A window to the world: Customs reform to streamline shipping processes

An increase in consumer spending facilitated by the arrival of numerous foreign retailers and a slate of new and upcoming bilateral trade agreements are set to significantly improve Colombia’s foreign trade activity. However, Colombian freight handlers fear a rise in cargo volumes will overburden already pressured physical and institutional infrastructure. A deficient nationwide road network, high fuel costs and limited distribution centres are part of transporters’ daily challenges.

CUSTOMS DELAYS: These are further burdened by lengthy foreign trade formalities stipulating stringent inspections by numerous public entities, increasing the time and cost for importers, exporters and Customs agents. Transport of flowers, Colombia’s biggest agricultural export volume, is one such example. Due to a history of drug trafficking, as well as bureaucracy and corruption, there are cumbersome export procedures obliging flower exporters to pass through a multitude of channels and inspections to gain shipping approval.

As most of the procedural steps require physical visits to offices in Bogotá, producers outside of the capital region – who make up a quarter of annual production – are at a significant disadvantage. Exporters also complain about penalties and waiting times in cases where documents are filled out with marginal errors, leading to frequent clashes between the Customs authority and the national foreign trade association. Meanwhile, new competitors in countries like Ecuador and Kenya that have similarly favourable conditions for flower cultivation as well as more efficient Customs procedures, are taking advantage of Colombia’s high cost structure. The same challenges apply to other export industries like textiles, coffee, fruit and vegetables.

CHANGE COMING: Mindful of the economic opportunities offered by the introduction of trade agreements with key partners, the transport community is hopeful for an improvement of Customs procedures.

Some reason for optimism has been provided by the implementation of the Single Window for Foreign Trade (Ventanilla Única de Comercio Exterior, VUCE). The concept consists of a digital system for the electronic processing, signing and payment of permits, certifications and approvals of the various government and private bodies involved in import and export operations.

COORDINATION: Implemented under the auspices of the Ministry of Commerce, Industry and Tourism ( Ministerio de Comercio, Industria y Turismo, MCIT), VUCE was developed to overcome a lack of coordination among the 18 entities involved in foreign trade formalities. Based on the experience of flower exporters, this has led to inefficiency and non-transparency with adverse implications on the price of goods and services, investments and domestic competitiveness. In addition, VUCE also seeks to provide traders with realtime online status updates while minimising the risks of falsification of documents and bribery.

Although a decree constituting the legal basis for VUCE was issued in December 2004, the programme has been gradually introduced over the past eight years.

The concept consists of four modules: imports, exports, a single foreign trade form used for disclosure of cargo and entity details, and the Simultaneous Inspection of Goods (SIIS). Full implementation of the import module, including nationwide automated import licensing applications and registrations, was reached in November 2006. This paved the way for implementation of the exports module, which became mandatory in May 2008, followed by the introduction of the single foreign trade form some months later.

SIIS is the last step in the process and considered a particularly big advance in facilitating foreign trade, as it seeks to reduce lengthy export clearance procedures by streamlining the various border control authorities at the maritime container terminals. These include the National Police through the Bureau of Narcotics, the Food and Drug Monitoring National Institute ( Instituto Nacional de Vigilancia de Medicamentos y Alimentos, INVIMA) and the Agricultural Institute of Colombia (Instituto Colombiano Agropecuario, ICA). Under the old system, the lack of institutional coordination was a key challenge to transporters and a heavy burden on their cost structure. According to the OECD, the average cost of Colombian bureaucratic procedures in international trade comprises 10% of the value of goods. SIIS seeks to bring this down to near zero. In addition, VUCE has reduced average response times to users from 25 to 20 days, according to figures from the MCIT.

PILOT PROJECT: Before being launched on a national scale, the system is going through a pilot programme in the port of Buenaventura, Colombia’s largest container terminal and the preferred facility for ColombianAsian trade. Once the process is optimised it will be rolled out to ports across the country, including the Caribbean outlets of Cartagena, Barranquilla and Santa Marta, which are all going through significant expansion.

Accompanying SIIS’s introduction, a decree was issued in November 2011 for the creation of Authorised Economic Operators (AEO), in accordance with guidelines of the World Trade Organisation and recognised by the police, the Customs authorities, INVIMA and ICA.

AEO certification grants trading companies the status of “trusted partner” which allows benefits such as the ability to act without a Customs broker, reduced physical inspections and mutual recognition overseas. Recipients can retain their licence indefinitely provided they pass an annual test showing that they have continued to remain in compliance with regulations.

AIRWAYS: Besides maritime trade, the MCIT is eager to extend the single window model to other points of entry, notably airports. This is of particular importance to the trade in perishable products, which are reliant on air transportation to make it to market.

Aeronáutica Civil de Colombia (Aerocivil), in collaboration with the International Air Transport Association, is investigating the ramifications of digital trade procedures, building on the experiences of its implementation in maritime trade. Both organisations are working on a white paper that would pave the path for amendments to VUCE for full and mandatory application in the aviation sector. No timeline for implementation had been revealed at the time of writing, although notable progress is expected over the course of the next year when recently signed trade agreements with Canada, the US, the EU and South Korea gain traction.

FACILITATING TRADE: Despite the near 10-year implementation period of the single window concept, bilateral commercial agreements are pushing the domestic authorities to align import procedures with international guidelines and facilitate exports in a bid to optimise competitiveness.

While progress has been significant, a key obstacle to the implementation of VUCE has been a lack of agreement from all stakeholders, notably the police. In light of issues with drug-trafficking, the Bureau of Narcotics has expressed caution towards standardisation and acceleration of trade formalities. This has undermined the impact of VUCE as police forces continue to insist on separate inspections at various entry points.

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The Report: Colombia 2013

Transport & Logistics chapter from The Report: Colombia 2013

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