysis, we strongly feel that unless the various organizations

communicate through a common Trade Portal for exchange of documents, the current

modernizations and reforms initiative will not achieve the desired objectives.

1 Report on Tunisian Export Facilitation Program is enclosed at Annex-B


141

We would like to propose a prototype sketch of the Trade Portal for this purpose2.

However, it is imperative that all the stakeholders should understand the reciprocal needs

and expectations of each other; let each other develop an understanding of what the entities

have accomplished so far and to what extent it is compatible to the systems of other

stakeholders; and, to formulate a strategy for the development of a common Trade Portal.

Needless to mention that the use of Trade Portal will be on charged basis to make this

venture self sustaining in the long run. It is expected that this additional cost of the

stakeholders shall be relatively very nominal as compared to the savings they would be able

to achieve through internal efficiencies and increased activity as a direct result of the Trade

Portal.

We would like to suggest a two-phase strategy i.e. short run and long run in this regard.

1. In the short run, organizations shall reengineer their internal processes and enhance their

IT capabilities with a vision to eventually link through a common Trade Portal in the

long run. Simultaneously, they should make arrangements to develop Electronic Data

Interchange (EDI) facilities with each stakeholder independently. This will enable the

traders and administration to avail partial advantages of these initiatives. This phase

should not exceed two/three years into the future.

2. Trade Portal Development Initiative (TPDI) may be undertaken simultaneously in

partnership and concurrence with all stakeholders. The Trade Portal should be made

available within two/three years’ time target envisaged above. Once the Trade Portal is

ready all the stakeholders can move on to the same.

2 Proposed Trade Portal


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Envisaged Usage of the Trade Portal

The portal will be accessed by stakeholders including Pakistan Customs, Pakistan Revenue

Automation Limited (PRAL), State Bank of Pakistan, Port authorities and the Clearing

Agent. Rest of the stakeholders in the export supply chain which includes the Exporter,

Authorized Dealers, Shipping Companies, Chambers of Commerce and Industry, Trade

Associations etc. will log onto the portal through web-mail at a common domain.

The portal engine will be either inter-net or intra-net based. The portal will allow the

stakeholders to submit and retrieve information/data and transact by using a unique user ID

and password, allotted to them. Every stakeholder will have a mailbox. The system will have

a built-in audit-trail to provide tracking of transaction processed/being processed by the

concerned stakeholder(s). Appropriate firewall feature will be built-in to protect any possible

unauthorized data access/manipulation. Connectivity will be available to the stakeholders via

local telephone line, DSL, Satellite, etc.

Exemplified Process

The Clearing Agent will prepare GD and other requisite Customs Documents on their

personal computer(s), using customized software. The customized software will have the

feature to conduct preliminary checks to ensure that only the correct and complete

information is submitted to the portal. This will enhance the portal efficacy and also reduce

unnecessarily increasing traffic on the portal network. After preparing the customs

documents, the same shall be uploaded onto the portal. Subsequently the portal will allot and

notify a Serial Number to the sender thereby confirming the receipt as well as acceptance of

the document. The Serial Number will be used to track the documents subsequently.

The customized software available at Clearing Agents’ end will have a built-in feature to

calculate duties and taxes payable on provisional basis. Once the data is transferred to the

Customs Computer System, it will reassess the duties and taxes on the basis of its internal


143

tariff data base and examination analysis under Section-25 of Pakistan Customs Act 1969. If

the consignment is selected for physical examination, the Clearing Agents shall be informed

of the time and date in advance.

Later, the Clearing Agent will be informed via portal the final assessment of the consignment

and will be asked to make the payments in a designated bank. Simultaneously, this

information will also be posted to the designated bank. Upon receipt of the payment in full

the designated bank confirms back the same on the portal.

Subsequently, the Customs shall authorize Port Operators (KPT) and Shipping Company to

release the consignment either for shipment in case of exports or pass-out from port area in

case of imports.

The Terminal Operators (KPT) will receive the relevant information from Customs into

their computer system via Trade Portal. By inputting the serial number they will be able to

check the description and/or quantity of goods being passed-in or passed-out. Terminal

Operators (KPT) will post the transaction occurrence confirmation on the Trade Portal.

Other stakeholders such as Drug Enforcement Cell, Anti Narcotics Force, Plant Protection

Department, etc. shall also be able to communicate through the Trade Portal.

The Trade Portal will keep track each entry and captures relevant details in progress, so to

provide up dated information to the stakeholders. The portal will also have its independent

data base inventory to capture the information relating to each completed transaction. This

data base shall be available to the concerned stakeholders on selective information basis,

either in the form of routine MIS reports or on specific query basis.


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145

PROPOSALS/RECOMMENDATIONS An over view of on going Trade Facilitation Initiatives

1. Modernization of Pakistan Customs 1.1 Customs Administrative Reforms (CARE) The Central Board of Revenue prepared a concept and strategy paper on Customs essentially based on the recommendations of the Task Force and set up an exclusive organization named Customs Administrative Reforms (CARE) Cell at Customs House, Karachi to undertake the implementation thereof. This Cell has done an extensive/comprehensive job to initiate the Customs reform program aimed at creating a paperless environment. A model Customs Collectorate has also been set up in the shape of a pilot project at Custom House, Karachi which would deal with all imports and exports through Karachi Int’l Container Terminal (KICT). The CARE team envisages Customs clearance of export consignments the same day. They have initially laid down a time period of 12 hours for bringing the consignment to the port area before the scheduled time of departure of the vessel which is considered sufficient to complete all Customs / port related formalities before the consignments are loaded and dispatched. Online port clearance will be granted by Customs. Salient features of the system designed by CARE are summarized herein below: Person / Department

Task Nature of Task

Basis

Exporter or his agent

Submission of Goods Declaration via internet or intranet, 24 Hrs x 7 days in a week.

Data entry at the Export / Agents End

Access through PIN

System (Custom)

Intimates to the Exporter and/or his agent and simultaneously to the NBP for the payment of requisite charges, if any. The payment can be made through debiting the exporter account at NBP or by depositing P.O.


System (Custom)

The GD is allocated to the available officer via system in a sequential order


Officer (Custom)

The officer shall review the GD on his terminal using system-based criteria. Subsequently, either he clears the goods for shipment (let export) or request examination

System generated risk assessment and Physical authentication of the electronic information contained in the GD


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System The information is then communicated to the followings: - Exporter or his agent - Terminal Operators - Concerned Custom officials

Auto generated process

Terminal Operators

Receive the container at gate, duly sealed by the exporter or his agent etc at least 12 hours prior to the scheduled time of vessel departure. Prior to pass in the container number and is fed into the system to determine the status of the goods.


Terminal Operators

Either move the goods in the yard for shipment as per loading program, or transfer the container in the examination area as the case may be as per electronically communicated instructions of Customs.


Terminal Operators

Unload the goods in presence of custom officials for examination / withdrawal of samples, if so required


Custom officials

Examine the goods or take samples to verify bonafideness of goods for export as per Pakistani laws and regulations. Upon satisfaction, authorizes “let export” via system

Physical examination

Terminal Operators

Reload the goods into the container Physical movement of goods

Custom Officials

Puts Custom’s Seal confirming examination. Physical action

Terminal Operators

Transfer the container to shipping yard for shipment as per loading program


Terminal Operators

Goods are shipped on board and informs custom of the same via system


Shipping Company / agents

Confirm loading of specific cargo and solicit approval for sailing off via system Need for issuance of ‘Mate Receipt’ will be dispensed with



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Custom Officials

Allows sailing off via system (port clearance)

System based approval

Custom Officials

Informs/authorizes SBP for refund of applicable duty draw back and/or sales tax via system. For duty drawback purposes, GD shall serve as duty drawback claim.

System generated information / authorization

Custom Officials

Informs to the Export or his agent of the sailing off of the ship


The above reengineered system shall have the following features/benefits:

- Traders or their agents will not be required to physically come to Customs for filing declarations or for arranging goods for examinations.

- Customs processing time will be in minutes through automated Risk Management. For the consignments selected by RMS for manual assessment or documentary check, Customs processing will be completed in less than 2 hours.

- No separate drawback claims are required to be filed, Goods Declaration will be the drawback claim.

- Drawback will be instantly sanctioned after sail of vessel and the State Bank of Pakistan will be intimated for re-imbursement to exporter.

- The proposed system will minimize the disruptive use of individual discretion both on part of Customs functionaries and Clearing Agents which used to cause unnecessary delays.

Further, details regarding the procedures for the export of goods as envisaged in the proposed Model Collectorate of Customs set up at Custom House, Karachi are enclosed at Annexure-A. 1.2 Introduction of Electronic Version of Custom Document titled “Goods Declaration” 1.3 Electronic processing of Custom Documents at PRAL

1.4 Re-engineering and diversification in Export Rebate Process

1.5 Conceptual development of Custom Document Exchange Portal


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2. Recommended Changes in the Trade Documents / Procedures

2.1 Proposed merger of E Form with Customs Document

2.2 Proposed restructuring in the Export Refinance Scheme

2.3 Proposed role of Commercial Counselors / Export Promotion Bureau in Exporter’s representation in dispute resolution and claim settlement with international buyers

2.4 Strengthening and enlargement of Export Oriented Free Trade Zones

facilities.

2.5 Proposed transition onto eBanking, as envisaged in the eUCP draft document


149

Recommendations The proposed Customs business facilitation plan envisaged by CARE Cell is apparently very

well conceived. Its successful implementation is absolutely critical for the trade facilitation in

general. However, the following factors need a very careful consideration to ensure the

success of this extremely important initiative:

a. A Transition Plan for the launching of the proposed pilot project at the Model

Collectorate, custom House, Karachi may be devised to ensure that:

- The roadblocks in the implementation of the pilot project and its replication at the

other Collectorates are carefully identified. It would not be easy to motivate and

persuade the Customs functionaries to modify age-old working habits of a manually

driven system involving multiple checks and frequent interfacing with the clients.

However, without bringing the rank and file of the Customs functionaries on board,

it would be difficult to successfully move over to a sophisticated risk based

automated system of Customs clearance. A Steering Committee should be set up in

CBR to devise strategy to overcome the roadblocks to ensure success of the reforms

programme and to oversee the implementation of the PACCS throughout Pakistan.

- The Customs organization across the board is duly motivated and is prepared for the

ownership of the reforms programme conceived by the team of CARE Cell. A core

team comprising of officials at each level may be constituted in each Collectorate to

liaise with the CARE team. It is imperative to bring about a change in the attitude

and mindset of Customs functionaries from an overly regulated and controlled

environment to a business friendly approach. It may be advisable to engage external

consultants to oversee the critical transition period and advise the Steering

Committee to undertake necessary measures for smooth transition to the proposed

system of automated clearance of goods.

- Training needs of Customs officials at all levels who would be required to implement

the automated system of customs clearance should be carefully conceived and

necessary skills particularly for operating in the computerized environment must be


150

developed in advance to avoid impediments in the smooth transition to the new

system.

- A plan for making necessary preparation to provide requisite infrastructure at the

rest of Collectorates/Dry Ports and Airports to replicate the CARE pilot project

should be conceived well in advance to save time.

- Information about the proposed reforms plan and specific details of the PACCS

should be disseminated to all stakeholders in particular Clearing Agents, large

business houses, Chambers of Commerce and trade bodies so that they are prepared

to effectively participate and benefit from the automated system of Customs

clearance of goods. An arrangement to ensure two way communications with all

stakeholders must be formalized / institutionalized to seek their wholehearted

cooperation to ensure success of this initiative. A Steering Committee should be

constituted at CBR to oversee the implementation of this very important project,

identify irritants/ problem areas during the operation of the pilot project.

Simultaneous development of the necessary infrastructure at other Collectorates,

training of Customs officials and liaison/coordination with the stakeholders should

be the responsibility of the Steering Committee to ensure successful implementation

of CARE project. The Steering Committee and CARE management team could

benefit from the recommendations contained in the revised Kyoto Convention and

other WCO instruments as well as in the ICC’s Custom Guidelines for reforms.

- Advantages / benefits of the proposed system are spelled out and explained to the

employees as well as the external stakeholders and their apprehensions must be

addressed prior to formal launching of the pilot project.


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STATISTICAL DATA

STAKEHOLDERS Steps in Current Scenario

Steps in Proposed Scenario 1

Persons in Current Scenario

Persons in Proposed Scenario 1

Bank 2 17 17 3 3

APTMA 05 00 2 0 Export Promotion Bureau 3 18 00 4 0

Clearing Agent 20 09 1 1

Insurance Company 11 11 2 2 Karachi Chamber of Commerce & Industry 09 06 2 2

Karachi Port Trust 05 05 3 3

Shipping Company 12 12 5 5

Customs Examination 08 02 5 1

Customs Pass-in 07 00 3 0 Customs Duty Drawback 22 03 4 2

Customs Export Facilitation Center 16 00 7 0

TOTAL 150 65 41 19

1 Number of steps and persons involved in the proposed system have been derived after in-depth discussions with the CARE Team. Analysis thereof has also been incorporated in this report at Page No. 43

2. It is expected that the Bank process will drastically reduce after the implementation of draft Electronic UCP.

3. In the post quota regime, function of Export Promotion Bureau to issue Export License/visa will conclude.


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PAKISTAN CUSTOMS


Steps in Proposed Scenario


Persons in Proposed Scenario

Customs Examination 08 2 5 1

Customs Pass-in 07 0 3 0 Customs Duty Drawback 22 3 4 2

Customs Export Facilitation Center 16 0 7 0

TOTAL 53 5 19 3

ORGANIZATIONS OTHER THAN CUSTOMS


Steps in Proposed Scenario


Persons in Proposed Scenario

Bank 17 17 3 3

APTMA 05 00 2 0 Export Promotion Bureau 18 00 4 0

Clearing Agent 20 09 1 1

Insurance Company 11 11 2 2 Karachi Chamber of Commerce & Industry 09 06 2 2

Karachi Port Trust 05 05 3 3

Shipping Company 12 12 5 5

TOTAL 97 60 22 16


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154


155


156


157


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ELECTRONIC - UCP

THE NEED OF E-UCP • The Commission on Banking Technique and Practice set its goal to focus on electronic

Trade on May 24, 2000.

• The idea was to bridge gap between the current UCP-500 and electronic equivalent of paper based credits.

• The UCP’s 60 years history, UCP rules are successfully governing the rules and now ICC is trying for updating the rules to accommodate technological changes.

THE NEED OF E-UCP • The main focus to take expert opinion of UCP expert, electronic trade, legal issues and

related industries.

• After 18 months of intense effort by the working group of Banking Commission the eUCP launched on April 01, 2002 and its shall be a supplement document to UCP-500 which is in practice from Jan, 1993.

SCOPE OF E-UCP • The eUCP not a revision of the UCP-500.

• The UCP will continue to provide the industry with rules for paper letter of credits.

• The eUCP is a Supplement Document in Conjunction with UCP.

• The eUCP document will provide the necessary rules for presentation of electronic equivalents of paper documents under letter of credit.

WORKING RELATIONSHIP OF UCP AND EUCP • The eUCP provide definition to allow current UCP terminology to work together.

• eUCP allows for completely electronically or for a mixture of paper documents and electronic presentation.

• However, at this point in time, further evolution and e-Commerce to develop electronic presentation.

APPLICATION OF E-UCP • The e-UCP does not address any issues relating to the issuance of credit or advice of

credits electronically. In the opinion of experts, this is already accommodated in UCP.

• Further development in electronic trade may require further changes in UCP-500 and it is already in consideration. The latest vision of eUCP is called I. O. .

Annex-A


159

APPLICATION OF E-UCP • The eUCP does not specify about the specific technology, the electronic system will be

agreed between the parties.

• In order to avoid the confusion between Articles of the UCP and the eUCP, the articles are numbered with an”e”.

• In all there are 12 articles in eUCP which are numbered as prefix “e”.

ARTICLE - E.1 • The Supplement to UCP-500 is to accommodate presentation of electronic records alone

or in combination with paper documents.

• It would be specifically mentioned on letter of Credit that it is subject to eUCP.

ARTICLE - E.2 Relationship of the eUCP to the UCP: • A credit subject to the eUCP is also subject to the UCP without-express in corporate of

the UCP.

• Beneficiary right to choose the presentation of documents either in paper form or electronic form.

ARTICLE - E.3: DEFINITIONS • Where the following terms are used in the UCP, for the purposes of applying the UCP

to an electronic record presented under an eUCP Credit, the term:

• “appears” on its face” and the like shall apply to examination of the data content of an electronic record.

• “document” shall include an electronic record. • “place for presentation” of electronic address. • “sign” and the like shall include an electronic signature. • “superimposed”, “notation” or “stamped” means data content whose

supplementary character is apparent in an electronic record. The following terms used in eUCP shall have the following meanings: • “electronic record” means:

– Data created, generated, sent, communicated, received, or stored by electronic means

– That is capable of being authenticated as to the apparent identity of a sender and the apparent source of the data contained in it, and as to whether it has remained complete an unaltered, and

– Is capable of being examined for compliance with the term and conditions of the eUCP Credit.


160

• “electronic signature” means a data process attached to or logically associated with an electronic record and executed or adopted by a person in order to identify that person and to indicate that person’s authenticated of the electronic record.

• “format” means the data organization in which the electronic record is expressed or to which it refers.

• “Paper document” means a document in a traditional paper form.

• “received” means the time when an electronic record enters the information system of the applicable recipient in a form capable of being accepted by that system. any acknowledgement of receipt does not imply acceptance or refusal of the electronic record under an eUCP Credit.

ARTICLE - E 4: • An eUCP Credit must specify the format in which the electronic records are to be

presented.

ARTICLE - E.5 • An eUCP credit must state a place of presentation.

• In case of both electronic and paper doc. It must state the place for presentation of paper documents.

• Paper documents and electronic records, may be presented separately, but within the validity of L/c.

• Beneficiary will have to give a notice to the bank that now the presentation is complete. In case of absence of this notice the documents will not be treated as accepted.

• If a bank’s system ( at which the presentation is to be made) in not opened or unable to receive a transmitted record on the stipulated expiry date.

• An electronic record that cannot be authenticated is dement not to have been presented.

ARTICLE - E.6: EXAMINATION • If electronic records are subject to an external system, it should be accessed by the

examining bank otherwise it would be treated at” Discrepancy”.

ARTICLE -E.8: ORIGINALS AND COPIES: • One or more Originals or copies of electronic record will satisfy the requirements.

ARTICLE – E.9: DATE OF ISSUANCE: • Specific date of issuance

• Otherwise, the date on which the documents are sent will be considered


161

ARTICLE-E.10: TRANSPORT DOCUMENTS: • In case of absence of Date of shipment the date of sending electronic records.

• In case of notation evidencing the date of shipment or dispatch.

ARTICLE-E.11: CORRUPTION FOR AN ELECTRONIC : • Provides presentation of the electronic records.

• If the electronic records are not presented within 30 days, the bank may treat that electronic record not presented and deadlines not extended.

ARTICLE-E.12:

• Additional Disclaimer of liability for presentation of electronic records.

LEGAL PROBLEMS IN ADOPTION OF ELECTRONIC RECORD: • For identification and authentication of documents, accreditation of companies by the

Government.

• Replacement of electronic record with Banker’s Book evidence act.

• Hacking possibilities – Securities Systems and fire walls.

• Stamp duties and e-UCP


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163

THE WORLDBANK PREM NOTES Economic Policy GOOD PRACTICE IN TRADE FACILITATION: LESSONS FROM TUNISIA

J U L Y 2 0 0 4

N U M B E R 8 9

Tunisia’s experience shows how information and communications technology can be used to facilitate trade—

cutting costs, saving time, and increasing international competitiveness. It also highlights the conditions that

make these benefits possible.

Although trade liberalization can create jobs and raise incomes, these benefits can easily be

undermined if trade transactions involve excessive costs and delays—reducing a country’s

export competitiveness. Trade facilitation efforts aim to reduce such costs and delays by

simplifying trade procedures and document flows, modernizing customs and port systems,

promoting quality and safety standards, and improving trade logistics.

In recent years several countries have used information and communications technology to

achieve one or more of these goals. Tunisia provides a good example of stakeholders coming

together to simplify trade procedures and automate documentation and customs

requirements. In fact, it is the first country in the Middle East and North Africa that has

succeeded in applying information and communications technology to the entire range of

trade documents. When other countries in the region (such as Morocco) have used such

technology, they have focused on customs and ports, overlooking other practices and

procedures that impose transactions costs on trade activities. This note summarizes the

context and challenges, key initiatives, impact, and success factors of Tunisia’s efforts.

Context and challenges

Over the past two decades Tunisia’s trade has been increasingly liberalized, with domestic

firms gaining greater access to export markets through an agreement with the European

From the development economics vice presidency and poverty reduction and economic management network

Annex-B


164

Union and adherence to World Trade Organization rules. But despite initiatives in the 1980s

to streamline the flow of information on merchandise trade, trade transactions remained

costly and inefficient through the 1990s. Customs clearance requirements, port logistics and

procedures, and quality assurance checks strained resources and imposed significant costs on

both the government and the private sector.

In the late 1990s cargo spent an average of 8 days in Tunisian ports—and in many cases up

to 18 days—due to customs, port, and technical control procedures, compared with a few

hours in Singapore and 4 days in Argentina and Brazil. Similarly, customs clearance required

an average of 4 days in Tunisia—and in many cases up to 7 days—while it took just 25

minutes in Singapore, 1 hour in Morocco, and 3 hours in Argentina. Moreover, Tunisian

customs officials physically inspected 50–80 percent of imported merchandise, while the

corresponding shares were less than 5 percent in Singapore, 15 percent in Morocco, and 30

percent in Argentina.

Further complicating matters, Tunisia's procedures for external trade required that

documents be processed by multiple entities: the Ministry of Commerce, banks, the port

authority, and the customs

agency, as well as the usual

professional organizations

such as customs brokers,

shipping agents, and freight

forwarders. The

inefficiencies of these trade

document processing and

clearance practices are

illustrated in figure 1, where

the lines indicate the main

document exchanges that

had to be carried out

physically —meaning that

hard copies of documents had to be delivered and in some cases picked up again (after


165

several days) for further processing. Underlying these inefficiencies were 19 distinct steps

required for import transactions and 15 steps for export transactions. (Some of these steps

did not apply to offshore companies, which by definition do not operate in the domestic

market. Still, there was a need to standardize processes and streamline procedures so that all

traders could benefit. This was particularly important because the distinction between

offshore and onshore enterprises will disappear once the agreement with the European

Union is fully implemented in 2008.) Beyond the costs involved, these cumbersome

processes severely impeded the ability of Tunisian companies to respond to or accept short-

notice orders, further undermining their competitiveness.

Key initiatives In 1999 the Tunisian government—supported by the World Bank through the Export

Development Project—introduced comprehensive measures to facilitate trade, starting with

the simplification and automated processing of trade documents. The project focused on

streamlining customs and inspection procedures and using information and communications

technology to improve the information exchange associated with cargo handling and

clearance.

Simplifying and standardizing documents The reforms were based on the adoption of international standards for trade documentation

(a process initiated a few years earlier with support from the European Commission) and

significant coordination among various stakeholders. Two documents previously required by

the authorities were eliminated, and three (the Certificate for External Trade, submitted by

importers and required by the Central Bank for foreign exchange control, the customs

declaration, and technical control documents) were redesigned to reduce duplication and

standardize terminology, with the customs declaration aligned with international standards.

In addition, two of the four documents required for goods removal were eliminated. The

development of electronic formats for trade documents made it easier to share information

among stakeholders and process the information contained in the documents.

Introducing Tunisie Trade Net In 2000 a semipublic agency, Tunisie Trade Net (TTN), was established to operate a value

added network that provides electronic data interchange for stakeholders and to expedite

flows and processing of trade documents. TTN shareholders include 10 government


166

agencies, including the national port authority and Tunis Air, and 18 private organizations,

including several banks and the Tunisian Internet Agency. The system works with all the

actors involved in international trade, including the customs agency, Ministry of Commerce,

technical control agencies, Central Bank, ports, and private traders, agents, freight

forwarders, customs brokers, and banks (figure 2).

Three main documents are

processed through the TTN

system: the Certificate for

External Trade, the customs

declaration, and technical

control documents. In

addition, the system processes

online tariff payments. A

connection to the TTN server

enables participants to

exchange documents and

messages with other

participants. Shipping

manifests and customs

declarations are sent over the

network, reducing processing times. In addition, manifest data are available to the cargo

handling operator in electronic format, eliminating the need for the handler to capture data

and improving planning and operations. TTN provides a flexible user interface: trade

professionals (customs brokers, freight forwarders, ship agents, and so on) use client based

applications designed to process large numbers of transactions, while occasional users can

opt for a Web-based interface.

TTN employs 45 staff, 25 of whom are experts in information technology. Users pay TTN

about $70 a month to access its network, as well as a processing fee per document ($3 for

each of the three required documents).


167

Other efforts Several other measures were needed to complement the above actions, including:

• Enhancing the customs computer system to support international message and

document standards for automation of manifest acquittal and processing of customs

declarations. (These changes have reduced personal contacts between declarants and

customs officials, facilitated more rapid, transparent, and consistent processing of

customs declarations and eliminated routine manual checks, and enabled risk

management by allowing data submitted through declarations to be compared with

predefined parameters to identify nonconforming patterns.)

• Developing Ministry of Commerce information systems to electronically process

approvals for restricted goods through TTN, eliminating manual delivery and collection

of the Certificate for External Trade to and from the Ministry of Commerce.

• Installing three scanners at key border and port locations to speed verification of

consignments. (Though not a perfect substitute, scanning and analysis of a full container

load takes an average of 2 minutes, whereas manual verification requires up to 12 hours

and three customs staff. At the port of Rades the use of scanners has reduced by about

two-thirds the number of trucks waiting for container verification.)

Impact Although it is too early to assess the full impact of the above initiatives, there is evidence

that Tunisia’s investments in trade facilitation have dramatically reduced import and export

processing times. Imported goods can now be cleared from ports in an average of 3 days,

compared with 8 days a few years ago. For example, manifest processing after the

completion of vessel operations used to take up to 4 days—but electronic processing has cut

that to 1–2 days. Payment of customs and port duties and storage charges now takes only a

few hours, rather than a full day. The time needed to prepare and process customs

declarations has dropped to 15 minutes, down from as long as 3 days. In 2003 the physical

inspection of goods reached the target level of 15 percent, down from 50–80 percent in late

1998.

Electronic processing of ship manifests has generated savings for the maritime cargo

handling operator by eliminating the need to capture data already available through the


168

electronic manifest and improving vessel and yard operations through the earlier availability

of accurate data. Moreover, the TTN experience has shown how information and

communications technology can increase the efficiency of government administrative

processes. As a result the TTN platform is being considered for electronic procurement

services and other e-government applications.

Success factors Tunisia’s experience points to the dramatic improvements in trade clearing that can result

when administrative and political commitment combines with advances in information and

communications technology. But there is much more involved than simply applying

technology to trade documents. Perhaps the most important prerequisite is commitment at

the highest level of government. This was made possible in Tunisia by the close involvement

of the minister of commerce, who was also the chairman of the Superior Export and

Investment Council, a cross-ministerial committee reporting directly to the president of

Tunisia.

The second main factor for success was cooperation among private and government

stakeholders at all stages of the reform process. This was achieved by creating a Steering

Committee and a technical committee composed of key stakeholders at the early stages of

the process. These committees were instrumental not only in the design of the initiatives, but

also in their implementation.

The third factor was the adoption of a regulatory framework that allowed and supported

electronic processing and signatures. Among the most important changes were allowing

value added network services to be supplied through telecommunications and the Internet,

introducing a new, streamlined customs declaration procedure and procedures for

submitting and processing external trade documents through the TTN system, and

recognizing the legal validity of electronic documents and signatures.

Other success factors included:

• Simplifying customs requirements.

• Extending electronic processing to all import and export administration and other agencies involved in trade transactions, and developing their “back offices” to handle electronic processing of trade documents.


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• Adopting internationally recognized standards and codes to ensure a common language among different users and in different countries.

• Aligning the relative costs of processing documentation on paper and online. Further reading Alavi, Hamid, and Donald Lim Fat. 2003. “An Initial Impact Evaluation of the Bank’s Trade Facilitation Support under Tunisia Export Development Project.” World Bank, Washington, D.C. This note was written by Hamid Alavi (Senior Private Sector Development Specialist, Finance, Private Sector, and Infrastructure Group, Middle East and North Africa Region) and is based on Alavi and Lim Fat (2003).