Survey on Improvement of Customs Procedures for Trade ...CLMV Cambodia, Lao PDR, Myanmar, and Viet...

SA2 JR

11-006

Survey on Improvement of Customs Procedures for Trade Facilitation

in the Mekong Region

Final Report

February 2011

JAPAN INTERNATIONAL COOPERATION AGENCY

PADECO Co., Ltd.

Survey on Improvement of Customs Procedures for Trade Facilitation


Final Report

February 2011

JAPAN INTERNATIONAL COOPERATION AGENCY

PADECO Co., Ltd.

Survey on Improvement of Customs Procedures for Trade Facilitation in the Mekong Region Final Report

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Contents Contents ................................................................................................................................... i List of Abbreviations and Acronyms ........................................................................................vi Executive Summary ............................................................................................................ ES-1 Chapter 1 Introduction ..................................................................................................1-1

1.1 Study Background ................................................................................................1-1 1.2 Study Objectives ..................................................................................................1-2 1.3 Study Tasks and Methodology ..............................................................................1-3 1.4 Structure of This Report .......................................................................................1-6

Chapter 2 Development Trends and Economic Corridors in the Mekong Region .......2-1

2.1 Socioeconomic Conditions of the Mekong Region Countries ................................2-1 2.2 Production Network in the Region ........................................................................2-3

2.2.1 Trade Structure ..............................................................................................2-3 2.2.2 Industrial Investment in the Region ................................................................2-6

2.3 Freight Transport in the Region ............................................................................2-8 2.3.1 Definition of the Transport Corridors .............................................................2-8 2.3.2 Routes Used for the Regional Trade ............................................................. 2-10 2.3.3 The Role of the Economic Corridors in the Production Network .................. 2-16

2.4 Customs and Related Transport and Trade Facilitation Problems by the Industrial Sector ................................................................................................. 2-17

2.4.1 Problems Identified by the Industrial Sector ................................................. 2-18 2.4.2 Summary of User Requirements .................................................................. 2-21

Chapter 3 Global and Regional Frameworks ................................................................3-1

3.1 Global Frameworks ..............................................................................................3-1 3.1.1 World Customs Organization .........................................................................3-1 3.1.2 World Trade Organization ..............................................................................3-2 3.1.3 United Nations...............................................................................................3-3

3.2 Regional Frameworks ...........................................................................................3-4 3.2.1 Association of Southeast Asian Nations .........................................................3-4 3.2.2 Greater Mekong Subregion ............................................................................3-6

3.3 Summary of Global and Regional Frameworks .....................................................3-8 Chapter 4 National Legal and Institutional Frameworks .............................................4-1

4.1 Introduction ..........................................................................................................4-1 4.2 Customs Laws and Regulations ............................................................................4-1 4.3 Organization and Management .............................................................................4-5 4.4 Human Resource Development .............................................................................4-9 4.5 Summary of Findings ......................................................................................... 4-14


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Chapter 5 Customs Operational and Procedural Issues ...............................................5-1

5.1 Introduction ..........................................................................................................5-1 5.2 Customs Valuation ................................................................................................5-1 5.3 Risk Management .................................................................................................5-5 5.4 Advance and Binding Tariff Rulings .....................................................................5-9 5.5 Rules of Origin ................................................................................................... 5-11 5.6 Integrity ............................................................................................................. 5-12 5.7 Information Technology ..................................................................................... 5-15 5.8 Customs-Private Sector Cooperation................................................................... 5-21 5.9 Transit ................................................................................................................ 5-23

Chapter 6 Border-Level Issues: Assessment of Selected Border Crossing Points ........6-1

6.1 Introduction ..........................................................................................................6-1 6.2 Poipet (Cambodia)–Aranyaprathet (Thailand) .......................................................6-3 6.3 Bavet (Cambodia)–Moc Bai (Viet Nam) ...............................................................6-7 6.4 Thanaleng (Lao PDR)–Nong Khai (Thailand) ..................................................... 6-11 6.5 Mukdahan (Thailand)–Savannakhet/Kaysone Phomvihane (Lao PDR) ............... 6-14 6.6 Dansavanh (Lao PDR)–Lao Bao (Viet Nam)....................................................... 6-18 6.7 Mae Sai (Thailand)–Tachileik (Myanmar) .......................................................... 6-21 6.8 Summary of Main Findings ................................................................................ 6-24

Chapter 7 Summary of Findings and Issues on Customs Legal/Institutional

Frameworks and Operations/Procedures.....................................................7-1

7.1 Introduction ..........................................................................................................7-1 7.2 National Level ......................................................................................................7-1

7.2.1 Cambodia ......................................................................................................7-1 7.2.2 Lao PDR .......................................................................................................7-2 7.2.3 Myanmar .......................................................................................................7-3 7.2.4 Thailand ........................................................................................................7-4 7.2.5 Viet Nam .......................................................................................................7-5

7.3 Regional ...............................................................................................................7-7 Chapter 8 Current Status of Initiatives to Address Issues ............................................8-1

8.1 Introduction ..........................................................................................................8-1 8.2 Mekong-Japan Cooperation ..................................................................................8-1 8.3 Japan International Cooperation Agency ...............................................................8-4 8.4 Asian Development Bank .....................................................................................8-6 8.5 World Bank ..........................................................................................................8-8 8.6 Other Development Partners .................................................................................8-9 8.7 Lessons Learned from Recent/Ongoing Initiatives .............................................. 8-11

Chapter 9 Future Directions of Japanese Assistance for Customs Facilitation ............9-1

9.1 Introduction ..........................................................................................................9-1 9.2 Selection of Priority Programs/Projects .................................................................9-1


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9.3 Priority Assistance Projects...................................................................................9-3 9.3.1 Cambodia ......................................................................................................9-3 9.3.2 Lao PDR .......................................................................................................9-8 9.3.3 Myanmar ..................................................................................................... 9-12 9.3.4 Thailand ...................................................................................................... 9-15 9.3.5 Viet Nam ..................................................................................................... 9-19 9.3.6 Regional ...................................................................................................... 9-22

9.4 Impacts of the Proposed Programs/Projects......................................................... 9-26 Appendix A Evaluation of Long List Projects .................................................................... A-1

Appendix B Project Profiles .............................................................................................. B-1


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List of Figures Figure 1-1 Regional Economic Corridors in the Mekong Region ....................................... 1-1 Figure 1-2 Study Objectives and Final Goal ...................................................................... 1-3 Figure 1-3 Study Flow ...................................................................................................... 1-4 Figure 2-1 Trends of GDP Growth .................................................................................... 2-1 Figure 2-2 Trends of Population Growth ........................................................................... 2-1 Figure 2-3 Industrial Structure of Mekong Region Countries ............................................. 2-2 Figure 2-4 Percentage of Import Origins ........................................................................... 2-5 Figure 2-5 Percentage of Export Destinations .................................................................... 2-5 Figure 2-6 Distribution of Production Centers in the Mekong Region ................................ 2-6 Figure 2-7 Regional Economic Corridors in the Greater Mekong Region ........................... 2-8 Figure 2-8 Sea Transport Network in ASEAN .................................................................. 2-11 Figure 2-9 Air Transport Network in ASEAN ................................................................... 2-11 Figure 2-10 Yangon – Bangkok Route ................................................................................2-13 Figure 2-11 Bangkok – Hanoi Route ..................................................................................2-13 Figure 2-12 Bangkok – Phnom Penh Route ........................................................................2-14 Figure 2-13 Phnom Penh – Ho Chi Minh City Route ..........................................................2-14 Figure 2-14 Bangkok – Ho Chi Minh City Route ...............................................................2-15 Figure 2-15 Vientiane – Bangkok Route .............................................................................2-15 Figure 2-16 Breakdown of Time Required for Export Procedures for Cargo (from the

Viewpoint of the Trader) .................................................................................2-17 Figure 2-17 Breakdown of Cost Required for Export Procedures for Cargo (per TEU;

from the Viewpoint of the Trader) ...................................................................2-17 Figure 5-1 Screenshots of Thai Customs’ Risk Management Program at Nong Khai .......... 5-8 Figure 5-2 Concept of the ASEAN Single Window ..........................................................5-21 Figure 5-3 Model of the Structure of the GMS Customs Transit System (Initial

Implementation along the East-West Economic Corridor) ................................5-25 Figure 6-1 Map of Border Crossing Pairs Visited............................................................... 6-1 Figure 6-2 Diagram of the Poipet-Aranyaprathet Border Crossing Points .......................... 6-4 Figure 6-3 Comparison of Current Border Facility at Aranyaprathet (left) with a

Good-Practice Example from the Turkey-Georgia Border (right) ...................... 6-7 Figure 6-4 Diagram of the Bavet-Moc Bai Border Crossing Points .................................... 6-8 Figure 6-5 Photographs of Bavet and Moc Bai .................................................................. 6-9 Figure 6-6 Photographs of Thanaleng-Nong Khai .............................................................6-12 Figure 6-7 Drawing of Mukdahan Border Checkpoint ......................................................6-15 Figure 6-8 Layout Plans of Dansavanh and Lao Bao Border Checkpoint Facilities ...........6-18 Figure 6-9 Photographs of Mae Sai-Tachileik ...................................................................6-22


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List of Tables Table 1-1 Organizations Interviewed in Each Country...................................................... 1-5 Table 2-1 Matrix of Trade in the Mekong Region, 2009 ................................................... 2-4 Table 2-2 Matrix of Major Traded Commodities in the Mekong Region, 2008 ................. 2-5 Table 2-3 FDI Inflow by Industry, 2008 ........................................................................... 2-7 Table 2-4 Comparison of Labor and Land Costs in Regional Economic Centers ............... 2-7 Table 2-5 Summary of the GMS Economic Corridors ...................................................... 2-9 Table 2-6 Current Status of Freight Transport Service on Bangkok – Hanoi Route ..........2-12 Table 2-7 Summary of Time and Cost for Freight Transport along the Major Economic

Corridors in the Mekong Region .....................................................................2-15 Table 2-8 Stages of Development of Transport Corridors ................................................2-16 Table 2-9 Number of Private Companies Interviewed .....................................................2-18 Table 2-10 Summary of User Requirements Based on Study Team Interviews...................2-21 Table 3-1 Accession of Mekong Region Countries to Key Global and Regional Legal

Frameworks ..................................................................................................... 3-9 Table 4-1 Summary of the 2007 ADB-AusAID Mission Report on Training and

Equipment Costs by Country and Category .....................................................4-14 Table 4-2 Summary of Customs Laws and Regulations in the Mekong Region ................4-15 Table 5-1 Example Customs Functions Vulnerable to Corruption ....................................5-13 Table 6-1 Characteristics of Border Crossing Points Assessed in This Study .................... 6-2 Table 6-2 Summary of Status and Issues at Border Crossing Points in the Mekong

Region ............................................................................................................6-25 Table 8-1 Chronology of Recent Collaboration between Japan and the Mekong

Countries for Economic Development .............................................................. 8-1 Table 8-2 Description of Outputs of the Upcoming ADB Cluster TA by Subproject

(Phase) ............................................................................................................. 8-7 Table 9-1 Number of Assistance Projects Identified for a Long List by Category and

Country............................................................................................................ 9-1 Table 9-2 Priority Projects for Cambodia ......................................................................... 9-3 Table 9-3 Priority Projects for Lao PDR .......................................................................... 9-8 Table 9-4 Priority Projects for Myanmar .........................................................................9-12 Table 9-5 Priority Projects for Thailand ..........................................................................9-15 Table 9-6 Priority Projects for Viet Nam .........................................................................9-19 Table 9-7 Priority Regional Projects ...............................................................................9-23 Table 9-8 Indicative Impacts of a Comprehensive Customs Facilitation Program ............9-27


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List of Abbreviations and Acronyms

AACF ASEAN-China Cooperation Fund

AADCP ASEAN Australia Development Cooperation Program

ACMECS Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy

ACTS ASEAN Customs Transit System

ACV (WTO) Agreement on Customs Valuation

ADB Asian Development Bank

AEO authorized economic operator

AFAFGT ASEAN Framework Agreement on Facilitation of Goods in Transit

AFTA ASEAN Free Trade Area

AHTN ASEAN Harmonized Tariff Nomenclature

AOTS Association for Overseas Technical Scholarship

APEC Asia-Pacific Economic Cooperation

APRIS ASEAN-EU Programme for Regional Integration Support

ASEAN Association of Southeast Asian Nations

ASW ASEAN single window

ASYCUDA Automated System for Customs Data

AusAID Australian Government Overseas Aid Program

BCP border crossing point or border checkpoint

eBTI electronic binding tariff information

BTR binding tariff ruling

C-R-PATA cluster regional—policy and advisory technical assistance

CAMFFA Cambodian Freight Forwarders’ Association

CBTA Cross-Border Transport Agreement

CCA common control area

CCC (ASEAN) Coordinating Committee on Customs

CECWG (ASEAN) Customs Enforcement and Compliance Working Group

CEN (WCO) Customs Enforcement Network

CIF cost, insurance, and freight

CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora


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CLMV Cambodia, Lao PDR, Myanmar, and Viet Nam

CMP cutting, making, and packing

CPTFWG (ASEN) Customs Procedures and Trade Facilitation Working Group

CSR corporate social responsibility

CTS customs transit (and temporary admission)system

CUPIA (Korea) Customs UNI-PASS Information Association

CamControl Cambodia Import Export Inspection and Fraud Repression Department

DANIDA Danish International Development Agency

EDI Electronic Data Interchange

EU European Union

FDI foreign direct investment

FOB free on board

FRETA freight transport association

FTA free trade area

GATT General Agreement on Tariffs and Trade

GDCE General Department of Customs and Excise (Cambodia)

GDP gross domestic product

GDVC General Department of Vietnam Customs (Viet Nam)

GMS Greater Mekong Subregion

GPS global positioning system

GR grant aid

HRD human resource development

HRM human resource management

HS Harmonized System

ICAC Independent Commission Against Corruption

ICD internal container (clearance) depot

ICT information and communications technology

IDA International Development Association

IMF International Monetary Fund

IT information technology

JAIF Japan-ASEAN Integration Fund


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JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

JICE Japan International Cooperation Center

JICS Japan International Cooperation System

LAN local area network

LCD liquid crystal display

LCL less than container load

LIC low-income country

LIFFA Lao International Freight Forwarders Association

Lao PDR Lao People’s Democratic Republic

MEF Ministry of Economy and Finance (Cambodia)

MIC middle income country

MJ-CI Mekong-Japan Economic Industrial Cooperation Initiative

MOU memorandum of understanding

NESDB National Economic and Social Development Board (Thailand)

NIE newly industrializing economy

NSEC North-South Economic Corridor

NSW national single window

NTFC national transport facilitation committee

OD origin-destination

ODA official development assistance

OSBP one-stop border post

PC personal computer

PHRD (World Bank) Policy and Human Resources Development Fund

PRC People’s Republic of China

PSCG private sector consultative group

RFID radio frequency identification

RKC Revised Kyoto Convention

SEC Southern Economic Corridor

SEZ special economic zone

SPCD (ASEAN) Strategic Plan of Customs Development


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SPS sanitary-phytosanitary

SSI single-stop inspection

ST study

TA technical assistance

TCP technical cooperation project

TEU twenty-foot equivalent unit

TFCP (World Bank) Trade Facilitation and Competitiveness Project

THB Thai baht

TICAD IV Fourth Tokyo International Conference on African Development

TIR transit international routier

TNA training needs assessment

TRS time release study

TTF transport and trade facilitation

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

UNESCAP United Nations Economic and Social Commission for Asia and the Pacific

UNIDO United Nations Industrial Development Organization

USAID United States Agency for International Development

USD United States dollar(s)

WCO World Customs Organization

WTO World Trade Organization

XML extensible markup language


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Survey on Improvement of Customs Procedures for Trade Facilitation in the Mekong Region Executive Summary

ES-1

Executive Summary 1. Study Background and Objectives Considering the needs expressed by private companies and the recent developments in Mekong-Japan Economic and Industrial Cooperation, the Japan International Cooperation Agency (JICA) launched this study to identify directions for improving institutional, policy, and operational aspects of customs procedures in order to facilitate freight transport in the Mekong Region. The study identified priority areas for assistance by the Government of Japan to achieve the goal of promoting freight transport along the region’s East-West and Southern Economic Corridors, and to address the needs of users of the customs system for improvement of customs procedures and relevant transport and trade facilitation issues. 2. User Requirements Based on interviews with private companies, user requirements for customs and related transport and trade facilitation are summarized in Table 1:

Table 1 Summary of User Requirements Based on Study Team Interviews Category User Requirements Consistent Coding

Less inconsistent coding Training programs for customs officers on Harmonized System (HS)

classification Establishment of electronic guidance systems utilizing the accumulated

customs clearance information Guidelines on HS classification for customs officers and users

Customs Valuation Use of transaction value (i.e., putting the WTO valuation method into practice)

Tariff Rulings (Classification, Valuation, and Origin)

Introduction of advance binding rulings and formal notification of rulings (by document) without delay

Abolishment of staff reward system in post-clearance auditing process (Thailand)

Reduction in the pending period for provisional clearance Operating Hours

Implementation of 24-hour (round-the-clock) operation at all border crossing points

Minimization of office closure for lunch Introduction of on-demand processing at night

Simplification of Customs Clearance Procedures at the Borders

Promotion of e-Customs Implementation of the ASEAN Green Lane system Introduction of single windows Increase in the number of front offices for import/export licensing Reduction in the requirements for original documents Introduction of common English-language customs documents by the

countries Simplification or elimination of duplicate examination and inspection

simplified (Cambodia) Skills Development

Better training of customs officials Introduction of training courses for customs agents and the industrial sector

in general Other Requirements Introduction of appropriate actions to terminate requirements for informal

payments Construction of customs bonded warehouses at the borders Increased traffic rights exchange between and among all Mekong countries. Improvement in banking system at the borders (Cambodia) Elimination of redundant checkpoints along economic corridors (Cambodia)

Note: Requirements are common to all five Mekong Region countries unless stated.


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3. Global and Regional Frameworks Table 2 presents a summary of the global and regional frameworks applicable in each Mekong Region country.

Table 2 Accession of Mekong Region Countries to Key Global and Regional Legal Frameworks

Framework Cambodia Lao PDR Myanmar Thailand Viet Nam WCO Revised Kyoto Convention x International Convention on the

Harmonized Commodity Description and Coding System (HS Convention)

x x x x

Revised Arusha Declaration x x x x x WTO Agreement on Customs Valuation x x x x Agreement on Preshipment

Inspection x x x x

Agreement on Rules of Origin x x x x UN Customs Convention on the

International Transport of Goods under the Cover of TIR Carnets

Convention on the Temporary Importation of Commercial Road Vehicles

x

Customs Convention on Containers International Convention on the

Harmonization of Frontier Controls of Goods

x

ASEAN ASEAN Agreement on Customs x x x x x ASEAN Framework on the

Facilitation of Goods in Transit x x x x x

Agreement [and Protocol] to Establish and Implement the ASEAN Single Window

x x x x x

ASEAN Customs Vision 2015 x x x x x ASEAN Trade in Goods Agreement x x x x x GMS Cross-Border Transport Agreement x x x x x

Note: Lao PDR applies the HS Convention although it has not acceded to it. Source: JICA Study Team 4. National Legal and Institutional Frameworks (1) Customs Law and Regulations Table 3 presents a summary of customs laws and regulations in each of the focus countries.


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Table 3 Summary of Customs Laws and Regulations in the Mekong Region Country Basic Customs Laws/Regulations Main Observations Cambodia Law on Customs (2007) ,

supplemented by various regulations, ministerial decisions, and directors’ circulars (e.g., Sub-Decree No. 21 on Facilitation of Trade through Risk Management)

The primary law is broadly consistent with international standards, but limited in coverage; additional regulations required for implementation of global and regional standards

Lao PDR Customs Law (1994) amended in 2005

While the 2005 amendment modernized the main law in certain respects, certain measures are not modern (e.g., Article 24, which seems to require 100% physical inspection; inadequate provisions on transit)

Myanmar Sea Customs Act of 1878, Land Customs Act of 1924, and Tariff Law of 1992

The basic laws are quite dated. An amendment of Article 30 of the Sea Customs Act is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation; significant revision of Myanmar’s customs laws is also required to bring it in line with the Revised Kyoto Convention.

Thailand Thai Customs Act (1926, B.E. 2469), which has been amended several times, as well as various Customs Notifications

Some recent developments (e.g., on advance rulings), but a comprehensive act due diligence and legal review might help Thai Customs bring the Act more in line with the provisions of the Revised Kyoto Convention, although significant time would be required before Parliamentary approval.

Viet Nam Customs Law (2001) and Law on Amendment of and Addition to a Number of Articles of the Law on Customs (2005)

The 2005 amendments contributed to a modernization of an overly “control-oriented” customs law, but further provisions may be necessary to better implement international agreements.

Source: JICA Study Team (2) Organization and Management Each customs administration has a different organizational structure; for example, the Cambodia, Myanmar, and Viet Nam organizational structures show a relationship with previous administrative regimes, while Thailand has an organizational structure facilitating a strategic roadmap to customs reform and modernization evidenced by an international good practice structure (e.g., it has bureaus clustered into administrative, revenue collection, enforcement, and strategy responsibilities). The General Department of Viet Nam Customs has a department supporting and implementing their reform and modernization program, although the remaining structure might benefit from the grouping of departments into functional management and operational task responsibility. (3) Human Resource Development Determined by circumstances, each customs administration has taken a different path to achieve fit-for-purpose staff and managers. For example, Myanmar and Viet Nam human resources management outputs are tailored for a more control and revenue collection oriented management approach compared with the Thai Customs Department, which has adopted a more proactive trade facilitation approach while maintaining a balance between revenue collection and security. The customs administrations of Cambodia, Lao PDR, and Viet Nam have been


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carrying out reform and modernization programs that should help introduce good practice human resource management methods and help create professional customs managers and staff with trade facilitation skills. Each customs administration has a commitment and a willingness to change its human resource management to meet new requirements and train its managers and staffs accordingly. Each administration has lessons learned, such as with Thailand’s e-Customs and authorized economic operator (AEO) programs, and Viet Nam’s train-the-trainers program, which might provide valuable good-practice examples for neighboring country customs administrations. The challenge is trying to achieve regional harmonization in human resources management and training to jumpstart initiatives such as the CBTA when there is so much diversity of customs administration human resource management structure and skills as well as a diversity of training methods and training centers, each with a different training program and different syllabuses and materials. Uniform human resources management, such as a uniform CBTA operating manual, may help achieve uniform application and performance, e.g., for implementation of single windows, single-stop inspection, customs transit system(s). 5. Customs Operational and Procedural Issues The customs administrations in the Mekong Region are at different levels of development and are carrying out different approaches to reform and modernization. Changing customs management and procedures includes a comprehensive list of actions to implement international standard working management methods, procedures, and techniques, although it is not a case of “one size fits all”. This part of the report addressed a number of mainly central-level topics in customs management and procedures in the Mekong Region customs administration. Selected topics are summarized below. (1) Customs Valuation Three of the five customs administrations in the Mekong Region (those of Lao PDR, Thailand, and Viet Nam) are generally applying the WTO Agreement on Customs Valuation (ACV), while two administrations (those of Cambodia and Myanmar) do not, although they are taking steps in the direction of complying with the ACV. Going forward, the region’s customs administrations may work to create valuation databases or obtain access to some of the commercially available value database options. It will also be productive to provide customs managers and staff responsible for making import goods valuation training in customs valuation, e.g., including (i) trade facilitation and the ACV, (ii) transparency and information dissemination; (iii) release prior to valuation determination; (iv) review and appeal methods; (v) sale for export; (vi) price paid or payable; (vii) commissions, assists, and royalties; (viii) related parties; (ix) value of identical or similar goods; (x) deductive, compound, and fallback methods; and (xi) burden of proof and litigation management. However, piecemeal technical assistance for customs valuation may disappoint without comprehensive customs modernization.1 (2) Risk Management The customs administrations countries of the Mekong Region countries are at different levels of risk management. Traders in some countries complain of aggressive post-clearance audits. Greater customs and trade consultations and partnerships and the use of low-risk customs due diligence programs such as Jordan’s Golden List program may help alleviate some of the less user-friendly aspects of balancing revenue collection with the need for trade facilitation. The region’s customs administrations may also consider developing and using risk management

1 Adrien Goorman and Luc De Wulf, “Customs Valuation in Developing Countries and the World Trade Organization Valuation Rules”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 174 [“It would be illusory to expect good valuation practices in an administrative and technically ill-equipped customs department”].


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databases and electronic links with databases used by other border control agencies in an attempt to fulfill a comprehensive and integrated approach to risk management. (3) Advance and Binding Rulings The use of advance export and import rulings—related to customs valuation, classification, and origin—is a good-practice trade facilitation method that benefits both the customs administration and the trading community. For customs administrations, advance rulings allow busy managers and staff at border crossing points to carry out document checks for accuracy and to execute risk management before goods arrive at the border, leading to improved revenue collection as well as increased safety/security. For importers and exporters, advance binding rulings improve and enhance the transparency and predictability of customs tariff rules since they enable them to estimate the amount of customs duty well in advance and goods do not have to wait for a determination of the amount of customs duty at the time of the importation. Advance rulings also enable prior settlement of possible customs duty disputes. As a result, advance rulings that have a binding effect facilitate international trade and investment and are in the interest of both the customs administration and the trading community.2 At present, none of the customs administrations in the Mekong Region issue advance binding tariff rulings although the Thai Customs Department has prepared a draft law on the subject and delivered it to the Cabinet for consideration, after which it would go to the Council of State and the Parliament for approval. It is not known how long this process might take.3 In order to avoid inconsistencies in the tariff rules, it is also extremely important to establish sophisticated infrastructure including the institutional framework to ensure the correct and uniform application of tariff rules throughout a country. (4) Rules of Origin Determining the country of origin or nationality of imported goods is required to apply basic trade policy measures (e.g., tariffs, quantitative restrictions, antidumping and countervailing duties, and safeguard measures), as well as for requirements relating to origin marking, public procurement, and for statistical purposes. Specific findings with respect to rules of origins issues in the Mekong Region follow: (i) Since each Mekong Region country has its own rules of origin and certificate of origin

provisions, harmonizing rules of origin is not a fast-track solution. (ii) Most of the countries in the region have not yet reached the level to be able to develop,

apply, and interpret detailed free trade agreement (FTA) rules of origin guidelines and as a result the countries are not making full use of available preferential rates. For example, a recent technical assistance project in Lao PDR assisted by the United Nations Development Programme (UNDP) found that a lack of capacity at both the central government and provincial levels to interpret and apply rules of origin is an impediment to business development.

(iii) The Japanese business community has noted that although the description of the free on board (FOB) price should not be mandatory to obtain a certificate of origin because this

2 Supply chain predictability may be an especially important consideration for foreign direct importers. For example, the French company that manufactures the Meccano children’s toy recently moved manufacturing back to France from the PRC because of the unpredictable supply chain between the PRC and the European market for their product. 3As noted in a previous footnote, currently the Thai Customs Department might impose a fine of up to four times the import value after duties and/or a 10-year prison term if a post-clearance audit reveals an insufficient amount of customs duty was collected because the Department decided that a different tariff classification should be applied. KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 39 [downloaded from http://www.kpmg.com/NZ/Lists/Copied%20Documents/Adding-Value-to-your-trade.pdf].


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is commercially sensitive information revealing a trader’s profit margin, it is generally a requirement in the Mekong Region.4 This impedes regional trade. Perhaps a regionally uniform and simple and consistent certificate of origin process eliminating the need for an invoice and the need to show the FOB price might provide extra predictability for traders in the Mekong Region countries and help increase regional trade.

(iv) There is a detailed set of guidelines on rules of origin in the Thailand-Australia FTA that might provide a good practice example.

(5) Integrity Issues in the Mekong Region that lead to a relatively high incidence of integrity problems in most of the countries5 include: (i) complex and overlapping legislation resulting in overlapping interpretations; (ii) manual procedures and examination routines that involve a direct interface between the

Customs officers and traders; (iii) demands for high levels of support paperwork; (iv) limited regulation of customs brokers; (v) internal authorization routines that increase illicit payment requirements; (vi) a lack of adequate internal controls; (vii) a developing small and medium enterprise (SME) sector that is itself subject to integrity

and governance problems; and (viii) low pay and poor career opportunities for customs officers.6 However, all Mekong Region countries, through their respective membership in WCO, are parties to the Revised Arusha Declaration on Integrity in Customs and there are recent of examples of countries in the region addressing the integrity issue. (6) Information Technology Thailand and Viet Nam are the most advanced of the Mekong Region countries in customs automation. They have implemented their own customs IT systems are moving toward the development of national single windows. Cambodia and Lao PDR are currently at the stage of implementing ASYCUDA World, with Cambodia a couple of years ahead of Lao PDR, but both are both quite far from implementation of national single windows. Finally, Myanmar is just beginning to move towards customs automation. ASEAN has called for full implementation of national single windows for the initial six members of ASEAN (including Thailand) as soon as possible and for Cambodia, Lao PDR, Myanmar, and Viet Nam by 2012, although at least informally it has been reported that now the first six ASEAN countries (including Thailand) are to implement national single windows by 2012 and all (including Cambodia, Lao PDR, Myanmar, and Viet Nam) by 2015, i.e., somewhat later than originally scheduled. Both the ASEAN-EU Programme for Regional Integration Support—Phase II (APRIS II) and the USAID’s ASEAN Single Window (ASW) Program have provided support for the development of the national single windows. After establishment of the respective national single windows, an ASEAN single window would be established. 4 Federation of Japanese Chambers of Commerce and Industry in ASEAN, Requests from Japanese Business community in ASEAN, 6 July 2010, p. 3. 5 Consider that Transparency International’s [general] Corruption Perceptions Index 201 ranking 179 countries, on which Thailand ranks 78th, Viet Nam ranks 116th , Cambodia and Lao PDR are tied for 154th, and Myanmar ranks 176th (i.e., tied for last).For reference, New Zealand and Singapore were tied for first, while Japan ranked 5th and the United States ranked 22nd. http://www.transparency.org/policy_research/surveys_indices/cpi/2010. 6 Scott Wilson in association with PADECO and BFC, Technical Assistance for Preparation of the Vietnam Customs Modernization Project, Integrity Report, prepared for the General Department of Customs, March 2005, p. 3.


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(7) Customs-Private Partnership An objective of all customs administrations should be to pursue close relationships with the trading community through transparent and efficient procedures. Recent developments in customs-private partnerships in the Mekong Region include the following: (i) On 9 October 2009, Cambodia issued Sub-Decree No. 906 on Establishment and

Functioning of a Customs-Private Sector Partnership Mechanism. Since 2009 Cambodia has introduced a registered (licensed) customs broker program, in accordance with Ministerial Decision (Prakas) No. 115 on Establishing and Functioning of Customs Brokers.

(ii) Long-standing customs-private sector cooperation in Thailand includes a joint committee between customs and the private sector, and a Transparency Partnership Project, involving the signing of an MOU between the Thai Customs Department and more than 100 companies to cooperate in the fight against corruption.

(iii) Viet Nam is implementing a trusted-trader program to authorize compliant traders to benefit from expedited clearance, reduced inspection rates, and improved services; in exchange, traders will be required to maintain a high level of compliance, use e-Customs, and maintain transparent accounting practices.

(8) Transit Transit procedures are not well-developed in the Mekong Region. However, to facilitate international transit, the countries, through the GMS (of which they constitute five of the six countries) and ASEAN (of which they constitute five of the ten countries) have recently opted to develop international transit systems through the GMS Cross-Border Transport Agreement (CBTA) and the ASEAN Framework Agreement on Goods in Transit. Proponents of the ASEAN customs transit system argue that it is superior to the GMS customs transit system because: (i) the TIR system on which the GMS system is outdated; (ii) the GMS system is paper-based and therefore vulnerable to fraud and administrative errors as well as being outdated; and (iii) the GMS guarantee arrangements are unnecessarily complicated and likely to be inadequate to meet liabilities in the event of organized fraud. On the other hand, proponents of the GMS customs transit system argue that since it is “inspired” by the TIR system, it will allow for easy and seamless transition in the future to the full TIR system, which is a goal of the GMS countries, seeking to assure trade and transport connectivity with other parts of Asia and the world, where the TIR regime is in force. Also, proponents of the GMS system argue that its strength lies in its simplicity since it involves a collective and continuous security, which means that the guarantee is to be provided only once for all the operators of a whole country together and for an indefinite period of time. It is also argued that the full computerization of the GMS CTS would delay its operationality for another 10-15 years. The GMS and ASEAN customs transit systems are not necessarily mutually exclusive. An upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion will assess the consistency of the GMS customs transit system with the ASEAN customs transit system based on a comprehensive evaluation of implementation challenges (e.g., financial guarantees). For full implementation of the GMS and/or the ASEAN regional transit system, the national laws, regulations, management plans, instructions, and guidelines of the respective countries will need to be revised for compatibility with the regional system(s). Also, a radio frequency identification (RFID)/global positioning system (GPS) tracking system could facilitate implementation of the customs transit system(s) by improving customs control of transit traffic.


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6. Border-Level Issues Table 4 presents a summary of status and issues in the Mekong Region, including development partner assistance. Although the target year for full implementation of the CBTA (2010) has now passed, this study confirmed that multi-step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at border checkpoints in the Mekong Region. Generally, only limited risk management techniques are employed at border crossings, although Thailand is an exception to some extent. Official operating hours range from 12-16 hours per day, but are effectively and perhaps unofficially shortened by lunch breaks, and opposition to extended operating hours is strong among “frontline” officials. Also, at most locations the use of information and communications technology (ICT) is very limited, with the borders generally operating stand-alone systems unconnected to the national system (as well as to the neighboring country’s system), although Thailand and to some extent Viet Nam are exceptions. That said, with a more pragmatic approach under the upcoming ADB C-R-PATA and by other development partners, measurable results in reducing delays at borders can be expected.

Table 4 Summary of Status and Issues at Border Crossing Points in the Mekong Region

Border Crossing Point Pair Status/Issues to be Addressed Poipet (Cambodia) – Aranyaprathet (Thailand)

Infrastructure Congested border crossing due to land uses on Cambodia side Need for IT on the Cambodian side Operations Open 0700 to 1900 but unofficial closures of the border during lunchtime High rates of physical inspection; no risk management on the Cambodian side Complicated processes on the Cambodian side No bilateral road transport agreement

Bavet (Cambodia) – Moc Bai (Viet Nam)

Infrastructure Infrastructure completed in 2003 (Viet Nam) and 2005 (Cambodia); need for

common control area Need for IT on the Cambodian side Operations Open 0600 to 2200 but unofficial closures of the border during lunchtime High rates of physical inspection, even with risk management on the Viet Nam

side Complicated processes on the Cambodian side MOU for initial implementation of CBTA (2006) not implemented Bilateral road transport agreement (1998) and protocol (2005), effective 2006

Thanaleng (Lao PDR) – Nong Khai (Thailand)

Infrastructure Good although aging infrastructure, not always effectively utilized Need for enhanced IT on the Lao PDR side Operations Open 0600 to 2200 With streamlining, only four agencies on the Lao PDR side of the border MOU for initial implementation of CBTA (2005) not implemented MOU for initial implementation of the CBTA between and among Lao PDR,

Thailand, and Viet Nam (2007) implemented only in June 2009 pilot Liberal bilateral road transport agreements (1999, 2001) in place

Mukdahan (Thailand) –Savannakhet/ Kaysone Phomvihane (Lao PDR)

Infrastructure Good infrastructure, with CBTA fast track lanes Need for enhanced IT on the Lao PDR side Operations Open 0600 to 2200, but since the Lao PDR national treasury closes the

account at the border crossing point at 1600, imports cannot be cleared after that time because import customs duties cannot be paid

With streamlining, only four agencies on the Lao PDR side of the border Liberal bilateral road transport agreements (1999, 2001) in place


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Border Crossing Point Pair Status/Issues to be Addressed Dansavanh (Thailand) – Lao Bao (Viet Nam)

Infrastructure USD 1 million, 18,000 m2 extension of common control area (CCA) is under

construction on the Viet Nam side; a survey is yet to be undertaken of the location of a CCA on the Lao PDR side (there is only an “informal” CCA at present)

Need for enhanced IT on the Lao PDR side Operations Open 0700 to 1900 With streamlining, only four agencies on the Lao PDR side of the border High rates of physical inspection on the Lao PDR side MOU for initial implementation of CBTA (2005) not implemented MOU for initial implementation of the CBTA between and among Lao PDR,

Thailand, and Viet Nam (2007) implemented only in June 2009 pilot Liberal bilateral road transport agreements (1999, 20001) in place

Mae Sai (Thailand) - Tachileik (Myanmar)

Infrastructure Narrow border road and only two access lanes on the Myanmar side Use of portable buildings, one for each agency, on the Myanmar side No x-ray scanner on the Myanmar side Need for IT on the Myanmar side Operations Open 0600-1800/0630-1830 High rates of physical inspection; no risk management on the Myanmar side MOU for initial implementation of CBTA negotiated but not signed (2005) No bilateral road transport agreement

Source: JICA Study Team 7. Recent/Ongoing Initiatives to Address Issues (1) Mekong-Japan Cooperation Table 5 summarizes recent collaboration between Japan and the Mekong Region for economic development, noting items with particular relevance to the current study.

Table 5 Chronology of Recent Collaboration between Japan and the Mekong Countries for Economic Development

Month/Year Conference/Meeting Relevance to This Study January 2008 First Mekong-Japan

Foreign Ministers Meeting

The Government of Japan announced the establishment of a USD 20 million Japan-ASEAN Integration Fund to improve the efficiency of logistics and distribution along the East-West and Southern Economic Corridors.

October 2009 Second Japan-Mekong Foreign Ministers Meeting

The meeting evaluated favorably the expansion of official development assistance in the region and the progress made in the freight transport sector, and noted the importance of continued assistance in the improvement of the economic corridors.

October 2009 First Japan-Mekong Economic Ministers Meeting

The Minister for Economy, Trade and Industry of Japan put forward the Mekong-Japan Economic and Industrial Cooperation Initiative (MJ-CI), which proposed among other measures, support for streamlining customs clearance and cross-border freight transport.

November 2009 First Summit Meeting between Japan and the Mekong Region Countries

The Tokyo Declaration of the First Summit Meeting between Japan and the Mekong Region Countries was adopted. This declaration called for support for Action 63, to include the establishment of cross-border regional economic systems as a priority item.


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Month/Year Conference/Meeting Relevance to This Study July 2010 Third Japan-Mekong


This meeting acknowledged major progress made in the implementation of Action 63 and the initiative stated in the Tokyo Declaration of November 2009.

August 2010 Second Japan-Mekong Economic Ministers Meeting

The industrial requirements of the MJ-CI Action Plan were presented, which included 24-hour (round-the-clock) operation of custom operations along economic corridors, harmonization of document formats, fast-track systems, and application of customs information technology (IT), and capacity building of customs officers.

September 2010 Mekong-Japan International Conference on the East-West Economic Corridor and the Southern Economic Corridor

The conference identified the need for streamlining of customs operations, standardization, promotion of industrial development, and trade facilitation as key factors for maximizing the benefits of the economic corridors.

October 2010 Second Summit Meeting between Japan and the Mekong Region Countries

The meeting identified the need for further cooperation and actions relating to the above findings and developments.

November 2010 APEC Japan Finance Ministers’ Meeting

The Japanese Minister of Finance announced a contribution of up to USD 25 million to ADB for the improvement of trade facilitation in ASEAN countries and India.

December 2010 Public-Private Partnership Forum

Based on the recommendation of the summit meeting in 2009, participants from public and private sectors met and discussed measures for mutual cooperation. Discussions were facilitated by dividing the participants into several working groups, of which focused on freight transport and emphasized the importance of capacity building in the sector along with and further improvement of the economic corridors particularly in the Myanmar sections.

Source: JICA Study Team The significance of the Mekong-Japan cooperation can be summarized as follows: (i) providing the framework to incorporate industrial requirements in policy planning; (ii) recognizing the importance of Japanese assistance in improving the economic corridors; (iii) calling for coordination between and among development partners to address issues; (iv) recognizing the importance of “soft” infrastructure as well as “hard” infrastructure; and (v) in particular, identification of skills development as one of the most important issues to

be addressed. (2) Japan International Cooperation Agency A number of JICA projects have been implemented in ASEAN/Mekong Region countries to address customs operations issues. Most of these projects have aimed at building skills in, for example, customs valuation, HS classification, risk management, and post-clearance audit. In Cambodia, from December 2005 to October 2007, JICA dispatched short- and long-term advisors to implement the Customs Risk Management Project to develop a customs risk management system following by the country’s accession to the WCO earlier in the decade. Activities undertaken in this project included: (i) translation of WCO risk management


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principles into local language (Khmer); (ii) definition of risk management processes; and (iii) development of a risk management system. In July 2009, JICA also commenced Customs Policy/Administration Advisory Services by sending a long-term advisor to the General Department of Customs and Excise of Cambodia. The main objective of these advisory services is assist in implementation of the Law on Customs (2007), and skills development to modernize customs policies and administration. For Viet Nam, JICA assisted the General Department of Vietnam Customs (GDVC) in the Training of Trainers Project for Customs Administration Modernization by dispatching long-term advisors between August 2004 and July 2007. The project aimed at the training of trainers in GDVC in the field of customs valuation, post-clearance audit, and HS classification. Following immediately after this project, JICA dispatched a long-term advisor to assist the development of an organizational structure to implement customs valuation and HS classification based on international standards. Since September 2009, JICA has been carrying out the Project on Strengthening the Training System for Improving the Capacity of Frontline Officers of Vietnam Customs, aiming at establishing human resource development systems to promote consistent and effective implementation of customs valuation and HS classification by frontline officers. To address region-wide customs issues, since 2008 JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient by reducing the time required for procedures, as well as to improve the skills and systems for risk management and monitoring at border crossing points in the region. Although the project is based in Thailand (at the Thai Customs Department), the customs administrations of Cambodia and Viet Nam (GDCE and GDVC, respectively) as well as that of Thailand have participated in the project, and training programs have been conducted in a number of areas. (3) Asian Development Bank ADB has carried out a series of technical assistance projects since 1996 to formulate, negotiate, and implement the GMS Cross-Border Transport Agreement. In addition, ADB has carried out two GMS transport sector strategy studies, one in 1993-1995 that prioritized improvement of the Southern, East-West, and North-South Corridors, and another in 2005-06, which provided a master plan for improvement of cross-border transport infrastructure as well as identifying a number of technical assistance projects to address “soft” infrastructure constraints to cross-border transport. Most recently, in November 2010, ADB’s Board of Directors approved a cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion. The first phase (“subproject”) is to last two years (2010-2012) with financing of USD 2.0 equivalent provided by the Government of Australia; assuming satisfactory progress, the second and third stages will be implemented in 2012-2014 and 2014-2016, respectively, at a cost of USD 1.85 million equivalent, for a total cost of USD 5.7 million equivalent, again provided by Australia. The cluster TA will have 10 outputs, divided into three categories: (i) transport facilitation (4 outputs, including exchange of traffic rights, customs transit system and border procedures, a GMS freight transporters’ association, and support for the road transport industry in Cambodia and Lao PDR), trade facilitation (4 outputs, including coordinated border management, an enhanced SPS regime, national and subregional institutions for trade facilitation, and a regional trade logistics strategy), and others (2 outputs, capacity development and legal/regulatory development).


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(4) World Bank While ADB has focused on assisting regional and border-level projects in customs and transport/trade facilitation, the World Bank focus has been on national projects. These projects have included the following: (i) In Cambodia, the World Bank has been assisting the USD 10.0 million equivalent Trade

Facilitation and Competiveness Project, which was initiated in 2005 and restructured in 2009. Originally, the project was to finance (a) an electronic single window integrating all trade facilitation agencies, including the use of ICT for automation of customs functions linked to complementary improvements in systems, procedures, and developments in the organizations involved in product clearance; (b) adherence to the Revised Kyoto Convention including the adoption of risk management capability; (c) design of a merit-based pay system for Cambodia’s trade regulatory agencies; and (d) development of a customs integrity plan based on self-assessment. In the 2009 restructuring the project objectives remained the same, but resources were shifted from the original design of an electronic single window to a wider and more sustainable rollout of ASYCUDA and automation of certificates of origin. Additional resources were allocated for the IT support function to ensure sustainability.

(ii) In Lao PDR, the World Bank has been assisting the USD 6.0 million equivalent Customs and Trade Facilitation Project initiated in 2008. Specific (sub)components of the project include: (a) implementation of ASYCUDA World, including preparation of the Lao PDR Customs Department to receive the new system, and strengthening of its IT center; and (b) customs modernization support, including assistance to meet the requirements of the Agreement on Customs Valuation, implementation of a post clearance audit function, compliance improvement and management strategy, establishment of a client service charter, introducing a comprehensive advance ruling system, developing a system of administrative appeals, intelligence and risk management development, integrity and anticorruption support, and training and translation support.

(iii) In Viet Nam, the World Bank has been assisting the USD 65.9 million equivalent Customs Modernization Project initiated in 2005. The objectives of the project have included facilitation of trade and increasing revenue collection, by improving effectiveness, efficiency, accountability, and transparency of the General Department of Vietnam Customs. A recent “midterm” review found serious delays in implementation and that the government is considering cancelling the project, which is currently scheduled to close in June 2011. While at the time of project appraisal Viet Nam was in the process of accession to WTO, post accession in January 2007 there has been resistance to a reform program in Customs and little progress.

(5) Other Development Partners There are a number of other development partners assisting customs and related transport and trade facilitation projects in the Mekong Region, most notably the European Union, Australia, and the United States: (i) The ASEAN-EU Programme for Regional Integration Support—Phase II (APRIS II)

was supported by a three-year, EUR 8.4 million technical assistance co-financed by the ASEAN Secretariat and European Commission Co-operation Office and was recently completed. APRIS II had five components, the most relevant of which was Component II on Customs and Trade Facilitation. Specific subcomponents of this component included: customs clearance, ASEAN single window, transit, and support to other strategic plans on customs development.


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(ii) The Government of Australia and AusAID’s main initiative in promoting transport and trade facilitation in the Mekong Region is it multi-year funding of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion.

(iii) The main initiative in promoting transport and trade facilitation in the Mekong Region of the United States Agency for International Development (USAID) has been its ASEAN Single Window (ASW) Program, which operates under its ASEAN Development Vision to Advance National Cooperation for Economic Integration (ADVANCE) project.

(6) Lessons Learned from Recent/Ongoing Initiatives A number of lessons may be derived from the various recent/ongoing customs and related transport and trade facilitation initiatives undertaken by the governments, Japan, ADB, the World Bank, and other international development partners. These include the following: (i) Political will and ownership is essential. (ii) A cross-agency perspective is required. (iii) There is a need for improved coordination between customs and other transport and

trade facilitation initiatives. (iv) There is need to avoid trying to do too much. (v) There is a need to provide adequate human and financial resources to project

implementation. (vi) Capacity building projects must be based on a presence in the beneficiary countries and

regions. (vii) Achieving “quick wins”—new, visible contributions to customs and related transport

and trade facilitation in the Mekong Region—will be vital to (re)establish credibility and to prepare for harder-won victories.

(viii) There is a need for all countries to benefit from customs and related transport and trade facilitation initiatives.

(ix) There has been insufficient involvement by the private sector in customs and related transport and trade facilitation activities to date.

(x) It is important to reengineer processes before investing in IT improvements. (xi) An efficient project management mechanism is required to implement the Customs IT. (xii) There is a need to acknowledge the pros and cons of off-the-shelf software packages

and newly developed software. (xiii) Disbursement should be simplified. (xiv) WTO-compliant user fees should be implemented to ensure the sustainability of IT

systems. 8. Future Directions of Japanese Assistance for Customs Facilitation (1) Preparation and Evaluation of Long List of Potential Assistance A long list of potential assistance projects was prepared for each of the five Mekong Region countries as well as for the region as a whole, in the following categories: (i) legal/institutional framework, (ii) customs procedures, (iii) customs IT, (iv) human resources management, (v) integrity, and (vi) border-level projects. In cases where ongoing or programmed projects by other development partners essentially “preempt” the field (e.g., as in the case of the countries with major IT procurement projects underway; or, as in the case of transit, where there are already major initiatives by ADB and the EU), no projects were included on the long list. Even when project names may be similar in different countries, the content of the project(s) would


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depend on the specific conditions in each country with respect to the areas to be addressed. Each of the potential assistance projects was then evaluated based on the criteria and methodology set out in the next section. The following four criteria were used to select priority projects.

a. Expected Impact in Facilitating Freight Transport b. Degree of Harmonization with Japanese Assistance c. Degree of Harmonization with Assistance of Other Development Partners d. Degree of Government/Regional Commitment

Each of the projects on the long list was qualitatively assessed and assigned scores of 1 (low), 2 (medium low), 3 (medium), 4 (high), or 5 (very high) for each of the four evaluation criteria. The scores were then summed to derive a single total score for each project (i.e., each of the criteria was weighted equally, or in other words, no weighting was applied). The projects with the highest total scores were selected as priority projects for each country and the region as a whole. However, the scores are meant to be more indicative than definitive, i.e., the scoring process provided an effective means of initially screening a long list of projects based on relevant criteria, but the projects eventually to be implemented should not necessarily be those with the highest score(s). Accordingly, a “menu” consisting of several projects was presented for each country and the region as a whole on the basis of the initial screening; in some cases, issues common to most or all countries may be addressed more appropriately and effectively through regionwide assistance programs rather than addressed independently with country-specific programs (and therefore some of the country-specific projects could be re-categorized as regional projects, in addition to the regional projects already identified). (2) Priority Assistance Projects The selected priority assistance projects for Cambodia, Lao PDR, Myanmar, Thailand, Viet Nam, and the region as a whole are shown as follows: Priority Projects for Cambodia

C1. Study and Technical Cooperation for Simplification/Standardization of Customs Procedures/Processes

C2. Technical Cooperation for the Development of Authorized Economic Operator System and Associated Training

C3. Study and/or Technical Cooperation for Risk Management Project C4. Study and Technical Cooperation for Introducing Coordinated Border Management at

Bavet and/or New Border Crossing Point C5. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing

Agencies of Neighboring Countries C6. Technical Cooperation for Further Development of Customs-Private Sector

Cooperation C7. Technical Cooperation for Accession to/Implementation of the Revised Kyoto

Convention C8. Technical Cooperation for Sustainable Customs Training C9. Feasibility Study of Relocating Freight Traffic from the Poipet-(Aranyaprathet) Border

Crossing Point


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Priority Projects for Lao PDR

L1. Study and Technical Cooperation for Simplification/Standardization of Customs Procedures/Processes

L2. Technical Cooperation for the Development of Authorized Economic Operator System and Associated Training

L3. Study and/or Technical Cooperation for Risk Management Project L4. Technical Cooperation for Introducing Coordinated Border Management at

Savannakhet (Kaysone Phomvihane) and/or Dansavanh (and possibly Thanaleng) L5. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing

Agencies of Neighboring Countries L6. Technical Cooperation for Further Development of Customs-Private Sector

Cooperation L7. Technical Cooperation for Accession to/Implementation of the Revised Kyoto

Convention L8. Technical Cooperation for Sustainable Customs Training

Priority Projects for Myanmar

M1. Study and Technical Cooperation for Simplification/Standardization of Customs Procedures/Processes

M2. Study and/or Technical Cooperation for Risk Management Project M3. Technical Cooperation for the Development of Authorized Economic Operator System

and Associated Training M4. Technical Cooperation for Introducing Coordinated Border Management at Tachileik

and/or Myawaddy M5. Technical Cooperation for Sustainable Customs Training M6. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing

Agencies of Neighboring Countries Priority Projects for Thailand

T1. Technical Cooperation for the Development of Authorized Economic Operator System and Associated Training

T2. Study and Technical Cooperation for Introducing Coordinated Border Management at Aranyaprathet, Mukdahan, and Mae Sai (and possibly Nong Khai)

T3. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing Agencies of Neighboring Countries

T4. Technical Cooperation for Further Development of Customs-Private Sector Cooperation

T5. Study and Technical Cooperation for Simplification/Standardization of Customs Procedures/Processes

T6. Technical Cooperation for Sustainable Customs Training T7. Feasibility Study of Relocating Freight Traffic from the Aranyaprathet-(Poipet) Border

Crossing Point Priority Projects for Viet Nam

V1. Study and Technical Cooperation for Simplification/Standardization of Customs Procedures/Processes

V2. Study and/or Technical Cooperation for Risk Management Project V3. Technical Cooperation for the Development of Authorized Economic Operator System

and Associated Training V4. Study and Technical Cooperation for Introducing Coordinated Border Management at

Moc Bai and/or Lao Bao


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V5. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing Agencies of Neighboring Countries

V6. Technical Cooperation for Further Development of Customs-Private Sector Cooperation

V7. Technical Cooperation for Sustainable Customs Training Priority Regional Projects

R1. Master Plan and Feasibility Studies for Development of Efficient Border Crossing Pairs on a Pilot Basis

R2. Regional Assistance for Risk Management R3. Introduction of a Region-wide Radio Frequency Identification (RFID)/Global Position

System (GPS) Tracking System for Corridor Management R4. Support of Upcoming C-R-PATA by Providing CBTA-Related Training at the Central

and Border Levels Cooperation R5. Annual Time Release Surveys and Measurement of Performance Indicators R6. Feasibility Study of Relocating Freight Traffic from the Aranyaprathet-Poipet Border

Crossing Point (3) Impacts of the Proposed Programs/Projects The impacts of a comprehensive customs assistance program may be assessed quantitatively. For example, applying the methodology used by the World Bank in the Customs and Trade Facilitation Project in Lao PDR, benefits in terms of reduced administrative costs, customs clearance (“compliance”) costs, and time costs may be assessed in each Mekong Region country and for the region as a whole, as shown in Table 6:

Table 6 Indicative Impacts of a Comprehensive Customs Facilitation Program in the Mekong Region

Unit: USD million equivalent (2009)

Country

Reduced Administrative

Costs

Reduced Customs Clearance (Compliance) Costs

Reduced Time Costs Total Benefits

Cambodia 31.7 127.0 15.9 174.6 Lao PDR 12.7 50.6 6.3 69.6 Myanmar 31.0 124.0 15.5 170.5 Thailand 606.8 2,427.1 303.4 3,337.2 Viet Nam 342.8 1,371.3 171.4 1,885.6 Regional Total 1,025.0 4,100.0 512.5 5,637.5

Note: This table was prepared following assumptions applied in World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, Annex 9, pp. 59-60, paragraphs 7-8 [assuming savings in administrative costs equal to 0.5% of import values, savings in compliance costs equal to 2.0% of import values, and savings in time costs equal to 0.25% of import values; the last-named percentage is considered a “lower bound”, and no benefit was estimated for the reduction in the variance of clearance time, which permits traders to keep lower inventory]. Import values (2009) were taken from Table 2-1, drawn from IMF, Direction of Trade Statistics, 2010. Source: JICA Study Team Total benefits for the region were estimated to be about USD 5.6 billion equivalent. About 59% of the benefits are for Thailand and 33% for Viet Nam. The largest benefit component is reduced customs clearance (compliance) costs (i.e., the costs incurred by declarants in presenting their declarations to customs administrations, including brokers’ fees), about 73% of the total.

Survey on Improvement of Customs Procedures Chapter 1 for Trade Facilitation in the Mekong Region Introduction

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Chapter 1 Introduction 1.1 Study Background In 1992, the Asian Development Bank (ADB) launched the Greater Mekong Subregion (GMS) Development Program in Cambodia, the People’s Republic of China (the PRC, originally including Yunnan Province and later Guangxi Zhuang Autonomous Region), the Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, and Viet Nam1 (i.e., what is known in Japan as the five Mekong Region countries, plus the PRC). Under the program, two GMS transport strategies (or master plans) were formulated (in 1995 and 2006) as overall cross-border transport strategies in the GMS including both “hard” and “soft” aspects. Notably, a Cross-Border Transport Agreement (CBTA) was formulated to address “soft” aspects including the improvement of customs operations. The ADB-assisted GMS transport strategies specified the priority development of corridors, including the East-West (Economic) Corridor, the Southern (Economic) Corridor, and the North-South (Economic) Corridor, as shown in Figure 1-1.

Source: Japan External Trade Organization (JETRO), Survey on the Business Needs and Strategies in Mekong Region, 2009

Figure 1-1 Regional Economic Corridors in the Mekong Region Under this framework, the Government of Japan has contributed to the improvement of physical infrastructure in the Mekong Region since the 1990s, particularly along the East-West Corridor. Although the corridor was fully connected in 2006, with the opening of the Second Mekong International Bridge at Savannakhet (Lao PDR)-Mukdahan (Thailand), there are a number of issues to address the required soft infrastructure including improved customs

1 Country spellings in this report follow the Asian Development Bank, Handbook of Style and Usage, 2009, p. 13 and Appendix 1. Also, as indicated this reference, country names are presented in alphabetical order unless a reason to present them otherwise is provided. An exception has been made in the case of proper nouns (e.g., General Department of Vietnam Customs). Where applicable, place spellings within a country follow those in Protocol 1 of the GMS Cross-Border Transport Agreement, as authorized by the respective countries.

LAO PDR

VIET NAM


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operations and other relevant cross-border regulations.2 In particular, cumbersome customs clearance procedures increase the time and cost for cross-border transport and constrain the smooth flow of freight transport and the development of an efficient production network in the Mekong Region. At a Japan-ASEAN Summit Meeting held in December 2005, the Government of Japan announced that it would establish of Japan-ASEAN Integration Fund (JAIF) to assist in reducing regional disparities and promoting the integration of ASEAN countries; the fund was formally established. In March 2006, a JPY 7.5 billion Japan-ASEAN Integration Fund (JAIF) was established by the Government of Japan. Later year, the Government of Japan set out the Japan–Mekong Region Partnership Program, which proposed realization of sustainable economic development in the region, and called for a series of ministerial level meetings to discuss how the program objectives could be achieved. Considering the needs expressed by private companies and the recent developments in Mekong-Japan Economic and Industrial Cooperation, the Japan International Cooperation Agency (JICA) launched this study to identify directions for improving institutional, policy, and operational aspects of customs procedures in order to facilitate freight transport in the Mekong Region. 1.2 Study Objectives As shown in Figure 1-2, this study aimed to collect and analyze information on institutional, policy, and operational aspects of customs procedures in the Mekong Region. The study also identified priority areas for assistance by the Government of Japan to achieve the goal of promoting freight transport along the East-West Economic Corridor and Southern Economic Corridor, and to address the needs of users of the customs system for improvement of customs procedures and relevant transport and trade facilitation issues.

2 It is considered that 25% of delays along transport corridors worldwide are a result of poor infrastructure, while 75% are related to poor facilitation. See, e.g., Creck Buyonge and Irina Kireeva, “Trade Facilitation in Africa: Challenges and Possible Solutions”, in World Customs Journal, Volume 2, Number 1, 2008, p. 43 (citing World Bank, Doing Business in 2006: Creating Jobs, 2005); and L.M. Harmon, B. Simataa, and A. Van der Merwe, Implementing Facilitation on Trade and Transport Corridors, 28th Annual Southern African Transport Conference, Pretoria, 6 July 2009.


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Figure 1-2 Study Objectives and Final Goal 1.3 Study Tasks and Methodology The study included eight tasks. The relation between and among each task is presented in Figure 1-3.

Study Objectives

Objective (ii): Propose issues on institutional, policy, and operational aspects of customs procedures customs to be addressed by Japanese Official Development Assistance (ODA)

Objective (iii): Propose components, methods, and implementation structure of Japanese ODA to address to issues relating to the institutional, policy, and operational aspects of customs procedures

Objective (i): Collect and analyze information on institutional, policy, and operational aspects of customs procedures

Implementation of the proposed projects

Final Goal: To promote freight transport in the Mekong Region with emphasis on transport along the East-West Corridor and Southern Economic Corridors through improvement of customs


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•Approaches for Introduction of a Single-Window System•Program to Improve Efficiency of Logistics and Distribution•Facilitation of Transport and Trade in the GMS (e.g., CBTA)•Discussions between Japan and the Mekong Countries•Customs Cooperation involving JICA•Past Approaches for the Facilitation of Transport and Trade

Task 3: Establishment of Approach to the Field Survey and Explanation to Relevant Organizations of the Government of Japan

Task 4: Gathering of Information on Institutional, Policy, and Operational Aspects Relevant to Customs Operations for Cross-Border Freight Transport along the Economic Corridors

Task 5: Collection of Macro Data on Cross-Border Transport/Trade and Time Consumed for Customs Clearance

Task 6: On-Site Investigation at Major Border Crossing Points and Related Activities

Task 7: Identification of Candidate Japanese Assistance Projects to Streamline Customs Procedures

Task 8: Preparation of Final Report

Task 1: Literature Review of Institutional/Policy/ Operational Aspects of Cross-Border Freight Transport along the Economic Corridors

•Transport routes•Major categories of cargo•Transport time and cost•Needs, issues, and measures to improve customs procedures

Task 2: Interviews with Freight Forwarders and Trading Companies Undertaking Cross-Border Freight Transport along the Economic Corridors

Institutional, Policy, and Operational Aspects Requests by Users of the Customs System

Organizing Information Obtained in Home-office/Field Work

Assessing the Possibility of New Assistance

Home-office work

Field work

Home-office Work

△IC/R

△F/R

Novem

berDecem

berJanuary

Note: IC/R – Inception Report and F/R – Final Report

Figure 1-3 Study Flow Priority areas for investigation in this study included: • The present situation and issues concerning institutions, policies, and operations related to

customs operations for freight transport (particularly road transport) between countries in the Mekong Region. More specifically, this investigation involved:

Requests made by customs system users such as 24-hour (round-the-clock) operation, harmonization of document formats, introduction of fast-track and electronic customs clearance systems, and capacity building of customs officers;

Framework and implementation structure for trade facilitation; Capacity of related public and private agencies; Status of implementation of the Revised Kyoto Convention of the World Customs

Organization; Status of implementation of the Agreement of the World Trade Organization on the

Agreement on Customs Valuation; Status of advance ruling, Harmonized System (HS) classification, and rules of origin

(in relation to the capacity of customs administration staff); Current status of and analysis of specialists in the private sector related to customs

procedures (e.g., authorized customs clearance agents); IT systems (e.g., the operational status of IT systems, the introduction of single

windows, the organizational aspects of IT, user interface and the satisfaction level of users, and the status of assistance by other international development partners); and

Code of ethics and integrity issues.


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• Present situation, achievements, and challenges/approaches that have been undertaken by governments, development partners, and private organizations to address the issues in the focus countries.

• Present situation, issues, and measures for improvement, for freight transport between and among countries in the Mekong Region.

Field visits were made to Cambodia, Lao PDR, Myanmar, Thailand, and Viet Nam in November and December 2010. Organizations visited included customs administrations, other national government organizations, private companies (e.g., forwarders, customs agents, manufacturing companies), private freight associations, regional economic organizations, and development partners. Table 1-1 lists the name of the organizations interviewed in each country.

Table 1-1 Organizations Interviewed in Each Country Country Organizations Interviewed Cambodia General Department of Customs and Excise; Ministry of Public Works and

Transport; World Bank; ADB; EU; and freight forwarding, trading, and manufacturing Companies

Lao PDR Customs Department; Ministry of Public Works and Transport; Ministry of Industry and Commerce; World Bank (and consultants); ADB; EU; JETRO; and freight forwarding, trading, and manufacturing companies

Myanmar Customs Administration; various ministries (Rail Transportation, National Planning and Economic Development, Transport, Finance and Revenue, Immigration and Population, Commerce, Health, Agriculture and Irrigation, Livestock and Fisheries, and Construction); JETRO; Myanmar International Freight Forwarders’ Association; and freight forwarding, trading, and manufacturing companies

Thailand National Economic and Social Development Board (NESDB), Customs Department; Ministry of Transport; Ministry of Commerce; UNESCAP; AusAID; EU ; USAID Regional Development Mission for Asia; JETRO; GMS Businss Forum; American Chamber of Commerce (Amcham); Centre for Excise & Customs Studies ; University of the Thai Chamber of Commerce; Thai Licensed Customs Brokers Association; and freight forwarding, trading, and manufacturing companies

Viet Nam General Department of Customs; Ministry of Trade and Industry; Vietnam Automobile Transportation Association; Vietnam International Freight Forwarders Association; World Bank; EU; and freight forwarding, trading, and manufacturing companies (Hanoi and Ho Chi Minh City)

Notes: ADB = Asian Development Bank, AusAID = Australian Government Overseas Aid Program, EU = European Union, JETRO = Japan External Trade Organization, UNESCAP = United Nations Economic Commission for Asia and the Pacific, and USAID = United States Agency for International Development Source: JICA Study Team On-site investigations were also conducted at six border crossing pairs, a total of 12 border crossing points (Poipet (Cambodia)–Aranyaprathet (Thailand), Thanaleng (Lao PDR)–Nong Khai (Thailand), Bavet (Cambodia)–Moc Bai (Viet Nam), Mukdahan (Thailand)–Savannakhet (Lao PDR), Dansavanh (Lao PDR)–Lao Bao (Viet Nam), Mae Sai (Thailand)–Tachileik (Myanmar)) along the economic corridors.3 Assessments of the present situation of border crossing points included operational issues related to customs operations and other related transport and trade facilitation issues. The investigations considered requirements for border improvement expressed by private companies.

3 A visit to Mae Sot/Myawaddy was initially planned but not undertaken for security reasons.


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1.4 Structure of This Report The structure of this report is described below. Chapter 2 presents an overview of socioeconomic circumstances and trade patterns, and the increasing demand for the improvement of customs operation and related transport and trade facilitation as well as the development of transport infrastructure in the Mekong Region. Characteristics of the economic corridors and their roles in industrial development in the region are also assessed. Chapter 3 to 7 set out the present situation and issues on customs operation in the Mekong Region. National legal and institutional frameworks are assessed, as well as customs management and procedures including customs valuation, risk management, advance ruling, rules of origin, and the application of information technology. Border issues are also assessed based on the site visits. Chapter 8 evaluates ongoing/planned assistance programs by development partners. Lessons learned from the current initiatives are summarized at the end of the chapter. Chapter 9 assesses future directions of Japanese assistance for customs facilitation in the Mekong Region. The strengths of JICA assistance are examined, and priority assistance programs identified considering the benefits of implementing the recommended programs, the level of government commitment, and complementarity with programs of other development partners.

Survey on Improvement of Customs Procedures Chapter 2 Development Trends and Economic Corridors for Trade Facilitation in the Mekong Region in the Mekong Region

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Chapter 2 Development Trends and Economic Corridors in the Mekong Region

2.1 Socioeconomic Conditions of the Mekong Region Countries Although the economies of the Mekong Region countries are all growing, the rates of growth and the size of their economies vary by country. Thailand has the largest economy in the region, while Viet Nam follows, but the economies of Cambodia, Lao PDR, and Myanmar are somewhat smaller with per capita GDPs of less than USD 1,000 (see Figure 2-1).1 Population in the region is also increasing as shown in Figure 2-2. Population growth is fastest in Myanmar and Viet Nam implying that these countries are acquiring relatively larger internal markets for labor and consumption.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Billi

on C

urre

nt U

SD

Cambodia

Lao PDR

Myanmar

Thailand

Viet Nam

Note: Estimates start from 2008 for Cambodia and Myanmar, and 2009 for Lao PDR, Thailand, and Viet Nam. Source: IMF, World Economic Outlook Database, 2010

Figure 2-1 Trends of GDP Growth

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mill

ion

Cambodia

Lao PDR

Myanmar

Thailand

Viet Nam

Note: Estimates start from 2006 for Myanmar, 2007 for Cambodia and Viet Nam, and 2009 for Lao PDR and Thailand. Source: IMF, World Economic Outlook Database, 2010

Figure 2-2 Trends of Population Growth

1 Following Thailand, Viet Nam was designated by the World Bank and ADB as a middle income country (MIC) in December 2010, while Cambodia, Lao PDR, and Myanmar remain low income countries (LICs).


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Many factors contribute to economic growth but the development of the manufacturing sector is the major driving force in the region. Figure 2-3 indicates that Thailand has the largest manufacturing sector including the largest automotive industry in the region. The Vietnamese industrial sector is currently transforming into one led by the manufacturing, energy, and construction subsectors. On the other hand, Cambodia, Lao PDR, and Myanmar are heavily dependent on primary (agricultural) sector industry, which accounts for more than 30% of their total industrial production. However, secondary and tertiary sector industries in these countries have been steadily growing since the turn of the century.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia 2000

Cambodia 2008

Lao PDR 2000

Lao PDR 2009

Myanmar 2000

Myanmar 2009

Thailand 2000

Thailand 2009

Viet Nam 2000

Viet Nam 2009

Agriculture Mining Manufacturing

Electricity, gas, and water Construction Trade

Transport and communications Finance Public administration

Others Source: ADB, Key Indicators for Asia and the Pacific, 2010 Figure 2-3 Industrial Structure of Mekong Region Countries2

Economic development of the Mekong Region has been addressed under several regional frameworks, including the Association of Southeast Asian Nations (ASEAN), the Asian Development Bank (ADB)-assisted Greater Mekong Subregion (GMS) Development Program, and the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS). An ASEAN Economic Community (AEC) is to be established among the ten member countries3 of ASEAN by 2015, to facilitate free intra-ASEAN movement of goods, people, and capital, strengthen regional economic competitiveness, and achieve equitable development within the member countries. ADB has assisted the five Mekong Region countries as well as the People’s Republic of China (PRC) through the GMS Program since 1992, covering nine priority sectors. Facilitation of cross-border transport and trade is a key aspect of the program, and various studies and projects have already been conducted for this purpose. In addition to these initiatives, the activities of ACMECS are complementary to and enhance existing regional and bilateral economic cooperation, aiming to bridge economic gaps between and among the member countries (which are the five Mekong Region countries) and promote sustainable prosperity in the subregion. The complementary ACMECS activities include, for example, the implementation of industrial and agricultural projects in the border areas along the major GMS corridors to promote economic development in the region. Since the achievement of peace throughout the Mekong Region in the late 1980s, the Government of Japan has actively promoted the development of the countries in the region with 2 In industrial GDP output. 3 Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam.


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the security of Asia and the Pacific in mind. A key element of this policy has been support of the GMS Development Program through grant and loan assistance to develop infrastructure. On various occasions in recent years, consultations have been held on future Japanese assistance to the five Mekong Region countries (e.g., Japan-Mekong Summit Meeting and the Japan-Mekong Economy Ministers’ Meeting). Japan has emphasized the provision of official development assistance (ODA) that would promote trade/investment in the Mekong Region countries. 2.2 Production Network in the Region 2.2.1 Trade Structure The economies of the Mekong Region countries have been growing over the last decade. The total trade volume of Mekong Region countries in 2009 was five times larger than in 2000, and the rate of growth of intra-Mekong Region trade was faster than that of total trade for the Mekong Region countries (see the gray cells in Table 2-1). The percentage of intra-Mekong Region trade has also increased over the last nine years (see Figure 2-4 and 2-5). Both the volume and percentage of intra-regional trade has been growing in all countries in the region except for Lao PDR, for which the rates of intra-regional imports and exports have slightly declined. The major trade flows in the region are between Thailand and Viet Nam, while there is little trade between and among the LICs. As shown in Figure 2-4, these LICs depend on imports from Thailand to certain extent. Trade between the Mekong Region and surrounding countries (including the other ASEAN countries and the PRC) has become more active as has growth in trade between and among the Mekong Region countries. Table 2-2 shows major commodities traded between and among the Mekong Region countries. It indicates significant intra-industry trade and inter-industry trade activities in the region. There are a few types of trade patterns in the region. The first type of intra-regional trade is bidirectional movement of intermediate goods or goods with a high degree of processing in the same industry (e.g., the machinery and electrical parts industries), which is shown between Thailand and Viet Nam. Such intra-industry trade indicates that the supply chains of these countries have been linked in a regional production network.4 In contrast, the second type of intra-regional trade is one-way or inter-industry trade, which is a dominant pattern between and among the MICs/LICs. Cambodia, Myanmar, and Lao PDR mainly export primary products and goods with a low degree of processing to Thailand and Viet Nam, and import manufacturing goods from the MICs. Although this is a conventional trade structure, intra-industry trade with Thailand is beginning to evolve in Cambodia and Lao PDR. For example, some production processes in the automotive and electrical parts industries have recently moved to Cambodia and Lao PDR, which supply their products to Thailand (e.g., wire harness for automotive production). This trend shows that regional production network is gradually expanding in the LICs. The five Mekong Region countries participate in the ASEAN Free Trade Area (AFTA), which has reduced tariffs within the regional community.5 AFTA is expected to promote more active intra-regional trade and lead to encourage expansion and increased sophistication of the regional production network.

4 A discussion of the evolution of intra-industry trade and the fragmented production network in the East Asia region is found in Mitsuyo Ando, Fragmentation and Vertical Intra-Industry Trade in East Asia, 2006. 5 AFTA was formed by ten member countries of ASEAN (see footnote 3 above).

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Survey on Improvem

ent of Customs Procedures

Chapter 2 Developm

ent Trends and Economic Corridors

for Trade Facilitation in the Mekong Region


Table 2-1 Matrix of Trade in the Mekong Region, 2009 Unit: USD million, F.O.B. price

Importer Mekong Countries

Exp

orte

r

Cambodia Lao PDR Myanmar Thailand Viet Nam ASEAN 10 Japan PRC World

Cambodia

0.3 0.0 71.2 167.0 238.6 634.1 129.7 33.0 4,024.3 (-21.9%) (0.0%) (13.4%) (27.0%) (20.2%) (26.6%) (31.9%) (3.7%) (15.2%)

Lao PDR 1.1

0.0 423.7 217.2 642.0 642.6 24.4 306.0 1,539.5 (44.2%) (0.0%) (22.4%) (9.5%) (16.3%) (16.1%) (9.3%) (55.2%) (16.4%)

Myanmar 0.2 0.0

2,549.0 60.1 2,609.3 2,865.1 309.5 586.9 5,567.1 (2.5%) (0.0%) (30.5%) (38.2%) (30.6%) (23.7%) (12.4%) (20.0%) (12.2%)

Thailand 1,575.1 1,636.8 1,539.6

4,666.1 9,417.7 32,398.9 15,677.1 16,076.2 151,972.0 (18.3%) (17.6%) (13.2%) (21.0%) (18.3%) (10.4%) (4.9%) (21.4%) (9.2%)

Viet Nam 1,251.7 131.1 28.5 1,271.4

2,682.6 8,912.8 6,326.5 4,310.1 55,658.7 (27.4%) (7.1%) (19.7%) (14.6%) (18.3%) (14.6%) (10.5%) (12.1%) (16.1%)

Mekong Countries

2,828.0 1,768.2 1,568.2 4,315.3 5,110.5 15,590.3 45,453.5 22,467.3 21,312.2 218,761.6 (21.5%) (16.3%) (13.3%) (22.5%) (20.5%) (19.6%) (11.8%) (6.4%) (18.9%) (10.8%)

ASEAN 10 3,828.2 1,816.8 2,863.1 27,666.3 15,536.7 51,711.1 204,257.1 78,460.7 96,130.0 835,630.5 (15.6%) (15.7%) (9.6%) (8.9%) (16.4%) (11.4%) (8.3%) (3.5%) (21.7%) (7.8%)

Japan 112.5 75.9 201.9 22,259.0 6,518.3 29,167.6 80,463.1

109,632.0 581,580.0

(8.9%) (15.0%) (0.0%) (5.6%) (14.2%) (7.0%) (1.8%) (15.3%) (2.2%)

China 905.0 376.3 2,279.1 13,326.2 16,303.0 33,189.6 106,389.3 98,044.9

1,203,420.0 (20.9%) (30.4%) (0.0%) (21.9%) (30.0%) (24.9%) (22.3%) (10.0%) (19.1%)

World 6,348.1 2,532.2 6,200.9 121,354.0 68,566.4 205,001.6 726,548.4 492,469.0 934,972.0 12,364,300.0 (13.7%) (17.0%) (0.0%) (8.6%) (19.2%) (11.5%) (7.9%) (4.2%) (17.9%) (7.6%)

Note: The lower rows represent the compound average growth rate between 2000 and 2009. Source: IMF, Direction of Trade Statistics, 2010


2-5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia 2000Cambodia 2009

Lao PDR 2000Lao PDR 2009

Myanmar 2000Myanmar 2009

Thailand 2000Thailand 2009

Viet Nam 2000Viet Nam 2009

Mekong Region 2000Mekong Region 2009

Cambodia Lao PDR Myanmar Thailand Viet Nam ASEAN PRC Others Source: IMF, Direction of Trade Statistics, 2010

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia 2000

Cambodia 2009

Lao PDR 2000

Lao PDR 2009

Myanmar 2000

Myanmar 2009

Thailand 2000

Thailand 2009

Viet Nam 2000

Viet Nam 2009

Mekong Region 2000

Mekong Region 2009

Cambodia Lao PDR Myanmar Thailand Viet Nam ASEAN PRC Others Source: IMF, Direction of Trade Statistics, 2010

Figure 2-4 Percentage of Import Origins

Figure 2-5 Percentage of Export Destinations

Table 2-2 Matrix of Major Traded Commodities in the Mekong Region, 2008 Exporter

Importer Cambodia Lao PDR Myanmar Thailand Viet Nam

Cambodia

Low volume Low volume

Seeds/fruits, vegetables, and cereals/iron/ steel vehicles

Earth/cement, rubber, wood, fruits/nuts, vegetables

Lao PDR


Copper, mineral fuels, wood, cereal, electrical products

Wood, copper earth/cement, coffee/tea, and miscellaneous other products

Myanmar


Mineral fuels, fish, wood, copper, and vegetables

Wood, vegetables, rubber, fish, and cereals

Thailand Mineral fuels, sugar, vehicles, machinery, earth/cement

Mineral fuels, vehicles, machinery, iron/steel, electric products

Mineral fuels, beverages, vehicles, electrical products, earth/ cement

Machinery, mineral fuels, plastics, vehicles, electric products

Viet Nam Mineral fuels, iron/steel, plastics, ships, miscellaneous other products

Mineral fuels, iron/steel, electrical products, machinery, miscellaneous other products

Furniture, pharmaceuticals, plastics, iron/steel, and Electrical products

Mineral fuels, machinery, iron/steel, precision products, fish

Note: “Machinery”, “Vehicles”, and “Electrical products” include final products and parts thereof. Source: Study Team based on UN Commodity Trade Statistics Databse (http://comtrade.un.org/)


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2.2.2 Industrial Investment in the Region As described, industrial activities in the Mekong Region are especially active in Thailand and Viet Nam. Factories are currently agglomerated around Bangkok, Ho Chi Minh City, and Hanoi, as shown in Figure 2-6. In addition to these three cores producing high-value added products, Yangon has a number of industrial parks producing garments and food processing commodities. Cambodia and Lao PDR have sought to promote industrial activity through the development of new industrial parks or special economic zones (SEZs), but industrial bases are not yet well-developed in these countries.

Source: Study Team based on ASEAN-Japan Centre website (http://www.asean.or.jp/ja/), 2010

Figure 2-6 Distribution of Production Centers in the Mekong Region Development of the existing production bases in Thailand has been achieved as a result of foreign direct investment (FDI), e.g., by companies from Japan and newly industrializing economies (NIEs)6 since in the late 1980s. Following Thailand, Viet Nam also attracted FDI and experienced rapid growth after the doi moi liberalization of its economy. The manufacturing sector of these countries is still the most important target for FDI in this region (see Table 2-3); the amount of FDI inflow is still smaller, but growing, in Cambodia, Lao PDR, and Myanmar.

6 Hong Kong, the Republic of Korea, Singapore, and Taiwan (China, Taipei) have been designated NIEs. Singapore, another NIE, is an original founding member of ASEAN.


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Table 2-3 FDI Inflow by Industry, 2008 Unit: USD million

Industry Cambodia Lao PDR Myanmar Thailand Viet Nam Agriculture, Fisheries and Forestry

72.3 (8.9%)

9.4 (4.1%) -

0.8 (0.0%)

150.3 (1.9%)

Mining and Quarrying 116.6 (14.3%)

16.4 (7.2%) -

143.0 (1.5%)

354.2 (4.4%)

Manufacturing -

76.5 (33.6%) -

1,448.0 (14.7%)

4,168.3 (51.8%)

Construction -

0.1 (0.1%) -

22.7 (0.2%)

734.2 (9.1%)

Trade/Commerce -

5.2 (2.3%) -

134.7 (1.4%)

260.8 (9.1%)

Financial Intermediation and Services

344.1 (42.2%) - -

994.0 (10.1%)

120.8 (3.2%)

Real Estate - - - 427.8

(4.3%) 813.5

(10.1%) Services 218.2

(26.8%) 28.6

(12.6%) - 185.4

(1.9%) 1,187.4 (14.8%)

Others 64.1 (7.9%)

91.6 (40.2%) - 6,478.1

(65.9%) 260.6

(3.2%) Total 815.3

(100%) 227.8

(100%) 283.0

(100%) 9,834.5 (100%)

8,050.0 (100%)

Source: ASEAN Secretariat The comparative advantage of the LICs is their relatively low cost of investment (see Table 2-4). For example, salaries and wages in Yangon are one tenth of those in Bangkok. For this reason, the LICs attract investment in labor-intensive industries from industrialized countries and neighboring countries. For example, Thai companies and foreign companies located in Thailand have been investing in the other four Mekong Region countries in order to reorganize their production structures.7 Likewise, companies in Viet Nam have been investing in Cambodia and Lao PDR because the wages of Vietnamese workers have become higher and as a consequence the attractiveness of Viet Nam for labor-intensive industry has decreased.

Table 2-4 Comparison of Labor and Land Costs in Regional Economic Centers

Bangkok Hanoi Ho Chi

Minh City Yangon Phnom Penh Vientiane

Worker wages (USD/month) 230.6 104.0 99.7 22.8 50 45~60 Manager salaries (USD/month) 1,341.5 822.3 669.3 118.4 150 300~500 Rental rate in industrial area (USD/m2/month) 6.39

0.146~ 0.19 0.18

0.15~ 0.255 0.80~1.5 0.67~1.67

Sources: (i) JETRO website, 2009 (for Bangkok, Hanoi, Ho Chi Minh City, and Yangon), (ii) Council for the Development of Cambodia, Cambodia Investment Guide, 2010 (for Phnom Penh), and (iii) ASEAN-Japan Centre website, 2010 (for Vientiane)

7 Thailand was the largest investor in Myanmar based on cumulative totals during 1988-2009 (Central Statistical Organization, Myanmar), and the second largest investor in Lao PDR based on cumulative totals during 2000-2007 (ASEAN-Japan Centre).


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At present, production bases in the region are concentrated around a few large metropolitan centers, but investment is also flowing into the LICs where labor and land costs are lower, enabling the LICs to gradually be integrated into the region-wide production network. Thus, the production network is strengthening and expanding in the Mekong Region, led by industries seeking higher competitiveness and an optimized production structure. 2.3 Freight Transport in the Region 2.3.1 Definition of the Transport Corridors There are three different international road networks (corridors) traversing the Mekong Region: (i) the Asian Highway routes, which cover the entire Asian continent; (ii) the ASEAN Highway, which includes the Asian Highways in the 10-country ASEAN region, which includes all five countries of the Mekong Region; and (iii) the GMS transport network, based on a number of economic corridors identified in the ADB-sponsored Greater Mekong Subregion Transport Sector Strategy Study, which covered the five Mekong Region countries as well as two provinces of the PRC. Figure 2-7 presents (sub)regional economic corridors in the Greater Mekong Subregion.

Source: ADB (PADECO Co., Ltd.), GMS Transport Sector Strategy Study, 2006

Figure 2-7 Regional Economic Corridors in the Greater Mekong Region


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As shown in the maps, most of the GMS Economic Corridors overlap with the Asian/ASEAN Highway Network. The East-West, Southern, and North-South Corridors were selected as development priorities based on the GMS Transport Sector Study undertaken by ADB (PADECO Co., Ltd.) from 1993 to 1995 and approved by the respective governments.8 Since the mid-1990s these three corridors have been developed by the governments with assistance from international development partners. A summary of the GMS economic corridors routes is set out in Table 2-5.

Table 2-5 Summary of the GMS Economic Corridors No. Corridor Name Section 1 East-West Economic Corridor Mawlaymine - DaNang 2.1 North-South Economic Corridor (West) Kunming – Bangkok via Lao

PDR/Myanmar 2.2 North-South Economic Corridor (Central) Kunming – Hanoi – Haiphong 2.3 North-South Economic Corridor (East) Kunming – Nanning – Hanoi 3.1 Southern Economic Corridor (Central) Bangkok – Phnom Penh – Ho Chi Minh – Vung

Tau 3.2 Southern Economic Corridor (Southern

Coastal) Bangkok – Trat – Koh Kong – Kampot – Ha Tien – Nam Can

3.3 Southern Economic Corridor (North) Bangkok – Siem Reap – Stung Treng – Rattanakiri – O Yadov – Play Ku – Quy Nhon

3.4 SEC-NSEC Inter-Corridor Link Dong Kralor – Stung Treng – Kratie – Phnom Penh – Sihanoukville

3.5 Southern Economic Corridor (Western Extension)

Bangkok – Dawei

4 Northwestern Corridor Bangkok –Mae Sot – Payagyi – Meiktila – Tamu – Imphal

5 Northern Corridor Kunming – Dali – Ruili – Lashio – Mandalay – Tamu – Imphal

6 Central Corridor Kunming – Mohan – Luang Prabang – Vientiane – Thakhek – Pakse – Phnom Penh – Sihanoukville

7 Northeastern Corridor Nanning – Hanoi – Vientiane – Bangkok/ Laem Chabang

Note: NSEC = North-South Economic Corridor; SEC = Southern Economic Corridor Source: ADB (PADECO Co., Ltd.), 2006, GMS Transport Sector Strategy Study A description of the seven corridors follows. East-West Economic Corridor: This corridor traverses the subregion from east to west, connecting Mawlamyine in Myanmar, the northeastern part of Thailand, Savannakhet in Lao PDR, and Da Nang in Viet Nam. The route connects the inland cities of Lao PDR and northeastern part of Thailand to global markets via the Vietnamese port of Da Nang and the Thai port of Laem Chanbang. The corridor also links the Mekong Region to the Indian subcontinent, via Myanmar, the western end of the East-West Economic Corridor. With the opening of the Second Mekong International Bridge in December 2006 with assistance from Japan, Mukdahan in Thailand and Savannakhet in Lao PDR were connected, resulting in full opening of the East-West Economic Corridor. The time required for land transport between Bangkok/Laem Chabang and Hanoi was shortened from four to three days after the opening. In addition to the bridge, Japan assisted development of road segments along this corridor, particularly in Lao PDR. 8 PADECO Co., Ltd., GMS Subregional Transport Sector Study, prepared for the Asian Development Bank, 1994.


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North-South Economic Corridor: This corridor traverses the subregion from north to south. The route originates in Kunming in the PRC’s Yunnan Province and ends in Bangkok/Laem Chabang in Thailand (North-South Economic Corridor West Route). The corridor diverges into R3A and R3B in the middle, which traverse Lao PDR and Myanmar, respectively. R3A was opened in March 2008, with the funds for the development of the road in Lao PDR equally contributed by ADB, the PRC, and Thailand. Also, there are two branch routes connecting Kunming and Hanoi. Development of R3B is planned to be executed with funds from the PRC and Viet Nam. Southern Economic Corridor: This corridor connects Bangkok and Ho Chi Minh City via Phnom Penh along its Central Subcorridor. Since this Corridor’s Central Subcorridor connects three major economic centers, its economic impact was expected to be the greatest among the corridors. However, development of this corridor has been slower than development of the East-West and North-South Economic Corridors. A significant improvement will be the bridge over the Mekong River at Neak Loeung to be financed by JICA. There are two other subcorridors of the Southern Economic Corridor, the Southern Coastal Subcorridor and the Northern Subcorridor. Northwestern Corridor: This corridor connects Bangkok and Imphal in India through Myanmar. The rapid development of the Subcontinent in the last decade has greatly increased the need to improve connections between the GMS and South Asia. The Thailand-Myanmar-India Transport Linkages project was defined as a priority route for development in the latest GMS Transport Sector Study (2005-2006), and it should be incorporated as part of a new Northwestern Corridor. It has been proposed that initially this should comprise the following routes: (i) Mae Sot-Thaton-Bagan-Kalay-Tamu/Moreh; (ii) Kawkareik-Mawlamyine-Thaton; and (iii) Kanchanaburi-Three Pagodas Pass-Thanbuzayat-Mudon-Mawlamyine. Northern Corridor: This corridor connects Kunming in the PRC and Imphal in India through Myanmar. Although the route links the world’s two most populated and dynamic nations, the road condition of the road route is very poor. The proposed Northern Corridor would have two sub-corridors: (i) a sub-corridor via Ruili; and (ii) a sub-corridor further north, as yet undefined, but possibly following the old Stillwell Road alignment. Central Corridor: This corridor links Kunming and Phnom Penh through Vientiane. With the opening of the Lao PDR/Cambodia border connecting Routes 13S and 7, the operation of this route will be started from Kunming to Sihanoukville, via Louang Prabang, Vientiane, Pakse, Stung Treng, and Phnom Penh. Northeastern Corridor: This corridor connects Nanning in the PRC’s Autonomous Region and Bangkok through Hanoi and Vientiane. This corridor also includes a branch to Laem Chabang port. 2.3.2 Routes Used for the Regional Trade While the regional economic corridors in the Mekong Region have been defined as noted above, there are various transport routes used for regional trade including links via railway, inland waterway, sea and air. In particular, road and sea links are the most used for regional freight transport although some high-value commodities are transported by air. The regional sea and air transport networks are shown in Figures 2-8 and 2-9.


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Source: Japan External Trade Organization, ASEAN Logistics Network Map, 2006

Figure 2-8 Sea Transport Network in ASEAN

Source: Japan External Trade Organization, ASEAN Logistics Network Map, 2006

Figure 2-9 Air Transport Network in ASEAN

The demand for freight transport networks for regional trade at present (2011) to connect industrial hubs and major consumption centers in some ways differs from that reflected by previous corridor definitions. These road freight transport networks based on emerging demand patterns in the Mekong Region are described as follows. Yangon – Bangkok Route (along the East-West Economic Corridor): This road route links Yangon and Bangkok although the route has not opened yet as a full-fledged freight transport route because of the bad condition and steepness of some road sections in Myanmar and also weight limits on the border bridge at Mae Sot/Myawaddy, which leads to transshipment to/from small trucks for the river crossing. Because of the poor road conditions in Myanmar, driving at night without two drivers is impossible. The development of an alternative route for the mountainous road section in Myanmar is ongoing. Construction of an alternative bridge at Mae Sot/Myawaddy depends on the resolution of border demarcation and other political issues between Thailand and Myanmar, although the Government of Myanmar has requested the Government of Thailand for assistance for construction of a new bridge. Because of the condition of the infrastructure, freight movements along this route have been limited to local flows. Agricultural products (e.g., fruits, vegetables, grain) are the main export commodities from Myanmar, according to data from the Myanmar Customs Administration. In the other direction, Thailand exports electrical equipment, plastics, and footwear along this route. This route has attracted more focus since Cyclone Nargis in 2008, which rendered Yangon Port unusable for a while. In response to the event, the Japan External Trade Organization (JETRO) conducted trial shipments for garment companies between Yangon and Japan using the road route to Bangkok.9 These trial runs demonstrated that this route has a significant potential to shorten import and export times between Myanmar and Pacific countries such as Japan, although the infrastructure needs to be improved.

9 Two shipments were tried, one for export from Myanmar to Japan in 2009 and another for import from Japan to Myanmar in 2010.


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Bangkok – Hanoi Route (part of the East-West Economic Corridor and additional road sections): This route connecting Bangkok and Hanoi and using part of the East-West Corridor is a major road transport link. Although after the opening of the East-West Corridor several freight forwarders commenced operations along the corridor, currently the demand is quite low due to the large difference between the cost of road and sea transport. In addition, although the East-West Corridor was a pilot corridor for the CBTA, the demand for implementation of the CBTA along this corridor has not been great because certain road sections along the within the Bangkok – Hanoi road route have not yet been included in the list of routes in Protocol 1 of the CBTA.10 Night driving also requires two drivers on this route. Generally, a Vietnamese vehicle is used for transport in Viet Nam and Lao PDR under the Lao PDR-Viet Nam bilateral road transport agreement, and a Thai vehicle is used from Mukdahan (Thailand) to Bangkok. Several international freight forwarders have operated land transport service between Bangkok and Hanoi on a weekly basis since the late 2000s, while a few others have carried out charter services and trials (see Table 2-6). This route is currently used for the export of intermediate products (e.g., electrical goods, machinery, and motorcycles) from Bangkok, and in the other direction, the export of finished products from Hanoi. Thus, users (and potential users) of this route include manufacturers shipping products with high values between production centers across borders. However, there is a large imbalance in cargo flows (i.e., there is an excess of exports from Thailand) on this route, which increases transport costs.

Table 2-6 Current Status of Freight Transport Service on Bangkok – Hanoi Route Company Name Service Type Remarks Dragon Logistics/ Sumitomo Global Logistics

Weekly (LCL) Service between industrial parks on both sides, since 2005

Nippon Express Weekly (LCL) Since 2009 Nissin Trial Collaboration with Mammoet Shipping (a Dutch

logistics company with a warehouse in Savannakhet)

Logitem Weekly (LCL) Holding a warehouse in Savannakhet, since 2008 Sagawa Global Logistics Trial Sankyu Charter only TNT Weekly (courier) Yusen Air & Sea Weekly (LCL) Since 2008

Note: LCL = Less than Container Load Source: Based on Japan External Trade Organization, ASEAN Logistics Network Map, 2008, updated with interview results

10 Article 2 of CBTA Protocol provides for addition of additional routes and border crossings based on an MOU between/among the contracting parties (governments) concerned.


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Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang

SaigonSihanouk Ville

Yangon

Shingapore

LaemChabang

Northeastern Corridor

Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi

Major Industrial HubMajor PortMajor AirportEconomic CorridorRoad LinkMajor Sea RouteFeeder Sea RouteAir Link

Phnom Penh

Phnom Penh

Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang


Yangon

Shingapore

LaemChabang


Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi


Phnom Penh

Phnom Penh

Source: JICA Study Team

Figure 2-10 Yangon – Bangkok Route


Figure 2-11 Bangkok – Hanoi Route

Bangkok – Phnom Penh Route (along the Southern Economic Corridor): This road route mainly serves exports from Thailand to Cambodia and to a lesser extent exports from Cambodia to Thailand.11 Road condition is relatively good along this route although two drivers are required for driving at night. However, trucks cleared at the inland clearance/container depot (ICD) at Phnom Penh have to visit the customs office of each province in Cambodia on the route along with staff of the customs clearance agent operating the ICD in Phnom Penh, which complicates freight transport and increases transport time and cost. Phnom Penh – Ho Chi Minh City Route (along the Southern Economic Corridor): This road route is used mainly for the exports from Viet Nam to Cambodia and to a lesser extent for exports from Cambodia to Viet Nam.12 Driving at night is possible, but trucks have to wait for a pontoon to cross the Mekong River. As is the case for freight transport between Bangkok and Phnom Penh, customs procedures within Cambodia are a key constraint increasing transport time and cost on this road link. Phnom Penh and Ho Chi Minh City are also connected by inland water transport along the Mekong River, on which barges carry bulk cargo (e.g., garments, products, and construction materials). Some of these commodities may be shifted to the road route if land transport becomes more convenient. Another potential is the diversion of transport currently destined for Sihanoukville Port. Cai Mep Port, near Ho Chi Minh City, advantageously located for import and export traffic from/to countries to the east (e.g., Japan).

11 Apart from local traffic. 12 See previous footnote.


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Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang


Yangon

Shingapore

LaemChabang


Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi


Phnom Penh

Phnom Penh

Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang


Yangon

Shingapore

LaemChabang


Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi


Phnom Penh

Phnom Penh


Figure 2-12 Bangkok – Phnom Penh Route


Figure 2-13 Phnom Penh – Ho Chi Minh City Route

Bangkok – Ho Chi Minh City Route (along the Southern Economic Corridor via Phnom Penh): This road link connects Bangkok and Hanoi, which are the largest active industrial hubs in the Mekong Region. For trade between Viet Nam and Thailand, a Vietnamese vehicle is used for transport within Viet Nam and Cambodia and a Thai vehicle is used for transport within Thailand. Although transport time by road is quite short, most cargo owners prefer sea transport to road transport because of the large difference in transport cost/price considering the reduced time by sea transport. Vientiane – Bangkok Route (along the Northeastern Economic Corridor): This corridor is a major trade route between Lao PDR and Thailand. Without a sea transport route alternative, this road route is the one most used for freight transport between the two countries. This route is also used for transport between Lao PDR and the rest of the world via Laem Chabang Port. The Thai Customs House at Nong Khai reported that the export amount from Thailand to Lao PDR is more than ten times the traffic in the other direction. Lao PDR imports manufacturing products and fuels, while Thailand imports primary products (e.g., timber, grain).


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Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang


Yangon

Shingapore

LaemChabang


Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi


Phnom Penh

Phnom Penh

Bangkok

Vientiane

Ho Chi Minh

Hai Phong

Da Nang


Yangon

Shingapore

LaemChabang


Yangon

Bangkok

Noi Bai

Tansonnhat

Yangon

Wat Tay

Hanoi

Suvarnabhumi


Phnom Penh

Phnom Penh


Figure 2-14 Bangkok – Ho Chi Minh City Route


Figure 2-15 Vientiane – Bangkok Route

The transport time and cost for a 40 foot container by road and sea routes are shown in Table 2-7. Substantial time saving can be made by using land route while costs are increased (except between Yangon and Bangkok).

Table 2-7 Summary of Time and Cost for Freight Transport along the Major Economic Corridors in the Mekong Region

Route and Direction Land Route Sea Route Yangon to Bangkok 3 days (USD 1,500) 26 days (USD 2,720) Bangkok to Yangon 3 days (USD 1,500) 28 days (USD 2,680) Bangkok to Hanoi 3 days (USD 2,290) 20 days (USD 1,370) Hanoi to Bangkok 3 days (USD 2,290) 20 days (USD 1,220) Bangkok to Phnom Penh 16 hours (USD 2,190) 14 days (USD 1,330) Phnom Penh to Bangkok 16 hours (USD 2,190) 14 days (USD 1,330) Phnom Penh to Ho Chi Minh City 10 hours (USD 1,210) 9 days (USD 900) Ho Chi Minh City to Phnom Penh 12 hours (USD 1,210) 9 days (USD 900) Bangkok to Ho Chi Minh City 2 days (USD 3,280) 10 days (USD 1,350) Ho Chi Minh City to Bangkok 2 days (USD 3,280) 10 days (USD 1,350) Vientiane to Bangkok 2 days (USD 800) (No sea route is available) Bangkok to Vientiane 2 days (USD 800) (No sea route is available)

Source: This Study


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2.3.3 The Role of the Economic Corridors in the Production Network The development of full-fledged economic corridors in the Mekong Region is expected to strengthen and expand the regional production network. As described in the preceding sections, intermediate goods are traded between/among and processed in a growing number of production bases in the region, and land transport corridors are utilized for this trade. Transport along the land corridors is less costly than by air, and is speedier and provides more reliable service than do ocean routes. This finding points to the efficiency and effectiveness of the corridors for establishing a regional supply chain linking spatially distributed production bases. Thus, improved transport and trade facilitation along these regional corridors will enable industries to optimize their production activities in the region, and it will attract new production centers along the corridors. As indicated by ADB, there are five stages in the evolution of transport corridors into full-fledged economic corridors (see Table 2-8). The objective is to transform corridors in the Mekong Region into economic corridors, which are defined as corridors with increased private investment and well-developed production chains. To that end, it is required to further reduce transport costs and times, and increase the reliability of transport services through the improvement of both “hard” and “soft” infrastructure along the corridors.

Table 2-8 Stages of Development of Transport Corridors Stage Type of Corridor Composition 1

Transport Corridor Physical infrastructure

2 (by 2011)

Transport and Trade Facilitation (TTF) Corridor

Cross-border transport operations and efficient border formalities

3 (by 2014)

Logistics Corridor Broader trade facilitation (behind-the-border) and developed cross-border logistics services

4 (by 2016)

Urban Development Corridor Improved economic infrastructure and enhanced capacity of corridor towns for public-private partnerships

5 (by 2018)

Economic Corridor Increased private investment and well-developed production chains

Source: Presentation material by Arjun Goswami (Head, Regional Cooperation and Integration Group,. Southeast Asia Department, ADB), Evolution of Economic Corridors: Transport and Trade Facilitation, Asian Development Bank, Economic Corridors Forum, September 2009 Figure 2-16 and 2-17 (respectively) show the (excessive) time and cost required for customs clearance and the preparation of related documentation. In terms of physical infrastructure, cross-border roads/corridors were developed in the region focusing on three priority corridors, with the efforts of each country and the assistance of ADB, Japan, and other international development partners. Even though each country has made great progress, further assistance is necessary to improve the soft infrastructure, such as customs procedures and legal systems to facilitate cross-border transport, in order to take full advantage of the progress achieved in the development of the hard infrastructure. In particular, complicated customs procedures in the Mekong Region have been said to increase the time, cost, and uncertainty of cross-border freight transport. Subsequent chapters assess the existing situation, issues to be addressed, and possible future Japanese assistance in customs and related transport and trade facilitation in the Mekong Region.


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0 5 10 15 20 25 30 35 40 45 50

Viet NamThailandLao PDR

CambodiaSingapore

PRCPhilippines

MalaysiaIndonesia

Brunei

days

Document preparation Customs clearance & technical control Ports & terminal handling Inland transport & handling

Note: The PRC is also shown in the table. Source: World Bank, Doing Business

Figure 2-16 Breakdown of Time Required for Export Procedures for Cargo (from the Viewpoint of the Trader)

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

Viet NamThailandLao PDR

CambodiaSingapore

PRCPhilippines

MalaysiaIndonesia

Brunei

USDDocument preparation Customs clearance & technical control Ports & terminal handling Inland transport & handling

Note: The PRC is also shown in the table. Source: World Bank, Doing Business

Figure 2-17 Breakdown of Cost Required for Export Procedures for Cargo (per TEU; from the Viewpoint of the Trader)

2.4 Customs and Related Transport and Trade Facilitation Problems

by the Industrial Sector It is important for industries in the Mekong Region to secure efficient and reliable freight transport systems. Their feedback on existing freight transport systems will provide valuable insights for addressing issues and planning for actions necessary for improvements. As shown in Table 2-9, a total of 48 private companies (manufacturers, trading companies, freight forwarders, and customs agents) were interviewed13 to identify problems in customs operations and other related transport and trade facilitation issues affecting cross-border traffic along the economic corridors.

13 Interviews in this study were conducted between November and December 2010. Also, 18 companies in Cambodia were interviewed by another JICA study in late 2010.

Mekong Region Countries

Mekong Region Countries


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Table 2-9 Number of Private Companies Interviewed

Country Trading

Companies

Freight Forwarders/

Customs Agents Manufacturing

Companies Total Cambodia 6 9 5 20 Lao PDR 3 1 0 4 Myanmar 0 2 1 3 Thailand 2 7 1 10 Viet Nam 2 8 1 11 Total 13 27 8 48

Note: Eighteen companies in Cambodia were interviewed by another JICA study. 2.4.1 Problems Identified by the Industrial Sector (1) Cambodia Problems faced during customs clearance in Cambodia were reported as follows: (i) Customs valuation does not depend on transaction values, but is based on price

information owned by the customs administration. (ii) Customs classification is not consistent between officials in the customs headquarters

and border offices. (iii) Import/export applications can only be lodged at the General Department of Customs

and Excise (GDCE) headquarters in Phnom Penh. In case of customs clearance at the Poipet border crossing point (on the Cambodia/Thailand border along the Southern Economic Corridor) the original documents have to be delivered to Poipet, but in case of delays the trucks must wait until the documents arrive.

(iv) Similar and duplicating inspections of documents are made by the Cambodia Import Export Inspection and Fraud Repression Department (CamControl), and a result it takes additional time to complete border clearance procedures.

(v) At Poipet, tax exempt goods can only be imported on Tuesdays; if the goods arrive after business on a Tuesday, it is nearly a full week before they can be cleared. The inconvenience is exacerbated since there is no customs bonded warehouse nearby.

(vi) Customs officers sometimes lack sufficient knowledge particularly on ASEAN Form D (certificate of origins), which results in additional waiting time at the border.

Other related transport and trade facilitation issues/problems include: (i) the high cost of land transport; (ii) the lack of transparency of customs clearance costs, with informal payments required; (iii) a requirement for customs duties to be paid in cash or by bank check at certain border

crossing points, but bank transfers cannot be made to the border because the banking system is at an early stage of development; and

(iv) the lack of adequate facilities/space for cargo loading/unloading and the lack of modern warehouses (e.g., for storing fabrics) in certain road sections between Phnom Penh and Ho Chi Minh City.

(2) Lao PDR Reported problems faced during customs clearance in Lao PDR are as follows: (i) Original documents are required for customs clearance at the borders. For example,

import licenses have to be obtained in Vientiane and the documents have to be sent to


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the Savannakhet (Kaysone Phomvihane) border crossing point, which requires driving six hours in each direction. This requires increased time and costs, and complicated the scheduling of freight arrival at the border crossing points.

(ii) Customs clearance procedures are slow. The time required for customs clearance in Thailand is about one hour while on the Lao PDR side is 3-4 hours.14

(iii) Office closures for lunch are too long. For example, the official lunch time at the Savannakhet border crossing point is from 1130 to 1400, but there are cases where customs officials do not return to work even after 1400.

(iv) The banks at the border crossing points close too early. The customs office is open until 2200 at the Savannakhet border crossing point, but the bank closes at 1600. If customs duties cannot be paid by that time, customs clearance cannot be completed even though the customs office is open.

Other related transport and trade facilitation issues/problems include: (i) Informal payments are required for customs clearance, which increases freight transport

costs. (ii) Road sections in Lao PDR along the East-West Economic Corridor lack sufficient

lighting and therefore it is not safe to drive at night. (iii) The weight limit for trucks in Lao PDR is lower compared to the weight limits in other

Mekong Region countries, which increases transport costs (e.g., the limit is 45 tons in Thailand but only 37 tons in Lao PDR).

(3) Myanmar Problems faced during customs clearance in Myanmar were reported as follows: (i) Import/export licenses from Ministry of Commerce and licenses from other relevant

ministries have to be obtained in Naypyidaw, the new national capital, located about 350 km north of Yangon, where most of trading companies/freight forwarders have their offices. Import/export licenses are required for each transaction (shipment) and trading companies have to visit Naypyidaw at least twice; once for the application and another time to receive the license documents (processing takes about one week). Consequently, most trading companies hire specialized staff for this purpose.

(ii) There are no inland customs bonded warehouses or dry ports in Myanmar. Existing bonded areas are only in port districts and inland industrial parks are not customs bonded areas, which constrains the storage of empty containers and efficient freight movement involving consolidated freight.15

Other related transport and trade facilitation issues/problems include: (i) Cargo insurance premiums are too high since there is only one insurance company,

which reinsures their policies with overseas insurance companies. (ii) Road sections leading to Myawaddy near the border with Thailand (at Mae Sod) along

the East-West Economic Corridor are narrow and inconvenient as one-way systems (changing directions each day) are applied to the sections (about 50 km in length).

(iii) The weight limit on the bridge at Myawaddy-Mae Sot is too low.16 (iv) Communication and power infrastructure in the country and at the borders require

improvement. 14 More precise information is found in TRS Task Force, Time Release Study, Lao PDR, December 2009. 15 There is a special customs arrangement for a processing trade called “cutting, making, and packing (CMP)”, but the factory area is not recognized as a customs bonded area. 16 According to a local forwarding company the weight limit on the bridge is 12 tons.


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(4) Thailand Reported problems faced during customs clearance in Thailand are as follows: (i) Customs classification is not consistent among customs officials. (ii) Rulings on HS classifications take too long (sometimes up to a few years) in the case

where the Thai Customs Department does agree on the classification codes. Provisional clearance is made but the importers cannot reflect accurate payments in their company accounting.

(iii) Binding tariff rulings are not given and the staff reward system used by the Thai Customs Department results too frequently in post-clearance audits and high additional duty payments in cases in which the declaration is judged to have been incorrect.

(iv) Even though e-Customs is relatively advanced, printed documents and attendance at the physical inspection are required at the borders, and therefore most customs agents have offices at the borders.

(v) Customs offices for commercial cargo are closed on weekends and holidays while they remain open for clearance of personal items.

(vi) Informal payments are sometimes required during cargo inspection. (5) Viet Nam Reported problems faced during customs clearance in Viet Nam are as follows: (i) Customs classification is not consistent among customs officials. Customs clearance

information has been accumulating in an electronic format but the information is not well utilized for establishing a consistent classification system.

(ii) E-Customs was introduced in 2008, but its use is limited only in the application process but not in the approval process.17

(iii) The original customs documents with appropriate signatures and seals are still required at the borders. For example, customs clearance at Lao Bao (across from Dansavanh, Lao PDR) necessitates the delivery of the original documents from Hanoi, which is located 670 km from the border.

(iv) Customs clearance is not undertaken at night, even at the international airports. (v) Lunchtime closures of border customs offices are too long (e.g., 1130-1330 at Moc Bai). (vi) Informal payments are required in the customs clearance process, which increases

overall freight transport costs. Other related transport and trade facilitation issues/problems include: (i) The number of traffic rights permits exchanged (with Cambodia) is too low; it is

currently 300 but it should be increased as the volume of freight traffic between Phnom Penh and Ho Chi Minh City is increasing.

(ii) Arterial roads in Viet Nam are unsafe for heavy vehicles as there are too many motorcycles and aggressive drivers.

(6) Regional A pilot implementation of the traffic rights and customs transit system of the GMS Cross-Border Transport Agreement along the East-West Economic Corridor was undertaken in June 2009, but the private sector noted that: (i) the traffic rights established for the corridor under the CBTA (Protocol 1) only apply for use along the corridor itself and not for connecting routes, e.g., to Bangkok, Laem Chabang, and Hanoi; (ii) the relatively large amounts of money to be deposited 17 Nevertheless, the industry welcomes the introduction of the e-customs as they can save customs clearance time by lodging the application in advance.


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by the national organizations providing a guarantee to customs authorities on behalf of road transport operators to whom they issue customs transit documents, in respect of any payment of duties and taxes due; and (iii) the need to change drivers (and/or vehicles) for safety reasons. 2.4.2 Summary of User Requirements Based on the interviews with private companies, user requirements for customs and related transport and trade facilitation are summarized in Table 2-10:

Table 2-10 Summary of User Requirements Based on Study Team Interviews Category User Requirements Consistent Coding

Less inconsistent coding Training programs for customs officers on HS classification Establishment of electronic guidance systems utilizing the accumulated

customs clearance information Guidelines on HS classification for customs officers and users

Customs Valuation Use of transaction value (i.e., putting the WTO valuation method into practice)

Tariff Rulings (Classification, Valuation, and Origin)

Introduction of advance binding rulings and formal notification of rulings (by document) without delay

Abolishment of staff reward system in post-clearance auditing process (Thailand)

Reduction in the pending period for provisional clearance Operating Hours

Implementation of 24-hour (round-the-clock) operation at all border crossing points

Minimization of office closure for lunch Introduction of on-demand processing at night

Simplification of Customs Clearance Procedures at the Borders

Promotion of e-Customs Implementation of the ASEAN Green Lane system18 Introduction of single windows Increase in the number of front offices for import/export licensing Reduction in the requirements for original documents Introduction of common English-language customs documents by the

countries Simplification or elimination of duplicate examination and inspection

simplified (Cambodia) Skills Development

Better training of customs officials Introduction of training courses for customs agents and the industrial

sector in general Other User Requirements

Introduction of appropriate actions to terminate requirements for informal payments

Construction of customs bonded warehouses at the borders Increased traffic rights exchange between and among all Mekong

countries. Improvement in banking system at the borders (Cambodia) Elimination of redundant checkpoints along economic corridors

(Cambodia) Note: Requirements are common to all five Mekong Region countries unless stated.

18 ASEAN Green Lane System enables simplified customs procedures for consignments of ASEAN Common Effective Preferential Tariff products by providing a special lane/counter. Progress varies by country, although its implementation should have been completed by 1996.


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Regarding the requirements for trade facilitation and logistics described above, the Japan External Trade Organization (JETRO) organized a series of business sector workshops in mid-2010, which recommended improvements in the business environment and submitted them to Japan–Mekong Economic Ministers Meeting in August 2010. The recommendations were highly appreciated by the ministers as indicated by the Mekong-Japan Economic and Industrial Cooperation Initiative (MJ-CI) Action Plan, which reflected the recommendations and addressed hard infrastructure and trade facilitation/logistics, as well as enhancement of small and medium enterprises (SMEs), supporting industries, entrepreneurship, the service sector, and the new industrial sector. Specifically, the business sector recommendations to improve trade facilitation/logistics in the Mekong Region were as shown in Box 2-1. Japanese assistance for customs facilitation will promote further investment and economic growth across the Mekong Region. Productivity and competitiveness in the region will be enhanced through optimization of the production network when streamlined customs procedures are provided to large private companies as key economic players. In addition, assistance for trade and transport facilitation will maximize the impact of past investments in infrastructure development in the region supported by Japanese official development assistance.

Box 2-1: Business Sector Recommendations to Improve Trade Facilitation/Logistics in the Mekong Region

• It is critical for the business sectors in Mekong Region to secure efficient transport to reduce trave times and increase reliability. While recognizing the efforts of the government agencies concernd, the business sectors operating in the region still face problems in achieving smooth cross-border transactions in terms of regulations, technology, and human resources.

• Since these problems are related to each other, a partial solution can have only a small effect. Rather, a comprehensive solution is required to improve logistics, which in turn will enhance th connectivity of various industries operating in the region.

• Under these circumstances, the Mekong Region countries and Japan should implement policy measures to enable manufacturers in the Mekong Region (e.g., in the automotive, electrical and electronics sectors) to transport parts, components, and finished products across borders within a short period of time if they have obtained prior approval from customs offices.

• In particular, the countries of the Mekong Region and Japan should promote trade facilitation and improve logistics so that manufacturers and freight forwarders in the region: can apply for and be authorized under an authorized economic operator (AEO) system

beforehand, do not have to wait for the opening of custom offices, which would be open 24 hours, in the case of AEOs, can finish custom clearance in five minutes on the basis of a

document or documents of only a few pages, can benefit from one-stop service inspection, and do not have to change their vehicles at the border.

• Cooperation between and among Mekong Region countries as well as efforts by each country has been substantial in realizing the smooth movement of goods. In addition, Japan can play an important role to support the Mekong Region countries in this sector.

Source: Ministry of Economy, Trade and Industry (Mr. Kunihiko Shinoda, Economic Cooperation Bureau), Mekong-Japan Industry and Government Dialogue & MJ-CI Action Plan, 14 December 2010

Survey on Improvement of Customs Procedures Chapter 3 for Trade Facilitation in the Mekong Region Global and Regional Frameworks

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Chapter 3 Global and Regional Frameworks 3.1 Global Frameworks1 3.1.1 World Customs Organization All Mekong Region countries are members of the World Customs Organization (WCO).2 The most notable WCO initiative in terms of trade facilitation is the International Convention on the Simplification and Harmonization of Customs Procedures (as amended)(Revised Kyoto Convention, the RKC, entering into force on 3 February 2006). The RKC, which includes one general annex and ten specific annexes3 in addition to the main body, provides for simplified and harmonized customs procedures, such as predictability, transparency, due process, maximum use of information technology, modern customs techniques (e.g., risk management, pre-arrival information, post clearance audit). Benefits from the RKC include an announcement effect, as a contracting party is certified as practicing international customs standards, as well as implementation effects, including faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness.4 Viet Nam is the only Mekong Region country to have acceded the RKC, having done so on 8 January 2008.5 Another notable WCO convention is the International Convention on the Harmonized Commodity Description and Coding System (HS Convention, done at Brussels in 1983, entering in force on 1 January 2008), to which all Mekong Region countries except for Lao PDR have acceded (and Lao PDR applies the convention although it has not acceded to it). The HS has also been adopted by the Mekong Region in Annex 15 of the GMS Cross-Border Transport Agreement (CBTA), discussed below. The HS is a multipurpose international product nomenclature comprised of about 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure and supported by well-defined rules to achieve uniform classification. The HS contributes to the harmonization of customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.6 A third notable WCO legal instrument is the Revised Arusha Declaration, which was unanimously endorsed by the WCO Council in June 2003. It includes 10 distinct but related elements considered essential for the development and implementation of a comprehensive and sustainable anticorruption and integrity enhancement program: (i) leadership and commitment, (ii) regulatory framework, (iii) transparency, (iv) automation, (v) reform and modernization, (vi) audit and investigation, (vii) code of conduct, (viii) human resources management; (ix) morale and organizational culture, and (x) relationship with the private sector. It balances positive strategies (e.g., reform and modernization, leadership, progressive human resources

1 Although not included in this chapter, two of the five Mekong Region countries (Thailand and Viet Nam) are members of the Asia-Pacific Economic Cooperation (APEC) forum, which has a Sub-committee on Customs Procedures. 2 Dates of accession to the Convention Establishing a Customs Co-operation Council (1952) for the Mekong Region countries are as follows: (i) Cambodia: 3 April 2001; (ii) Lao PDR: 16 January 2007; (iii) Myanmar: 25 March 1991; (iv) Thailand: 4 February 1972; and (v) Viet Nam: 1 July 1993. 3 Covering arrival of goods in a customs territory (A), importation (B), exportation (C), customs warehouses and free zones (D), transit (E), processing (F), temporary admission (G), offences (H), special procedures, and origin (I). 4 Tadashi Yasui, Benefits of the Revised Kyoto Convention, WCO Research Paper No. 6, February 2010. 5 Japan acceded to the RKC on 26 June 2001. See http://www.wcoomd.org/files/1.%20Public%20files/PDFand Documents/About%20Us/legal_instru/PG0182E1b.pdf. 6 See, e.g., http://www.wcoomd.org/hsharmonizedsystem.htm.


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management policies) with control strategies (e.g., sanctions, controls, investigation, prosecution).7 There are also a number of other WCO conventions (e.g., the International Convention on Mutual Administrative Assistance in Customs Matters, the Johannesburg Convention; the Convention on Temporary Admission, the Istanbul Convention; the Customs Convention on Containers, discussed in the subsection on United Nations conventions). 3.1.2 World Trade Organization The World Trade Organization (WTO) membership status of the Mekong Region countries is as follows: (i) Cambodia: member since 13 October 2004; (ii) Lao PDR: observer, accession application of 16 July 1997; (iii) Myanmar: member since 1 January 1995; (iv) Thailand: member since 1 January 1995; and (vi) Viet Nam: member since 11 January 2007. Notable WTO legal texts regarding customs and related trade facilitation include the following: (i) The Agreement on Implementation of Article VI of the General Agreement on Tariffs

and Trade (GATT, 1994), also known as the WTO Agreement on Customs Valuation (ACV). It is comprised of 24 articles and three annexes, with the technical rules of customs valuation set out in Articles 1–8.8 It is based on a “positive” as opposed to a “normative” economic principle, i.e., what the value of the goods is rather than what the value of the goods should be is taken as the correct customs value. Thus, the Agreement’s primary basis of valuation is “transaction value”, i.e., “the price actually paid or payable” by the buyer for the imported goods. If a sale is freely negotiated (and the Agreement contains rules for valuation of sales that are not), the price the buyer pays the seller is considered to best represent the actual, market value of the product, and should be used for customs purposes. Such an approach is: (a) transparent, predictable in application, and less open to discretion; (b) conforms closely to real commercial practice; and (iii) can be administered based on ordinary commercial records, normally available in the country of importation, without requiring importers and exporters to create and keep additional records only for customs.9 In addition to transaction value, the Agreement defines five alternative valuation methods: (a) transaction value of identical goods (Article 2), (b) transaction value of similar goods (Article 3), (c) deductive value (Article 5), (d) computed value (Article 6), and (e) residual or fallback method (Article 7).

(ii) The WTO Agreement on Preshipment Inspection (1995) provides that that the preshipment inspection process 10 should not give rise to unnecessary delays or unequal treatment. It creates an independent, impartial review body to resolve disputes between importers and preshipment inspection companies. While inspections can facilitate trade, in some cases they can lead to problems for exporters, including

7 To assist member administrations in implementing the provisions of the revised Arusha Declaration, the WCO developed an Integrity Development Guide, established an Integrity Resource Center, formulated a Model Code of Ethics and Conduct, and conducts a range of national and regional integrity seminars, workshops, and training programs. See Gerald McLinden, “Integrity in Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 72-74. 8 The remaining articles mainly cover the implementation in national legislation and practice (e.g., rights of appeal and publication requirements, the importer’s rights to notifications and release of goods pending valuation), and settlement of valuation disputes between WTO Members, and the administration and review of the Agreement by the WTO Valuation Committee and Technical Committee. 9 See Sheri Rosenow and Brian J. O’Shea (World Trade Organization), Handbook on WTO Customs Valuation Agreement, December 2010, Chapter 1 (Introduction), pp. 1-26. 10 Preshipment inspection is the practice of employing specialized private companies to check shipment details (price, quantity, and quality) of goods ordered overseas.

http://www.wcoomd.org/home_about_us_conventionslist_johannesburg_convention.htm


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delays in shipments, disagreements over the quantity and quality of the goods that were ordered, and failure to protect confidential business and proprietary information. This WTO Agreement addresses such issues.11

(iii) The WTO Agreement on Rules of Origin (1995) aims at long-term harmonization of rules of origin, other than rules of origin relating to the granting of tariff preferences, and to ensure that such rules do not themselves create unnecessary obstacles to trade. It requires that WTO members apply their rules of origin in an impartial, transparent, and consistent manner.12

(iv) Additional relevant GATT articles include: (a) Article V on transit (e.g., providing “freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties”; and (b) Article X on the publication and administration of trade regulations.

3.1.3 United Nations A number of relevant land transport facilitation conventions have been promoted by the United Nations, in Asia particularly by its Economic and Social Commission for Asia and the Pacific (UNESCAP), including the following conventions called for in UNESCAP’s Resolution 48/11 (1992): (i) the Customs Convention on the International Transport of Goods under the Cover of

TIR Carnets (TIR Convention, 1975), 13 which permits the international carriage of goods by road from one customs office of departure to a customs office of arrival, through as many countries as necessary, without any intermediate frontier check of the goods carried;

(ii) the Convention on the Temporary Importation of Commercial Road Vehicles (1956, which facilitates the temporary importation of freight road vehicles (trucks);

(iii) the Customs Convention on Containers (1972), which facilitates the temporary importation of loading units; and

(iv) the International Convention on the Harmonization of Frontier Controls of Goods (1982), providing a legal framework for the harmonization of such operations to minimize border control measures in international transport, harmonize their inspection requirements, and to provide, if possible, for joint inspection locations.14

Generally, the Mekong Region countries have not acceded to these conventions, although Cambodia has acceded to the Convention on the Temporary Importation of Commercial Road Vehicles and Lao PDR has acceded to the Convention on the Harmonization of Frontier Controls of Goods.

11 See, e.g., (i) http://www.wto.org/english/docs_e/legal_e/ursum_e.htm#g1Agreement; and (ii) http://tcc.export.gov/ Trade_Agreements/Exporters_Guides/List_All_Guides/exp_005555.asp. 12 Rules of origin are the laws, regulations, and administrative guidelines that governments use to determine an imported product's country of origin, which is not always an easy matter when the raw materials, manufacturing, processing or assembly of a product can be provided in several different countries. Rules of origin have many applications, e.g., example in setting duty rates (including anti-dumping and countervailing duties), granting tariff preferences, administering government procurement policies, and applying safeguards. See, e.g., (i) http://www.wto.org/english/docs_e/legal_e/ursum_e.htm#g1Agreement; and (ii) http://tcc.export.gov/Trade_Agree ments/Exporters_Guides/List_All_Guides/exp_005553.asp. 13 TIR (transit international routier, or international road transit in English) carnets are road transit permits. 14 ESCAP Resolution 48/11 on Road and Rail Transport Modes in Relation to Facilitation Measures, 23 April 1992.


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3.2 Regional Frameworks 3.2.1 Association of Southeast Asian Nations All of the Mekong Region countries are members of the Association of Southeast Aisan Nations (ASEAN), with Thailand a founding member, and Cambodia (1999), Lao PDR (1997), Myanmar (1997), and Viet Nam (1995) becoming members in the late 1990s.15 ASEAN agreements touching on customs and related transport and trade facilitation include the following: (i) the ASEAN Agreement on Customs (1997), which among other things calls for customs

valuation according to the WTO customs valuation agreement (Article VII of the GATT), simplified and harmonized customs procedures in ASEAN, cooperation with the private sector, and monitoring of the agreement by the ASEAN Customs Directors General16;

(ii) the ASEAN Framework on the Facilitation of Goods in Transit (1998), which among other things provides for adequate frontier (border) facilities and adopts the provisions of the International Convention on Harmonization of Frontier Control of Goods (Article 7 and Protocol 2), provides for the harmonization and simplification of customs procedures (Article 17), and establishes a customs transit regime (Article 18 and Protocol 7)17;

(iii) the Agreement to Establish and Implement the ASEAN Single Window (2005), along with the Protocol to Establish and Implement the ASEAN Single Window (2006), which provides the legal framework for establishment of the ASEAN single window;

(iv) the ASEAN Customs Vision 2015 (2008), which among other things calls for Customs Service Charters and established service performance indicators, transparency and full access to all customs laws and regulations, accelerated customs reform and modernization and public accountability, sustainable human resource development of ASEAN customs officers, a consistent and uniform classification of goods and commodities in line with international standards and practices, uniform methods of customs valuation based on international conventions, consistent and uniform determination of the origin of goods in accordance with established rules and practices, standardized and streamlined procedures and practices for clearance and release of goods for trade facilitation aligned to international best practices, acceleration of information and communication technology in customs control and management with the aim of expediting customs clearance of goods, modernization of customs control by use of risk management techniques, and establishment of an ASEAN customs transit system; and

(v) the ASEAN Trade in Goods Agreement (2009), which among other things provides for the use of ASEAN Harmonised Tariff Nomenclature (AHTN) as set out in the Protocol Governing the Implementation of the ASEAN Harmonised Tariff Nomenclature (2003),calls for an ASEAN Trade Repository containing trade and customs laws and procedures of all Member States shall be established and made accessible to the public

15 The other member states of ASEAN are Brunei, Indonesia, Malaysia, the Philippines, and Singapore. 16 ASEAN is now in the first stage of reviewing this document. 17 The ASEAN Framework Agreement on the Facilitation of Inter-State Transport (2009) includes many similar provisions. Other relevant ASEAN transport agreements include the Agreement on Recognition of Domestic Driving Licenses Issued by ASEAN Countries (1985), Agreement on Recognition of Commercial Vehicle Inspection Certificates for Goods Vehicles and Public Service Vehicles Issued by ASEAN Member Countries (1998), and the ASSEAN Framework Agreement on Multimodal Transport (2005).


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through the internet, and in Chapter 6 on Customs has provisions relating to pre-arrival documentation, risk management, customs valuation, application of information technology, authorized economic operators, post clearance audit, advanced rulings, and temporary admission.18

Relevant plans implemented by ASEAN include: (i) a Strategic Plan of Customs Development (SPCD, 2005-2010) 19: (ii) an ASEAN Trade Facilitation Work Programme (2007-2015)20; and (iii) a Sectoral Integration Protocol for the Logistics Services Sector. 21 Key institutional mechanisms under the ASEAN Finance Ministers and ASEAN Customs Directors General include: (i) the Coordinating Committee on Customs (CCC); (ii) the Customs Enforcement and Compliance Working Group (CECWG); (iii) the Customs Procedures and Trade Facilitation Working Group (CPTFWG), (iv) the Customs Capacity Building Working Group (CCBWG), and (v) the ASEAN Single Window Steering Committee. The Master Plan on ASEAN Connectivity included strategies to: (i) fully operationalize the three framework agreement on transport facilitation; (ii) substantially improve trade facilitation in the region, including full implementation of national single windows for the initial six members of ASEAN (including Thailand) as soon as possible and for Cambodia, Lao PDR, Myanmar, and Viet Nam by 2012,22 and to simplify customs procedures and practices of all member states with the target of reducing processing costs by 20% by 2013 and 50% by 2015; and (iii) enhance 18 “Temporary admission” refers to the customs procedure under which certain goods can be brought into a customs territory conditionally relieved from payment of import duties and taxes; such goods must be imported for a specific purpose and must be intended for re-exportation within a specified period and without having undergone any change except normal depreciation due to the use made of the goods. 19 Core objectives include: SPCD 1: Tariff Classification; SPCD 2: Customs Valuation; SPCD 3(1): Origin Determination of Goods and Commodities – Preferential Rules of Origin; SPCD 3(2): Origin Determination of Goods and Commodity 2 – Non-Preferential Rules of Origin; SPCD 4: Establishment of ASEAN e-Customs and ICT applications in Customs for Trade Facilitation and Customs Control; SPCD 5: Customs Clearance; SPCD 6: Customs Transit; SPCD 7: Temporary Admission; SPCD 8: Customs Post Clearance Audit; SPCD 9: Customs Enforcement and Mutual Assistance; SPCD 10: Customs Reform and Modernization; SPCD 11: Customs Human Resource Development and Administration; SPCD 12: International Partnership and ASEAN Customs; SPCD 13: Partnership with Customs Stakeholders and Trading Community; SPCD 14: Narrowing the Development Gap; and SPCD 15: Public Security and Protection of the Society. 20 Including: (i) Tariff Classification: application of a uniform system of classification of goods and commodities; (ii) Customs Declaration Document: development and application of a single simplified and harmonized customs declaration form; (iii) Customs Valuation: application of harmonized practices in customs valuation by development of an ASEAN Customs Valuation Guide for the implementation of the WTO Agreement on Customs Valuation; (iv) Standardization of Customs Clearance Procedures in line with international conventions and practices: application of harmonized and standardized customs clearance procedures; (v) Advance Rulings: establishment of an effective customs advance ruling system; (vi) Authorized Traders: ensuring uniform and transparent criteria in granting the status of authorized traders for trade facilitation in partnership with businesses and industries; (vii) Risk Management: application of risk management techniques to optimize customs interventions and to facilitate the flow of legitimate goods; (viii) Post Clearance Audit: PCA Manual; (ix) Customs Transit: Development of an ASEAN Transit System to ensure free movement of means of transport and goods in transit throughout the ASEAN region; and (x) Establishment of ASEAN e-Customs: Implement the SPCD Specific Program on ASEAN e-Customs by 2010 and synchronize works of this Specific Program with those of putting into place the ASEAN Single Window. 21 Covering (i) customs clearance services; (ii) implementation of the WTO Customs Valuation Agreement; (iii) implementation of the WCO immediate release guidelines; (iv) implementation of the WCO framework of standards to secure and facilitate global trade; (v) identification of suitable standards to secure interconnectivity and interoperability in facilitating trade within a customs jurisdiction; (vi) adoption of the WCO data model; (vii) adoption of client service charters; (viii) implementation of 24 x 7 customs operations; (ix) promotion of advanced information systems to be shared among governmental agencies, shippers, and industry; (x) development of single windows; (xi) promotion of the used of radio frequency identification (RFID) applications; (xii) enhancement of cooperation between customs and the business sector; and (xiii) implementation of risk management to facilitate trade while maintaining effective customs control. 22 At least informally, it has been reported that the first six ASEAN countries (including Thailand) are to implement national Single Windows by 2012 and all (including Cambodia, Lao PDR, Myanmar, and Viet Nam) by 2015, i.e., somewhat later than originally scheduled. Interview with Mr. S. Pushpanthan, Deputy Secretary-General of ASEAN for ASEAN Economic Community, 21 April 2009.


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border management capabilities, including synchronizing procedures, formalities, and practices, and promoting joint border management (“One Single Inspection and Processing Point”), both by 2013.23 3.2.2 Greater Mekong Subregion24 The five countries of the Mekong Region along with the People’s Republic of China (Yunnan Province and Guangxi Zhuang Autonomous Region, PRC) comprise the Greater Mekong Subegion (GMS), in which framework 25 they have agreed to a Cross-Border Transport Agreement (CBTA).26 Lao PDR, Thailand, and Viet Nam had signed the CBTA in 1999, and all GMS countries had signed, ratified, or accepted it by 2003, after which it entered into force. Also, all the GMS countries signed27 all of the CBTA’s implementing annexes, protocols,28 and guidelines between 2004 and 2007. Cambodia, Lao PDR, and Viet Nam (as well as the PRC) have ratified or accepted all the annexes and protocols.29 The CBTA is a pioneering, landmark accord, which consolidates, in a single legal instrument, all of the key nonphysical measures for efficient cross-border land transport. The CBTA includes mechanisms that: (i) enable vehicles (on designated open routes), drivers (with mutual recognition of driving licenses and visa facilitation), and goods (with regimes for dangerous and perishable goods) to cross national borders through the GMS road transport permit system; (ii) enable avoidance of costly transshipment through the customs transit and temporary importation system and guarantee system for goods, vehicles, and containers; (iii) enable the reduction of time spent at borders, through single-window inspection, single-stop inspection,30 information and communication equipment/system for information exchange, risk management, and advance information for clearance; and (iv) enable increasing the number of border checking points implementing CBTA in order to maximize its network effect and economies of scale. If

23 Association of Southeast Asian Nations, Master Plan on ASEAN Connectivity, 2010, pp. 47, 52-54. 24 This section draws extensively on Asian Development Bank, Greater Mekong Subregion Cross-Border Transport Facilitation Agreement: Instruments and Drafting History, to be published in 2011, to which the leader of the JICA study team was a major contributor. 25 With support from the Asian Development Bank (ADB), the six countries along the Mekong River initiated the GMS Economic Cooperation Program in 1992. 26 The GMS CBTA began as a three-party agreement signed by Lao PDR, Thailand, and Viet Nam on 26 November 1999, and later acceded to by Cambodia on 29 November 2001, by the PRC on 3 November 2002, and by Myanmar on 19 September 2003. 27 Signing indicates agreement at the ministerial level, but usually ratification (or acceptance) is required before accession to an international treaty. 28 An annex is an attachment to the CBTA that contains technical details. A protocol is an attachment to the CBTA that contains time- and/or site-specific variable elements. 29 Thailand has not yet ratified Annex 1 on the Carriage of Dangerous Goods, Annex 4 on the Facilitation of Frontier Crossing Formalities, Annex 6 on the Transit and Inland Customs Clearance Regime, Annex 8 on the Temporary Importation of Motor Vehicles, Annex 10 on the Conditions of Transport, and Annex 14 on the Container Customs Regime. Myanmar has yet to ratify any of the annexes and protocols, although internal processes have started. 30 As defined in article 4(a) of the CBTA, single-window inspection is when the different inspections and controls of people (passport/visa, driving license, foreign exchange, customs, health/epidemiological), vehicles (registration, roadworthiness, insurance), and goods (customs, quality, phytosanitary/plant protection, veterinary) are carried out jointly and simultaneously by the respective competent authorities involved (e.g., customs, police, immigration, trade, agriculture, health department). As defined in Article 4(b) of the CBTA, in single-stop inspection “[t]he officials of the country pairs are to assist one another to the extent possible in the performance of their duties. The two adjacent national authorities will carry out their inspections jointly and simultaneously. It has been argued that implementation of single-stop inspection will reduce border crossing times and costs by about half. Consider, for example, that the Common Market for Eastern and Southern Africa (COMESA) estimated that the opening of the Chirundu OSBP in December 2009 between Zambia and Zimbabwe along the North-South Corridor will reduce border delays by 30-50%. “COMESA, EAC and SADC regions to have its first-ever One Stop Border Post,” in e-COMESA Newsletter, Issue #230, 4 December 2009, p. 3. However, the World Bank in a report of a trade and transport facilitation mission to the GMS during the last quarter of 2008 argued that it may be illusory to think that combining export and import inspections will reduce delays because exit inspections are different from entry inspections; indeed, combining control structures may encourage Customs officials to conduct inspections that they might otherwise not undertake.


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fully implemented, CBTA could (i) improve efficient transport services by facilitating cross-border transport; (ii) complement economic corridors, physical infrastructure, and investment; and (iii) create a more favorable environment for cross-border trade, investment, and tourism. Key aspects of the development of the CBTA are presented in Box 3-1.

Box 3-1: Key Aspects of the Development of the CBTA (i) The CBTA was designed to strike a balance between opening up the national territory of the

signatory states to the foreign traffic of people, vehicles, and goods on the one hand, and the ability of their respective authorities to control and police this traffic on the other hand. To the extent possible, the CBTA endeavors to affect as little as possible existing national legislation and regulations of the signatory states, but in some respects the instrument requires compliance and adaptation of the national body of law.

(ii) For the signatory states, regional integration as supported by facilitation requires or entails a certain degree of relinquishing national sovereignty. The host country will have to accept, recognize, and rely on licenses issued, controls, and inspections performed by the other signatory states. In order to enable such mutual recognition, the CBTA establishes a critical minimum level of harmonization of standards so as to create sufficient reciprocal trust among the member states.

(iii) The CBTA was formulated and developed to broadly incorporate provisions of international conventions, while at the same time it endeavored to reflect the unique realities of the GMS countries.

(iv) Notwithstanding that during the negotiations of the CBTA, some GMS countries have not yet become members of the World Trade Organization (WTO), throughout the drafting of the annexes and protocols in the negotiation meetings, due diligence was taken to ascertain that the CBTA annexes and protocols are aligned with the WTO Framework.

(v) The CBTA was designed to be flexible and adapt to the changing needs and requirements of the subregion. The CBTA consists of three tiers: (a) a main agreement that contains the principles of the system; (b) a supplementary set of annexes containing technical details and protocols containing more time- and site-related variables; and (c) bilateral and trilateral memoranda of understanding (MOUs) that provide detailed implementation arrangements.

(vi) During the drafting of the CBTA annexes and protocols, in order to ensure smooth negotiations and to have a solid and enforceable structure to put the CBTA into action, the GMS countries established concrete institutional mechanisms to monitor the CBTA. At the national level, each country established the National Transport Facilitation Committees and at the regional level, the countries have established the Joint Committee Meeting of the CBTA. The Joint Committee is a standing body without legal personality, and consistent with its role in the GMS Economic Cooperation Program, ADB serves as the Secretariat of the Joint Committee and its subcommittees.

Source: Asian Development Bank, Greater Mekong Subregion Cross-Border Transport Facilitation Agreement: Instruments and Drafting History, to be published in 2011.


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Unfortunately, however, the initial/pilot implementation of the CBTA has been delayed or stalled. The pilot projects are not proceeding, except to a limited extent at one of the border crossing pairs. Multi-step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at most border checkpoints in the GMS. Limited, if any, risk management techniques are employed at border crossings, except in Thailand. At most locations the use of information and communication technology (ICT) is very limited, with the borders generally operating stand-alone systems unconnected to the national system, with Thailand the exception again.31 3.3 Summary of Global and Regional Frameworks Table 3-1 presents a summary of the global and regional frameworks applicable in each Mekong Region country. The implementation status of each is assessed in Chapter 5.

31 Recent studies have demonstrated the costs of the non-implementation or slow implementation of the CBTA. For example, an analysis of trade costs and time along the East-West Economic Corridor between Da Nang (Viet Nam) and Tak (Thailand) found that nearly half of the corridor time and 43% of the trade costs were attributable to customs clearance and border crossings. Asian Development Bank, Independent Evaluation Department, Transport and Trade Facilitation in the Greater Mekong Subregion – Time to Shift Gears, December 2008, pp. 36–37 (citing The GMS East-West Corridor Logistics Benchmark Study and Logistics Development Study of the North-South Economic Corridor (draft reports) by the Center for Logistics in Bangkok (these studies were undertaken as part of ADB TA 6262-REG: Enhancing the Development Effectiveness of the Greater Mekong Subregion Economic Cooperation Program. One international logistics company operating in Cambodia (and elsewhere) informed ADB of problems related to the time required for advance approvals of shipments to travel under bond, the need to obtain transit approval from provinces, the need to apply for export licenses in advance, and the need to pay “tea money”.


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Table 3-1 Accession of Mekong Region Countries to Key Global and Regional Legal Frameworks

Framework Cam-bodia

Lao PDR

Myan-mar

Thai-land

Viet Nam

WCO Revised Kyoto Convention x International Convention on the

Harmonized Commodity Description and Coding System (HS Convention)

x x x x

Revised Arusha Declaration x x x x x WTO Agreement on Customs Valuation x x x x Agreement on Preshipment Inspection x x x x Agreement on Rules of Origin x x x x UN Customs Convention on the International

Transport of Goods under the Cover of TIR Carnets

Convention on the Temporary Importation of Commercial Road Vehicles

x

Customs Convention on Containers International Convention on the

Harmonization of Frontier Controls of Goods

x

ASEAN ASEAN Agreement on Customs x x x x x ASEAN Framework on the Facilitation of

Goods in Transit x x x x x

Agreement [and Protocol] to Establish and Implement the ASEAN Single Window x x x x x

ASEAN Customs Vision 2015 x x x x x ASEAN Trade in Goods Agreement x x x x x GMS Cross-Border Transport Agreement x x x x x

Note: Lao PDR applies the HS Convention although it has not acceded to it. Thailand has not yet ratified six of the annexes to the GMS Cross-Border Transport Agreement, and Myanmar has not yet ratified any of the annexes and protocols to the this agreement. Source: JICA Study Team


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Survey on Improvement of Customs Procedures Chapter 4 National Legal and for Trade Facilitation in the Mekong Region Institutional Frameworks

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Chapter 4 National Legal and Institutional Frameworks 4.1 Introduction This chapter examines the existing situation and issues regarding the national legal and institutional frameworks of customs in the Mekong Region countries. Section 4.2 assesses customs laws and regulation, Section 4.3 evaluates organization and management, and Section 4.4 assessed human resource management/development issues. Finally, Section 4.5 summarizes the findings of the chapter. 4.2 Customs Laws and Regulations Considering the importance of customs in trade and revenue collection, as well as social protection, it is important that customs be supported by an effective legal framework that guarantees transparent, predictable, and prompt customs procedures. Outdated customs laws act as significant nontariff barriers, prevent effective revenue collection, discourage foreign trade and investment, and potentially threaten social and national security. 1 Strategic objectives should include the development of a legal basis that (i) provides a stable, comprehensive, and modern legal framework based on international standards; (ii) supports the development, organization, and powers of a modern customs administration and demonstrates accountability and responsibility; (iii) provides effective powers for customs officers to administer and enforce customs legislation in line with international best practice and standards; (iv) supports the facilitation of legitimate trade as a matter of principle; and (v) supports mutual assistance with other customs administrations.2 (1) Cambodia Cambodia enacted a new Law on Customs on 20 July 2007 that is broadly consistent with international standards (e.g., Article 21 provides that the customs value of imported goods in transaction value, consistent with the WTO Agreement on Customs Valuation) but limited in coverage (e.g., e-Customs is not addressed). The new law is supplemented by a set of various sub-decrees (anukret), ministerial decisions (prakas), and directors’ circulars (e.g., Prakas No. 1147 on Customs Declaration Provisions and Procedures, Prakas No. 115 on Establishing and Functioning of Customs Brokers, Prakas No. 116 on Customs Bonded Warehouses, Prakas No. 387 on Customs Valuation of Imported Goods, Prakas No. 388 on Post Clearance Audit by Customs and Excise Department, Prakas No. 508 on Customs Transit. Prakas No. 906 on Establishment and Ongoing Operation of Customs-Private Sector Partnership Mechanism). Particularly notable is Anukret No. 21 on Facilitation of Trade through Risk Management, issued on 1 March 2006, which provides for interagency cooperation (i.e., among the Customs and Excise Department, the Cambodia Import Export Inspection and Fraud Repression Department [CamControl],3 Ministry of Commerce, Ministry of Industry Mines and Energy, Ministry of Health, Ministry of Agriculture and Fisheries) 1 Kunio Mikuriya, “Legal Framework for Customs Operations and Enforcement Issues”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 51-52. 2 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 13. 3 “In addition to Customs, CamControl is responsible for the inspection of goods, both when they enter the country and in the domestic markets. While Customs are in charge of revenue collection, protection of the economy, and trade facilitation measures, CamControl operates under a legislation that provides that agency with broadly similar powers of investigation and control. Although controls made by CamControl at the borders should be coordinated, they are often overlapping, and there is apparently no integration of procedures between the two agencies.” World Bank, Cambodia, Seizing the Global Opportunity: Investment Climate Assessment and Reform Strategy for Cambodia, Report No, 27925-KH, August 2004, p. 19. Not much has changed in this respect since 2004, reform efforts notwithstanding.


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through service-level agreements in efficiently carrying out risk-based operating procedures.4 Additional regulations are required for implementation of global and regional standards, e.g., the Revised Kyoto Convention, the WTO Agreement on Valuation. The new Law on Customs along with various regulations sub-decrees (anukret), ministerial decisions (prakas), and directors’ circulars were published by the General Department of Customs and Excise in a bilingual (Khmer-English) Manual on Law on Customs and Related Regulations in 2009, with the support of JICA.5 (2) Lao PDR The Lao PDR Customs Law was enacted on 18 July 1994 and amended on 25 May 2005.6 The 2005 amendment has modernized Lao PDR customs law in certain respects. For example, generally, Article 3 “establishes policies relating to customs to encourage and promote production and services”. Article 13 (The Declared Value of Imports) states that “[t]he determination of the declared value of imports must be in accordance with the principles determined in the General Agreement on Tariffs and Trade of 1994 of the World Trade Organization”. Article 33 provides an exemption from duties for goods transiting across Lao PDR territory. Articles 34-36 provide a regime for bonded warehouses. Articles 70-73 provide for a modern customs organization, including the authority to centralization customs administration, making officials of the provincial government national government officials. In addition, a notable recent positive step in Lao PDR was PMO Notice 406, issued on 13 March 2007, which reduced the number of agencies at the border from about ten to three (Customs as well as Immigration and Quarantine). However, in some ways the amended Lao PDR Customs Law is not a 21st century legal text: (i) Implementation of more facilitating cargo clearance measures is constrained by certain

provisions, most notably being Article 24 on the Inspection of Goods by Customs Officers, which provides that “after the completion of registration of detailed customs declaration, all or some of the goods are subject to physical inspection conducted by customs officers as they may deem appropriate”. This provision seems to require that all consignments must be physically inspected although some may be inspected only partially; it may explain why in most cases at least imports and exports are physically inspected by Lao PDR Customs.7

(ii) Another issue is the absence of a provision in the Law allowing the filing of a Customs declaration in advance of cargo arrival. Article 19 (Time for Customs Declaration) provides that “the detailed customs declarations shall be presented to customs checkpoints within 30 days after the goods have been registered into warehouse.…” Thus, Customs may accept declarations only upon arrival of the goods covered at the cargo clearance facility or temporary store. Time is lost because goods must remain at the cargo terminal longer than necessary.8

4 Article 15 provides that documentation requirements should be the minimum necessary for the authorities to carry out their responsibilities and should only be required to be lodged once. 5 Also see http://www.customs.gov.kh/lawoncustoms.html. As noted in Section 4.3, in July 2009 JICA commenced Customs Policy/Administration Advisory Services by sending a long-term advisor to GDCE; the main objective of these advisory services is assist in implementation of the Law on Customs (2007), as well as skills development to modernize customs policies and administration. 6 See http://laocustoms.laopdr.net/laws_and_regulations_view_all.htm and http://www.mfa.gov.sg/vientiane/Laws/ Customs%20Law%20&%20Decree%20FINAL%2020-03-06.pdf. 7 Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 35. 8 See source in previous footnote, pp. 35-36.


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(iii) There is no provision to cover national (domestic) transit or the transport of cargo under customs control from one provincial customs office to another. 9 Also, the provision for international transit is not efficient.10

Perhaps the highest priority in Lao PDR is to amend the Customs law to permit selective and risk-based inspections, to provide advance declaration and processing, and generally support intervention by exception. A recent ADB study has called for these measures to be taken before implementing ASYCUDA, because without these measures, the Customs ICT system of the country “would be nothing more than an oversized calculator and an electronic database of declarations”.11 (3) Myanmar The basic Myanmar Customs legislation is quite dated: (i) the Sea Customs Act of 1878 and (ii) the Land Customs Act of 1924.12 A Tariff Law was enacted on 12 March 1992 to assist the transition toward a market economic system and facilitate external trade. In accordance with the Tariff Law, a notification was issued to regulate the classification of imported goods and assessment of duties. To move toward international practice, the Harmonized Commodity Description and Coding System (HS) was introduced on 1 April 1992. Article 30(b) of the Sea Customs Act provides for customs valuation based on “real value” has been construed to mean the cost at which goods of the like kind and quality could be delivered at the time and place of importation. The assessable value of goods therefore normally includes CIF value and the landing charges at the port of importation. 13 However, an amendment of Article 30 is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation. Significant revision of Myanmar’s customs laws is also required to bring it in line with the Revised Kyoto Convention and its Annexes. (4) Thailand The Thai Customs Act (1926, B.E. 2469) 14 has been modernized through a number of amendments. For example, Customs Act No. 17 (2000, B.E. 2543) referred to “customs price” or “price” and provided new definitions of these terms to bring Thailand’s customs laws into compliance with the WTO Agreement on Customs Valuation. Before these changes, “true market prices” were used as the basis for the assessment of duties on imported goods. That said, the Customs Department Director General retains the authority to set the prices of the customs goods as he/she deems fit, in circumstances where the price of the goods is evidently low or

9 See source in previous footnote, p. 38. 10 Article 33 covers transit through Lao PDR of, e.g., Thai goods to Viet Nam or Vietnamese goods to Thailand; for these operations, transit goods guarantee permits must be presented to customs checkpoints at the offices of entry and exit controls as well as to customs officers along the routes used (mobile checkpoints). See source in previous footnote, p. 39. 11 See source in previous footnote, p. 36. 12 These laws were enacted under British occupation. The country’s customs Administration is still influenced by Indian Laws and procedures because the British rulers considered Myanmar a province of India. See http://mmcustoms.org/. http://www.vertic.org/media/National%20Legislation/Myanmar/MM_Land_Customs_Act.pdf presents the text of the land Customs Act. 13 http://www.asosai.org/asosai_old/R_P_government-revenues/chapter_16_myanmar.htm. 14 An English version is available at: http://thailaws.com/law/t_laws/tlaw0421.pdf and http://www.thailawforum. com/database1/customs-act.html. B.E. refers to dates expressed in the Buddhist Era.


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unlikely to be an accurate reflection of their true value, even though the price of the goods has been fixed according to the definition of “customs prices” in Section 2 of the Act.15 Customs Notification No. 54/2551 on advance rulings was issued on 1 July 2008 and reportedly implemented although Bryan Cave International Trade (a customs and trade consultancy) 16 reports that the advance ruling service is regarded as a “pilot project” paving the way for a more complete system. Customs Notification No. 67/2552 (2009) governs the application process including information and supporting documents required. The Customs Valuation and Procedure Standard Bureau is responsible for carrying out the ruling within 30 days of receiving an application. The process includes notifying the applicant of a ruling and revocation. With the aim of further modernizing the Thai Customs Department, a new draft Customs Code has been prepared that adopts a number of the best practice approaches set out in the Revised Kyoto Convention, but the Joint Chambers of Commerce of Thailand has raised three concerns with this draft code: (i) a customs penalty regime that continues to be out of step with best practice internationally and the practice of domestic revenue departments (i.e., the Thai Revenue Department) and the Thai Excise Department); (ii) provisions extending current penalty provisions, 17 by which incentives are paid from penalties, which causes conflicts of interest and reduces the objectivity of customs officers; and (iii) omission of a the list of valuation methods from the body of the act, leaving them to be prescribed by ministerial regulations, which are subject to frequent change and a greater risk for misinterpretation and misapplication.18 While Thai Customs Act has been updated a number of times, a comprehensive legal review might help Thai Customs bring the Act more in line with the provisions of the Revised Kyoto Convention and its Annexes. However, the process of getting a new Customs Act prepared and enacted may take some time because the Customs Department, the Ministry of Finance, the Cabinet, the State Council, and eventually the Parliament must all approve the draft. Finally, more general Thai laws bear upon customs matters, including the Civil Law, which requires archiving of documents for five years, and the Criminal Law, which requires archiving of documents for ten years, both of which affect post clearance audits.

15 See http://www.tillekeandgibbins.com/publications/pdf/customs_law.pdf. The United States Department’s Foreign Trade Barriers Report (2008) found that: “Despite Thailand’s commitment to fully implement the WTO Customs Valuation Agreement, the Thai Customs Director General retains the authority to arbitrarily increase the customs value of imports. The United States continues to urge Thailand to implement legislation to revoke this authority.” http://www.ustr.gov/sites/default/files/uploads/ reports/2008/NTE/asset_upload_file823_14611.pdf. On 6 October 2006 and 8 May 2007, the WTO Committee on Customs Valuation examined Thai legislation relating to customs valuation and Thailand replied to WTO Members’ questions in certain areas including the use of reference pricing. In Thailand’s written replies to written questions raised by the United States in October 2006, the Thai authorities indicated that the proposal for the repeal of Section 11 bis of the Customs Act (1926) stipulating that the Director General may determine the customs value if the declared value does not accurately reflect true value had been approved by the Cabinet and Council of State, but given the changing political situation the process of repealing the Section in question would be continued when the new Parliament is installed. The authorities indicated that Section 11 bis had never been invoked (see www.ncc.gov.tw WT/TPR/S/191/Rev.1 Trade Policy Review Section 17, p. 46). 16 http:www.bryancavetrade.com. 17 Violations of customs rules and regulations in Thailand are subject to severe penalties, including a fine of four times the import value after duties and a surcharge of 1% per month, a 10-year prison term, or both. KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 39 [downloaded from http://www.kpmg.com/NZ/Lists/Copied%20Documents/Adding-Value-to-your-trade.pdf]. 18 Draft Amendment of the Customs Act B.E. 2469 (1926), Summary of Opinions and Comments Provided by Joint Foreign Chambers of Commerce in Thailand, August 2010.


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(5) Viet Nam The World Bank found that Viet Nam’s Customs Law of 29 June 2001 (No. 29/2001/QH10)19 did “not altogether provide for the modern instruments required under an expanding economy”.20 The 2001 Customs Law did not include many provisions of the original or revised Kyoto Convention, was not consistent with WTO rules, and had weak enforcement provisions. A step toward modernization of Vietnamese customs law was the Law on Amendment of and Addition to a Number of Articles of the Law on Customs of 14 June 2005,21 which for example called for the modernization of the administration of customs and provided for transaction-based customs procedures. However, as an ADB study concludes, customs legislation in Viet Nam has been “too control-oriented”.22 Also, Viet Nam’s customs rules are complex, frequently amended, and subject to varying interpretations.23 More recently, in Directive Number 10/2006/CT-TTg, the Prime Minister ordered the reduction of paper documents in the operations of government administrative bodies. Decree 40 (2007) and Circular 40 (2008) regulate customs valuations. The transactional valuation method is generally the preferred valuation basis; adoption of alternative methods may lead to uncertainty over customs duties and potential penalties. Recent relevant decisions issued by the General Department of Vietnam Customs (GDVC) include: (i) Decision No. 2425/QD-TCHQ, issued on 27 November 2008, promulgating an action plan to implement the WCO SAFE24 Framework of Standards for security and global trade facilitation, to expedite implementation of E-Customs and IT applications, risk management applications, use of container scanners and other modern equipment, and design of an authorized economic operator (AEO) or trusted-trader program, with implementation programmed for 2011; and (ii) Decision No. 2599/QD-BCDSW, issued on 21 October 2009, establishing a steering committee to develop a single window under the ASEAN initiative. To increase the compliance of Viet Nam’s customs laws and regulations with international agreements, there may be a need to enact further provisions on (i) valuation, tariff classification, and origin; (ii) professional requirements for brokers; (iii) broader enforcement powers; (iv) electronic transactions; (v) risk management; and (vi) post clearance audit.25 4.3 Organization and Management Customs organizational structures are important because they give staff and management the structure within which to prepare and deliver the customs mandate, functions, and responsibilities. Customs authorities are traditionally within a country’s Ministry of Finance, as e.g., in Japan.26 The organizational structure should enable a customs administration to prepare,

19 http://www.dncustoms.gov.vn/web_eglish/english/luat_pl/CUSTOMS_LAW.htm. 20 World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, October 17, 2005, p. 17. 21 http://www.vietnamlaws.com/freelaws/Lw42na14Jun05Customs%5BVII921%5D.pdf. 22 Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 49. 23 KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 41. 24 SAFE is not an acronym. 25 See, e.g., source in previous footnote; Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 49; World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, October 17, 2005, p. 30. 26 Autonomous revenue authorities (ARAs) emerged in the late 1980s, e.g., in the United Kingdom. They are single-purpose agencies, separate from the Ministry of Finance. They are free from political interference in day-to-day activities. With the assistance of the World Bank, International Monetary Fund, and the United Kingdom Department for International Development (DFID), ARAs have been created in a number of countries in Latin America and Africa (Colombia, Ethiopia, Ghana, Kenya, Leostho, Malawi, Mexico, Peru, Rwanda, South Africa, Tanzania, Uganda, Venezuela, Zambia, and Zimbabwe). Luc De Wulf, “Human Resources and Organizational Issues in


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deliver, and monitor the strategic customs objectives (e.g., if the customs strategy includes proactive trade facilitation measures such as lower rates of physical inspection and fast track solutions for authorized importers/exporters), the organizational structure might include a risk management center and/or include a unit tasked to carry out a low risk trader program (e.g., AEOs). The European Union’s Taxation and Customs Union organization and management good practice example is “[t]o develop a modern Customs administration which matches international standards and meets the needs of stakeholders, through effective business planning, management and internal and external communication”.27 This matches the strategy statement of the Cambodian and Thai customs departments (e.g., “developing Customs capacity to world class standard”) 28 . The message of the Thai and Cambodia strategy statements shows commitment and willingness for Customs reform and modernization. The traditional structure of labor-intensive customs department segregation into legal, rules of origin, tariff classification, human resource management, information technology, and enforcement is giving way to a more trader-responsive structure, e.g., with a departments or section responsible for AEOs, as in Thailand), public relations, and information technology, and a team of directors/managers tasked with the management of a customs reform and management program, as in Cambodia. However, some customs administrations maintain a central decision making structure and process instead of a delegated “front office” method; e.g., customs valuation decisions in Lao PDR are made in Vientiane and not by managers located at border crossing points. Revenue collection is an important responsibility for all customs administrations but it is especially important for some administrations in the Mekong Region such that of Cambodia (where customs accounts for 60 to 70% of national government revenues) 29 and Lao PDR. In contrast, the Thai Customs Department collects only about 13% of national government revenues. (1) Cambodia The current organizational structure of the Cambodian General Department of Customs and Excise (GDCE) is established by Ministry of Economy and Finance (MEF) Ministerial Decision (Prakas) No. 212 dated, issued on 19 July 2004 mandating GDCE to have (i) central offices, (ii) operational city offices, (iii) provincial and regional customs branches; and (iv) customs checkpoints). Each of GDCE’s five deputy directors is tasked to manage 7-8 departments or offices and branches. 30 The eight departments at GDCE headquarters include: (i) the Department of Administration and Management; (ii) the Department of Planning, Technique, and International Affairs; (iii) the Department of Excise; (iv) the Department of Customs Regime; (v) the Department of Duty-free Zone Management; (vi) the Department of Legal Affairs, Post Clearance Audit and Public Relations; (vii) the Department of Anti-smuggling and Suppression; and (viii) the Secretariat Office.31 The Department of Planning, Technique, and

Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 40-41. 27 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 17. 28 Vision and Strategies statement provided by the Thai Customs Department to the JICA Study Team, 8 December 2010. 29 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 76. 30 http://www.customs.gov.kh/GDCEOrgChart.html. 31 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 114.


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International Affairs is responsible for considering strategies as well as obligations and commitments to bilateral and multilateral agreements. GDCE has published a strategic objective to review its current organizational structure in view of its changing operational workload and its reform and modernization program. The need to review the structure is described in Sub-Decree (Anukret) No. 134 on the Promotion of the Customs and Excise Department, issued on 15 September 2008. This review was to focus initially on departments at the headquarters level, to be followed by an assessment of provincial and municipal customs and excise branches and other sub-branches. This effort is building upon a previous reform initiative from 2003 to 2008 in which GDCE recognized the need to increase the decentralization of administrative authority (by devolving the right to make technical decisions to branches and sub-branches) and implement monitoring and control methods ensuring managers are accountable for their decisions.32 Future organizational structure changes of GDCE may need to consider where to place tariff classification, valuation, rules of origin, and risk management responsibilities. (2) Lao PDR Article 99 of the Lao PDR Customs Law stipulates that the Customs Department is under the Ministry of Finance and includes: (i) the Department of Customs and its divisions; (ii) customs offices in the provinces, municipalities, and special zones; (iii) border crossing point customs; (iv) customs control posts; and (v) mobile customs control units.33 As Lao PDR carries out its customs reform and modernization program, it will be productive to review whether its current organizational structure supports the objectives of the program, in particular whether it could become more responsive to trade facilitation requirements (e.g., implementation of a new risk management program may require a new risk management unit). (3) Myanmar The organizational structure of the Myanmar Customs Administration comprises one director general and one deputy director. The seven departments are each managed by a departmental director. There are 29 regional customs offices spread over six regions. 34 The Myanmar Customs Administration’s mission statement emphasizes the traditional role of customs: “… to achieve trade facilitation through simplifying customs procedures, without adversely affecting customs control objectives to maintain proper revenue collection” [emphasis added].35 (4) Thailand The vision, mission, and strategies of the Thai Customs Department36 (also known as Royal Thai Customs) are those of a modern customs administration. 37 Fulfilling this vision and 32 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 114-15. 33 http://laocustoms.laopdr.net/laws_and_regulations_part11.htm. 34 Pathein is under direct control of the headquarters. 35 PowerPoint presentation on Myanmar Customs Human Resources Management made by the Myanmar Customs Administration to the JICA study team on 29 November 2010, p. 2. 36 Also known as Royal Thai Customs. 37 The vision is a “world-class Customs for national competiveness and social protection.” The mission is to: (i) provide modern, expeditious, and global standard customs service; (ii) promote economic development and national competiveness by implementing customs-related measures; (iii) enhance efficiency in customs control, targeting social protection; and (iv) collect revenue in an efficient, fair, and transparent manner. The strategies are to: (i) develop customs measures, targeting national competiveness; (ii) develop capacity for customs control, focusing on international standards; and (iii) manage a revenue collection system, focusing on the principle of good governance. Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 8.


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mission along with the associated strategies requires an organizational structure that can prepare, support, and deliver them in a manner benefiting both the Customs Department and private sector users. The functions and responsibilities of the Thai Customs Department were established in a ministerial regulation of 2008 (B.E. 2551) which assigns the department enforcement, tax policy, export and import enhancement, and an investigation and suppression roles. The Thai Customs Department comprises four clusters: (i) a strategic cluster, (ii) an administrative cluster, (iii) a tax/duty and incentive cluster, and (iv) an enforcement cluster. Each cluster has several bureaus and offices. For example, the strategic cluster includes a planning and international affairs bureau, the administrative cluster includes the human resources management bureau, the tax/duty and incentive cluster includes customs valuation and tariff bureaus, and the enforcement cluster includes a post clearance audit bureau. Each cluster is managed by one of the Customs Department’s Deputy Director Generals. Customs reform and modernization program support is given by the planning and international affairs bureau, and by the principal advisor on customs control development, who reports to the Director General.38 (5) Viet Nam The current organizational structure of the General Department of Viet Nam Customs (GDVC) was established by Decision No. 02/2010/QD-TTg of the Prime Minister, issued on 15 January 2010.39 This organizational structure was a response to Decision No. 192/2001/QD-TTg of the Prime Minister, 17 December 2001, to downsize the bureaucracy as part of a Public Sector Reform. Decree No. 10/2020/ND-CP gives GDVC the authority to reallocate expenditures between/among budget line items. The organizational structure of GDVC has four divisions each managed by a Deputy Director General, as did the previous structure.40 The structure established in 2010 resembles that of 2005 except for the addition of an international cooperation department, while the three goods classification departments (north, central, and south) were combined into one department. After a GDVC gap analysis in 2005, the creation of new departments was considered, e.g., departments for strategic planning, change management, finance and planning, risk management, intelligence, appeals, and procurement and facilities management. However, a proposed structure of four “clusters” was not adopted.41 The 2005 analysis recommended reducing the number of customs departments and provincial offices. However, there are still 33 provincial offices, with 185 customs checkpoints and 35 enforcement units. The 2005 study concluded that the GDVC reform and modernization 38 See source in previous footnote, pp. 10-11. 39 http://www.thuvienphapluat.vn/archive/Quyet-dinh/02-2010-QD-TTG-vb102703t17.aspx. 40 See Scott Wilson in association with PADECO, Organizational Restructuring, Technical Assistance for Preparation of the Viet Nam Customs Modernization Project,[World Bank] PHRD Grant No. TF053144, prepared for General Department of Customs of the Ministry of Finance, Viet Nam, April 2005, p. 28. 41 See source in previous footnote, p. 37. The four cluster proposal included seven divisions. Division A would incorporate all finance, tax, and accounting functions; Division B would have included all legal functions including international cooperation; Division C would have included human resource management functions such as personnel, training, inspection, and the dissemination of customs news and information using publications; Division D, an administration division would have incorporated procurement and facilities management. The proposal did not include separate valuation, tariff, and rules of origin departments, but these functions would have been brought together into a division for operations (Division E). Strategic planning and modernization was to have been included in Division F, a planning division, while information technology and statistics would come under an ICT division (Division G).


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strategy for 2010-2020 provided a long-term vision but did not provide precise enough direction. In addition, there is no performance benchmarking42 that would give senior GDVC management information enabling them to monitor the result of policies and to consider what executive actions need taking to direct and correct reform and modernization progress. The 2005 project report43 includes important guidelines for all customs administrations in the Mekong Region because organizational structure change inevitably results in changes in work patterns and sometimes creates job security concerns and career anxiety issues all of which need mitigation. 4.4 Human Resource Development Customs administrations must have managers and staff with the skills and experience to carry out their daily operational and management tasks and continually develop their administrations using international good practice standards. Good management of human resources may be the most important factor affecting the efficiency of customs, irrespective of organizational structure.44 Effective human resources management supports the achievement of the customs administration’s strategy and objectives, is founded on and bound by national personnel legislation and international standards, and explicitly recognizes that people are the organization’s most valuable resource. 45 All aspects of customs management and clearance require staff qualified to operate the existing systems efficiently (including modern information technology) and to prepare for the introduction of new processes and techniques. Staff is required with qualifications to: (i) enforce domestic laws and regulations at borders, (ii) implement modern customs clearance processes, (iii) maintain open communications with the trading community, (iv) enforce laws (e.g., related to drug trafficking), and (v) collect and disseminate international trade statistics.46 More specifically, staff is required to carry out good practice customs procedures such as advance valuation, advance tariff and advance rules of origin trade facilitation procedures efficiently and effectively. All five Mekong Region customs administrations display commitment to training and giving their managers and staff the skills to carry out their daily operational and management tasks. (1) Cambodia The human resource development component of GDCE’s Strategy and Work Program (2009-2013) calls for the training of over 1,000 managers and staff members. The roles, functions, and job descriptions of staffs and managers working in the departments, branches, and border crossing points are to be clarified and determined; this will be a challenge because the strategy calls for GDCE to change its management style and redefine the roles, functions, and responsibilities of customs headquarters, branches, and local offices. GDCE will need to determine a new management style and decide the functions and responsibilities before the human resource management (HRM) department can commence preparation of new job

42 Scott Wilson in association with PADECO, Technical Assistance for Preparation of Customs Modernization Project, Diagnostic Report, [World Bank] PHRD Grant No.TF053144, prepared for the General Department of Customs of the Ministry of Finance, Viet Nam, January 2005, p. 22. 43 Scott Wilson in association with PADECO, Technical Assistance for Preparation of Customs Modernization Project, Project Implementation Plan, [World Bank] PHRD Grant No.TF053144, prepared for the General Department of Customs of the Ministry of Finance, Viet Nam, March 2005, p. 22. 44 Luc De Wulf, “Human Resources and Organizational Issues in Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 32-33. 45 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 21. 46 Luc De Wulf, “Human Resources and Organizational Issues in Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 32-33.


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descriptions, a new HRM Strategy, and a new training program with new annual training plans and new training curricula.47 GDCE’s current training program includes 25 different courses. The courses include a three-month induction course as well as several basic short courses lasting about a week (e.g., on the WTO Customs Valuation Agreement, HS code classification, rules of origin, risk management, Cambodian customs law and rules, penalty laws, and post clearance audit) 48 The current customs training courses do not include advanced training on certain topics (e.g., the WTO Customs Valuation Agreement, advance tariff rulings, rules of origin training). The GDCE work program for customs reform calls for a new approach to develop the 1,000+ staff members and managers, including the use of: (i) a comprehensive training program to strengthen management and technical customs skills; (ii) creation of a Customs Training Center with a training program requiring international technical assistance; and (iii) recruiting of 30-50 suitably qualified staff each year using a civil service open examination method. The current Customs Training Center may be insufficient to fulfill the objectives of the 2009-2013 strategy because: (i) there is no dedicated customs training center and the current training room cannot accommodate more than one training session at a time; (ii) a comprehensive customs training assessment has not been carried out; (iii) there are no training texts; (iv) there are no training curricula and syllabuses; (v) there is no coordinated training program; and (vi) there is no train-the-trainers program and syllabus. The current situation in which trained trainers are moved from the Customs Training Center to posts either in headquarters or at border crossing points needs to be addressed. Perhaps in the future trained trainers might stay and commit to about four years in the Customs Training Center, providing sufficient time for another batch of experienced managers and staff to become trained trainers. (2) Lao PDR Lao PDR Customs has a Customs Training Center in Vientiane that can accommodate 50-60 trainees. Trainers sometimes visit the border crossing points to deliver basic level courses, e.g., in valuation, HS code classification, rules of origin, risk management, and physical inspection methods. Border checkpoint staff members have received basic single-stop inspection training. 49 Ideally, customs training centers need smaller training rooms as well that can accommodate 10-15 trainees because training is best delivered using interactive rather than lecture methods. The lack of a suitably equipped Customs Training Center could be addressed by the development of a sustainable training center complete with fit-for-purpose training furniture (e.g., desks in a U-shaped configuration) and with training equipment (e.g., photocopiers, printers, computers, whiteboards, video camera, library of training materials). A recent report prepared by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce50 found that the reason for the country’s noncompliance with WTO

47 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 103-05. 48 Interview at Bavet on 26 November 2010 with (i) Mr. Ying Sam An, Chief of Customs, Bavet; (ii) Mr. Huy Sineth, Deputy Chief of Customs, Bavet; (iii) Mr. Nhem Parthora, Bavet Customs Excise Official; and (iv) Mr. Khov Kyan, Bavet Customs Excise Official. 49 Interview on 22 November 2010 with: (i) Mr. Soksavanh Bouapha, Deputy Director, Thanaleng Checkpoint, Lao PDR Customs, Thanaleng (First Friendship/Mittaphab Bridge), and (ii) Mr. Thanomsith Khaophibane, Chief of Multilateral Cooperation Unit, International Cooperation Division, Lao PDR Customs. 50 Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce, Technical Report: Lao PDR WTO Trade Facilitation National Self-Assessment of Needs and Priorities, February 2010, pp. 5-6


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trade facilitation measures 51 is human resource constraints including the lack of expertise, insufficient personnel, and a lack of motivation and training. The limited availability of funds for training was also indicated as a constraint. The report concluded that Lao PDR needs personnel training to assist the development of a legal framework particularly in relation to GATT Articles V (Freedom of Transit), VIII, and X, with the training to be delivered nationally and regionally. (3) Myanmar The Myanmar Customs Administration has a staff of 2,387, a large number of whom are dedicated to preventive tasks and activities (i.e., control measures), which suggests an opportunity to retrain some managers and staff members in proactive trade facilitation measures to help increase Myanmar’s exports by reducing transaction costs and reducing the time to market. Nevertheless, the fundamentals of human resource management are in place. The HRM and personnel management process includes: (i) human resource planning, (ii) job and work design and analysis, (iii) staffing allocation, (iv) training and development; (v) performance appraisal and review; (vi) compensation and reward; (vii) employee protection and representation; and (viii) organizational improvement. The Myanmar Customs Administration’s HRM planning includes a needs forecasting method involving the analysis of external conditions (e.g., Government, customs activity, legislation, technology). Future human resource requirements and availability enable the Myanmar Customs administration to forecast human resource needs. HRM planning includes performance management and career management. The HRM job design includes the job content and organizational responsibilities. The HRM internal staffing process includes staffing transfer (rotation), promotion, and demotion. The facilities for customs training and development in Myanmar include a training center established in 1981 that delivers ten courses (i.e., basic customs officer, advanced customs officer, basic WTO valuation, advanced WTO valuation, ASEAN harmonized tariff nomenclature/AHTN, post clearance audit, township customs officer, basic computer, basic English language). However, it would be productive to develop additional training courses, e.g., HS code classification, rules of origin, advance tariff and valuation rulings, customs technical English, risk management. Training includes the process developing a training program such as training needs assessment, setting training objectives, training budget, selection of trainees, choosing trainers, selecting and training the trainers, and evaluating training results. Staff performance appraisal and review includes a 10-item scoring list. The HRM program includes carrying out an assessment of the organizational responses to challenges including organizational effectiveness and efficiency and an organizational development program. (4) Thailand The Thai Customs Department had a staff of 4,347 government officials52 as of June 2010, with 887 deployed at the department’s 45 customs houses. The department’s organizational structure

51 E.g., World Trade Organization, General Agreement on Tariffs and Trade, Article VIII (1)(c); Agreement on Rules of Origin; Technical Barriers to Trade Agreement; Sanitary and Phytosanitary Measures Agreement (SPS Agreement). 52 They also had 602 government employed staff, 688 permanent employed staff, and 296 temporary employed staff. Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 13.


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reflects proactive trade facilitation objectives, and accordingly it has allocated staff to trade facilitation functions and responsibilities (e.g., post clearance audit). The Thai Customs Department’s training center with a staff of 30 arranges 16 different courses including basic WTO valuation, tariff classification, ASEAN customs value, rules of origin, GMS CBTA, and GMS customs transit system training courses. The customs training center also conducts training needs assessment for officers at border crossing points. Courses are then delivered by experienced officers who are not all trained customs trainers.53 Support to provide the training center staff with the skills to prepare and deliver new training syllabuses such as advanced valuation, advanced HS Code Classification, advanced rules of origin, AEO system, and other advanced training courses would be productive and was informally mentioned by the Thai Customs Department. 54 A new customs training library with the equipment to provide officers in the provinces and at the land, sea, and air border crossing point distance access to the library using the internet was also mentioned 55 There is also an opportunity to prepare and deliver a new customs technical English language course because both managers and staff must be able to read manifests, invoices, and packing lists, which are often presented to them in the English language. Another training requirement involves training trainers in the provisions of the Revised Kyoto Convention and its Annexes.56 It may also be productive to carry out a train-the-trainer’s course in the training center. Such a course was carried out with JICA assistance five years ago, but the trained trainers have since been rotated to other positions in the Thai Customs Department, which is to be expected because customs officers are normally rotated during their service careers. The Thai Customs Department may consider how they to keep experienced trainers in the training center for a certain period of time before eventually allowing another group of trained trainers to take their places. The solution, which could be facilitated with development partner assistance, may involve having a sustainable train-the-trainers program complete with syllabus, trainers’ handbook, and training materials, and development. A challenge facing the Thai Customs Training Center is that its annual budget of only THB 3 million is insufficient and it is difficult to obtain additional funds when the government has recently reduced the Customs Department’s budget by 60% from its request. Therefore, after designing new training courses and carrying out a sustainable train-the-trainers program, the training center may not be in a financial position to deliver extra or new training courses, which may provide an opportunity for development partners to provide training courses within the Thai Customs Training Center training program. Finally, the Thai Customs Department has suggested a regional seminar at which the output of the current study would be presented and regional discussion would be held on various topics, e.g., valuation, HS code classification nomenclature, and rules of origin procedures.57 (5) Viet Nam GDVC has a total of 9,000 managers and staff, the largest personnel numbers of any customs department in the five-country Mekong Region. A total of 700 are located in Hanoi staffing 11 departments. Others are at Ho Chi Minh City (1,800) and Haiphong (700), among other locations.

53 Interview with Ms. Janya Rojanadilog, Training Center Manager, Thai Customs Department, 8 December 2010. 54 Meeting with the Thai Customs Department, 8 December 2010 [discussion after conclusion of the formal meeting]. 55 See previous footnote. 56 Training in the preparation and management of a binding tariff rule might also be another useful training objective with benefits for customs, traders, and foreign direct investors. 57 Meeting with the Thai Customs Department, 8 December 2010.


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A 2008 assessment by the Hanoi-based Institute of World Economics and Politics found that in Viet Nam there was a lack of human resources in customs (and other border control fields). It noted the lack of an efficient, long-term recruitment mechanism. It found that the current customs (as well as quarantine and immigration staff lack advanced professional knowledge and skills) to exploit modern technology. It also identified that these staff members are often weak in foreign languages (i.e., English and the languages of the neighboring countries) and computer skills. Senior staff members with professional experience are usually unable to speak foreign languages and use specialized computerization systems, while junior staff, which have these skills, often lack practical experience and professional skills. The Institute of World Economic and Politics assessment concluded that an overall a strategy for staff training and re–training is needed.58 The World Bank Customs Modernization Project has included human resource management and development subcomponents, to: (i) develop a human resources strategic plan, (ii) provide a computerized human resource system and database, (iii) conduct a detailed staffing requirements assessment, (iv) develop new personnel practices and policies (e.g., recruitment selection, mobility, remuneration, performance management, separation/redundancy), and (v) establish of a twinning arrangement with an internationally recognized provider of relevant vocational education designed to support the long-term development of the Ho Chi Minh City-based Customs College. However, the project has not been meeting its targets. JICA has provided training support to the GDVC for about a decade. The training program from August 2004 to July 2007 (Training of Trainers Project for Customs Administration Modernization) focused on training trainers and developing training syllabuses and new training materials. For example, ten trainers were trained to develop customs valuation, HS code classification, and post clearance audit training skills. A three-year Project on Strengthening of Training Systems for Skills Development of Customs Administration Officials commenced in September 2009 focusing on border crossing point officers and assisting the development of customs training centers by preparing and delivering training plans and syllabuses.59 In addition, JICA has a risk management program based in Thailand but also working in Viet Nam (as well as Cambodia).60 The outputs are delivered by two long-term experts from the Japan Customs and Tariff Bureau whose assignments end in March 2011. The GDVC requested support for its Customs Training Center61 to assist its managers and staff in to designing a training master plan, formulating training policies, improving its train-the-trainer program (including train-the-trainer study tours perhaps to Japan and Malaysia and other national customs training centers or academies), and preparing an induction training course for new customs officer recruits and for existing customs managers and staff tasked to carry out reform and modernization projects. Upgrading of the Customs Training Center facility was also requested. (6) Regional There are regional human resource development requirements in addition to national training requirements. A joint ADB-AusAID mission during April-May 2007 recommended a 58 Dr. Bui Quang Tuan, Institute of World Economics and Politics, Vietnamese Academy of Social Sciences, Hanoi, “Trade Facilitation Policy Analysis in the Greater Mekong Subregion: A Case from Viet Nam”, at the Regional Policy Dialogue on Trade Facilitation Policy Gap Analysis on Cross Border Transport Agreement (CBTA) in the Greater Mekong Sub-Region, GMS Regional Policy Dialogue, Mekong Institute, April 2008, p. 63. 59 Training plans are not consistent because some plans are implemented centrally while others are implemented at a province level. 60 See Section 4.3 for more information on the JICA-sponsored Project on Risk Management for Customs in Mekong Region. 61 Response to questionnaire by the General Department of Viet Nam Customs, 24 December 2010


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sustainable training management model to provide CBTA human resource skills, including: (i) a regional training and development coordinator, (ii) a local CBTA training and Development Coordinator, (iii) CBTA border agency training officers, (iv) international training and development experts, and (v) the development of vocational education and training programs in border management62 within the GMS. The mission was estimated a requirement for training for 799 trainees from Customs (289), Immigration (327), Sanitary and Phytosanitary/Quarantine (97), and other border crossing point control agencies (86) over 21 months with about 90 training sessions delivered at 10 locations either at border crossing points or at a customs training center. A summary of this CBTA training recommendation is presented in Table 4-1. While an upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) includes an output for training workshops/meetings, the budget available is insufficient to meet the requirement of AUD 12.1 million estimated in 2007.

Table 4-1 Summary of the 2007 ADB-AusAID Mission Report on Training and Equipment Costs by Country and Category

Units: AUD (2007) and %

Country Training Equipment Infrastructure

Training Program

Management Country Totals

Percent of Total

Cambodia 403,213 449,800 0 231,000 1,084,013 9% PRC 272,171 449,800 0 231,000 952,971 8% Lao PDR 872,062 1,799,200 3,979,000 231,000 6,881,262 57% Thailand 469,398 899,600 0 231,000 1,599,998 13% Viet Nam 416,756 899,600 6,000 231,000 1,553,356 13% Category Totals 2,433,600 4,498,000 3,985,000 1,155,000 12,071,600

Percentage 20% 37% 33% 10% 100% Note: The AUD appreciated by about 21% from the time of the ADB-AusAID mission in April-May 2007 to January 2011. Source: Extract from ADB-AusAID Mission Report, April-May 2007 4.5 Summary of Findings (1) Customs Law and Regulations Table 4-2 presents a summary of customs laws and regulations in each of the focus countries.

62 The Organization for Security and Co-operation in Europe (OSCE) under the United Nations is currently preparing a new Best Practices at Border Crossing Handbook that might serve as a useful training tool for customs training centers.


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Table 4-2 Summary of Customs Laws and Regulations in the Mekong Region Country Basic Customs Laws/Regulations Main Observations Cambodia Law on Customs (2007),

supplemented by various regulations, ministerial decisions, and directors’ circulars (e.g., Sub-Decree No. 21 on Facilitation of Trade through Risk Management)

The primary law is broadly consistent with international standards, but limited in coverage; additional regulations required for implementation of global and regional standards

Lao PDR Customs Law (1994) amended in 2005

While the 2005 amendment modernized the main law in certain respects, certain measures are not modern (e.g., Article 24, which seems to require 100% physical inspection; inadequate provisions on transit)

Myanmar Sea Customs Act of 1878, Land Customs Act of 1924, and Tariff Law of 1992

The basic laws are quite dated. An amendment of Article 30 of the Sea Customs Act is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation; significant revision of Myanmar’s customs laws is also required to bring it in line with the Revised Kyoto Convention.

Thailand Thai Customs Act (1926, B.E. 2469), which has been amended several times, as well as various Customs Notifications

Some recent developments (e.g., on advance rulings), but a comprehensive act due diligence and legal review might help Thai Customs bring the Act more in line with the provisions of the Revised Kyoto Convention, although significant time would be required before Parliamentary approval.

Viet Nam Customs Law (2001) and Law on Amendment of and Addition to a Number of Articles of the Law on Customs (2005)

The 2005 amendments contributed to a modernization of an overly “control-oriented” customs law, but further provisions may be necessary to better implement international agreements.

Source: JICA Study Team (2) Organization and Management Each Customs administration has a different organizational structure; for example, the Cambodia, Myanmar, and Viet Nam organizational structures show a relationship with previous administrative regimes, while Thailand has an organizational structure facilitating a strategic roadmap to customs reform and modernization evidenced by an international good practice structure (e.g., because it has bureaus clustered into administrative, revenue collection, enforcement, and strategy responsibilities). The Viet Nam customs administration has a department supporting and implementing their reform and modernization program,63 although the remaining structure might benefit from the grouping of departments into functional management and operational task responsibility.

63 However, it has been reported that that the General Department of Vietnam Customs has two modernization entities within its organization, one under the World Bank project as well as their own internal one. Interview with Mr. William LeDrew, Customs Consultant, European Technical Assistance Team, ASEAN-EU Programme for Regional Integration Support (APRIS) – Phase II, 21 April 2009.


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(1) Human Resource Development Determined by circumstances, each customs administration has taken a different path to achieve fit-for-purpose staff and managers. For example, Myanmar and Viet Nam human resources management outputs are tailored for a more control and revenue collection oriented management method compared with the Thai Customs Department, which has adopted a more proactive trade facilitation approach while maintaining a balance between revenue collection and security. The customs administrations of Cambodia, Lao PDR, and Viet Nam have been carrying out reform and modernization programs that should help introduce good practice human resource management methods and help create professional customs managers and staff with trade facilitation skills. Each customs administration has a commitment and a willingness to change its human resource management to meet new requirements and train its managers and staffs accordingly. Each administration has lessons learned, such as with Thailand’s e-Customs and AEO programs, and Viet Nam’s train-the-trainers program, which might provide valuable good-practice examples for neighboring country customs administrations. The challenge is trying to achieve regional harmonization in human resources management and training to jumpstart initiatives such as the CBTA when there is considerable diversity of customs administration human resource management structure and skills as well as a diversity of training methods and training centers, each with a different training program and different syllabuses and materials. Uniform human resources management, such as a uniform CBTA operating manual, may help achieve uniform application and performance, e.g., for implementation of single windows, single-stop inspection, and customs transit system(s). Challenges that have been experienced by customs human resource management departments and training centers in fulfilling their training objectives have included: (i) insufficient budget to deliver additional training courses; (ii) an insufficient number of trained trainers and training materials to prepare and deliver 2-3 week advance level training courses in subjects such as the WTO Agreement on Customs Valuation, WCO customs valuation, HS code classification, rules of origin, advance ruling, binding tariff rules, pre-alert, and coordinated border management methods (e.g., for implementation of single-window and single-stop inspection); (iii) insufficient skills to deliver Customs technical English language training; (iv) a lack of uniform and comprehensive CBTA training; (v) a lack of Customs ethics training courses using the Arusha Declaration as a template; (vi) a lack of training needs assessment (TNA); (vii) a lack of sustainable customs training centers with trained trainers, managers, and staff with the skills to develop national training programs, develop new training syllabuses, trainee textbooks, and new training materials, ideally in national languages, thereby obviating the need for “fly in–fly out” training; (viii) a lack of Revised Kyoto Convention courses; and (ix) a lack of customs strategy, change management, project management, and business skills training for directors and managers.

Survey on Improvement of Customs Procedures Chapter 5 Customs Operational and for Trade Facilitation in the Mekong Region Procedural Issues

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Chapter 5 Customs Operational and Procedural Issues 5.1 Introduction The customs administrations in the Mekong Region are currently at different levels of development and each administration is carrying out different approaches to reform and modernization. Changing customs management and procedures includes a comprehensive list of actions to implement international standard working management methods, procedures, and techniques, although it is not a case of “one size fits all”.1 The customs administrations of Cambodia, Thailand, and Viet Nam2 have written customs strategies describing their reform and modernization needs, plans, and achievements, which will improve their customs management and procedures. The WCO’s 21st Century New Strategic Direction3 provides a useful reform and modernization checklist, while the United Kingdom’s Customs Blueprint and the Australia Customs Service’s Vision 2015 are examples of relatively advanced customs administrations implementing proactive and trade-friendly procedures and initiatives. In all the Mekong Region customs administrations there is evidence of a commitment to reform and modernization; only the paths and speed of change are different. This chapter addresses a number of mainly central-level topics in customs management and procedures in the Mekong Region customs administration, including: (i) customs valuation, (ii) risk management, (iii) advance rulings, (iv) rules of origin; (v) binding tariff rulings, (vi) integrity, (vii) customs-private sector cooperation, (viii) information technology, and (ix) transit. Organizational and human resource issues were addressed in Chapter 4, while border-level issues are addressed in Chapter 6. 5.2 Customs Valuation Foreign direct investors and national traders need a consistent, transparent, and predictable method of determining customs value so they can price their goods in the market and predict their profit margins as part of their rationale for doing business in a country. 4 The aim of customs valuation is to (i) guarantee the proper and uniform assessment of duties and (ii) ensure the compliance of national legislation with international rules, in particular with the WTO Agreement on Customs Valuation (ACV, also known as the Customs Value Code). Achieving

1 A list of seven comprehensive trade facilitation and logistics measures was included in the Ministry of Foreign Affairs of Japan Mekong-Japan Economic and Industrial Cooperation Initiative (MJ-CI) Action Plan: (i) 24-hour customs operation; (ii) harmonization and simplification of documents; (iii) introduction of fast track lanes; (iv) introduction and improvement of information technologies; (v) human resources development; (vi) issues related to the CBTA; and (vii) others such as border crossing point facilities (e.g., common control areas). http://www.mofa.go.jp/region/asia-paci/mekong/summit02/mjciap.htmlMJ-CI Action Plan, 29 October 2010, pp. 4-6. 2 Viet Nam is the only Mekong Region country to have acceded the Revised Kyoto Convention, having done so on 8 January 2008; however, generally compliance has been less than expected, as the governmental commitment to move the General Department of Vietnam Customs away from its traditional control orientation has lagged after WTO accession. 3 In June 2008 the WCO published Customs in the 21st Century: Enhancing Growth and Development through Trade Facilitation and Border Security as a stimulus for WCO member customs administrations to reform and modernize their procedures and business practices. The 10-page document described the need for a new strategic direction for customs because in the new global trading world customs administrations must play their role enabling end-to-end supply chains while balancing the need for trade facilitation with security following a 10-point strategic direction: (i) globally networked customs; (ii) better coordinated border management; (iii) intelligence-driven risk management; (iv) customs-trade partnership; (v) implementation of modern working methods, procedures, and techniques; (vi) enabling technology and tools; (vii) enabling powers; (viii) a professional, knowledge-based service culture; (ix) capacity building; and (x) integrity. 4 See, e.g., Jones, Day, Reavis & Pogue,“Non-tariff Trade Barriers: Customs Valuation and the WTO, in China Law & Practice, January 2003, p. 2.


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this aim requires the customs administration to have strategic objectives including: (i) implementation of national provisions based on transaction value5, in accordance with the ACV; (ii) development of clear procedures to make customs valuation transparent, objective, and verifiable; (iii) development of a specialized structure capable of applying the rules of determination of customs value based on the ACV; (iv) empowerment of customs to perform efficient post-clearance controls in the field of customs valuation, based on risk analysis; and (v) development and implementation of a training system on customs valuation to make customs officers acquainted with WTO rules on valuation.6 Key indicators of a customs valuation method include legal policy and procedures. For example, legal indicators may include: (i) laws ensuring customs valuation according to WTO rules; and (ii) laws enabling a customs declaration to be lodged when not all the elements of customs value are known and providing for rules to verify the value after release of the goods. Policy and procedure indicators may include: (i) procedures for efficient post-clearance controls in the field of customs valuation, based on risk analysis; (ii) procedures for appeals; (iii) the exchange of information on customs value at international level based on agreements signed in this respect and with assurance of data protection; and (iv) complete and updated information on the legislation on customs valuation for participants in international trade.7 For background, Box 5-1 sets out the valuation methods prescribed in the ACV.

Box 5-1: Valuation Methods Provided in the WTO Agreement on Customs Valuation (ACV)

The ACV provides one primary and five alternate methods to be applied in the prescribed order:

(i) Article 1 provides the primary method of valuation, which is to be based on the transaction value, i.e., that the price actually paid or payable for the goods when sold for export to the country of importation, subject to adjustments for certain costs and considerations in accordance with Article 8 of the ACV. The possible adjustments include commissions, containers, packing, certain goods and services, royalties, and license fees. Buying commissions are not to be included, and legitimate discounts to sole agents and sole concessionaries are to be accepted. Article 1 also stipulates that if the buyer and seller are related in business, this does not in itself constitute grounds for rejecting the transaction value. Such values need to be accepted provided that the relationship did not influence the price.

(ii) Article 2 provides the first alternate method, the transaction value of identical goods. (iii) Article 3 provides the second alternate method, the transaction value of similar goods. (iv) Article 5 provides the third alternate method, the deductive method. (v) Article 6 provides the fourth alternate method, the computed value method. (vi) Finally, Article 7 provides the fallback method. Article 7 prohibits the determination of value

on the basis of: (a) the selling price of goods produced in the importing country; (b) a system based on accepting the higher of two values; (c) the price of goods on the domestic market of the exporting country; (d) the cost of production other than the computed value as determined in line with the computed value method; (e) the price of the goods for export to a country other than the importing one; (f) minimum values; and (g) arbitrary or fictitious values.

The ACV includes provisions concerning the treatment of transport and insurance costs, currency conversion, right of appeal, publication of laws and rules about customs valuation, and prompt clearance procedures.

Source: Adrien Goorman and Luc De Wulf, “Customs Valuation in Developing Countries and the World Trade Organization Valuation Rules”, in Luc de Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 158-59.

5 “Transaction value” is “Price actually paid or payable for the goods”. 6 European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 57. 7 See previous footnote.


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(1) Cambodia Cambodia is a member of the WTO and its five-year transition or grace period for application of the ACV has expired. However, Cambodia has not yet begun to apply the ACV. The General Department of Customs and Excise (GDCE) currently uses a customs reference value database to determine cost, insurance, and freight (CIF) values for imports following a 1993 Amendment to the Law on Import and Export. Lists of reference values are prepared using survey inspection reports and catalogue pricelists rather than the transaction value method prescribed by the ACV. Import goods above USD 4,500 in value are verified by a central Customs Valuation Office. A GDCE steering group on customs valuation has received some assistance from the Japan Customs and Tariff Bureau. The steering group prepared a two-year action plan for GDCE to identify skills gaps and transaction value challenges as well as discrepancies between declared values8 and Customs-determined value. (2) Lao PDR Lao PDR Customs applies the “declared value” in line with Chapter 3 of the Customs Law on the Value of Goods, including Article 8 on declared export value and Article 9 on declared import value, i.e., transaction value.9 When using the transaction value method, the following costs must be included in the customs value: (i) transport costs to Lao PDR; (ii) insurance costs; (iii) packing and special handling costs; (iv) fees paid to the exporters for royalties and licenses; (v) storage costs, (vi) all escalation costs, (vii) all selling costs such as commissions, and (viii) goods or services supplied by the importer to the exporter free or at a reduced cost that were used in the production of the goods. (3) Myanmar The Myanmar Customs Administration uses its “real value” method rather than the transaction value prescribed by the ACV. As defined in the Sea Customs Act of 1878 and as mentioned in Section 4.2.3, Article 30(b) of the Sea Customs Act provides for customs valuation based on “real value”, which has been construed to mean the cost at which goods of the like kind and quality could be delivered at the time and place of importation. The assessable value of goods therefore normally includes CIF value and the landing charges at the port of importation. 10 However, again as also mentioned in Section 4.2.3, an amendment of Article 30 is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation. (4) Thailand A number of legal instruments govern customs valuation in Thailand and broadly follow the ACV.11 Customs officers therefore have the legal instruments to use the “transaction value”. A valuation declaration form is used and there is a valuation dispute and appeal procedure. 8 Declared value is the value of a shipment as declared by its shipper to serve as the basis for computation of customs duties and taxes. 9 See: http://laocustoms.laopdr.net/laws_and_regulations_part1.htm and http://laocustoms.laopdr.net/import_and_ export_information_value.htm. 10 http://www.asosai.org/asosai_old/R_P_government-revenues/chapter_16_myanmar.htm. 11 E.g., Thailand further amended legislation in 2003 and 2004 in order to enhance the implementation of the ACV, increase transparency, and raise standards of customs valuation practices. The amendments include provisions allowing importers to request consultation and reasons for, and written notification of, the method for determining customs value when the transaction value method is inapplicable; revising the definition of "price actually paid or payable"; and, adopting the interpretative notes in Annex I and Annex III of the Agreement on Implementation of Article VII of the GATT 1994.

http://laocustoms.laopdr.net/laws_and_regulations_part1.htm


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However, the Thai Customs Department maintains the authority and discretion to arbitrarily increase the customs value of imports, which means an inconsistent and unpredictable application of the transaction valuation method.12 A WTO panel in a ruling of 15 November 2010 found that the Thai Customs Department had improperly rejected an importer’s declared transaction values for goods imported from the Philippines and then inconsistently determined alternative customs values under the ACV. The WTO panel confirmed that the transaction value is the primary basis for assessing the customs value of imported goods, and that it cannot be rejected simply because the buyer and seller are related. Instead, additional objective grounds other than the parties’ relationship must justify the rejection of the transaction value in a related party situation.13 (5) Viet Nam The General of Vietnam Customs (GDVC) applies the ACV, e.g., the transaction value method is applied as the primary method. GDVC notes the advantages of applying the ACV, including: (i) objectivity and transparency, (ii) improving company responsibility, (iii) risk management, (iv) reduced physical inspection, and (v) quicker clearance; at the same time, they perceive certain disadvantages including wrong values, commercial fraud, and reduced revenue collection.14 They note that solutions include (i) the development of an adequate value database to assess suspect invoices as a solution an information database, and (ii) post-clearance audit. GDVC’s officers may require (further) training in customs valuation so that revenue collection is not at risk. (6) Summary of Findings Three of the five customs administrations in the Mekong Region (those of Lao PDR, Thailand, and Viet Nam) are generally applying the WTO Agreement on Customs Valuation (ACV), while two administrations (those of Cambodia and Myanmar) do not, although they are taking steps in the direction of complying with the ACV. Going forward, the region’s customs administrations may work to create valuation databases or obtain access to some of the commercially available value database options. 15 It will also be productive to provide customs managers and staff responsible for making import goods valuation training in customs valuation, e.g., including (i) trade facilitation and the ACV, (ii) transparency and information dissemination; (iii) release prior to valuation determination; (iv) review and appeal methods; (v) sale for export; (vi) price paid or payable; (vii) commissions, assists, and royalties; (viii) related parties; (ix) value of identical or similar goods; (x) deductive, compound, and fallback methods; and (xi) burden of proof and litigation management. 16 However, piecemeal technical assistance for customs valuation may disappoint without comprehensive customs modernization.17

12 United States Trade Representative Report in Thailand in 2010, 9 April 2010 (see http://chiangmai2.mofcom. gov.cn/aarticle/lawsofhostcountry/investmenthost/201004/20100406860632.html). 13 Sidley Austin LLP, WTO Panel Clarifies Key Principles in Customs Valuation, International Trade Update, 16 November 2010 (see http://www.sidley.com/files/News/8d8a3fd2-d4d7-4c00-bd39-055ebd40ed8f/Presentation/News Attachment/080a2899-476e-4e03-bff5-08b001faa68d/International%20Trade%2011.16.10%20WTO%20Panel%20 Clarifies.pdf). 14 PowerPoint presentation by Quangtri Provincial Customs, 3 December 2010. 15 See, e.g., World Customs Organization, A National Valuation Database as a Risk Management Tool, 2004. 16 See, e.g., http://www.cclec.net/en/directorylistings/profiles/132-valuation-training-for-oecs-customs-officers [Canadian Border Services valuation training]. 17 Adrien Goorman and Luc De Wulf, “Customs Valuation in Developing Countries and the World Trade Organization Valuation Rules”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 174 [“It would be illusory to expect good valuation practices in an administrative and technically ill-equipped customs department”].


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5.3 Risk Management Effective risk management is essential for modern customs operations, and it provides the means to achieve an appropriate balance between trade facilitation and regulatory control.18 The aim of risk management is to develop appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures.19 Risk management programs in the Mekong Region are early in their development20 and use compared with those of customs administrations in Japan, Australia, the United Kingdom, and New Zealand, for example. They are an important management tool helping balance the needs for revenue collection, security, and safety with trade facilitation in Cambodia, Thailand, and Viet Nam, where some level of risk management has already been implemented. Another aspect of risk management for customs administrations is that it enables them move away from the traditional “gateway” control approach at border crossing points to a more proactive management method using available customs and commercial information to ascertain risk levels and necessary management response.21 (1) Cambodia GDCE initiated a risk management program when the Government issued Sub-Decree No. 21 on Facilitation of Trade through Risk Management, issued on 1 March 2006, which provides for interagency cooperation (i.e., among the Customs and Excise Department, CamControl, Ministry of Commerce, Ministry of Industry Mines and Energy, Ministry of Health, Ministry of Agriculture and Fisheries) through service-level agreements (MOUs) in efficiently carrying out risk-based operating procedures. The current risk management program with assistance from JICA includes channel selectivity decisions using risk assessment and risk profiling.22

18 David Widdowson, “Managing Risk in the Customs Context”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 98-99. 19 Specific requirements include: (i) development of a comprehensive legal basis conferring the necessary powers on customs administrations to collect data and information for the purposes of analysis and assessment of risk and appropriate dissemination of such information; (ii) establishment of a harmonized model of risk management to target commercial traffic for customs control and test the effectiveness of the risk analysis undertaken, with the aim of ensuring compliance with the laws and regulations that customs are responsible for enforcing; (iii) establishment of appropriate measures to determine the areas that are most exposed to risks and to support management decisions on how to allocate limited resources effectively; (iv) development of cooperation at policy and operational levels between the different national and international agencies and establishment of relationships with other administrations and agencies to ensure that information is exchanged efficiently and securely; (v) establishment of effective internal communication and cooperation between the intelligence functions within the national administration in order to maintain the highest possible level of efficiency in customs services nationwide and create an environment where all employees assume responsibility for managing risks; and (vi) allocation of the resources required to provide suitable facilities, equipment, and computerization in support of data collection, analysis, evaluation and dissemination of information. European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45. 20 Customs administrations at early stages of risk management are generally more open to assistance from international development partners than customs administration at more advanced stages because the latter becomes increasingly concerned of the sharing of information on its risk management system with foreigners. 21 David Widdowson, “Managing Risk in the Customs Context”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 91. 22 As presented in Chapter 8, from December 2005 to October 2007, JICA dispatched short- and long-term advisors to implement the Customs Risk Management Project to develop a customs risk management system following by the country’s accession to the WCO earlier in the decade. Activities undertaken in this project includes: (i) translation of WCO risk management principles into local language (Khmer); (ii) definition of risk management processes; and (iii) development of a risk management system.


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The Cambodia risk management method is based on the risk-based compliance management pyramid developed by the Centre for Customs and Excise Studies of the University of Canberra, taking into account legislative basis, client service, compliance assessment, and enforcement/recognition.23 Applying this model, a leadership team headed by the Ministry of Commerce and the chair of a “sub-steering” committee on trade facilitation, prepared a risk management strategy with GDCE, in cooperation with the various concerned ministries and agencies. Additional planned activities include: (i) putting into practice a traders’ credibility management system; (ii) developing a network between the risk management system and ASYCUDA; (iii) developing risk management networking between GDCE and other concerned ministries and agencies; (iv) setting up risk management groups at provincial customs offices, to collect data, profile, analyze, and identify risks; (v) implement a customs intelligence program; and (vi) continuing with associated training of customs officers.24 Risk management in Cambodia could be made more effective with continued (JICA) assistance, for example to help GDCE prepare and fulfill a risk management database. Customs procedures on an intervention by exception basis25, e.g., such as low-risk trade compliance programs could be implemented to prepare the skills base carry out an authorized economic operator program. Training GDCE and other border control agency and private sector managers and staff would increase program effectiveness. Extending IT capacity to border crossing points such as Bavet, where 100% of trucks are selected for physical inspection (although only about 10-15% of the cargo is physically inspected), will improve risk management information exchange within GDCE and between GDCE and other border control agencies. Extending IT links with neighboring customs administrations would provide risk management information exchange capabilities that currently do not exist and that would assist implementation of the CBTA. (2) Lao PDR The Lao PDR Customs Department has not yet developed a risk management program. As noted, Article 24 of the country’s Customs Law on the Inspection of Goods by Customs Officers provides that “after the completion of registration of detailed customs declaration, all or some of the goods are subject to physical inspection conducted by customs officers as they may deem appropriate”. This provision seems to require that all consignments must be physically inspected although some may be inspected only partially; it may explain why in most cases at least imports and exports are physically inspected by Lao PDR Customs.26 Considering that the Lao PDR Customs Department is currently preparing a pilot project for ASYCUDA, it may be too early to roll out risk management. However, to some extent, “the principles of risk management can be applied by all customs administrations, whether or not they operate manual or automated systems, if they adopt strategies that incorporate the key elements of a risk-based approach to compliance management”.27 In any case, the Lao PDR Customs Department may wish to consider the option of using the ASYCUDA risk management module after the Department as well as private industry users become acquainted with using the

23 Dr. Cheaseth Seng (Official in Cabinet of H.E. Deputy Prime Minister, Minister in Charge of Council of Ministers, Kingdom of Cambodia, Associate Dean, Faculty of Business and Economics, Pannasatra University of Cambodia), Toward Risk Based Compliance Management: A Case of Cambodia General Department of Customs and Excise, 2010, p. 1 [based on David Widdowson, “Managing Risk in the Customs Context”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 96. 24 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 96. 25 An approach to inspect high-risk cargo only. 26 Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 35. 27 David Widdowson, “Managing Risk in the Customs Context”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 99.


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transit, import, and export modules of ASYCUDA. The Department may then decide to develop advance declarations using import and export pre-alert good-practice methods. A risk management database may be developed and the Department may consider joining the WCO national Customs Enforcement Network (CEN). (3) Myanmar The Myanmar Customs Administration does not have a risk management program. While it currently carries out a high level of customs physical inspections based on a perceived need to detect narcotics smuggling, customs risk management at border crossing points requires different risk management methods 28 using trader compliance programs and a customs risk management database, which should be linked to databases of enforcement agencies and other border crossing point control agencies. The Myanmar Customs Administration might consider using the WCO national Customs Enforcement Network (CEN) and developing a risk management database. For full-fledged implementation of a national customs risk management program, computer equipment, internet fiber optic cables and other communication lines and methods will need to be upgraded. Training for all border crossing point control agencies and for private industry users will also be required to develop the capacity of managers and staff. (4) Thailand The Thai Customs Department applies well-developed, formal risk management procedures aligned with WCO’s risk management techniques at all road, seaport, and airport border crossing points. There is a clear statement of objectives and identification of the risks to be managed. The risk management policy reportedly keeps a balance between customs control and security with the need for trade facilitation complying with WCO risk management techniques.29 The Department has a relatively advanced IT system that allows for the exchange of risk management information between headquarters and regional customs offices and with border crossing points. Central/local profiles are operational for all major customs areas, e.g., customs clearance for imports and exports, warehouses and free zones, intellectual property rights, precursor chemicals, and hazardous goods.30 The central risk profile is prepared by the Post Clearance Audit Bureau, which cooperates with the Investigation and Suppression Bureau. Local risk profiles are developed by a risk management working team located in the regional customs offices, e.g., in the Laem Chabang Port Customs Office and at the Suvarnabhumi Airport Cargo Control Customs Bureau.31 Central and local risk profiles replaced random physical examination of documents and goods using a targeted method and help allocate scarce departmental human resources. Risk profiles include information such as company name, high risk cargo, country of origin (e.g., all cargo from Myanmar at the Mae Sai border crossing point is inspected), and the country of loading and unloading. The risk profiles are automated enabling fast selectivity analysis. Figure 5-1 presents screenshots of the Thai Customs Department’s risk management program at Nong Khai.

28 The detection of narcotics smuggling uses different techniques from those used by customs managers and staff members processing import, export, and transit cargo at border crossing points. Antinarcotics programs use specialized risk management databases that should be used by skilled antinarcotics officers. 29Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 35. 30 Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 52-53. 31Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 35.


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Profile System

Source: Nong Khai Customs House

Figure 5-1 Screenshots of Thai Customs’ Risk Management Program at Nong Khai

The Thai Customs Department evaluates the risk management method each month or on a case-by-case basis identifying weaknesses in the program and making improvements. Risk profiles are reviewed periodically ensuring that they are up-to-date with the market, as well as safety and security. (5) Viet Nam GDVC is implementing risk management with JICA assistance. There are three levels of customs inspection: (i) a green stream exempted from detailed inspection of the dossier and physical inspection of the goods; (ii) a yellow stream in which detailed inspection of the dossier is made, but physical inspection of the goods is exempted; and (iii) a red stream in which detailed inspection of both the dossier and physical inspection of the goods is undertaken (5%, 10%, up to 100%). The classification into green, yellow, or red streams is implemented according to: (i) the Customs Law, the Law on Import and Export tariffs, and other related regulations; (ii) results of the risk management system, and (iii) other information available during the customs clearance process. The Customs Director may decide to change inspection levels; customs officers at steps 1, 2, or 3 may decide the clearance of consignments.32 GDVC has begun to carry out a low-risk customs due diligence program in which it is classifying businesses according to the risks they present. Post-clearance audits are necessarily a feature of risk management programs although the trading community has complained that GDVC now conducts such audits “aggressively”.33 As in the case of Thailand, GDVC may welcome assistance in refining their risk management database in association with the WCO national Customs Enforcement Network (CEN).

32 Site visit to Lao Bao undertaken on 3 December 2010, including a PowerPoint presentation by Quangtri Provincial Customs. Previously, the procedure involved: (i) no inspection if a company had no violation within 1-2 years and the commodity was on a “no inspection” list; (ii) random inspection up to 10%; and (iii) full inspection if the company had many violations or there was evidence of a violation regarding the consignment. 33 See, e.g., KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 41 [downloaded from http://www.kpmg.com/NZ/Lists/Copied%20Documents/Adding-Value-to-your-trade.pdf].


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(6) Summary of Findings The customs administrations countries of the Mekong Region countries are at different levels of risk management. Traders in some countries complain of aggressive post-clearance audits. Greater customs and trade consultations and partnerships and the use of low-risk customs due diligence programs34 such as Jordan’s Golden List program35 may help alleviate some of the less user-friendly aspects of balancing revenue collection with the need for trade facilitation. The region’s customs administrations may also consider developing and using risk management databases and electronic links with databases used by other border control agencies in an attempt to fulfill a comprehensive and integrated approach to risk management. 5.4 Advance and Binding Tariff Rulings The use of advance export and import rulings—related to customs valuation, classification, and origin—is a good-practice trade facilitation method that benefits both the customs administration and the trading community. For customs administrations, advance rulings allow busy managers and staff at border crossing points to carry out document checks for accuracy and to execute risk management before goods arrive at the border, leading to improved revenue collection as well as increased safety/security. For importers and exporters, advance binding rulings improve and enhance the transparency and predictability of customs tariff rules since they enable them to estimate the amount of customs duty well in advance and goods do not have to wait for a determination of the amount of customs duty at the time of the importation. Advance rulings also enable prior settlement of possible customs duty disputes. As a result, advance rulings which have a binding effect facilitate international trade and investment and are in the interest of both the customs administration and the trading community.36 At present, none of the customs administrations in the Mekong Region issue advance binding tariff rulings although the Thai Customs Department has prepared a draft law on the subject and delivered it to the Cabinet for consideration, after which it would go to the Council of State and the Parliament for approval. It is not known how long this process might take.37 In other customs administrations around the world, binding tariff rulings (BTRs) are issued upon consideration of an application for an advance ruling. The customs administration lists the documents needed to consider and process a decision. Not all applications might be successful and the administration must give the reasons if a BTR application is refused. For example, in the EU an electronic Binding Tariff Information (eBTI) is issued on request to economic operators by the customs authorities of the member states. It is valid throughout the European Community, regardless of the member state that issued it. The main benefit to the holder is legal certainty with regard to tariff classification, which is important since the tariff classification is the basis for determining customs duties, export refunds, and the application of other related legal provisions (e.g., import/export certificates). In the EU, a BTI is generally valid for six years, but 34 Low-risk customs due diligence is similar to intervention by exception programs in helping legitimate traders while moving resources to higher risk consignments and traders with low compliance records. One of the objectives of risk management programs is to reduce the number of non-complaint traders and non-complaint intermediaries. Proactive assistance to bring traders and their intermediaries into compliance should be the policy instead of relying solely on penalties and fines (administrative actions). 35 See http://www.bizclir.com/galleries/bestpractices/01.128.08BP1_%20Jordan.pdf. 36 Supply chain predictability may be an especially important consideration for foreign direct importers. For example, the French company that manufactures the Meccano children’s toy recently moved manufacturing back to France from the PRC because of the unpredictable supply chain between the PRC and the European market for their product. 37As noted in a previous footnote, currently the Thai Customs Department might impose a fine of up to four times the import value after duties and/or a 10-year prison term if a post-clearance audit reveals an insufficient amount of customs duty was collected because the Department decided that a different tariff classification should be applied. KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 39 [downloaded from http://www.kpmg.com/NZ/Lists/Copied%20Documents/Adding-Value-to-your-trade.pdf].


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in certain cases (e.g., the publication of a classification regulation, a change in the interpretation of the nomenclature at international level, or any other possibility laid down by the provisions for the implementation of the Customs code) a BTI may cease to be valid. In case of Japan, the validity lasts up to three years. In order to avoid inconsistencies in the tariff rules, it is also extremely important to establish sophisticated infrastructure including the institutional framework to ensure the correct and uniform application of tariff rules throughout a country. (1) Cambodia GDCE does not currently provide advance valuation, classification, and origin rulings to traders. Cambodia applies ASEAN Harmonized Tariff Nomenclature (AHTN) 2007, which includes the 2007 amendments of the WCO’s Harmonized System (HS). Cambodia became a contracting party to the International Convention on the Harmonization of Commodity Description and Coding System (the HS Convention; see Section 3.1.1) in 2002. The Japan Customs and Tariff Bureau trained 144 customs officers during 2007 and the training seminars included HS and AHTN. (2) Lao PDR The Lao PDR Customs Department does not provide advance valuation, classification, or origin rulings to traders at present. A recent WTO Trade Facilitation Self-Assessment of Needs presentation by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce found a number of non-compliant WTO including provision of advance rulings (as well as pre-arrival processing, risk management, and creation/publication of average release and clearance times).38 (3) Myanmar The Myanmar Customs Administration does not currently provide valuation, classification, and origin rulings to traders. As noted, for example, Myanmar needs to modernize its 19th century Sea Customs Act to comply with the WTO Agreement on Customs Valuation. (4) Thailand The Thai Customs Department has a management method of providing traders with advance rulings on valuation, classification, and origin. As noted in Section 4.2, Customs Notification No. 54/2551 on advance rulings was issued on 1 July 2008 and reportedly implemented although Bryan Cave International Trade (a customs and trade consultancy)39 reports that the advance ruling service is regarded as a “pilot project” paving the way for a more complete system. Customs Notification No. 67/2552 (2009) governs the application process including the information and supporting documents required. The Customs Tariff Bureau is responsible for processing applications and making rulings. The application must be made at least 30 days prior to arrival of the goods and the Thai Customs Department applies a standard to reply to each application within 30 days. There are procedures for review and revocation of an advance tariff ruling.40 However, after Thai customs gives an advance tariff it is currently not legally binding.

38 Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce, Technical Report: Lao PDR WTO Trade Facilitation National Self-Assessment of Needs and Priorities, February 2010, pp. 5-6 39 http:www.bryancavetrade.com. 40.Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 38.


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For importers and foreign direct investors not having a predictable binding tariff can lead to uncertainty and a lack of confidence in the trading process.41 (5) Viet Nam GDVC does not currently provide advance tariff customs valuation or origin rulings to traders, although they plan to do so in the future. An ASEAN-sponsored Pre-Arrival Processing Workshop was held in Hanoi on 24-26 July 2007 with the Australian and New Zealand Customs Services, which explained how they use advance rulings as part of pre-arrival processing. 42 More recently, on 7 December 2010, GDVC announced that it intends to use advance rulings “as used in the USA, Singapore, Japan, New Zealand and Australia for goods classification, rules of origin and valuation”. However, GDVC plans to first complete an e-Customs test run with 800 enterprises. The implementation of advance rulings in Viet Nam should commence in 2011 and be available on the internet.43 (6) Summary of Findings Advance rulings—which are provided by the world’s most sophisticated customs administrations (e.g., those of Japan, Australia, New Zealand, Singapore, and the United States—are being provided, at least on a pilot project basis in Thailand and will be provided in 2011 in Viet Nam. Cambodia, Lao PDR, and Myanmar do not currently implement or plan to implement advanced rulings, but a program to train customs administration and customs broker and trading company staff in such procedures could be productive, if accompanied by the associated policy and legal changes. 5.5 Rules of Origin Determining the country of origin or nationality of imported goods is required to apply basic trade policy measures (e.g., tariffs, quantitative restrictions, antidumping and countervailing duties, and safeguard measures), as well as for requirements relating to origin marking, public procurement, and for statistical purposes. The nature of rules of origin and their application has important implications for the work of customs. Complex rules of origin that differ between countries can be a significant constraint on trade and a burden on customs administrations in improving trade facilitation.44 The Revised Kyoto Convention (Annexes D.1 to D.3) includes rules of origin guidelines and deals with administrative issues. Also, the WTO Agreement on Rules of Origin aims at long-term harmonization of rules of origin, other than rules of origin relating to the granting of tariff preferences, and to ensure that such rules do not themselves create unnecessary obstacles to trade; it requires that WTO members apply their rules of origin in an impartial, current, and consistent manner (see Section 3.1.2). Specific findings with respect to rules of origins issues in the Mekong Region follow: (i) Since each Mekong Region country has its own rules of origin and certificate of origin

provisions, harmonizing rules of origin is not a fast-track solution.

41 See, e.g., http://www.customsclinic.org/index.php?option=com_content&view=article&id=279&Itemid=314&lang =en. 42 ASEAN, New Zealand Customs Service, and Australian Customs service, Summary Record of the ASEAN - CER Pre-arrival Processing Procedures Workshop, Hanoi, 24-26 July 2007. The most common advance ruling provided in Australia and New Zealand is the tariff ruling, while the other two are determining origin and assessing Customs value. 43 http://www.saigonmoney.com/2010/12/07/vietnam-customs-set-to-further-reform/. 44 Paul Brenton and Hiroshi Imagawa, “Rules of Origin, Trade, and Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 183-84, 204.


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(ii) Most of the countries in the region have not yet reached the level to be able to develop, apply, and interpret detailed free trade agreement (FTA) rules of origin guidelines and as a result the countries are not making full use of available preferential rates. For example, a recent technical assistance project in Lao PDR assisted by the United Nations Development Programme (UNDP) found that a lack of capacity at both the central government and provincial levels to interpret and apply rules of origin is an impediment to business development.

(iii) The Japanese business community has noted that although the description of the free on board (FOB) price should not be mandatory to obtain a certificate of origin because this is commercially sensitive information revealing a trader’s profit margin, it is generally a requirement in the Mekong Region.45 This impedes regional trade. Perhaps a regionally uniform and simple and consistent certificate of origin process eliminating the need for an invoice and the need to show the FOB price might provide extra predictability for traders in the Mekong Region countries and help increase regional trade.

(iv) There is a detailed set of guidelines on rules of origin in the Thailand-Australia FTA that might provide a good practice example.

5.6 Integrity The aim of customs integrity is to develop a customs service that ensures that all staff observe the rule of law and perform their duties in a fair, impartial, honest, trustworthy, polite, and professional, but firm manner.46 Customs administrations are vulnerable to corruption because the nature of the work puts officials, even at junior levels, in situations in which they have sole authority and responsibility and in which careful supervision and accountability is difficult. Also, they work with members of the private sector who have a strong incentive to influence decisions made by customs officials; for example, high tariffs and complex regulations offer significant incentives for the private sector to make informal payments to reduce import charges and/or speed up transactions.47 Section 2.4 noted that industry interviewees as part of the current study pointed to requests for informal payments as a problem and some magnitude of informal payments has been documented in development partner assisted studies. 48 In an Investment Climate Survey in Cambodia, 71% of respondent firms reported that they make facilitation payments, with 71% of large firms stating that such payments are frequent.49 The problem is at least arguably exacerbated by the low formal salaries that customs officials in developing countries receive 50 ; for example, average salaries in Cambodia’s Customs and Excise Department were reported to be only USD 23 per month.51

45 Federation of Japanese Chambers of Commerce and Industry in ASEAN, Requests from Japanese Business community in ASEAN, 6 July 2010, p. 3. 46 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 23. 47 Gerald McLinden, “Integrity in Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 70. 48 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping Of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010. The magnitude of informal payments reported in this study was less than reported by some private sector interviewees in the current study. 49 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p. 2, [citing World Bank, Cambodia, Seizing the Global Opportunity: Investment Climate Assessment and Reform Strategy for Cambodia, Report No, 27925-KH, August 2004]. 50 Customs administrations are characterized by administrative monopoly coupled with the exercise of wide discretion, particularly in a work environment that may lack proper systems of control and accountability, and accordingly corruption is often an issue. Jouko Lempiainen (Director, Compliance and Facilitation, World Customs Organization), Integrity in Customs, ICAC [Independent Commission Against Corruption]-Interpol Conference, undated. 51 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p. 2. A question is whether low salaries are really a factor


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There are a number of areas in which corruption can take place in customs, as shown in Table 5-1:

Table 5-1 Example Customs Functions Vulnerable to Corruption Customs Function Example Integrity Violations

Processing of import, export and transit declarations

Soliciting or accepting payment to: (i) accelerate the processing of documents; (ii) ignore the fact that some cargo listed on the manifest was not declared; (iii) certify the exportation of fictitious exports or provide for a wrong HS classification; or (iv) permit goods in transit to be released for domestic consumption

Assessment of origin, value, and classification of goods

Soliciting or accepting payment to: (i) permit under-invoicing of goods; (ii) not challenge the declaration of goods under a different HS with a lower tariff rate; or (iii) accept a false country of origin declaration, thus permitting the importer to benefit from a preferential tariff regime

Physical inspection, examination, and release of cargo

Soliciting or accepting staff would: (i) ensure that an inspecting officer is chosen who will take an accommodating approach to the inspection; (ii) skip the inspection; (iii) influence the findings of the inspection; or (iv) simply speed up the inspection

Administration of concessions, suspense and exemption schemes, and drawback schemes

Soliciting or accepting payment to: (i) permit traders to release, for domestic consumption and without paying the required import duties, goods that entered under suspense regimes or goods made with inputs that entered under such regimes; (ii) obtain a release of the bond that is to protect customs revenues in cases of temporary admission of imports without adequate documentation; (iii) permit traders to claim excessive input coefficients for exports produced with inputs that benefited from the suspense regimes; (iv) permit traders to claim drawbacks for fictitious exports; or (v) permit importers to transfer imports that benefited from duty relief to non-authorized users or for non-intended purposes, or permitting them to import such goods in excess of agreed amounts

Conduct of post-clearance audits Soliciting or accepting payment to influence audit findings Issuing of import licenses, warehouse approvals, and authorized trader status approvals

Soliciting or accepting payment to obtain these licenses or certificates without proper justification

Processing of urgent cargo assignments

Soliciting or accepting payment to obtain preferential treatment or accelerated clarance

Source: Gerald McLinden, “Integrity in Customs”, in Luc de Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 69

explaining corruption. One study in Tanzania and Uganda found that even with relatively high salaries and good working conditions, corruption may persist because salaries can never equal the amount that officials can make from taking bribes. Odd-Helge Fjelstad, Ivar Kolstad, and Siri Lange, Autonomy, Incentives, and Patronage: A Study in the Tanzania and Uganda Revenue Authorities, published by the Michelsen Institute 2003 [cited by Gerald McLinden, “Integrity in Customs”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 82].


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Specifically, issues in the Mekong Region that lead to a relatively high incidence of integrity problems in most of the countries52 include: (i) complex and overlapping legislation resulting in overlapping interpretations; (ii) manual procedures and examination routines that involve a direct interface between the

Customs officers and traders; (iii) demands for high levels of support paperwork; (iv) limited regulation of customs brokers; (v) internal authorization routines that increase illicit payment requirements; (vi) a lack of adequate internal controls; (vii) a developing small and medium enterprise (SME) sector that is itself subject to integrity

and governance problems; and (viii) low pay and poor career opportunities for customs officers.53 However, all Mekong Region countries, through their respective membership in WCO, are parties to the Revised Arusha Declaration on Integrity in Customs and there are recent of examples of countries in the region addressing the integrity issue. (i) In Cambodia, GDCE put into practice a code of conduct 54 and ethics for customs

officers, although implementation of associated orders and guidelines was limited. However, the World Bank assisted Trade Facilitation and Competiveness Project has assisted GDCE in developing an Integrity Action Plan and revising its code of conduct and ethics as a customs strategy objective.55

(ii) In Lao PDR, the customs modernization support component of the Customs and Trade Facilitation Project is to include a USD 60,000 integrity and anticorruption support activity. Specifically, the project is to (a) finance the provision of consultancy support to assist Lao Customs Department officials in undertaking a review to assess the department’s current level of compliance with the Revised Arusha Declaration; (b) assist to design and launch a departmental national integrity and anti-corruption strategy; and (c) provide ongoing support and monitoring for its successful implementation.56

(iii) In Thailand, the Customs Department has since 2005 implemented a Transparency Partnership Project, including the signing of an MOU between the department and more than 100 companies to cooperate in the fight against corruption, as well as telephone hotline that the public can use report misconduct, corruption, and other problems.57

52 Consider that Transparency International’s [general] Corruption Perceptions Index 201 ranking 179 countries, on which Thailand ranks 78th, Viet Nam ranks 116th , Cambodia and Lao PDR are tied for 154th, and Myanmar ranks 176th (i.e., tied for last).For reference, New Zealand and Singapore were tied for first, while Japan ranked 5th and the United States ranked 22nd. http://www.transparency.org/policy_research/surveys_indices/cpi/2010. 53 Scott Wilson in association with PADECO and BFC, Technical Assistance for Preparation of the Vietnam Customs Modernization Project, Integrity Report, prepared for the General Department of Customs, March 2005, p. 3. 54 However, there is little or no evidence that the benefits of codes of conduct and posters outweigh their costs. See Bryane Michael and Nigel Moore, “What Do We Know About Corruption (and Anti-Corruption) in Customs?”, in World Customs Journal, Volume 4, Number 1, March 2010, p. 57. 55General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 105, 196. 56 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, p. 39. 57 Thai Customs Department, Snapshot of Thai Customs, June 2010, p. 40.


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(iv) The Customs Modernization Project in Viet Nam assisted by the World Bank included a component for development and implementation of a comprehensive integrity/anti-corruption program based on the Revised Arusha Declaration.58

Going forward, strategic objectives for achieving greater levels of customs integrity in the Mekong Region countries may include: (i) full implementation of an integrity policy that specifies the professional and personal conducts and standards of service required of all customs employees, and that is fully endorsed, observed, and supported by the management; (ii) provision of information on the customs integrity policy and appropriate training for every employee; (iii) development and implementation of a management control system that ensures that the integrity policy is applied; (iv) development and implementation of a management and organizational system that eliminates or minimizes opportunities for misconduct and corruption; (v) development and implementation of a recruitment system to select new employees that match the integrity profile of the customs administration; (vi) development and implementation of a system of internal sanctions for staff misconduct; and (vii) development of a remuneration system that ensures a sufficient level of staff salaries to support ethically correct behavior.59 5.7 Information Technology Automation and computerization of systems is an important tool for customs administrations as well as other government agencies in any country to simplify, standardize, and streamline transport and trade procedures. In most cases, customs information technology (IT) has been an integral part of customs reforms and modernization. With the use of IT technology, a customs administration can benefit from improved transparency, greater efficiency, and enhanced security. In addition, advancements in customs IT may facilitate the utilization of IT by other government agencies as well as private sector stakeholders60 including: (i) immigration, quarantine, transport, and security agencies), (ii) importers and exporters, (iii) freight forwarders, (iv) cargo carriers, (v) customs brokers, and (vi) financial institutions. Customs IT is usually considered as the core of a national single window. ASEAN defines a national single window as a system that enables: (i) a single submission of data and information; (ii) a single and synchronous processing of data and information; and (iii) single decision-making for customs release and clearance.61 ASEAN has called for full implementation of national single windows for the initial six members of ASEAN (including Thailand) as soon as possible and for Cambodia, Lao PDR, Myanmar, and Viet Nam by 2012, although at least informally it has been reported that now the first six ASEAN countries (including Thailand) are to implement national single windows by 2012 and all (including Cambodia, Lao PDR, Myanmar, and Viet Nam) by 2015, i.e., somewhat later than originally scheduled.62

58 (i) World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, 17 October 2005, Annex 4, p. 36; and (ii) Scott Wilson in association with PADECO and BFC, Technical Assistance for Preparation of the Vietnam Customs Modernization Project, Integrity Report, prepared for the General Department of Customs, March 2005. 59 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 23. 60 At the same time, customs administrations are increasingly required to integrate their systems and procedures with the global logistical networks used by international transport and trade operators. See source in previous footnote, p. 285. 61Agreement to Establish and Implement the ASEAN Single Window, 9 December 2005, Article 1. Single decision-making is to be uniformly interpreted as a single point of decision for the release of cargo by the customs administration on the basis of decisions, if required, taken by the line ministries and agencies and communicated in a timely manner to the customs administration. 62 Interview with Mr. S. Pushpanthan, Deputy Secretary-General of ASEAN for ASEAN Economic Community, 21 April 2009.


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There are various customs IT application system solutions. More than 90 countries around the world, including many developing countries, have implemented the Automated System for Customs Data (ASYCUDA) developed by the United Nations Conference on Trade and Development (UNCTAD) for their customs automation. ASYCUDA is an automated customs data management system that meets the major requirements of customs clearance. For example, ASYCUDA allows for the electronic processing of declarations, risk management, transit operations, and expedited clearance of goods, in addition to collecting timely and accurate statistical data for fiscal and trade policy objectives.63 (1) Cambodia Following GDCE’s Work Program for Customs Reform 2003-2008,64 and with USD 2.1 million in support from the World Bank’s Trade Facilitation and Competiveness Project initiated in 2005, GDCE has been implementing ASYCUDA World, the latest version of ASYCUDA, which features compatibility with major database management and operating systems, and the use of extensible markup language (XML) permits, multi-languages, and communication via the internet. 65 The project has proceeded in four phases: (i) a prototype stage to study customs procedures in the country, (ii) a pilot stage, commenced in July 2007, during which 15 PCs were installed at Sihanoukville port, where the electronic declaration was tested, as well as at Phnon Penh Airport and dry ports at Tech Srun and Teng Lay; (iii) a current phase including rollout of the system to customs offices countrywide, including Poipet on the border with Thailand, and Bavet on the border with Cambodia, both along the priority Southern Economic Corridor; and (iv) a final phase to establish linkages with other government agencies towards development of a national single window. Implementation of ASYCUDA World to date in Cambodia has raised several issues as follows: (i) There have been delays in project implementation. While the planned implementation

period was 24 months, it has taken 42 months to complete the implementation at the pilot sites. GDCE requires strong support in project management (e.g., assistance in setting up and managing a performance monitoring framework and developing quality control mechanisms);

(ii) Early during project implementation, the government decided not to proceed with the institutional model initially envisaged for the creation of a single window, the ASEAN commitment notwithstanding.

(iii) The sustainability of the ASYCUDA system depends on the IT capacity of GDCE, and ASYCUDA World, the latest version of ASYCUDA, employs the most advanced technology. The technical design did not adequately factor in Cambodia’s capacity constraints (e.g., it took time to find a cost-effective solution for a wide-area network). GDCE still has to largely depend on external resources for operation and maintenance of ASYCUDA system. The Cambodian border posts visited by the study team (i.e., Bavet and Poipet) lacked IT infrastructure and human resources. Once the infrastructure is installed and the officers are trained, there will still be a need to establish a helpdesk function at GDCE headquarters to provide assistance for day-to-day operations at the borders posts.

(iv) Procurement packaging could have been better designed to allow for the emerging, but weak capacity of the local IT industry and the risk that integrated software/hardware contracts will not deliver value for money. Also, the contract design could have

63 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 21, January 2008, p. 1. 64 Cambodia General Department of Customs and Excise, Work Program for Customs Reform 2003-2008, 2003. 65 See previous footnote.


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considered performance management considering the risks of delays in such a complex project.

(v) While the ASYCUDA system has facilitated customs procedures, there is a need to improve the process to facilitate trade. For example, the current customs procedures still require original documents for customs clearance. The pilot ASYCUDA site of Sihanoukville port has neither been networked nor interlinked with GDCE headquarters. The review of process and networking is essential to achieve more efficient process of customs clearance. Third, the sustainability of ASYCUDA systems needs to be strengthened. The GDCE still has to largely depend on the external resources for operation and maintenance of ASYCUDA system. The current situation at border posts where the Study Team visited (i.e., Bavet and Poipet) was more serious as the lack of IT infrastructure and human resources was observed. In view of this, there is a need to establish and strengthen the helpdesk functions at the GDCE to provide the assistance for the day-to-day operations at border posts.66

(2) Lao PDR The Lao PDR Department of Customs has utilized C2000 systems for the automation of its procedures. The system has been deployed at a number of Lao PDR’s border checkpoints, with 9 of the 19 international gateways directly connected with headquarters through the fiber optic cable Under the Customs and Trade Facilitation Project commenced in July 2008, the Lao PDR Department of Customs initiated the implementation of ASYCUDA World, at a cost of USD 2.14 million.67 This component of the project aims to improve the efficiency and effectiveness of customs administration by simplification of customs procedures, elimination of duplication and redundancy, reduction of transaction costs and time to clear goods, and increase of transparency and accountability. The implementation of ASYCUDA World is to take about 27 months in three phases,68 in order to meet an ASEAN requirement for national single window implementation originally set for 2012 (and, according to some reports, later extended to 2015 for Cambodia, Lao PDR, Myanmar, and Viet Nam). One interesting feature is a project is a plan to implement WTO-compliant user fees to ensure the sustainability of the IT systems to be implemented. A project effectiveness condition specifies that all revenue from the fee be retained in a special escrow account specifically

66 Sources include: (i) General Department Customs and Excise, Briefly Progress of ASYCUDA Implementation (July 2006-July 2010), August 2010; (ii) World Bank, Project Paper Supporting the Restructuring of the Grant H-165KH, Cambodia: Trade Facilitation and Competiveness Project (TFCP), 12 November 2009; (iii) World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005; and (iv) site visits by the study team to Poipet on 15 November 2010, and Bavet on 26 November 2010. 67 General Department Customs and Excise, Briefly Progress of ASYCUDA Implementation (July 2006-July 2010), August 2010 [USD 4.22 million, USD 3.98 million to be financed by the International Development Association, IDA, of the World Bank Group, according to World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005). 68 In Phase 1, a fully functional prototype will be developed by the project team at the headquarters of the Lao PDR Customs Department. As a preliminary to this phase, a mapping of the current export and import processes was carried out, to identify all documentation requirements. Upon validation of the prototype, in Phase 2 the system will be deployed at a pilot site, expected to be Thanaleng in 2010. The process of installing the computerized system will be accompanied by adaptation and introduction of procedures and documentation. This will involve substantial interaction with, and training of, the trading community to ensure maximum efficiency and promote the government's priority policy to liberalize the trading process. Upon validation of the pilot, in Phase 3, the nationwide rollout of the system to customs offices will be carried out. World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, pp. 6-7, 23-26.


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dedicate for support of the ASYCUDA system. The fee will cover only the cost of processing import, export, and transit declarations and is expected to be modest.69 Procurement of the ASYCUDA World System from UNCTAD is to be based on the direct contracting method. However, based on UNCTAD’s detailed technical and financial proposals and after negotiations, the draft negotiated contract was reviewed by IDA.70 It has not been long since commencement of the ASYCUDA World system implementation and the deployment of international consultants for the prototype development in Lao PDR. The detailed specifications have yet been developed. Considering the relatively long time required for preparation of the necessary documents for customs clearance in Lao PDR (and other Mekong Region countries), the development of the prototype should be associated with a substantial change of business procedures. The World Bank has suggested that while implementation of ASYCUDA is likely to streamline and rationalize processes and procedures and provide a sound platform for the introduction of a range of internationally agreed standards, it is unlikely to realize its full potential unless a number of complementary reforms and operational changes are implemented in parallel with system implementation. Accordingly, the ongoing World Bank project will also finance a range of capacity building activities and a long-term international customs reform and modernization advisor.71 (3) Myanmar The Myanmar Customs Administration has not yet commenced automation. Currently, customs procedures in Myanmar are manual except for database development for statistical purposes. However, like the other Mekong Region (as well as the other ASEAN) countries, the Myanmar has recognized that Customs IT is a key component for trade facilitation and accordingly it is now planning to implement a customs IT application system. In 2009 the Myanmar Customs Administration studied two alternatives: (i) a USD 2.2 million proposal for initial implementation of UNCTAD’s ASYCUDA, and (ii) a EUR 9.9 million proposal for implementation of UNI-PASS developed by the Korea Customs UNI-PASS Information Association (CUPIA). The CUPIA proposal was recommended partly because it would allow for single window implementation; it has been forwarded to the Cabinet for approval.72 UNI-PASS was originally developed and implemented by the [Republic of] Korea Customs Service. 73 Since the early 2000s, CUPIA has promoted the export of UNI-PASS to other countries, such as Nepal and the Dominican Republic. The package has been translated into English (and Spanish). Going forward, the Myanmar Customs Administration faces a number of challenges to successfully implement customs IT, particularly in view of the requirement to implement national single window by 2012 or 2015, and considering that Myanmar is the only country in 69 See source in previous footnote, p. 9, paragraph 9. 70 See source in previous footnote, Annex 6, p. 53, paragraph 2. 71 With support from the advisor, a technical assistance sub-component is to be implemented (e.g., to support the introduction of the WTO ACV, post-clearance audit, risk management, introduction of an advance rulings regime, the development of an integrity and anti-corruption strategy). World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, pp. 7-8. 72 Interviews with the Myanmar Customs Administration, 29-30 November 2010. 73 http://www.unipass.or.kr/eng/ds2_2_2.html. UNIPASS is a general term that encompasses the services of the Korea Customs Service, including clearance, cargo management, and duty collection. A possible alternative model worthy of consideration by Myanmar and other Mekong Region customs administrations is the new Japanese single window (NACCS, originally Nippon Automated Port and Cargo Consolidated Cargo System). See, e.g., Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010.


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the Mekong Region that has not yet initiated a customs IT project. Development of customs software will require substantial time to implement even though the Myanmar Customs Administration plans to adapt package (“off-the-shelf”) solutions. Since current customs procedures in Myanmar are highly centralized, there may be a need to review the process as a whole and decentralize some functions to the borders together with the systems installation. (4) Thailand The Thai Customs Department implemented electronic data interchange to control all commercial customs operations with the introduction of a computer clearance system for exports in 1998. The system was expanded to cover imports and fully implemented at seaports and airports nationwide in 2000. The Thai Customs Department shifted to an open system philosophy and upgraded the application systems to web-based “e-Customs”, i.e., a system linked with other government agencies, transport operators, banks, free zone, and warehouse operators to exchange information electronically. The e-Customs system was implemented on 1 January 2007 and comprises e-Import, e-Export, e-Manifest, e-Payment, and e-Warehouse subsystems. The system provides a paperless environment for customs procedures. The system is administered by Thai Customs Department with the assistance of a private contractor that provides technical support and maintenance. The private contractor also provides hotline support to the border posts for troubleshooting of hardware, software, and network failures. The first phase of national single window development officially commenced operation in Thailand in July 2008. The Thai Customs Department and 34 other government departments in 12 ministries signed an MOU to undertake data harmonization and document simplification/ standardization, in line with the recommendations of the National Logistics Committee chaired by the Prime Minister and the Agreement to Establish and Implement the ASEAN Single Window of 9 December 2005. The second phase of the national single window initiative commenced in June 2010, and the project is scheduled for completion in November 2011, although indications that meeting this deadline will be difficult.74 (5) Viet Nam In 1993 the UNDP and the Government of France financed a USD 2 million Customs Automation Project involving the implementation of ASYCUDA v.2.7, provided by UNCTAD. The system was installed over several years, but by 2000 the project was stopped. Customs has since engaged in a step-by-step provisioning of customs sites with computer equipment and communications.75 In line with an e-commerce project undertaken by the Ministry of Industry and Trade, an e-customs program was initiated to replace the ASYCUDA system and standardize and streamline the customs procedures nationwide. Piloting of the e-customs project in Haiphong and Ho Chi Minh City commenced in October 2005. Although the new e-customs does not provide a paperless environment, the pilot test proved the improvement of efficiency of customs procedures as the data is electronically transmitted to the checkpoints. GDVC accelerated the rollout of e-customs to other checkpoints. By 2009, a total of 36 or about 70% of the customs offices in the country have provided e-customs services. GDVC provides technical support at

74 This subsection draws upon: (i) interviews with the Thai Customs Department on 11 November and 9 December 2010; (ii) Thai Customs Department, Snapshot of Thai Customs, June 2010, pp. 14-17; and (iii) http://www.customs. go.th/Customs-Eng/indexEng.jsp. 75 Scott Wilson in association with PADECO, Information and Communications Technical Audit, Technical Assistance for Preparation of the Viet Nam Customs Modernization Project, [World Bank] PHRD Grant No. TF053144, prepared for General Department of Customs of the Ministry of Finance, Viet Nam, April 2005, p. 5.


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each Customs office. For example, Lao Bao Customs office has two technical staff to ensure the sustainable operation of the e-customs system.76 The World Bank-assisted Customs Modernization Project, commenced in 2005, has included a USD 41.4 million information and communications technology component, which was to include the development and implementation of a comprehensive and modern management information system to support redesigned Customs processes.77 However, a recent “midterm” review found serious delays in implementation (only 3% of the project funds have been disbursed), and that the government is considering cancelling the project, which currently scheduled to close in June 2011. While at the time of project appraisal Viet Nam was in the process of accession to WTO, post accession in January 2007 there has been resistance to a reform program in Customs and little progress.78 Viet Nam has been proceeding with development of its national single window under the ASEAN initiative. On 21 October 2009, Viet Nam Decision No. 2599/QD-BCDSW, established a steering committee on the ASEAN Single Window. Some assistance has been provided by USAID, as mentioned in Section 8.6. However, there are a number of challenges, e.g., the IT systems of the different ministries are quite different, the mechanism of sharing information between ministries and the private sector has not been established, and limited human and financial resources.79 (6) Regional As noted, ASEAN has called for full implementation of national single windows for the initial six members of ASEAN (including Thailand) as soon as possible and for Cambodia, Lao PDR, Myanmar, and Viet Nam by 2012, although at least informally it has been reported that now the first six ASEAN countries (including Thailand) are to implement national single windows by 2012 and all (including Cambodia, Lao PDR, Myanmar, and Viet Nam) by 2015, i.e., somewhat later than originally scheduled.80 As described in Section 8.6, both the ASEAN-EU Programme for Regional Integration Support—Phase II (APRIS II) and the USAID’s ASEAN Single Window (ASW) Program have provided support for the development of the national single windows. After establishment of the respective national single windows, an ASEAN single window would be established, as conceptualized in Figure 5-2.

76 See, e.g., (i) interview with General Department of Viet Nam Customs, 16 November 2010; and (ii) interviews at Moc Bai and Lao Bao border crossing points on 25 November 2010 and 3 December, respectively; (iii) a PowerPoint presentation by Quangtri Provincial Customs, 3 December 2010; and (iv) Scott Wilson in association with PADECO, Information and Communications Technical Audit, Technical Assistance for Preparation of the Viet Nam Customs Modernization Project,[World Bank] PHRD Grant No. TF053144, prepared for General Department of Customs of the Ministry of Finance, Viet Nam, April 2005. 77 World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, 17 October 2005, p. 6. 78 One issue may be that the General Department of Vietnam Customs has two modernization entities within its organization, one under the World Bank project as well as their own internal one. 79 The Implementation of National Single Window and ASEAN Single Window in Viet Nam, Asia-Pacific Economic Cooperation, presentation by Viet Nam at Single Window Working Group Capacity Building Workshop 4 (2009/SCCP/SWWG/WKSP4/011), Singapore, 6-8 April 2009 [downloaded from http://www.wcoomd.org/files/ 6.SW_Files/SW%20Initiatives/APEC/APEC%20-%20Viet%20Nam%20Implementation%20of%20NSW%20-%20 April%202009.pdf]. 80 Moreover, the development of the national single windows is likely to take even longer than that. Consider, for example, that as noted for Cambodia, “early during project implementation [of the World Bank assisted Trade Facilitation and Competiveness Project], the government decided not to proceed with the institutional model initially envisaged for the creation of a single window, the ASEAN commitment notwithstanding”.


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Notes: ASW = ASEAN Single window; NSW = National Single Window Source: Association of Southeast Asian Nations

Figure 5-2 Concept of the ASEAN Single Window (7) Summary of Findings Thailand and Viet Nam are the most advanced of the Mekong Region countries in customs automation. They have implemented their own customs IT systems are moving toward the development of national single windows. Cambodia and Lao PDR are currently at the stage of implementing ASYCUDA World, with Cambodia a couple of years ahead of Lao PDR, but both are both quite far from implementation of national single windows. Finally, Myanmar is just beginning to move towards customs automation. 5.8 Customs-Private Sector Cooperation An objective of all customs administrations should be to pursue close relationships with the trading community through transparent and efficient procedures. Strategic objectives may include: (i) establishment of legal preconditions for consideration of the legitimate needs of the trading community when new agreements, customs laws, policies, and procedures are developed and introduced; (ii) the development of trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (iii) formulation of strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iv) establishment of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.81 Recent developments in customs-private partnerships in the Mekong Region include the following: (i) On 9 October 2009, Cambodia issued Sub-Decree No. 906 on Establishment and

Functioning of a Customs-Private Sector Partnership Mechanism, which consists of a customs-export-oriented garment industry working group, a customs-export non-garment industry working group, and a customs-domestic market oriented working

81 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 31.

NSW NSW

NSW

NSW

NSW

NSW

NSW

NSW NSW

NSW

ASW


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group (Article 2). The Mechanism is to: (a) collaborate and seek mutual understanding between GDCE and the private sector, in terms of “enhancing fiscal ethics and maximum trade facilitation, in particular, the needs for understanding of existing regulations (e.g., enhancement of the level of legal compliance, simplification of customs procedures); (b) resolve all issues and misunderstandings to effectively implement the government’s trade facilitation policy; and (c) coordinate the private sector’s involvement in the development and revision of customs regulations (Article 6). Based on the results of quarterly meetings, requests for actions by competent authorities may be made, accompanied by relevant documentation (Article 7).82 Also worth noting, since 2009 Cambodia has introduced a registered (licensed) customs broker program, in accordance with Ministerial Decision (Prakas) No. 115 on Establishing and Functioning of Customs Brokers.

(ii) Long-standing customs-private sector cooperation in Thailand includes: (a) a joint committee between customs and the private sector, which serves as a formal consultative mechanism with freight forwarders, shipping agents, customs brokers, and chambers of commerce, and which discusses changes in customs services, monitoring, and evaluation of customs performance, and providing advice on the streamlining of customs services; (b) under a Transparency Partnership Project, the signing of an MOU between the Thai Customs Department and more than 100 companies to cooperate in the fight against corruption (as noted above); (c) the establishment of a customs hotline to handle complaints on corruption and misconduct and solve problems encountered by the business community during cargo clearance (also as noted above); (d) establishment of a licensed customs broker scheme (operating since 1998, with 300 registered companies); (e) establishment of a gold card scheme, by which an importer with a good record with customs for at least the past three years and possesses other qualifications is eligible; (f) establishment of a customs clinic, to address all customs-related problems; (g) establishment of a local private sector cooperation center; and (h) implementation of a corporate social responsibility (CSR) project.83

(iii) In Viet Nam, WCO’s private sector consultative group (PSCG) recently launched a cooperation initiative to provide capacity building support to GDVC. The first area of cooperation focused on the development and implementation of a trusted-trader program, which is equivalent to an AEO program, to be piloted in 2011, with the aim of promoting grater trade facilitation and voluntary compliance, as well as closer cooperation between GDVC and the local private sector stakeholders. A first work session, held in December 2010, focused on gathering input and recommendations from all concerned parties. The trusted-trader program is to authorize compliant traders to benefit from expedited clearance, reduced inspection rates, and improved services; in exchange, traders will be required to maintain a high level of compliance, use e-Customs, and maintain transparent accounting practices. Initially, the program is expected to be open to several manufacturing and trading enterprises.84

Depending on the current level of customs-private sector cooperation in a country, future actions may include: (i) the conclusion of MOUs between the customs administration and the trading community, (ii) the establishment of cooperation forums such as customs consultative committees, comprising representatives from customs, trade organizations, or other

82 Ministry of Economy and Finance, General Department of Cambodia Customs and Excise, Cambodia Chamber of Commerce, and Japan International Cooperation Agency, Customs-Private Sector Partnership Mechanism (CPPM), published with assistance from the Japan International Cooperation Agency, 2009. 83 Thai Customs Department, Snapshot of Thai Customs, June 2010, pp. 40-41. 84 Participants at roundtable meetings included the International Federation of Customs Brokers Association (PSCG Chair), IBM, Hutchison Port Holdings, Limited Brands, Nissan, and Samsung Electronics. http://www.wcoomd.org/home_cboverviewboxes_cbnews1_cbarwcopscgvietnamcustoms.htm.


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representative groups from the private sector and other relevant government agencies to meet on a regular basis, (iii) mechanisms to ensure that customs working methods and IT systems are, where appropriate, developed in cooperation between the customs administration and the trading community;85 and (iv) development of AEO or trusted-trader programs. 5.9 Transit Customs transit relates to the custom procedures under which cargo is transported across countries from one customs office to another without paying duties, domestic consumption taxes, or other charges normally assessed on imports.86 The procedures are designed to protect the revenues of the country of transit by avoiding the leakage of the goods into the domestic economy, while being simple enough to avoid excessive delays and costs. Key elements of transit include seals, to physically secure the goods while in transit, guarantees to customs to cover the payments of duties, taxes, and other charges if the goods do not leave the country when using the transit procedure, and a documentation flow to monitor the transit procedure. 87 Internationally, the Transit International Routier (TIR) transit system has been operating since the 1950s and the European Union’s community transit system has been operating the 1980s. In the Mekong Region countries transit procedures are not well-developed, as outlined below: (i) To date, there is no international transit in Cambodia, but only national transit, mainly

for movement of goods from the seaport to the inland dry port. GDCE does not require a guarantee for such national transit.

(ii) In Lao PDR, a security guarantee is required for the transit of goods. A guarantee waiver is granted to the Lao International Freight Forwarders Association (LIFFA). A bank guarantee is also acceptable as security but is not used by traders.

(iii) Myanmar has not yet implemented any simplified transit procedures.

(iv) Declarations for transit in Thailand are processed manually and supporting documents (e.g., invoices, bills of lading) are mandatory. The procedures in place are supported by the legal framework and information is made available on the customs Website. However, simplifications are not applicable for the transit procedure and the guarantee required for transit is THB 1 million Baht regardless of transaction volume and is normally valid for one year.

(v) Viet Nam has not yet implemented any simplifications of transit procedures. While there is no registration required with Customs for transit operators, a license to handle transit is issued by the Ministry of Trade. As in the case of Cambodia, there is no guarantee required for transit.88

85 See, e.g., European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 32. 86 As defined in Article 3(u) of the CBTA, transit traffic is the “transport of goods across the territory of a Contracting Party when the passage through this territory is only a portion of a complete journey starting and ending beyond the frontiers of a Contracting Party across whose territory the traffic passes”. 87 Jean-François Arvis, “Transit and the Special Case of Landlocked Countries”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, pp. 243-45. There is a distinction between international transit, which refers to the crossing of national borders, and national transit, when goods are transferred within the national borders from the first point of entry to the point where customs procedures are undertaken. See previous source, p. 244. This subection focuses on international transit. 88 (i) ASEAN-EU Programme for Regional Integration Support – Phase II (APRIS II) and The European Commission, Technical Assistance Project, Sub-project Number 2.c.1, ASEAN Customs Transit System (ACTS), ICT Feasibility Study Report, 11 November 2008, pp. 23-32; and (ii) and interviews with the Myanmar Customs Administration, 29-30 November 2010.


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To facilitate international transit, the Mekong Region countries, through the GMS (of which they constitute five of the six countries) and ASEAN (of they constitute five of the ten countries) have recently opted to develop international transit systems through the GMS Cross-Border Transport Agreement (CBTA) and the ASEAN Framework Agreement on Goods in Transit.89 Each is discussed below. The GMS customs transit system (CTS) is provided for by: (i) Annex 6, which provides a Transit and Inland Cargo Clearance Regime, which is modeled upon the TIR Convention (1975), and which relates to the transit of commercial cargo; (ii) Annex 8, which provides for the Temporary Importation of Motor Vehicles, and is modeled upon the Customs Convention on the Temporary Importation of Commercial Road Vehicles; and (iii) Annex 14, which provides a Container Customs Regime, and which is modeled upon the Customs Convention on Containers (1976). It was formulated and negotiated in the early 2000s, signed in 2007, and has been ratified by four of the six GMS countries (i.e., all except for Myanmar and Thailand). The GMS transit regime requires each country to authorize a national organization/institution to issue the customs transit document to vetted and authorized road transport operators. The national organization/institution provides a guarantee to customs authorities on behalf of road transport operators to whom they have issued Customs transit documents, in respect of any payment of duties and taxes due. The national organization/institution acts as intermediary between national customs authorities and the road transport operator in regard to the proper conduct of the transit operation. The appointed national organization/institution—known as the “issuing/guaranteeing organization”—is usually an industry representative body, such as a road transport association or chamber of commerce. The rules or conditions for operation, consistent are embodied in a series of formal agreements between parties and which bind each: (i) National GovernmentIssuing/Guaranteeing Organization; (ii) Issuing/Guaranteeing OrganizationCustoms authorities; and (iii) Issuing/Guaranteeing OrganizationRoad Transport Operator. Figure 5-3 presents the structure of the GMS customs transport system as proposed and implemented on a pilot basis along the East-West Economic Corridor in June 2009.90

89 Accession to the TIR convention was considered unrealistic by the Mekong Region countries because of its level of complexity and onerous requirements. 90 Asian Development Bank, Greater Mekong Subregion Customs Transit System, 2009, p.2.


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Note: The arrows between/among the parties, i.e., Customs, the Issuing/Guaranteeing Organization and approved Transport Operator, represent the formal agreements that establish the conditions, rights, and obligations of each. Source: Asian Development Bank, Greater Mekong Subregion Customs Transit System, 2009, p.4

Figure 5-3 Model of the Structure of the GMS Customs Transit System (Initial Implementation along the East-West Economic Corridor)

Protocol 7 (Customs Transit System) of the ASEAN Framework Agreement on Facilitation of Goods in Transit (1998) calls for a customs transit regime, which was to be operationalized by 2000 according to ASEAN’s the 1999-2004 Hanoi Action Plan. However, detailed development of the ASEAN customs transit regime did not take place until 2008 under the APRIS II project. Rather than being based on the TIR system, the emerging ASEAN customs transit system is based on the EU’s Common Transit system (and Singapore’s national transit system, which is modeled on the EU Common Transit system). A key feature of the ASEAN system is that it is fully computerized and uses electronic messages for exchange of message between traders and Customs, and between Customs authorities. 91 An amendment to Protocol 7 was agreed in principle at an ASEAN Customs Directors General Meeting in June 2010 and full pilot project implementation is expected in 2011 along a corridor linking Thailand, Malaysia, and Singapore, with assistance from an “APRIS III” project to commence around mid-2011.92 91 ASEAN-EU Programme for Regional Integration Support – Phase II (APRIS II) and The European Commission, 1998 ASEAN Framework Agreement on Facilitation of Goods in Transit (AFAFGT): Realisation of the ASEAN Customs Transit System, October 2008. At each border a message that the goods in transit have been cleared would be prepared and forwarded to the next Customs post and so on. There would be immediate acquittal without a need to wait for the paper forms; banks in the region have indicated interest in underwriting this system at competitive rates. Interview with Mr. David Martin, Team Leader, European Technical Assistance Team, ASEAN-EU Programme for Regional Integration Support (APRIS) – Phase II, 21 April 2009. 92 Because Cambodia, Lao, PDR, and Vietnam ( as well as Viet Nam) are behind other ASEAN countries in implementing complete national customs declaration processing systems within a sustainable national telecommunication environment, it was deemed prudent to proceed with the ASEAN customs transit system project on a phased basis, addressing the corridor between Thailand and Singapore (through Malaysia) initially. ASEAN-EU Programme for Regional Integration Support – Phase II (APRIS II) and The European Commission, Technical Assistance Project, Sub-project Number 2.c.1, ASEAN Customs Transit System (ACTS), ICT Feasibility Study Report, 11 November 2008, p. 33.

Thai Customs

Lao PDR Customs

Viet Nam Customs

Viet Nam Transport Operator

Lao Transport Operator

Thai Transport Operator

Transit Goods Movement

Board of Trade Lao International

Freight Forwarders Association

Viet Nam Automobile Transport

Association Bank Guarantee/Deposit

Bank Guarantee/Deposit

Bank Guarantee/Deposit


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Proponents of the ASEAN customs transit system argue that it is superior to the GMS customs transit system because: (i) the TIR system on which the GMS system is outdated; (ii) the GMS system is paper-based and therefore vulnerable to fraud and administrative errors as well as being outdated; and (iii) the GMS guarantee arrangements are unnecessarily complicated and likely to be inadequate to meet liabilities in the event of organized fraud.93 On the other hand, proponents of the GMS customs transit system argue that since it is “inspired” by the TIR system, it will allow for easy and seamless transition in the future to the full TIR system, which is a goal of the GMS countries, seeking to assure trade and transport connectivity with other parts of Asia and the world, where the TIR regime is in force. Also, proponents of the GMS system argue that its strength lies in its simplicity since it involves a collective and continuous security, which means that the guarantee is to be provided only once for all the operators of a whole country together and for an indefinite period of time.94 It is also argued that the full computerization of the GMS CTS would delay its operationality for another 10-15 years.95 The GMS and ASEAN customs transit systems are not necessarily mutually exclusive. For historical and practical reasons, the Community Transit and TIR system operate simultaneously in the same countries in Europe.96 That said, the upcoming ADB C-R-PATA will assess the consistency of the GMS customs transit system with the ASEAN customs transit system based on a comprehensive evaluation of implementation challenges (e.g., financial guarantees). For full implementation of the GMS and/or the ASEAN regional transit system, the national laws, regulations, management plans, instructions, and guidelines of the respective countries will need to be revised for compatibility with the regional system(s). 97 Also, a radio frequency identification (RFID)/global positioning system (GPS) tracking system could facilitate implementation of the customs transit system(s) by improving customs control of transit traffic.

93 See sources in previous footnote. 94 This way of providing the security is considered realistic. The creation of a regional supranational institution with local member organizations representing each other for the purpose of guaranteeing the operations may be utopian in the near future. The differentiation of the guarantee according to the concrete type and value of each individual transport operation and identity of the transport operator would require ad hoc guarantees on a case per case basis. Such an ad hoc system is contrary to facilitation because it would dramatically increase the administrative effort time is ripe. 95 ICT application was envisaged in the CBTA instruments: see, e.g., Article 3(c) of CBTA Annex 4 and Article 1(b) (xii) of CBTA Annex 6. Arguably, a strength of the CBTA system lies in the fact that it is designed to accommodate at the same time: (i) a paper-based regime, which allows immediate operationality; and (ii) an ICT system, which can be implemented in the future when the time is ripe. Consider, for example, that only now there are plans to automate the TIR system, which has been operational already for decades. 96 ASEAN-EU Programme for Regional Integration Support – Phase II (APRIS II) and The European Commission, 1998 ASEAN Framework Agreement on Facilitation of Goods in Transit (AFAFGT): Realisation of the ASEAN Customs Transit System, October 2008, p. 14. 97 E.g., as noted in Section 4.2(2), the provision for international transit in the Lao PDR Law on Customs is not efficient. Article 33 covers transit through Lao PDR of, e.g., Thai goods to Viet Nam or Vietnamese goods to Thailand; for these operations, transit goods guarantee permits must be presented to customs checkpoints at the offices of entry and exit controls as well as to customs officers along the routes used (mobile checkpoints). Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 39.

Survey on Improvement of Customs Procedures Chapter 6 Border-Level Issues: Assessment of for Trade Facilitation in the Mekong Region Selected Border Crossing Points

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Chapter 6 Border-Level Issues: Assessment of Selected Border Crossing Points

6.1 Introduction This section explores border-level issues through an assessment of the six border crossings visited during the field survey for this study. These included: (i) Poipet (Cambodia)-Aranyaprathet (Thailand), (ii) Bavet (Cambodia)-Moc Bai (Viet Nam), (iii) Thanaleng (Lao PDR)-Nong Khai (Thailand), (iv) Mukdahan (Thailand)-Savannakhet/Kaysone Phomvihane (Lao PDR), (v) Dansavanh (Lao PDR)-Lao Bao (Viet Nam), and (vi) Mae Sai (Thailand)-Tachileik (Myanmar). 1 Border crossing pairs (i) and (ii) are along the Southern Economic Corridor, (iv) and (v) are along the East-West Economic Corridor, (vi) is along the North-South Economic Corridor, while (iii) is along an “other corridor/route” identified in Protocol 1 of the CBTA as well as the Northeastern Corridor identified in the 2006 GMS Transport Sector Strategy Study. Figure 6-1 maps the locations of these border crossing pairs, and Table 6-1 sets out characteristics of border crossing point assessed in this study.

Bangkok

Ho Chi Minh City

Hanoi

Phnom Penh

Vientiane

Moc Bai

Bavet

Aranyaprathet

Poipet

Savannakhet Lao Bao

DansavanhMukdahan

Nong Khai

Tachileik

Mae Sai

Myawaddy

Mae Sot

Southern Economic Corridor

Thanaleng

East-WestEconomic Corridor

North-South Economic Corridor Northeastern

Economic Corridor


Figure 6-1 Map of Border Crossing Pairs Visited

1 A visit to Mae Sot/Myawaddy was initially planned but not undertaken for security reasons.


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Table 6-1 Characteristics of Border Crossing Points Assessed in This Study Border Crossing Point Pair Situational Context Traffic Delay Time Poipet (Cambodia) –Aranyaprathet (Thailand)

One of two border crossings along the priority Southern Economic Corridor linking Thailand, Cambodia, and Viet Nam, identified as the highest priority in the first GMS Subregional Transport Sector Study in 1994

Medium (120 trucks per day, 2010) Very little intra-GMS transit traffic due to the difficulties of transiting Cambodia

Medium (6.7 hours on both sides, total elapsed time; 2005)

Bavet (Cambodia) – Moc Bai (Viet Nam)

One of two border crossings along the priority Southern Economic Corridor linking Thailand, Cambodia, and Viet Nam, identified as the highest priority in the first GMS Subregional Transport Sector Study in 1994

Medium (130 trucks per day, 2010)

Medium (2.4-3.0 hours, 2005, both sides, but during the site visit batch processing of trucks was observed on the Viet Nam side, an inefficient practice by which about 20 trucks were held and then simultaneously released; also a transshipment problem was observed in the 2005 time releases study and this was not included in the “total elapsed time”)


At the site of the Australia-funded 1,174 km Friendship Bridge, which opened in 1994; is on the busiest route to/from Vientiane (about 25 km from Thanaleng) Listed as a border crossing along one of the “Other Corridors/Routes” in Protocol 1 of the CBTA; however, in the 2006 GMS Transport Sector Strategy Study, a Northeastern Corridor was identified linking Nanning, Hanoi, Vientiane, and Bangkok/Laem Chabang

High (195 trucks per day, 2010) A small volume of intra-GMS transit traffic

High (19 hours on Lao PDR side; submission to approval, 2009)


At the site of the 1,600 m long Japan-funded Second Mekong International Bridge (the Second Thai-Lao Friendship Bridge Friendship Bridge II), which opened in 2006, one of three border crossings along the priority East-West Economic Corridor linking Myanmar, Thailand, Lao PDR, and Viet Nam included in Protocol 1 of the CBTA

Medium (150 trucks per day, 2010)

Medium (3.4 hours on the Lao PDR side; submission to approval, 2009)

Dansavanh (Thailand) – Lao Bao (Viet Nam)

Easternmost of the three border crossings along the priority East-West Economic Corridor linking Myanmar, Thailand, Lao PDR, and Viet Nam included in Protocol 1 of the CBTA

Low (80 trucks per day, 2010)

Medium (2.3 hours on the Lao PDR side; submission to approval, 2009)


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Border Crossing Point Pair Situational Context Traffic Delay Time Mae Sai (Thailand) – Tachileik (Myanmar)

One of two border crossings along an alternate of the priority North-South Economic Corridor linking Thailand, Myanmar, and the PRC (the last named not one of the Mekong Region countries as defined in this study) included in Protocol 1 of the CBTA

High (240 trucks per day, 2010)

No time release data available

Notes: (1) Traffic: below 100=low, 100-190 = medium, and more than 190 = high (2) Delay time: both sides, less than 2 hours (none) = low, 4-8 hours = medium, more than 8 hours = high Source: JICA Study Team The assessment in the following subsections considers the situational context, infrastructure, operations, and steps forward for each border crossing pair. The final subsection presents a summary of findings. 6.2 Poipet (Cambodia)–Aranyaprathet (Thailand)2 Poipet-Aranyaprathet is one of two border crossings along the priority Southern Economic Corridor route linking Thailand, Cambodia, and Viet Nam included in Protocol 1 of the CBTA, specifically Bangkok/Laem Chabang-Phnom Penh-Ho Chi Minh City/Vung Tau (the other is Bavet-Moc Bai, discussed below). This route, designated R1, was identified as the highest priority in the first GMS Subregional Transport Sector Study in 1994.3 Cross-border traffic averages a total of about 110 trucks per day in both directions.4 There is very little intra-GMS transit traffic due to the difficulties of transiting Cambodia.5 Findings with respect to the infrastructure at Poipet-Aranyaprathet follow: (i) A simplified diagram of the border crossing points is presented in Figure 6-2:

2 This subsection draws from: (i) a site visit undertaken on 15 November 2010, including interviews with (a) Mr. Ratchapol Ornnim, Customs Inspector, Aranyaprathet Customs House; (b) Ms. Savika Nak-on, Customs Inspector, Aranyaprathet Customs House; (c) Mr. Choup En, Chief of Poipet Customs; (d) Mr. Norng Sokhom, Deputy Chief of Poipet Customs; (e) Mr. Pol Ratanek, Deputy Chief of Poipet Customs; (f) Mr. Muy Pagnarith, Customs Officer, Poipet Customs; (g) Mr. Chey Sokchea, Customs Officer, Poipet Customs; and (h) Mr. Lv Bunson, Customs Officer, Poipet Customs; (ii) a PowerPoint presentation by the Aranyaprathet Customs House, 15 November 2010; (iii) European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010; and (iv) Asian Development Bank, Time Release “Before” Study for the Poipet-Aranyaprathet Border Crossing Points, 2005. 3 PADECO Co., Ltd., GMS Subregional Transport Sector Study, prepared for the Asian Development Bank, 1994. The Phnom Penh to Ho Chi Minh City Highway Project was the first cross-border transport project assisted by ADB. 4 The main cargo items from Thailand to Cambodia include construction materials, cement, steel, motorcycles, and second-hand clothes (the last named from Singapore). The main cargo items from Cambodia to Thailand include handicrafts, finished garments, and handmade furniture. 5 Constraints noted by one private sector logistics company include: (i) the need to apply at least 48 hours in advance for approval for a shipment to travel under bond from the border to Phnom Penh (which is time consuming and expensive) – the need for the physical paperwork to be taken from Phnom Penh and back to the borders delays the entire process and adds considerable costs; (ii) the need to obtain transit approval from each province and to provide documents for this process, which delays the transit and hence increases the costs to all; (iii) the need to apply for an export license/approval, 48 hours in advance of an export shipment, which greatly reduces the competitive advantage of Cambodian products – the timing is uncertain and not guaranteed to be issued even in 48 hours; and (iv) the need to pay substantial levels of “tea money” for even the most basic of approvals to be processed in these times.


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Source: JICA

Figure 6-2 Diagram of the Poipet-Aranyaprathet Border Crossing Points

(ii) On the Cambodian side, the BCP site includes a number of hotels and about seven

casinos frequented by Thai visitors. Other trading activities affecting BCP use and congestion include a large clothes and consumer goods market close to the main BCP. Also, there is an industrial zone on the Thai side of the BCP.

(iii) On both sides, the border crossing point access road is very narrow with no area for trucks to park and for drivers to rest and prepare for the border crossing; trucks park on the road causing congestion and a safety hazard. On the Cambodian side, transshipment occurs in several private areas about 2 km away.

(iv) On the Thai side, there are several primary exit and entry vehicle inspection lanes plus footpaths designated for cross-border pedestrians consisting of backpack tourists and people working at or near the border crossing point. There is no lane segregation: cars, trucks, and buses are mixed in the same lane. However, there is a gold card fast track service for registered users. Each primary inspection lane has an entry barrier gate.

(v) On neither side is there primary inspection lane non-intrusive inspection equipment, e.g., vehicle number registration number plate scanners, truck x-ray scanners, heat scanners, passport and visa scanners.

(vi) On neither side is there a single building for all border control agencies, which would enable “single-roof inspection”.

(vii) Computer facilities, internet/intranet connectivity, and electricity are adequate on the Thai side. On the Cambodia side, there is only a small quantity of computer equipment, none of which is adequate for a Customs BCP; they have only four PCs (two of which were purchased two years ago). There is neither a local area network (LAN) nor an internet connection. Four officers use the four PCs to prepare monthly reports. No information is exchanged with the Thai side. The stability of the power supply is an issue on the Cambodia side because electricity is cut on average once a week each for about 10-30 minutes. There is no backup power generator.

(viii) While Thailand has installed an e-Customs system, all imports at Aranyaprathet are cleared using paper-based documents. On the Cambodia side, ASYCUDA is not yet operating; it is scheduled for implementation in Poipet in July 2011 under the World Bank assisted Trade Facilitation and Competiveness Project.

Findings with respect to operations at Poipet-Aranyaprathet follow: (i) In principle, the border operating hours are 0700 to 1900 on both sides every day. As at

other Mekong Region border crossings, closures of 1-2 hours for lunch have been reported by the private sector.


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(ii) On the Thai side, seven agencies are represented at the border including Customs, Immigration, Food and Drugs, Animal Quarantine, Public Health, Ministry of Agriculture, and Foreign Trade. There is a “one stop service center” equipped with office furniture and some PCs but they were not functioning at the time of the visit. Joint agency primary inspection teams are not used, but there is a plan to implement some form of coordinated border management on the Thai side in 2011; the Municipality and Customs were scheduling a meeting to discuss how to proceed.

(iii) On the Cambodian side, border agencies include the representative of the Governor of the Banteay Meanchey Province (who plays the lead role), Customs, Camcontrol (under the Ministry of Commerce and which acts as a duplicate customs agency in many respects), Police, Immigration, and Quarantine (including the ministries of Health and Agriculture). There is no area for joint inspection by the Cambodian border control agencies. A total of 44% of the steps in both the import and export process at Poipet are at the customs house.6

(iv) On both sides, all imports are cleared at the border, except for liquefied natural gas, which on the Cambodian side is cleared in the town.

(v) On both sides, no pre-release import or export method is applied. No import and export pre-alert is used in Thailand. In Cambodia, pre-alert is used for known importers but their goods are checked in the red lane

(vi) The Thai side applies IT for risk management using local risk profiles and central risk profiles at headquarters; on the Thai side, the rate of customs physical inspection is 40%. There is no risk management practiced yet on the Cambodian side, although a JICA risk management expert based in Bangkok visited this BCP; on the Cambodian side, the secondary physical inspection rate for imports is currently 10-15%, although 100% inspection is carried out for certain cargo items.

(vii) On the Cambodian side, obtaining accurate HS tariff classifications is a problem for brokers using paper documents, which delays some cargo because the declaration must be resubmitted. Brokers need to keep up-to-date with tariff changes such as the 5%-15% tariff reduction in the ASEAN region for cement. Customs revenue has dropped as a result. In addition, brokers need to be aware of the tariff structure. However, the regular commodities passing this BCP such as cement and steel scrap should be relatively easy to clear.

(viii) On the Thai side, there are 69 customs staff of which 59 are permanent Thai Customs officers and the remaining are staff on temporary assignment. There are 35 customs officers working on the Cambodian side.

(ix) Especially Cambodian Customs officers need to learn technical customs terms in English in order to read declarations, manifests, and packing lists.

(x) A time release study at this border crossing conducted by ADB in 2005 surveyed exports from Thailand to Cambodia and found processing time of 12 minutes and elapsed time of 150 minutes on the Thai side, and processing time of 55 minutes and elapsed time of 255 minutes on the Cambodian side. Total elapsed time on both sides was 405 minutes (i.e., six hours and 45 minutes).7

(xi) The recent development partner assisted [Cambodia] Trade Mapping Study found that the process at Poipet required 2-3 hours and up to a day, at least four different

6 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, Figure 12, p. 29. 7 Asian Development Bank, Time Release “Before” Study for the Poipet-Aranyaprathet Border Crossing Points, 2005, paragraphs 8-9.


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documents, and at least THB 1,000 in informal fees. Specific problems included: (a) complicated processes, (b) process steps not providing valued added, (c) institutionalized unofficial fees, (d) a lack of private sector understanding and information; and (e) a lack of differentiation and risk management implementation.8

(xii) A Memorandum of Understanding for Initial Implementation of the Cross-Border Transport Agreement at Poipet-Aranyaprathet was signed on 4 July 2005. It consisted of over 50 articles including provisions for single-stop and single-window inspection9 and provisions for opening the border crossing points on request (to transition toward round-the-clock operation), but it was never effectively implemented.

(xiii) There is no bilateral road transport agreement10 between Cambodia and Thailand. A May 2010 Memorandum of Understanding between the Royal Government of Cambodia and the Government of the Kingdom of Thailand on the Exchange of Traffic Rights for Cross Border Transport Through the Aranyaprathet-Poipet Border Crossing Points provides for an initial exchange of traffic rights for 40 vehicles, but it has not been ratified by the Thai Parliament as required by Article 190 of the Thai constitution,11 with unrelated political issues between the countries possibly a cause for the delay.

In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic,12 most likely 12 km south of the current location, at Nong Auen (Thailand)-Stoung Bot (Cambodia). The proposal was originally made by Cambodia. A potential obstacle is that the streambed border is not well defined. The University of the Thai Chamber of Commerce is undertaking a preliminary study of the border crossing point relocation.13 If the border demarcation issue can be resolved, development of this new BCP presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads, e.g., from Route 5 in Cambodia, which is 10-12 km away from the proposed new BCP site. The new BCP presents an opportunity to design a facility with more than one- or two-lane access roads linking the access road lanes with multiple BCP primary inspection exit and entry lanes each with a booth built on a raised platform (plinth) so that the 8 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, pp. 3-4, 28. 9 As defined in article 4(a) of the CBTA, single-window inspection is when the different inspections and controls of people (passport/visa, driving license, foreign exchange, customs, health/epidemiological), vehicles (registration, roadworthiness, insurance), and goods (customs, quality, phytosanitary/plant protection, veterinary) are carried out jointly and simultaneously by the respective competent authorities involved (e.g., customs, police, immigration, trade, agriculture, health). As defined in Article 4(b) of the CBTA, in single-stop inspection the officials of the country pairs assist one another to the extent possible in the performance of their duties; the two adjacent national authorities carry out their inspections jointly and simultaneously. 10 Bilateral road transport agreements in the Mekong Region include agreements between: (i) Lao PDR and Thailand (1999, with a subsidiary agreement in 2001); (ii) Cambodia and Viet Nam (1998, with a protocol in 2005); and (iii) Lao PDR and Viet Nam (1994, amended in 2000). Such agreements cover mainly the exchange of traffic rights and related subjects (e.g., specification of routes, insurance requirements), but they are not as comprehensive as the CBTA. Also, there have been MOUs for initial implementation of the CBTA at Lao Bao-Dansavanh (2005), Poipet-Aranyaprathet (2005), Mukdahan-Savannakhet (2005), and Bavet-Moc Bai (2006), which cite applicable bilateral road transport agreements. 11 Article 190 of the current Thai Constitution (approved on 19 August 2007 and effective on 24 August 2007) requires that any international agreement affecting Thailand's society, its economy, or the integrity of its borders be approved by Parliament before signing. 12 The new BCP may focus on containerized cargo traffic. The eventual operating practices have not yet been defined. 13 The Thai Ministry of Commerce wishes to develop the new BCP with a special economic zone with an inland checkpoint 30 km away together with a logistics center and container terminal.


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border control officers sitting in each booth are at the height of the truck drivers’ cab window in keeping with the Revised Kyoto Convention Annex recommending that truck drivers should stay in the cab. (For reference, Figure 6-3 presents the current design at Aranyaprathet compared with a good-practice example from the Turkey-Georgia border at Sarp/Sarpi). Ideally, each primary inspection lane would be equipped with a vehicle number registration scanner linked to Department of Land Transport (Thailand)/Ministry of Public Works (Cambodia) and other databases checking to determine if the truck is legitimately registered. One lane in each direction might be designated as a fast track lane for GMS/ASEAN transit, or for trucks belonging to an operator that is a member of a low-risk due diligence program (e.g., an authorized economic operator program). As one of the priority border crossings located along one of the priority corridors identified in Protocol 1 of the CBTA, Poipet-Aranyaprathet (or Nong Auen-Stoung Bot as its successor) is likely to be one of the border crossing pairs identified for coordinated border management as part of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion (described in Section 8.4). This component is to support efforts at specific border crossings to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes.

Several kiosks: one for each border control agency; the driver must leave the truck to go to each kiosk; the truck is blocking the lane.

Several truck lanes with kiosks at window level: the driver stays in the truck and completes passport and primary inspection formalities at one booth.

Figure 6-3 Comparison of Current Border Facility at Aranyaprathet (left) with a Good-Practice Example from the Turkey-Georgia Border (right)

6.3 Bavet (Cambodia)–Moc Bai (Viet Nam)14 Bavet-Moc Bai is one of two border crossings along the priority Southern Economic Corridor route linking Thailand, Cambodia, and Viet Nam included in Protocol 1 of the CBTA,

14 This subsection draws from: (i) a site visit undertaken on 26 November 2010, including interviews with (a) Mr. Ying Sam An, Chief of Customs, Bavet; (b) Mr. Huy Sineth, Deputy Chief of Customs, Bavet; (c) Mr. Nhem Parthora, Bavet Customs Excise Official; (d) Mr. Khov Kyan, Bavet Customs Excise Official; (e) Mr. Nguyen Du Duc, Vice Chief of Customs; and (f) Mr. Dong Van Thong, Customs Official, Moc Bai; (ii) European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010; (iii) Asian Development Bank, Time Release “Before” Study for the Bavet-Moc Bai Border Crossing Points, 2005; (iv) Asian Development Bank, Kingdom of Cambodia and Socialist Republic of Viet Nam: Greater Mekong Subregion: Phnom Penh to Ho Chi Minh City Highway Project, Completion Report, December 2007; an (v) Asian Development Bank, Operations Evaluation Department, Kingdom of Cambodia and Socialist Republic of Viet Nam: Greater Mekong Subregion: Phnom Penh to Ho Chi Ming City Highway Project, Performance Evaluation Report, December 2008.


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specifically Bangkok/Laem Chabang-Phnom Penh-Ho Chi Minh City/Vung Tau (the other is Poipet-Aranyaprathet, discussed above). As noted, this route, designated R1, was identified as the highest priority in the first GMS Subregional Transport Sector Study in 1994.15 Cross-border traffic averages a total of about 120 trucks per day in both directions.16 Also, as noted in the subsection on Poipet-Aranyaprathet, there is very little intra-GMS transit traffic due to the difficulties of transiting Cambodia.17 Findings with respect to the infrastructure at Bavet-Moc Bai follow: (i) A simplified diagram of the border crossing points is presented in Figure 6-4 below:

Source: JICA

Figure 6-4 Diagram of the Bavet-Moc Bai Border Crossing Points (ii) The current border facilities in Cambodia are basically those provided under the ADB-

assisted Phnom Penh to Ho Chi Minh City Road Project, which were completed in December 2005, and were considered adequate for traffic levels at the time of project completion. The border facilities on the Cambodian side were government funded and completed in April 2003.18 Photographs of Bavet and Moc Bai are displayed in Figure 6-5.

(iii) There is the Manhattan Special Free Zone located on the outskirts of Bavet town, several new factories in and around Bavet, and several casinos in Bavet.

(iv) There is 100 m of “no-man’s land” between the two border posts.

(v) On neither side is there a fast track lane for trucks; “equal treatment” is applied.

(vi) There is a small common control area for eventual single-stop inspection on the Cambodian side, while construction of a larger one was reported to be commenced in 2011.

15 PADECO Co., Ltd., GMS Subregional Transport Sector Study, prepared for the Asian Development Bank, 1994. The Phnom Penh to Ho Chi Minh City Highway Project was the first cross-border transport project assisted by ADB. 16 The main cargo items from Cambodia to Viet Nam at this border crossing point include bicycles, electronic items, finished garments, and alcoholic beverages (beer). The main cargo items from Viet Nam to Cambodia at this border crossing point include agricultural products (vegetables) and daily consumables. 17 Constraints noted by one private sector logistics company were listed in a footnote in the subsection on Poipet-Aranyaprathet (e.g., the need to apply at least 48 hours in advance for approval for a shipment to travel under bond from the border to Phnom Penh, which is time consuming and expensive). 18 Asian Development Bank, Kingdom of Cambodia and Socialist Republic of Viet Nam: Greater Mekong Subregion: Phnom Penh to Ho Chi Ming City Highway Project, Completion Report, December 2007, pp. 8-14; and Asian Development Bank, Operations Evaluation Department, Kingdom of Cambodia and Socialist Republic of Viet Nam: Greater Mekong Subregion: Phnom Penh to Ho Chi Minh City Highway Project, Performance Evaluation Report, December 2008, p. 14.

Viet Nam

(Viet Nam side)


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(vii) On the Cambodian side, they have four x-ray machines to inspect luggage, but these machines, procured from Poland in 2005, are all broken and the warranties have expired. Viet Nam has functioning scanners, but for luggage only.

(viii) At present, they have only 10 computers on the Cambodian side and no internet. Viet Nam has 15 computers and internet access.

(ix) On the Cambodia side, ASYCUDA is not yet operating but is scheduled for implementation at Bavet by the end of 2011 under the World Bank assisted Trade Facilitation and Competiveness Project.

Bavet Moc Bai

Figure 6-5 Photographs of Bavet and Moc Bai Findings with respect to operations at Bavet-Moc Bai follow: (i) In principle, the border operating hours are 0600 to 2200 on both sides every day (they

were only 0700 to 1800 in 2005). As at other Mekong Region border crossings, closures of 1-2 hours for lunch have been reported by the private sector. There was strong opposition to 24-hour operation because customs officers “are not machines”.

(ii) On the Cambodian side, pursuant to Sub-Decree No. 64, the border agencies include the representative of the Governor of Svay Rieng Province (who plays the lead role), Customs, CamControl (under the Ministry of Commerce and which acts as a duplicate customs agency in many respects), Police, Immigration, and Quarantine (including the ministries of Health and Agriculture). The Cambodian border control agencies have an interagency meeting every month to formulate solution to problems encountered.

(iii) On the Viet Nam side, following Decree No 32/2005/ND-CP of 14 March 2005, agencies present at the border Customs, Immigration, and Quarantine (Health, Plant, and Animal Inspection), and the Police. There is no lead agency.

(iv) On the Cambodian side, clearance is done at an ICD about 2 km away using the single administrative document, the packing list, the bill of lading, and the manifest. Both the General Department of Customs and Excise and CamControl are present at the ICD; they have a joint inspection team and are in the same building but in different rooms. A total of 55% of the steps in both the import and export process at Bavet are at the customs house.19

(v) On the Viet Nam side, all imports are cleared at the border.

(vi) On the Cambodian side, 100% physical inspection was reported, “according to the rules”. Cambodia is inspecting about 10-15% of the contents of each container,

19 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, Figure 12, p. 29.


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following the results of paper-based risk management procedures. Viet Nam has a computerized risk management system in place, but reported that at this border they are still practicing 100% physical inspection, like their Cambodian counterparts, and unlike what was reported at Lao Bao, opposite Dansavanh.

(vii) On the Cambodian side, there are 37 customs staff members, while there are 36 customs officers working on the Viet Nam side. Regular training for Cambodian officers is provided in Phnom Penh and for Vietnamese officials in Ho Chi Minh City, where the General Department of Viet Nam Customs operates a “customs college”. The WCO’s Regional Office for Capacity Building in association with ADB provided training at Bavet-Moc Bai in July 2006.

(viii) The customs officers on both sides need to learn technical customs terms in English in order to read declarations, manifests, and packing lists.

(ix) Meetings between the customs officials of the two sides are held (only) once per year

(x) A time release study at this border crossing conducted by ADB in 2005 surveyed exports from Cambodia to Viet Nam and found that total processing time averaged 101 minutes (total of Viet Nam export processing and Cambodia import processing), while total elapsed time averaged 143 minutes. The same study found that for exports from Viet Nam to Cambodia, the total processing time averaged 120 minutes (the total of Cambodia export processing and Viet Nam import processing), while total elapsed time averaged 181 minutes. A key finding was that while the entry and exit procedures on the Viet Nam side were already minimal, about 3-4 hours was required for the loading and unloading of cargo in the no-man’s land between the Cambodian and Viet Nam and Cambodia borders (and this was not included in the “total elapsed time”).20

(xi) The recent development partner assisted [Cambodia] Trade Mapping Study found that the process at Bavet required 1-2 hours and up to a day, at least five different documents, and USD 100-300 in informal fees. As noted regarding Poipet, specific problems included: (a) complicated processes, (b) process steps not providing valued added, (c) institutionalized unofficial fees, (d) a lack of private sector understanding and information; and (e) a lack of differentiation and risk management implementation.21

(xii) On the day of the border visit, batch processing of trucks was observed on the Viet Nam side, an inefficient practice by which about 20 trucks were held and then simultaneously released about in mid-to-late afternoon.

(xiii) A Memorandum of Understanding for Initial Implementation of the Cross-Border Transport Agreement at Bavet-Moc Bai was signed on 6 March 2006. It consisted of over 50 articles including provisions for single-stop and single-window inspection and provisions for opening the border crossing points on request (to transition toward round-the-clock operation), but it was never effectively implemented. An Arrangement for Initial Implementation of Single Stop Inspection at Moc Bai and Bavet, between the General Department of Customs and Excise [Cambodia] and the General Department of Vietnam Customs, was signed on 2 June 2009, although it has not yet been implemented.

(xiv) A bilateral road transport agreement between Cambodia and Viet Nam was signed on 1 June 1998 and the protocol for implementation of the agreement was signed on 10 October 2005 and effective from 30 September 2006. Based on a recent (2010) MOU,

20 Asian Development Bank, Time Release “Before” Study for the Bavet-Moc Bai Crossing Points, 2005, paragraphs 7-8. 21 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, pp. 3-4, 25.


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traffic rights may now be exchanged for up to 300 trucks and buses, up from 40 in 2006 and 150 in 2009.22

As one of the priority border crossings located along one of the priority corridors identified in Protocol 1 of the CBTA, Bavet-Moc Bai is likely to be one of the border crossing pairs identified for coordinated border management as part of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion (described in Section 8.4). As noted, this component is to support efforts at specific border crossings to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. 6.4 Thanaleng (Lao PDR)–Nong Khai (Thailand)23 Thanaleng-Nong Khai, the site of the Australia-funded 1,174 km Friendship Bridge, which opened in 1994 (the first international bridge over the Mekong River), is on the busiest route to/from Vientiane (about 25 km from Thanaleng), with about 195 trucks per day (2010; about 7% more than at Savannakhet-Mukdahan according to Thai Customs statistics), along with 20 buses and 1,550 cars.24 There is a small volume of intra-GMS transit traffic, consisting mainly of low volumes of seasonal fruit from Viet Nam to Thailand and from Thailand to the People’s Republic of China. Thanaleng-Nong Khai is listed as the border crossing along one of the “Other Corridors/Routes” in Protocol 1 of the CBTA, specifically Nateuy-Oudomxai-Pakmong-Louang Prabang-Vientiane-Thanaleng (Lao PDR)-Nong Khai-Udon Thani-Khon Kaen-Bangkok (Thailand).25 Because the route was not listed by the GMS governments as one of the main routes in CBTA Protocol 1, the border crossing has not received much attention in the context of the CBTA, even though it is listed as being covered by the agreement. However, in the 2006 GMS Transport Sector Strategy Study, a Northeastern Corridor was identified linking Nanning, Hanoi, Vientiane, and Bangkok/Laem Chabang (see Section 2.3.1). Findings with respect to the infrastructure at Thanaleng-Nong Khai follow: (i) There are a total of six entry and exit lanes on each side but cars become mixed with

trucks in the truck lane(s). There is a kiosk for each primary inspection lane, although the booth window is not at the level of the truck driver’s window.

22 More precisely, 300 buses from the Viet Nam side, and 150 buses and 150 trucks from the Cambodian side, although only one company, with 20-30 trucks, has applied. 23 This subsection draws from: (i) a site visit undertaken on 19 November 2010, including interviews with (a) Mr. Soksavanh Bouapha, Deputy Director, Thanaleng Checkpoint, Lao PDR Customs, Thanaleng (First Friendship/Mittaphab Bridge), (b) Mr. Thanomsith Khaophibane, Chief of Multilateral Cooperation Unit, International Cooperation Division, Lao PDR Customs, (c) Mr. Noppadol Saekrung, Assistant Chief, Nong Khai Customs House, (d) Mr. Jarin Limpakarn, Chief of Customs Formality Assessment, Nong Khai Customs House, (e) Mr. Wisutthasak Kerdbangrachan, Coordinator, Nong Khai Customs House, and (f) Ms. Orawan Boonsrang, Customs Technical Officer, Nong Khai Customs House; (ii) a PowerPoint presentation by the Nong Khai Customs House, 25 November 2010; and (iii) Japan Bank for International Cooperation, Special Assistance for Project Implementation for Second Mekong International Bridge Construction Project in Thailand and Lao PDR, Final Report, March 2004. 24 The main cargo items from Thailand to Lao PDR at this border crossing point include construction materials, gasoline, and vehicles. The main cargo items from Lao PDR to Thailand at this border crossing point include garments, wood products, and electrical cable for the automotive industry. 25 GMS Cross-Border Transport Agreement, Protocol 1 Attachment, section 4 c). However, it was subsequently defined as a new Northeastern Corridor in ADB (PADECO CO. Ltd.), GMS Subregional Transport Sector Strategy, 2006.


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(ii) Traffic on the bridge drives on the left, as in Thailand, while traffic in Lao PDR drives on the right. The changeover at the Lao PDR end, just before the border post, is controlled by traffic lights.

(iii) On the Lao PDR side, there is a fast-track lane for fruits and vegetables, which are entitled to priority border crossing according to Annex 3 of the CBTA on the Carriage of Perishable Goods.

(iv) The size of the border crossing point was reported as 15 ha on the Lao PDR side and 80 ha on the Thai side.

(v) There are mobile x-ray scanners on either side. The one on the Thai side is shown in Figure 6-6.

(vi) Thai Customs operates about 60 PCs and Lao PDR Customs operates about 30.

(vii) ASYCUDA will be installed in 2011 at Thanaleng on a pilot basis as part of the World Bank assisted Customs and Trade Facilitation Project.

(viii) Generally, the border crossing infrastructure at Thanaleng-Nong Kai does reflect the improvements that have been developed in recent years in terms of border traffic management.

(ix) Photographs of Thanaleng-Nong Khai are shown in Figure 6-6.

Exiting Lao PDR (Thanaleng) Exiting Thailand (Nong Khai) X-ray scanner (Nong Khai)

Source: JICA Study Team and Nong Khai Customs House

Figure 6-6 Photographs of Thanaleng-Nong Khai Findings with respect to operations at Thanaleng/Nong Khai follow: (i) In principle, the border crossing is open from 0600 to 2200, although Customs usually

operates from 0600 to 2000. Nong Khai Customs expressed interest in round-the-clock operation of the border to facilitate trade and investment, but both sides pointed to personnel constraints.

(ii) Pursuant to Prime Minister’s Office (PMO) Notice 406, issued on 13 March 2007, only Customs, Immigration, and Quarantine, along with the Bridge Management Unit, are located on the Lao PDR side of the border. The Border Control Cooperation Unit on the Thai side comprises the Nong Khai Governor, Customs, Immigration, the Army, the Navy, the canine unit, the Police, the Railway Police, the Narcotics Control Board, and a local volunteer unit. There is informal and formal exchange of information between and among agencies. However, Nong Khai is one of the Thai customs houses with “one stop service”.26

26 The “one stop service center” has been developed pursuant to the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS), as part of Thailand’s implementation of national single window under ASEAN. “National single window” in this context refers to a system/mechanism with single submission, single processing, and

http://en.wikipedia.org/wiki/Right-_and_left-hand_traffic




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(iii) Imports (on both sides) are cleared at the border crossing and not at an inland clearance/container depot (ICD).

(iv) Thai Customs stated that the physical inspection rate was 10%. They apply IT for risk management using local risk profiles and a central risk profiles headquarters, as illustrated in Figure 5-1.

(v) Lao PDR reported a 10% physical inspection rate for “known traders”. However, as noted, Article 24 of the Lao PDR Law on Customs (on the Inspection of Goods by Customs Officers), seems to require the physical inspection of consignments although some may be inspected only partially.

(vi) There are 145 Customs staff and managers on the Lao PDR side, and 60 on the Thai side (including managers from the regional office).

(vii) Advance declaration is used on the Thai side. Lao PDR Customs reported that they are carrying out a survey to determine which companies should be eligible for pre-shipment declaration.

(viii) A time release study at Thanaleng assisted by the World Bank and WCO in 2009 found that the mean time from arrival to removal was one day, 16 hours, and 29 minutes (with a standard deviation of 3 days, 4 hours, and 32 minutes); the mean time from arrival to the end of unloading was 19 hours and 57 minutes (with a standard deviation of 1 day, 11 hours, and 46 minutes); and the mean time from submission to approval was 19 hours (with a standard deviation of 2 days, 3 hours, and 3 minutes). All of these times are significantly slower than at Friendship Bridge II (Mukdahan-Savannakhet).27

(ix) Interstate road transport between Lao PDR and Thailand generally moves based on two bilateral agreements: (a) the Agreement between the Government of the Kingdom of Thailand and the Government of the Lao People’s Democratic Republic on Road Transport (1999), according to Article 2 of which vehicles and operators of the other Contracting Party are recognized and entitled to operate in the other Contracting Party’s territory; and (b) the Subsidiary Agreement Specifying Road Transport Arrangements between the Government of the Kingdom of Thailand and the Government of the Lao People’s Democratic Republic (2001), Article 2 of which specifies the border crossing points, including the Friendship Bridge (Vientiane Municipality and Nong Khai Province), and Article 8 of which specifies the routes (corridors), which include Nong Khai-Bangkok but no connecting route in Lao PDR.

Going forward, it is recommended that Nong Khai-Thanaleng be more actively included in the CBTA transport and customs facilitation regime considering that it is along the busiest and important route for Lao PDR. Also, some simple and relatively inexpensive modifications to the infrastructure could be introduced to significantly improve both the throughput and the effectiveness of controls at border stations.

single decision making (front end and back office), while “one stop service” refers to the front-end services to the customers (single submission, front-end only). See http://www.customs.go.th/Customs-Eng/Publication/Publication Result.jsp?Docidt=A00044&tlechk=1. 27 TRS Task Force, Time Release Study, Lao PDR, December 2009, p. 17.


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6.5 Mukdahan (Thailand)–Savannakhet/Kaysone Phomvihane (Lao PDR)28

Mukdahan-Savannakhet/Kaysone Phomvihane, the site of the 1,600 m long Japan-funded Second Mekong International Bridge (the Second Thai-Lao Friendship Bridge Friendship Bridge II), which opened in 2006,29 is one of three border crossings along the priority East-West Economic Corridor route linking Myanmar, Thailand, Lao PDR, and Viet Nam included in Protocol 1 of the CBTA. Cross-border traffic averages a total of about 150 trucks per day in both directions (2010; about 20-25% less than at Nong Khai-Thanaleng according to Thai Customs statistics).30 There is some intra-GMS transit traffic, including traffic between Thailand and Viet Nam and between Thailand and the PRC (e.g., food products from Thailand to the PRC); there is about one transit declaration for every five export declarations. Findings with respect to the infrastructure at Mukdahan-Savannakhet/Kaysone Phomvihane follow: (i) There are four entry and four exit traffic lanes on each side. Each lane is wide enough

for two vehicles. If the border crossing point becomes busier, there would not likely be a need for extra traffic lanes because they are each wide enough to accommodate two trucks. Traffic is segregated on both sides and has good discipline. There are “CBTA fast track lanes”. The various border control agencies serve the traffic from different kiosks. A drawing of the border checkpoint on the Mukdahan side is presented in Figure 6-7 below.

28 This subsection draws from: (i) a site visit undertaken 2-3 December 2010, including interviews with (a) Ms. Paunpimon Sattayapinanth, Director of Mukdahan Customs House, (b) Mr. Charin Thainpermpool, Customs Technical Officer, Mukdahan Customs House, (c) Mr. Kiatchai Bmongpaapai, Customs Officer, Mukdahan Customs House, and (d) Mr. Keosomboun Duangphothisanh, Deputy Head, Regional Customs, Friendship Bridge II, International Customs Checkpoint, Thanaleng; (ii) a PowerPoint presentation by the Mukdahan Customs House, 2 December 2010; and (iii) Japan Bank for International Cooperation, Special Assistance for Project Implementation for Second Mekong International Bridge Construction Project in Thailand and Lao PDR, Final Report, March 2004. 29 The opening ceremony was on 20 December 2006, and the bridge opened to regular traffic in January 2007. 30 The main cargo items from Thailand to Lao PDR at this border crossing point include cars and spare parts; chemicals for the gold mine at Sepon, electrical goods such as televisions, refrigerators, personal computers, construction equipment and fuel. The main cargo items from Lao PDR to Thailand at this border crossing point include timber, copper ingot, and finished garments.


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BUS

BUS

BUS

BAGGAGE CHECKING

VV

Export manifest clearance

V

Security

X-RayContainerInspectionTerminal

WC

WC

To Mukdahan

V

N

MUKDAHAN BOUNDARY POST DIAGRAM

SCALE 1 : 1,000

immigration

X-RAY

D E P A R T U R E B U I L D I N G

customs

customsPASSPORT CONTROL

A R R I V A L B U I L D I N G

immigrationcustoms

BAGGAGE CHECKINGcustoms PASSPORT

CONTROL

Customs Import manifest

Declaration

Immi.

Cust.Immi.

Immi.Cust.

Cust.Cust.

Cust.

Immi.

Immi.

Cust. Immi.

WeighingApparatus

POLICE

ELECTRICITYCONTROL

CUSTOMS

CCA.OFFICE BUILDINGCCA.

WAREHOUSE

TRUCK PARKING AREA

Source: Mukdahan Customs House

Figure 6-7 Drawing of Mukdahan Border Checkpoint (ii) Traffic on the bridge drives on the right, as in Lao PDR, while traffic in Thailand drives

on the left; the change-over is on the Thai side.

(iii) There is a container lifting gantry crane in the ICD 2 km from the border on the Mukdahan side (in the direction of Mukdahan city) and one in the common control area (CCA, for eventual single-stop inspection)31 on the Savannakhet side.

(iv) There are mobile x-ray scanners under canopies on either side.

(v) Radio communications equipment would be beneficial on both sides.

(vi) Thai Customs operates about 12 PCs and Lao PDR Customs operates about 20.

(vii) The internet is very slow on the Lao PDR side; loading a document often takes several minutes.

(viii) An e-Customs system has been installed at Mukdahan. ASYCUDA will be installed soon at Savannakhet as part of the World Bank assisted Customs and Trade Facilitation Project following the pilot at Thanaleng; the installation is likely to be in 2011 or 2012.

(ix) An advance export declaration via internet between Mukdahan and Savannakhet has been agreed but needs IT hardware and software for implementation. ADB surveyed the costs for an ICT connection between the Mukdahan and Savannakhet sides.

31 The governments consider that establishment of a CCA is a precondition to implementing single-stop inspection. However, a World Bank mission on the trade and transport facilitation in the GMS in the last quarter of 2008 found that at each border crossing there is already an inspection area used by national authorities, and since the number of inspections should be reduced with implementation of the CBTA, the space already available should be in sufficient for establishing a CCA in most cases.





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Findings with respect to operations at Mukdahan-Savannakhet/Kaysone Phomvihane follow: (i) In principle, the border crossing is open from 0600 to 2200. However, since the Lao

PDR national treasury closes the account at the border crossing point at 1600, imports cannot be cleared after that time because import customs duties cannot be paid. Trucks must park and wait until the next morning.

(ii) Pursuant to PMO Notice 406, issued on 13 March 2007, only Customs, Immigration, and Quarantine, are located on the Lao PDR side of the border; the three agencies work together according to the principles of single-window inspection.32 Agencies on the Thai side of the border include Customs, Immigration, Plant Quarantine, Food and Drugs, Livestock, Fisheries, Resources and the Environment (CITES),33 and Health Control. However, Mukdahan is one of the Thai customs houses with “one stop service”.34

(iii) On the Thai side, all imports for customs clearance procedures and payment of duties and fees go to the land port/ICD about 2 km from the border crossing point. On the Lao PDR side, all entering trucks pass along the dedicated primary inspection lane at the border crossing point for an Immigration and Customs document check before all going to the common control area (CCA) to carry out customs procedures. They are waiting for Thai Customs to work in the CCA for single-stop inspection (there is a “Lao-Thai Customs” sign at the CCA) but the Thai customs law must first be amended.

(iv) Thai Customs weighs all outgoing freight traffic, and the weight certificate issued in Thailand is also recognized by Lao PDR Customs.

(v) On the Thai side, the rate of physical inspection of imports is about 80% for trucks but they do not inspect 100% of the cargo in these trucks. For example, for the same time item if there are 10 cases, 1 case is inspected. Customs will inspect shipments from the PRC with many consignees. They also inspect when prohibited or counterfeit cargo is suspected.

(vi) Lao PDR Customs scans about 10 trucks each day using a simple “rule of thumb” method: containers with one consignee are scanned whereas containers with goods from two or more consignees are not scanned since the risk is deemed higher in this latter case.

(vii) The Thai side applies IT for risk management using local risk profiles and a central risk profiles headquarters, similar to those illustrated in Figure 5-1 above for Nong Khai. There is no risk management on the Lao PDR side. If they have any reason (or sometimes no reason), they stop the truck and carry out an inspection.

(viii) There are about 18 Customs staff members on the Thai side and 60 on the Lao PDR side (although some of these 60 staff members also work at other border crossing points in the province).

(ix) Especially Lao PDR customs officers need to learn technical customs terms in English in order to read declarations, manifests, and packing lists, and to use a customs PC. Customs staff members and managers have not received English language training since the bridge opened.

32 This relates to single-window inspection under the CBTA, which was defined in footnote 9 of this chapter, i.e., when the different inspections and controls of people, vehicles, and goods are carried out jointly and simultaneously by the respective competent authorities involved. 33 CITES = Convention on International Trade in Endangered Species of Wild Fauna and Flora. 34 See footnote 25 of this chapter.


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(x) A time release study at Savannakhet assisted by the World Bank and WCO in 2009 found that the mean time from arrival to removal was 5 hours and 3 minutes (with a standard deviation of 11 hours and 52 minutes); the mean time from arrival to the end of unloading was 6 hours and 26 minutes (with a standard deviation of 12 hours and 54 minutes); and the mean time from submission to approval was 3 hours and 21 minutes (with a standard deviation of 11 hours and 37 minutes). All of these times are significantly faster than at Nong Khai-Thanaleng.35

(xi) The legal basis for interstate road transport between Lao PDR and Thailand, including traffic at this border crossing, is two bilateral agreements: (a) the Agreement between the Government of the Kingdom of Thailand and the Government of the Lao People’s Democratic Republic on Road Transport (1999), and (b) the Subsidiary Agreement Specifying Road Transport Arrangements between the Government of the Kingdom of Thailand and the Government of the Lao People’s Democratic Republic (2001). The routes identified in the 2001 agreement include Savannakhet-Dansavanh and Mukdahan-Bangkok.

(xii) A Memorandum of Understanding for Initial Implementation of the Cross-Border Transport Agreement at Mukdahan-Savannakhet was signed on 4 July 2005. It consisted of over 50 articles including provisions for single-stop and single-window inspection and provisions for opening the border crossing points on request (to transition toward round-the-clock operation), but it was never effectively implemented. A Memorandum of Understanding between and among Lao PDR, Thailand, and Viet Nam on Initial Implementation of the Cross-Border Transport Agreement was signed on and was effective from 23 August 2007.36 Based on this August 2007 MOU, there was a pilot operation of the GMS Customs Transit System along the East-West Economic corridor in June 2009, but there were only four shipments of eastbound transit goods (i.e., bound for Viet Nam) and two shipments of westbound transit goods (i.e., bound for Thailand) during the one-day pilot.

As one of the priority border crossings located along one of the priority corridors identified in Protocol 1 of the CBTA, Mukdahan-Savannakhet/Kaysone Phomvihane is likely to be another of the border crossing pairs identified for coordinated border management as part of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion (described in Section 8.4). This component is to support efforts at specific border crossings to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes.

35 TRS Task Force, Time Release Study, Lao PDR, December 2009, p. 17. 36 As noted, Article 190 of the current Thai Constitution (approved on 19 August 2007 and effective on 24 August 2007) requires that any international agreement affecting Thailand's society, its economy, or the integrity of its borders be approved by Parliament before signing. The date of signing and effectiveness of the MOU was one day before the date of effectiveness of the current Thai constitution.


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6.6 Dansavanh (Lao PDR)–Lao Bao (Viet Nam)37 Dansavanh-Lao Bao is the easternmost of the three border crossings along the priority East-West Economic Corridor route linking Myanmar, Thailand, Lao PDR, and Viet Nam included in Protocol 1 of the CBTA. Cross-border traffic averages a total of about 80 trucks per day in both directions (October 2010),38 which is about 60% of the cross-border traffic between the two countries. There is some intra-GMS transit traffic from Thailand to Viet Nam (mainly electrical goods and garments). Findings with respect to the infrastructure at Dansavanh-Lao Bao follow: (i) The border access road is in fair to good condition on the Lao PDR side and in good

condition on the Viet Nam side. The cross-border bridge was constructed 30-40 years ago and is very weak.

(ii) There is a “no-man’s land” of only about 50 m separating Dansavanh and Lao Bao.

(iii) Layout plans of the respective border crossing points are set out in Figure 6-8. Some improvements of customs facilities at Dansavanh (e.g., construction of administration building, improvement of electricity and water supply infrastructure) were programmed with assistance from the Japan-ASEAN Integration Fund.39

Source: Asian Development Bank, Dansavanh, Lao PDR & Lao Bao, Vietnam Border Checkpoint, Operations Manual, November 2006, pp. 11, 65.

Figure 6-8 Layout Plans of Dansavanh and Lao Bao Border Checkpoint Facilities

37 This subsection draws from: (i) a site visit undertaken on 3 December 2010, including interviews with (a) Mr. Boungleng Demouthoau, Vice Customs Chief, Dansavanh; (b) Mr. Damlong Boudsakhone, Vice Immigration Chief, Dansavanh; (c) Mr. Sengpasith Sonesamsack, Customs Inspector, Dansavanh; and (d) Mr. Nguyen Ngoc Hai, Officer, Quangtri Provincial Customs; (ii) a PowerPoint presentation by Quangtri Provincial Customs, 3 December 2010; and (iii) Asian Development Bank, Dansavanh, Lao PDR & Lao Bao, Vietnam Border Checkpoint, Operations Manual, November 2006. 38 The main cargo items from Lao PDR to Viet Nam include agricultural goods (e.g., coffee, bananas), sawn wood, gypsum, and cooper. The main cargo items from Viet Nam to Lao PDR include daily consumables, plastics, garments, construction materials. 39 CTI Engineering International Co., Ltd., Monthly Progress Report No. 5 for Improvement Project for Customs Facilities in Dansavanh, CMLVT-L-09-01, prepared for Japan International Cooperation System and Ministry of Public Works and Transport (Lao PDR), May 2010.


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Source: Asian Development Bank, Dansavanh, Lao PDR & Lao Bao, Vietnam Border Checkpoint, Operations Manual, November 2006, pp. 11, 65.

Figure 6-8 Layout Plans of Dansavanh and Lao Bao Border Checkpoint Facilities (continued)

(iv) While a CCA has been completed on the Viet Nam side, and a USD 1 million, 18,000

m2 extension is under construction on the Viet Nam side (for eventual use for single-stop inspection), a survey is yet to be undertaken of the location of a CCA on the Lao PDR side (there is only an “informal” CCA at present).

(v) A customs warehouse was developed at Dansavanh with the assistance of ADB.

(vi) They are now installing a container scanner at Lao Bao, while there is already one at Dansavanh.

(vii) Power is generated from a hydroelectric source on the Viet Nam side and is considered stable at Lao Bao; although there are occasional power outages at Dansavanh, there is a backup generator available.

(viii) There are only six computers on the Lao PDR side, while every staff member on the Viet Nam side has access to a computer. Also, on the Viet Nam side they have a local network to connect the workstations and send/receive data packets to/from Hanoi hourly.

(ix) ASYCUDA will be installed soon at Dansavanh as part of the World Bank assisted Customs and Trade Facilitation Project following the pilot at Thanaleng; the installation is likely to be in 2012.

Findings with respect to operations at Dansavanh-Lao Bao follow: (i) In principle, the border crossing is open for trucks from 0700 to 1900 (on the Lao PDR

side) and to 1930 on the Viet Nam side, although there seems to be some flexibility depending on the flow of goods and passengers may be cleared later. As at other Mekong Region border crossings, closures of 1-2 hours for lunch have been reported by the private sector.


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(ii) Pursuant to PMO Notice 406, issued on 13 March 2007, only Customs, Immigration, and Quarantine, are located on the Lao PDR side of the border; the three agencies work together according to the principles of single-window inspection. Border management is led by the head of Savannakhet Province.

(iii) On the Viet Nam side, following Decree No 32/2005/ND-CP of 14 March 2005, agencies present at the border include Customs, Immigration, and Quarantine (Health, Plant, and Animal Inspection), for a total of five agencies, plus the Police. There is no lead agency.

(iv) On the Lao PDR side, clearance is undertaken at the border. On the Viet Nam side, it is possible to declare electronically in advance; also, it is possible to declare at Lao Bao with inspection elsewhere (e.g., in Hanoi).

(v) On the Lao PDR side, the reported rate of physical inspection of imports was 80-90%. Items are selected for physical inspection based on the customs value of the good and applicable duty rate. On the Viet Nam side, the rate of physical inspection is more than 5% because they effectively apply risk management based on national risk profile accessed from the headquarters of the General Department of Vietnam Customs in Hanoi and local risk profiles.

(vi) Dansavanh-Lao Bao is often reported as the one GMS border crossing that is effectively implementing single-stop inspection; it has been said that the countries are at step 2 of implementation, with joint customs inspection in a common control area and clearance/processing of customs documents in the country of entry. However, single-stop inspection was not observed during the JICA study team’s visit to Dansavanh-Lao Bao. 40 A constraint is the lack of a cable connection between the two sides, which prevents Vietnamese customs officials from accessing risk management databases in Hanoi.

(vii) There are 30 Customs staff members on the Lao PDR side and about 40 on the Vietnamese side. Officers receive training in Vientiane and Hanoi/Ho Chi Minh City, respectively.

(viii) Lao PDR and Vietnamese customs officers need to learn technical customs terms in English in order to read declarations, manifests, and packing lists, and to use a customs PC. For example, only 3-4 of the 40 Vietnamese Customs officers at Lao Bao can speak English (and 5-6 can speak Lao).

(ix) A time release study at Dansavanh assisted by the World Bank and WCO in 2009 found that the mean time from arrival to removal was 7 hours and 54 minutes (with a standard deviation of 7 hours and 50 minutes); the mean time from arrival to the end of unloading was 11 hours and 28 minutes (with a standard deviation of 7 hours and 33 minutes), partly due to the lack of a proper warehouse; and the mean time from submission to approval was 3 hours and 14 minutes (with a standard deviation of 5 hours and 14 minutes). All of these times are significantly slower than at Savannakhet at the other Lao PDR border crossing point along the East-West Economic Corridor.41

(x) Interstate road transport between Lao PDR and Viet Nam, including traffic at this border crossing, generally moves based a 1994 bilateral road transport agreement (amended in 2000), which has been the most liberal in the GMS in terms transport facilitation.

(xi) A Memorandum of Understanding for Initial Implementation of the Cross-Border Transport Agreement at Dansavanh-Lao Bao was signed on 25 March 2005. It was

40 A World Bank mission visiting Dansavanh-Lao Bao in the last quarter of 2008 had a similar finding. 41 TRS Task Force, Time Release Study, Lao PDR, December 2009, p. 17.


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similar to other MOUs for initial implementation of the CBTA (e.g., for Mukdahan-Savannakhet), but it was never effectively implemented. As noted, a Memorandum of Understanding between and among Lao PDR, Thailand, and Viet Nam on Initial Implementation of the Cross-Border Transport Agreement was signed on and was effective from 23 August 2007. 42 Based on this MOU, there was a limited pilot operation of the GMS Customs Transit System along the East-West Economic corridor in June 2009.

As one of the priority border crossings located along one of the priority corridors identified in Protocol 1 of the CBTA, Dansavanh-Lao Bao is likely to be another of the border crossing pairs identified for coordinated border management as part of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion (described in Section 8.4). This component is to support efforts at specific border crossings to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. Specific project proposals raised by officials interviewed at Dansavanh-Lao Bao included: (i) construction of a new cross-border bridge; (ii) simplification of customs procedures including the declaration forms for vehicles and goods, and procedures for non-commercial vehicles. (iii) training in new and difficult fields of customs, including risk management, customs valuation, and customs modernization; (iv) study tours to Thailand-Myanmar, Lao PDR-PRC (Yunnan Province), and Singapore-Malaysia border crossings; and (v) research at the Mekong Institute in Khon Kaen (Thailand). 6.7 Mae Sai (Thailand)–Tachileik (Myanmar)43 Mae Sai-Tachiliek, site of [Freight] Friendship Bridge 2 between the countries as well as a [Passenger] Friendship Bridge 1, is one of two border crossings along an alternate of the priority North-South Economic Corridor linking Thailand, Myanmar, and the PRC (the last named not one of the Mekong Region countries as defined in this study) included in Protocol 1 of the CBTA. Cross-border traffic averages a total of about 240 vehicles per day in both directions.44 There is some limited intra-GMS transit traffic, from the PRC to Thailand. Findings with respect to the infrastructure at Mae Sai-Tachileik follow: (i) The border access road on the Thai side has two lanes and is in good condition. On the

Myanmar side, traffic is slow because the narrow border crossing point approach road is on the outskirts of Tachileik town and is shared by cars, trucks, motorcycles, and bicycles.

42 As noted, Article 190 of the current Thai Constitution (approved on 19 August 2007 and effective on 24 August 2007) requires that any international agreement affecting Thailand's society, its economy, or the integrity of its borders be approved by Parliament before signing. The date of signing and effectiveness of the MOU was one day before the date of effectiveness of the current Thai constitution. 43 This subsection draws upon a site visit undertaken on 7 December 2010 including interviews with (i) Mr. Prayuth Punprasert, Chief of Customs Control Division, Mae Sai Customs House; (ii) Mr. On Unth, Customs Officer, Mae Sai Customs House; and (iii) U Mg Mg Kyan, Assistant Director, Tachileik Customs. 44 The main cargo items from Thailand to Myanmar at this border crossing point include fuel (gasoline), instant coffee, tires, beer, construction materials including bagged cement on pallets transported by open trucks, galvanized steel sheet, lubricant oil, and rebuilt used cars. The main cargo items from Myanmar to Thailand at this border crossing point include agricultural produce and timber.


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(ii) As noted there are two bridges: [Freight] Friendship Bridge 2 and [Passenger] Friendship Bridge 1.

(iii) There are no fast track lanes due, although there are truck-only lanes on the Thai side.

(iv) On the Thai side, there are seven entry and exit lanes, each with two booths, but the full capacity is not used. On the Myanmar side, there is one lane each for entry and exit, although each lane is wide enough for two trucks.

(v) On the Thai side, the respective border control agencies share a building (“single roof inspection”), while on the Myanmar side each agency has a “portakabin” (portable building) office.

(vi) On the Thai side, there is a mobile x-ray scanner under a canopy. On the Myanmar side, there is no x-ray scanner, either at the border crossing point or at the secondary inspection area.

(vii) There are truck weighbridges on both sides.

(viii) There is no logistics equipment (e.g., cranes, forklifts) on either side.

(ix) Customs staff on the Thai side use walkie-talkies for communication.

(x) There is an ICD on the Thai side. On the Myanmar side, trucks travel 4 km to a secondary inspection area where they are inspected using a wooden overhead walk gantry platform built about 20 years ago.

(xi) Thailand is using e-Customs for imports and exports, while Myanmar has no customs computer system import, export, or transit declarations and no customs management information system. Computer equipment on the Myanmar side includes only 1 PC, one server, one printer, and one scanner. There are few electricity problems on either side.

(xii) There is a plan to develop a special economic zone on the Myanmar side.

(xiii) Selected photographs of Mae Sai-Tachileik are displayed in Figure 6-9.

Mae Sai

Tachileik

Figure 6-9 Photographs of Mae Sai-Tachileik


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Findings with respect to operations at Mae Sai-Tachileik follow: (i) The border crossing operating hours are coordinated, from 0600 to 1800 on the

Thailand side and 0630 to 1830 on the Myanmar side (which is in a time zone that is 30 minutes behind Thailand). Times of peak traffic at the [Freight] Friendship Bridge 2 are 0700-1000 and 1300-1700.

(ii) Agencies on the Thai side of the border include Customs, Immigration, Plant Quarantine, Food and Drugs, Livestock, Fisheries, and Health Control, although there is no lead agency. However, Mae Sai is one of the Thai customs houses with “one stop service” 45 Customs and Quarantine carry out joint inspections. Agencies on the Myanmar side of the border include the Department of Border Trade of the Ministry of Commerce, which is the lead agency, as well as the Customs Department, Immigration and the National Registration Department, and the Police Force. Daily coordination of activities is undertaken through joint agency teams.

(iii) On the Thai side, entering trucks register with the customs office and then proceed to an ICD about 300 m away to register the import declaration for customs formalities to start, including determination of tariff and valuation, and payment of duties and fees. Customs prints a hard copy of the export invoice and export registration from the Thai Customs e-Export system before physically checking the truck and cargo.

(iv) On the Myanmar side, all imports are cleared at the Friendship Bridge 1 border crossing point. However, trucks must travel 4 km to a secondary inspection area.

(v) Neither side uses an import pre release method or pre-alert of imports and exports.

(vi) Rates of physical inspection are close to 100% on both sides. On the Thai side, criteria for selectivity include the origin of the goods; e.g., Myanmar products all go to the red channel because of the high risk for drugs, while goods from the PRC may go to the red or green channel. On the Myanmar side, Customs inspects all trucks but out of shipment of about 1,000 cartons they might inspect 30. Selectivity channels are not used for imports under the Myanmar Customs Remittance System.

(vii) Risk management policy allows the use of local profiles decided by a committee at the Mae Sai Customs House every six months. The risk profile is based only at country of origin and revised depending on events and intelligence.46 It would be productive to carry out data mining at the local level. The central risk profiles in Bangkok use different criteria.

(viii) No risk management system is applied on the Myanmar side of the border.

(ix) There are about 80 Customs staff members on the Thai side and 40 on the Myanmar side (of which 20 are at Friendship Bridge 1 and 20 are at Friendship Bridge 2). On the Thai side, officers receive mainly voluntary training in the Customs Act, intellectual property rights, enforcement, tariffs, valuation, and investigation; mainly classroom training methods are used, with little use of practical demonstrations and scenarios. On the Myanmar side, compulsory customs training courses are provided (e.g., in valuation), but there are no training programs of sufficiently long duration.

(x) A time release study has not been conducted at this border crossing point. Average customs clearance times of 30 minutes (Thailand)-60 minutes (Myanmar) were self-reported by the respective customs administrations, but self-reported customs clearance times are often much shorter than those determined in rigorous time release studies.

45 See footnote 26 of this chapter. 46 Recently, there was a high risk of sugar smuggling to Myanmar because of the lower price in Thailand but this is a smuggling detection issue rather than a risk management issue.


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(xi) There is no road transport agreement between Thailand and Myanmar.

(xii) A Memorandum of Understanding for Initial Implementation of the Cross-Border Transport Agreement at Mae Sai-Tachileik was negotiated in 2005 but was never signed.

As one of the priority border crossings located along one of the priority corridors identified in Protocol 1 of the CBTA, Mae Sai-Tachileik is another candidate border crossing pair for implementation of coordinated border management as part of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion (described in Section 8.4). With respect to possible ADB support for Myanmar, a footnote in the ADB TA report for this project stated that “[t]he Government of Australia has indicated that TA implementation may support capacity building and technical advisory activities in all the six GMS countries subject to appropriate legal and other considerations.”47 6.8 Summary of Main Findings Table 6-2 presents a summary of status and issues in the Mekong Region, including development partner assistance. Although the target year for full implementation of the CBTA (2010) has now passed, this review confirmed that multi-step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at border checkpoints in the Mekong Region. Generally, only limited risk management techniques are employed at border crossings, although Thailand is an exception to some extent. Official operating hours range from 12-16 hours per day, but are effectively and perhaps unofficially shortened by lunch breaks, and opposition to extended operating hours is strong among “frontline” officials. 48 Also, at most locations the use of information and communications technology (ICT) is very limited, with the borders generally operating stand-alone systems unconnected to the national system (as well as to the neighboring country’s system), although Thailand and to some extent Viet Nam are exceptions. That said, with a more pragmatic approach under the upcoming ADB C-R-PATA and by other development partners, measurable results in reducing delays at borders can be expected.49

47 Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 5, footnote 6. 48 It is encouraging that in January 2011 the Deputy Prime Minister of Thailand was assigned to study the strengths and weaknesses of round-the-clock operation of border checkpoints, although insufficient personnel and security concerns are still mentioned as a constraint. However, 24-hour border operation has been introduced elsewhere despite such concerns, e.g., at the Malaba border crossing between Kenya and Uganda in May 2008. 49 A modest target of reducing “average transit time at border crossings” by 10% between 2010 and 2015 has been set. Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 7, Appendix 1. In contrast, ASEAN has called for (i) simplifying customs procedures and practices of all member states with the target of reducing processing costs by 20% by 2013 and 50% by 2015; and (ii) enhancing border management capabilities, including synchronizing procedures, formalities, and practices, and promoting joint border management (“One Single Inspection and Processing Point”), both by 2013. Association of Southeast Asian Nations, Master Plan on ASEAN Connectivity, 2010, pp. 53-54.


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Table 6-2 Summary of Status and Issues at Border Crossing Points in the Mekong Region

Border Crossing Point Pair Status/Issues to be Addressed Development Partner Assistance Poipet (Cambodia) – Aranyaprathet (Thailand)

Infrastructure Congested border crossing due to land uses on

Cambodia side Need for IT on the Cambodian side Operations Open 0700 to 1900 but unofficial closures of

the border during lunchtime High rates of physical inspection; no risk

management on the Cambodian side Complicated processes on the Cambodian side No bilateral road transport agreement

Possible support for development of a new border crossing point for freight traffic, most likely 12 km south of the current location

Possible implementation of coordinated border management under upcoming ADB C-R-PATA

Rollout of ASYCUDA at Poipet in 2011 under the World Bank assisted Trade Facilitation and Competiveness Project

Bavet (Cambodia) –Moc Bai (Viet Nam)

Infrastructure Infrastructure completed in 2003 (Viet Nam)

and 2005 (Cambodia); need for common control area

Need for IT on the Cambodian side Operations Open 0600 to 2200 but unofficial closures of

the border during lunchtime High rates of physical inspection, even with

risk management on the Viet Nam side Complicated processes on the Cambodian side MOU for initial implementation of CBTA

(2006) not implemented Bilateral road transport agreement (1998) and

protocol (2005), effective 2006

Infrastructure on Cambodia side completed in 2005 with ADB assistance

Training provided by WCO and ADB in 2006


Rollout of ASYCUDA at Bavet by the end of 2011 under the World Bank assisted Trade Facilitation and Competiveness Project


Infrastructure Good although aging infrastructure, not

always effectively utilized Need for enhanced IT on the Lao PDR side Operations Open 0600 to 2200 With streamlining, only four agencies on the

Lao PDR side of the border MOU for initial implementation of CBTA

(2005) not implemented MOU for initial implementation of the CBTA

between and among Lao PDR, Thailand, and Viet Nam (2007) implemented only in June 2009 pilot

Liberal bilateral road transport agreements (1999, 2001) in place

Possible implementation of coordinated border management under upcoming ADB C-R-PATA; however, because the route was not listed by the GMS governments as one of the main routes in CBTA Protocol 1, the border crossing has not received much attention in the context of the CBTA, although it is on the busiest and important route for Lao PDR

Rollout of ASYCUDA at Thanaleng on a pilot basis in 2011 under the World Bank assisted Customs and Trade Facilitation Project


Infrastructure Good infrastructure, with CBTA fast track

lanes Need for enhanced IT on the Lao PDR side Operations Open 0600 to 2200, but since the Lao PDR

national treasury closes the account at the border crossing point at 1600, imports cannot be cleared after that time because import customs duties cannot be paid

With streamlining, only four agencies on the Lao PDR side of the border


Completion of bridge constriction in 2006 with Japanese assistance


Rollout of ASYCUDA at Savannakhet in 2011 or 2012 under the World Bank assisted Customs and Trade Facilitation Project


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Border Crossing Point Pair Status/Issues to be Addressed Development Partner Assistance Dansavanh (Lao PDR) – Lao Bao (Viet Nam)

Infrastructure USD 1 million, 18,000 m2 extension of

common control area (CCA) is under construction on the Viet Nam side; a survey is yet to be undertaken of the location of a CCA on the Lao PDR side (there is only an “informal” CCA at present)

Need for enhanced IT on the Lao PDR side Operations Open 0700 to 1900 With streamlining, only four agencies on the

Lao PDR side of the border High rates of physical inspection on the Lao

PDR side MOU for initial implementation of CBTA

(2005) not implemented MOU for initial implementation of the CBTA

between and among Lao PDR, Thailand, and Viet Nam (2007) implemented only in June 2009 pilot


Some improvements of customs facilities at Dansavanh programmed with assistance from Japan-ASEAN Integration Fund


Rollout of ASYCUDA at Dansavanh in 2011 or 2012 under the World Bank assisted Customs and Trade Facilitation Project

Mae Sai (Thailand) - Tachileik (Myanmar)

Infrastructure Narrow border road and only two access lanes

on the Myanmar side Use of portable buildings, one for each agency,

on the Myanmar side No x-ray scanner on the Myanmar side Need for IT on the Myanmar side Operations Open 0600-1800/0630-1830 High rates of physical inspection; no risk

management on the Myanmar side MOU for initial implementation of CBTA

negotiated but not signed (2005) No bilateral road transport agreement


(there may be a possibility of providing assistance to Myanmar)


Survey on Improvement of Customs Procedures Chapter 7 Summary of Findings and Issues on Customs Legal/ for Trade Facilitation in the Mekong Region Institutional Frameworks and Operations/Procedures

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Chapter 7 Summary of Findings and Issues on Customs Legal/Institutional Frameworks and Operations/Procedures

7.1 Introduction The previous chapters (Chapters 3 to 6) examined the current status of customs operations in Mekong Region countries. This chapter summarizes the findings and issues identified. The national level is reviewed in Section 7.2, and the regional and border level is summarized in Section 7.3. 7.2 National Level 7.2.1 Cambodia With strong political will and assistance from the World Bank, Cambodia has been actively engaged in customs modernization over the last few years, but its customs clearance procedures and associated industrial requirements arguably remain the most restrictive in the Mekong Region. (1) Legal and Institutional Frameworks

• The Law on Customs (2007) is supplemented by various regulations, ministerial decisions, and director’s circulars (e.g., Sub-Decree No. 21 on Facilitation of Trade through Risk Management of 2006). The primary law is broadly consistent with international standards, but limited in coverage; additional regulations required for implementation of global and regional standards.

• The General Department of Customs and Excise (GDCE) has published a strategic objective to review its current organizational structure in view of its changing operational workload and its reform and modernization program. This effort is building upon a previous reform initiative from 2003 to 2008 in which GDCE recognized the need to increase the decentralization of administrative authority (by devolving the right to make technical decisions to branches and sub-branches) and implement monitoring and control methods ensuring managers are accountable for their decisions. Future organizational structure changes of GDCE may need to consider where to place tariff classification, valuation, rules of origin, and risk management responsibilities.

• A unique issue in Cambodia is the presence of the Cambodia Import Export Inspection and Fraud Repression Department, the border controls of which often overlap with those of GDCE.

• The current Customs Training Center infrastructure may be insufficient to fulfill the objectives of the GDCE’s 2009-2013 strategy.

• The current situation in which trained trainers are moved from the Customs Training Center to posts either in headquarters or at border crossing points needs to be addressed.

(2) Operations and Procedures

• Cambodia is a member of the WTO and its five-year transition or grace period for application of the Agreement on Customs Valuation (ACV) has expired. However, Cambodia has not yet begun to apply the ACV.


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• GDCE initiated a risk management program when the Government issued Sub-Decree No. 21 on Facilitation of Trade through Risk Management (2006), which provides for interagency cooperation through service-level agreements (MOUs) in efficiently carrying out risk-based operating procedures. The current risk management program with assistance from JICA includes channel selectivity decisions using risk assessment and risk profiling. Risk management in Cambodia could be made more effective with continued JICA assistance, for example to help GDCE prepare and fulfill a risk management database.

• GDCE does not currently provide advance valuation, tariff, and origin rulings to traders. Cambodia applies ASEAN Harmonized Tariff Nomenclature (AHTN) 2007, which includes the 2007 amendments of the WCO’s Harmonized System (HS). Cambodia became a contracting party to the HS Convention in 2002.

• GDCE put into practice a code of conduct and ethics for customs officers, although implementation of associated orders and guidelines was limited. However, the World Bank assisted Trade Facilitation and Competiveness Project has assisted GDCE in developing an Integrity Action Plan and revising its code of conduct and ethics as a customs strategy objective.

• Following GDCE’s Work Program for Customs Reform 2003-2008, and with support from the World Bank’s Trade Facilitation and Competiveness Project initiated in 2005, GDCE has been implementing ASYCUDA World. However, there have been a number of issues: (i) delays in implementation; (ii) a decision by the government not to proceed with the institutional model initially envisaged for the creation of a single window; (iii) the weak the IT capacity of GDCE staff; and (iv) procurement packaging that could have been better designed to allow for the emerging, but weak capacity of the local IT industry. While the ASYCUDA system has facilitated customs procedures, there is a need to improve the process to facilitate trade.

• Cambodia has issued a sub-decree (No. 906, 2009) on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism.

• Cambodia has introduced a registered (licensed) customs broker program, in accordance with Ministerial Decision No. 115 on Establishing and Functioning of Customs Brokers (2009).

7.2.2 Lao PDR Lao PDR has made some significant progress with customs modernization and improved border management in recent years, although its small size and early stage of development has resulted in it continuing to lag behind most countries in the Mekong Region. (1) Legal/Institutional Frameworks

• The Customs Law (1994) was amended in 2005. While the 2005 amendment modernized the main law in certain respects, certain measures are not modern (e.g., Article 24, which seems to require 100% physical inspection; inadequate provisions on transit; no provision allowing the filing of a Customs declaration in advance of cargo arrival).

• As Lao PDR carries out its customs reform and modernization program, it will be productive to review whether its current organizational structure supports the objectives of the program, in particular whether it could become more responsive to trade facilitation requirements (e.g., implementation of a new risk management program may require a new risk management unit).

• The lack of a suitably equipped Customs Training Center could be addressed by the development of a sustainable training center complete with fit-for-purpose training furniture


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(e.g., desks in a U-shaped configuration) and with training equipment (e.g., photocopiers, printers, computers, whiteboards, video camera, library of training materials).

• A recent report prepared by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce found that the reason for the country’s noncompliance with WTO trade facilitation measures is human resource constraints including the lack of expertise, insufficient personnel, and a lack of motivation and training. The limited availability of funds for training was also indicated as a constraint.

(2) Operations/Procedures

• The Lao PDR Customs Department applies the “declared value” in line with Chapter 3 of the Customs Law on the Value of Goods, including Article 8 on declared export value and Article 9 on declared import value, i.e., transaction value.

• The Department has not yet developed a risk management program. Considering that the Lao PDR Customs Department is currently preparing a pilot project for ASYCUDA, it may be too early to roll out risk management.

• The Department does not provide advance valuation, tariff, or origin rulings to traders at present. A recent WTO Trade Facilitation Self-Assessment of Needs presentation by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce found a number of non-compliant WTO, including provision of advance rulings (as well as pre-arrival processing, risk management, and creation/publication of average release and clearance times).

• The Department has utilized C2000 systems for the automation of its procedures, but under the Customs and Trade Facilitation Project commenced in July 2008, the implementation of ASYCUDA World has been initiated. The World Bank has suggested that while implementation of ASYCUDA is likely to streamline and rationalize processes and procedures and provide a sound platform for the introduction of a range of internationally agreed standards, it is unlikely to realize its full potential unless a number of complementary reforms and operational changes are implemented in parallel with system implementation.

• The customs modernization support component of the Customs and Trade Facilitation Project assisted by the World Bank is to include an integrity and anticorruption support activity.

7.2.3 Myanmar Although it is an active participant globally with WCO and WTO membership, and regionally with GMS and ASEAN involvement, its customs administration and procedures remain problematical, due to old legislation and limited adoption of IT, among other factors. (1) Legal/Institutional Frameworks

• The basic Myanmar Customs legislation is quite dated: (i) the Sea Customs Act of 1878 and (ii) the Land Customs Act of 1924. An amendment of Article 30 of the Sea Customs Act is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement; significant revision of Myanmar’s customs laws is also required to bring it in line with the Revised Kyoto Convention.

• Myanmar has various commitments through membership in WCO and WTO as well as the GMS and ASEAN.

• The Myanmar Customs Administration has a staff of 2,387, a large number of whom are dedicated to preventative tasks and activities (i.e., control measures), which suggests an


7-4

opportunity to retrain some managers and staff members in proactive trade facilitation measures to help increase Myanmar’s exports by reducing transaction costs and reducing the time to market. Nevertheless, the fundamentals of human resource management are in place.

• The facilities for customs training and development in Myanmar include a training center established in 1981 that delivers ten courses, but it would be productive to develop additional training courses, e.g., HS code classification, rules of origin, advance tariff and valuation rulings, customs technical English, risk management (see the discussion of operations and procedures below).

(2) Operations and Procedures • The Myanmar Customs Administration uses its “real value” method rather than the

transaction value prescribed by the ACV. However, an amendment of Article 30 of the 1878 Sea Customs act is now before the country’s Cabinet to adopt the valuation methodology set out in the ACV.

• The Administration does not yet have a risk management program. While it currently carries out a high level of customs physical inspections based on a perceived need to detect narcotics smuggling, customs risk management at border crossing points requires different risk management methods using trader compliance programs and a customs risk management database, which should be linked to databases of enforcement agencies and other border crossing point control agencies.

• The Administration does not currently provide advance valuation, tariff, and origin rulings to traders.

• The Myanmar Customs Administration has not yet commenced automation. However, like the other Mekong Region (as well as the other ASEAN) countries, the Myanmar has recognized that Customs IT is a key component for trade facilitation and accordingly it is now planning to implement a customs IT application system and procurement of the UNI-PASS system developed by the Korea Customs UNI-PASS Information Association (CUPIA) is under consideration of the Cabinet. Since current customs procedures in Myanmar are highly centralized, there may be a need to review the process as a whole and decentralize some functions to the borders together with the systems installation.

7.2.4 Thailand While Thailand follows most practices recommended and prescribed by the WCO and WTO and is the leader in customs modernization in the Mekong Region, further development will help it achieve its goal of having a world-class customs service. . (1) Legal/Institutional Frameworks

• Thailand aspires to have a world-class Customs service and is generally the leader in the Mekong Region.

• The Thai Customs Act (1926) has been amended several times; there have been some recent developments (e.g., on advance rulings), but pending amendments to the Customs Act are required for greater consistency with the WCO Revised Kyoto Convention.

• The Thai Customs Department, also known as Royal Thai Customs, had a staff of 4,347 government officials as of June 2010, with 887 deployed at the department’s 45 customs houses. The department’s organizational structure reflects proactive trade facilitation objectives, and accordingly it has allocated staff to trade facilitation functions and responsibilities (e.g., post clearance audit).


7-5

• A challenge facing the Customs Training Center is that its annual budget of only THB 3 million is insufficient and it is difficult to obtain additional funds when the government has recently reduced the Customs Department’s budget by 60% from its request. However, measures to improve customs training are required (e.g., support to provide the training center staff with the skills to prepare and deliver new training syllabuses such as advanced valuation, advanced HS Code Classification, advanced rules of origin, AEO system, and other advanced training courses).

(2) Operations and Procedures

• A number of legal instruments govern customs valuation in Thailand and broadly follow the ACV. Customs officers therefore have the legal instruments to use the “transaction value”. A valuation declaration form is used and there is a valuation dispute and appeal procedure. However, Thai Customs Department maintains the authority and discretion to arbitrarily increase the customs value of imports, which means an inconsistent and unpredictable application of the transaction valuation method.

• The Thai Customs Department applies well-developed, formal risk management procedures aligned with WCO’s risk management techniques at all road, seaport, and airport border crossing points. The Department has a relatively advanced IT system that allows for the exchange of risk management information between headquarters and regional customs offices and with border crossing points.

• The Department has a management method of providing traders with advance rulings on valuation, tariff, and origin. The advance ruling service is regarded as a “pilot project” paving the way for a more complete system. The Department has prepared a draft law on the subject and delivered it to the Cabinet for consideration, after which it would go to the Council of State and the Parliament for approval. It is not known how long this process might take.

• The Department has since 2005 implemented a Transparency Partnership Project, including the signing of an MOU between the department and more than 100 companies to cooperate in the fight against corruption, as well as telephone hotline that the public can use report misconduct, corruption, and other problems.

• The first phase of national single window development officially commenced operation in Thailand in July 2008. The Thai Customs Department and 34 other government departments in 12 ministries signed an MOU to undertake data harmonization and document simplification/standardization, in line with the recommendations of the National Logistics Committee chaired by the Prime Minister and the Agreement to Establish and Implement the ASEAN Single Window of 9 December 2005. The second phase of the national single window initiative commenced in June 2010, and the project is scheduled for completion in November 2011, although indications that meeting this deadline will be difficult.

• Customs-private sector cooperation in Thailand is long-standing, including for example, a joint committee between customs and the private sector, which serves as a formal consultative mechanism with freight forwarders, shipping agents, customs brokers, and chambers of commerce, and which discusses changes in customs services, monitoring, and evaluation of customs performance, and providing advice on the streamlining of customs services.

7.2.5 Viet Nam While Viet Nam has made many steps toward customs modernization (e.g., it has acceded to the Revised Kyoto Convention), governmental commitment to move the General Department of Vietnam Customs away from its traditional control orientation has lagged after WTO accession.


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(1) Legal/Institutional Frameworks

• The main laws are the Customs Law (2001) and Law on Amendment of and Addition to a Number of Articles of the Law on Customs (2005); the 2005 amendments contributed to a modernization of an overly “control-oriented” customs law, but further provisions may be necessary to better implement international agreements.

• The current organizational structure of the General Department of Viet Nam Customs (GDVC) was established by Decision No. 02/2010/QD-TTg of the Prime Minister, issued on 15 January 2010, but the structure established in 2010 resembles that of 2005 except for the addition of an international cooperation department, while the three goods classification departments (north, central, and south) were combined into one department.

• After a GDVC gap analysis in 2005, the creation of new departments was considered, e.g., departments for strategic planning, change management, finance and planning, risk management, intelligence, appeals, and procurement and facilities management. However, a proposed structure of four “clusters” was not adopted.

• The 2005 analysis recommended reducing the number of customs departments and provincial offices. However, there are still 33 provincial offices, with 185 customs checkpoints and 35 enforcement units.

• There is a lack of performance benchmarking that would give senior GDVC management information enabling them to monitor the result of policies and to consider what executive actions need taking to direct and correct reform and modernization progress.

• A 2008 assessment by the Hanoi-based Institute of World Economics and Politics found that Viet Nam lacked human resources in customs (and other border control fields). It noted the lack of an efficient, long-term recruitment mechanism. It found that the current customs (as well as quarantine and immigration staff lack advanced professional knowledge and skills) to exploit modern technology. It also identified that these staff members are often weak in foreign languages (i.e., English and the languages of the neighboring countries) and computer skills. The Institute of World Economic and Politics assessment concluded that an overall strategy of staff training and re–training is needed.

(2) Operations and Procedures • Viet Nam is the only Mekong Region country to have acceded to the Revised Kyoto

Convention, having done so on 8 January 2008; however, generally compliance has been less than expected, as the governmental commitment to move the General Department of Vietnam Customs away from its traditional control orientation has lagged after WTO accession

• The General Department of Vietnam Customs (GDVC) applies the ACV, e.g., the transaction value method is applied as the primary method. To improve implementation, GDVC is proceeding with two strategies: (i) the development of an adequate value database to assess suspect invoices, and (ii) post-clearance audit. GDVC’s officers may require (further) training in customs valuation so that revenue collection is not at risk.

• GDVC is implementing risk management with JICA assistance. The Department has begun to carry out a low-risk customs due diligence program in which it is classifying businesses according to the risks they present. Post-clearance audits are necessarily a feature of risk management programs although the trading community has complained that GDVC now conducts such audits “aggressively”.

• On 7 December 2010, GDVC announced that it intends to use advance rulings “as used in the USA, Singapore, Japan, New Zealand and Australia for goods classification, rules of


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origin and valuation”. However, GDVC plans to first complete an e-Customs test run with 800 enterprises. The implementation of advance rulings in Viet Nam should commence in 2011 and be available on the internet.

• The Customs Modernization Project assisted by the World Bank included a component for development and implementation of a comprehensive integrity/anti-corruption program based on the Revised Arusha Declaration.

• Viet Nam has been proceeding with development of its national single window under the ASEAN initiative. On 21 October 2009, Viet Nam Decision No. 2599/QD-BCDSW, established a steering committee on the ASEAN Single Window. However, there are a number of challenges, e.g., the IT systems of the different ministries are quite different, the mechanism of sharing information between ministries and the private sector has not been established, and limited human and financial resources.

• GDVC has begun developing a trusted-trader program, to be piloted in 2011, with the aim of promoting greater trade facilitation and voluntary compliance, as well as closer cooperation between GDVC and the local private sector stakeholders.

7.3 Regional While ADB has directed its efforts to regional and border level projects, there remain significant opportunities for addressing customs issues that are best addressed at these levels, rather than the national or central level. • Although the target year for full implementation of the CBTA (2010) has now passed, multi-

step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at border checkpoints in the Mekong Region.

• Generally, only limited risk management techniques are employed at border crossings, although Thailand is an exception to some extent.

• Official operating hours range from 12-16 hours per day, but are effectively and perhaps unofficially shortened by lunch breaks, and opposition to extended operating hours is strong among “frontline” officials.1

• At most locations the use of information and communications technology is very limited, with the borders generally operating stand-alone systems unconnected to the national system (as well as the neighbor country’s system), although Thailand and to some extent Viet Nam are exceptions.

• An ASEAN single window is to be implemented by 2012 (or a few years later), but all Mekong Region countries are behind schedule for the development of their respective national single windows and at last one seems to have virtually given up.

• Both the GMS and ASEAN have developed customs transit systems, but neither has been implemented yet; ADB and the EU, respectively, are actively assisting these programs.

• CBTA-related training at both the central and border levels would assist ADB in its task of operationalizing the CBTA. A joint ADB-AusAID mission during April-May 2007 estimated a budgetary requirement of AUD 12.1 million for the required training, equipment, infrastructure, and training program management.

1 However, 24-hour border operation has been introduced elsewhere despite such opposition, e.g., at the Malaba border crossing between Kenya and Uganda in May 2008.


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• There is a need for master plan and feasibility studies to improve the efficiency of border crossing pairs. There may be a need for a feasibility study of relocating freight traffic from the Aranyaprathet-Poipet border crossing point.

• All things considered, with a more pragmatic approach under the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, and by other development partners, measurable results in reducing delays at borders can be expected.

Survey on Improvement of Customs Procedures Chapter 8 Current Status of Initiatives for Trade Facilitation in the Mekong Region to Address Issues

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Chapter 8 Current Status of Initiatives to Address Issues 8.1 Introduction This chapter assesses current status of initiatives to address the issues raised in the above chapters, including initiatives of: (i) Mekong-Japan Cooperation, (ii) the Japan International Cooperation Agency), (iii) the Asian Development Bank, (iv) the World Bank, and (v) other development partners (i.e., the EU, AusAID, and USAID). The section concludes with an assessment of the lessons learned from recent/ongoing initiatives, which will inform the formulation of projects in Chapter 9. 8.2 Mekong-Japan Cooperation At a Japan-ASEAN Summit Meeting held in December 2005, the Government of Japan announced that it would establish of a JPY 7.5 billion Japan-ASEAN Integration Fund (JAIF) to assist in reducing regional disparities and promoting the integration of ASEAN countries; the fund was formally established in March 2006.1 In January 2007, the Government of Japan announced the Japan–Mekong Region Partnership Program, which proposed further strengthening of the relationship between Japan and Mekong Region, and realization of sustainable economic development in the region. The program called for expansion of Japanese assistance in the region and proposed a series of ministerial level meetings to discuss how the program objectives could be achieved. Table 8-1 summarizes recent collaboration between Japan and the Mekong Region countries for economic development, noting items with particular relevance to the current study.

Table 8-1 Chronology of Recent Collaboration between Japan and the Mekong Countries for Economic Development

Month/Year Conference/Meeting Relevance to This Study January 2008 First Mekong-Japan


The Government of Japan announced the establishment of a USD 20 million Japan-ASEAN Integration Fund to improve the efficiency of logistics and distribution along the East-West and Southern Economic Corridors.

October 2009 Second Japan-Mekong Foreign Ministers Meeting

The meeting evaluated favorably the expansion of official development assistance in the region and the progress made in the freight transport sector, and noted the importance of continued assistance in the improvement of the economic corridors.

October 2009 First Japan-Mekong Economic Ministers Meeting

The Minister for Economy, Trade and Industry of Japan put forward the Mekong-Japan Economic and Industrial Cooperation Initiative (MJ-CI), which proposed among other measures, support for streamlining customs clearance and cross-border freight transport.

November 2009 First Summit Meeting between Japan and the Mekong Region Countries

The Tokyo Declaration of the First Summit Meeting between Japan and the Mekong Region Countries was adopted. This declaration called for support for Action 63, to include the establishment of cross-border regional economic systems as a priority item.

1 Some improvements of customs facilities at Dansavanh, Lao PDR (e.g., construction of administration building, improvement of electricity and water supply infrastructure) were later programmed with assistance from fund.


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Month/Year Conference/Meeting Relevance to This Study July 2010 Third Japan-Mekong


This meeting acknowledged major progress made in the implementation of Action 63 and the initiative stated in the Tokyo Declaration of November 2009.

August 2010 Second Japan-Mekong Economic Ministers Meeting

The industrial requirements of the MJ-CI Action Plan were presented, which included 24-hour (round-the-clock) operation of custom operations along economic corridors, harmonization of document formats, fast-track systems, and application of customs information technology (IT), and capacity building of customs officers.

September 2010 Mekong-Japan International Conference on the East-West Economic Corridor and the Southern Economic Corridor

The conference identified the need for streamlining of customs operations, standardization, promotion of industrial development, and trade facilitation as key factors for maximizing the benefits of the economic corridors.

October 2010 Second Summit Meeting between Japan and the Mekong Region Countries

The meeting identified the need for further cooperation and actions relating to the above findings and developments.

November 2010 APEC Japan Finance Ministers’ Meeting

The Japanese Minister of Finance announced a contribution of up to USD 25 million to ADB for the improvement of trade facilitation in ASEAN countries and India.

December 2010 Public-Private Partnership Forum

Based on the recommendation of the summit meeting in 2009, participants from public and private sectors met and discussed measures for mutual cooperation. Discussions were facilitated by dividing the participants into several working groups, of which focused on freight transport and emphasized the importance of capacity building in the sector along with and further improvement of the economic corridors particularly in the Myanmar sections.

Source: JICA Study Team Based on this background and the needs of private companies surveyed by the Japan External Trade Organization (JETRO), Japan proposed cooperation for the improvement of trade facilitation including customs procedures in the First Mekong-Japan Economic Ministers’ Meeting in October 2009, which met with the approval of the Mekong Region countries. In addition, the Tokyo Declaration of the First Meeting between the Heads of the Governments of Japan and the Mekong Region Countries was adopted in November 2009. It proposed Action 63 and called for implementation of various programs for customs improvement in order to transform regional transport corridors into economic corridors with the involvement of the private sector. Planned measures relating to customs operations and related transport and trade facilitation are to include: (i) assistance for efficient and effective customs clearance through technical assistance in risk management, capacity building, and provision of necessary equipment; (ii) organizing workshop(s) for forwarders and traders; (iii) assistance in GMS- and CBTA-related capacity building; (iv) dispatch of customs administration advisors for the improvement of legal/regulatory systems; and (v) dissemination of the knowledge and experience of CBTA among customs officials and freight forwarders through seminars and workshops.


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In the Second Mekong-Japan Economic Ministers’ Meeting in August 2010, the Business Recommendations on Mekong-Japan Economic Industrial Cooperation Initiative (MJ-CI) Action Plan were released. The Recommendations included various measures related to customs operations along the corridors such as 24-hour operation, harmonization of document formats, introduction of fast-track and customs information technology (IT) systems, and capacity building of customs officers. Following the Economic Ministers Meeting in October 2010, the second Summit Meeting between Japan and the Mekong Region Countries discussed and agreed on the MJ-CI Action Plan involving five categories of actions: (i) hard infrastructure; (ii) trade facilitation/logistics; (iii) enhancement of small and medium enterprises/supporting industries/ entrepreneurship; (iv) enhancement of the service sector and new industrial sectors; and (v) development of a review and follow-up mechanism. Box 8-1 shows the contents of MJ-CI Action Plan on trade facilitation/logistics.

Box 8-1: MJ-CI Action Plan on Trade Facilitation/Logistics 1. Realization of 24-hour Customs Operation

• Realize 24-hour operation or introduce a system in which shippers or freight forwarders can receive “out-of-time” customs clearance services with advance notification (an "advance notification system") at border customs along the East-West and Southern Economic Corridors, on step-by-step approach, taking into account the current status of customs operations in Mekong Region countries [to be undertaken by Mekong Region countries with the assistance of Japan]

• Implement pilot projects for the East-West and Southern Economic Corridors [Japan and Mekong Region countries]

2. Harmonization/Simplification of Documents

• Harmonize the format of documents necessary for customs clearance, by employing an ASEAN Custom Declaration Format (written in English) or the Revised Kyoto Convention, possibly by 2012 [Mekong countries]

• Participate actively in the discussion of ASEAN and dialogue partners on Rules of Origin, especially those facilitated under the framework of ASEAN+3/+6, to realize harmonized certificates of origin in the region [Mekong Region countries]

• Facilitate the above activities through human resource development and workshops/seminars [Japan and Mekong Region countries]

3. Introduction of Fast-Track Lanes

With a view to establishing and developing fast-track channels for customs clearance so that shippers/freight forwarders that frequently carry cargo along the East-West Economic Corridor and/or the Southern Economic Corridor can receive some benefit for their contribution to the regional economy: • Examine a detailed system of fast-track lanes through which cargo could pass within five

minutes. [Mekong Region countries] • Collect and analyze data to identify frequent (i.e., top 50) shippers/freight forwarders in the

region as an initial step [Mekong Region countries with the assistance of Japan] • Conduct a feasibility study of introducing fast-track lane systems at border customs in 2011

for the establishment of effective systems, based on data [Mekong Region countries with the assistance of Japan]

• Conduct a feasibility study to improve regional customs transit system [Mekong Region countries with the assistance of Japan]

• Provide assistance to Mekong Region countries, in the collection/analysis of data and feasibility study/studies [Japan]


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4. Introduction/Improvement of IT Technologies • Conduct a feasibility study for the introduction of an electronic clearance system in 2011 at the

specified border customs described in the Business Recommendations, including the appropriate system (function, capacity) to be introduced, utilize any prior effective studies [Mekong Region countries with the assistance of Japan]

• Support Mekong Region countries in introducing/improving e-custom systems based on the above study [Japan]

5. Human Resources Development (HRD)

Considering the need for: (i) understanding of the Harmonized System (HS) code, (ii) prevention of smuggling, (iii) early issuance of certificates of origin, (iv) reduced transhipment, and (v) transparency in custom procedures: • Implement projects that match the above-mentioned objectives (e.g., training for customs

officers, capacity building for logistics companies in ASEAN) [Japan] • Enhance further training courses for customs and trade administration agencies, either in the

form of dispatching experts or group training considering the requests from Mekong Region countries [Japan]

• Conduct a Logistics Workshop for the Mekong Region and ASEAN in August 2010 in cooperation with the Japan External Trade Organization and the Thai National Shippers’ Council on capacity building for the private sector, as a pilot project, and based on the result of this workshop, consider further enhancement of effective HRD programs. [Japan]

• Upgrade capacity for data collection and analysis for import and export statistics in the Mekong Region countries [Cambodia, Lao PDR, Myanmar, and Viet Nam, with the assistance of Japan and Thailand]

Note: The MJ-CI Action Plan on Trade Facilitation/Logistics also calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required.

Source: http://www.mofa.go.jp/region/asia-paci/mekong/summit02/mjciap.html

Future planned meetings on Mekong-Japan Cooperation include the following: (i) in April 2011, a Mekong-Japan Business and Government Forum is planned to discuss future direction of the actions based on the MJ-CI progress report; and (ii) in August 2011, a Mekong-Japan Business and Government Forum/Japan-Mekong Economic Ministers Meeting is planned to review progress of implementation of the MJ-CI action plan. Consequently the significance of the Mekong-Japan Cooperation can be summarized as follows: (i) providing the framework to incorporate industrial requirements in policy planning; (ii) recognizing the importance of Japanese assistance in improving the economic corridors; (iii) calling for coordination between and among development partners to address issues; (iv) recognizing the importance of “soft” infrastructure as well as “hard” infrastructure; and (v) in particular, identification of skills development as one of the most important issues to

be addressed. 8.3 Japan International Cooperation Agency A number of JICA projects have been implemented in ASEAN/Mekong Region countries to address customs operations issues. Most of these projects have aimed at building skills in, for example, customs valuation, HS classification, risk management, and post-clearance audit. In Cambodia, from December 2005 to October 2007, JICA dispatched short- and long-term advisors to implement the Customs Risk Management Project to develop a customs risk


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management system following by the country’s accession to the WCO earlier in the decade. Activities undertaken in this project included: (i) translation of WCO risk management principles into local language (Khmer); (ii) definition of risk management processes; and (iii) development of a risk management system. In July 2009, JICA also commenced Customs Policy/Administration Advisory Services by sending a long-term advisor to the General Department of Customs and Excise of Cambodia. The main objective of these advisory services is assist in implementation of the Law on Customs (2007), and skills development to modernize customs policies and administration. For Viet Nam, JICA assisted the General Department of Vietnam Customs (GDVC) in the Training of Trainers Project for Customs Administration Modernization by dispatching long-term advisors between August 2004 and July 2007. The project aimed at the training of trainers in GDVC in the field of customs valuation, post-clearance audit, and HS classification. Following immediately after this project, JICA dispatched a long term advisor to assist the development of an organizational structure to implement customs valuation and HS classification based on international standards. Since September 2009, JICA has been carrying out the Project on Strengthening the Training System for Improving the Capacity of Frontline Officers of Vietnam Customs, aiming at establishing human resource development systems to promote consistent and effective implementation of customs valuation and HS classification by frontline officers. To address region-wide customs issues, since 2008 JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient by reducing the time required for procedures, as well as to improve the skills and systems for risk management and monitoring at border crossing points in the region. Although the project is based in Thailand (at the Thai Customs Department), the customs administrations of Cambodia and Viet Nam (GDCE and GDVC, respectively) as well as that of Thailand have participated in the project, and training programs have been conducted in a number of areas. In addition to assistance in Mekong Region countries, JICA has been implementing several projects in the customs and trade facilitation sectors in Indonesia, Malaysia, and the Philippines, as well as in Africa. The demonstrated strengths of Japanese assistance in this sector can be summarized as follows: • Capacity building projects in the beneficiary countries and regions: JICA technical

assistance projects are implemented on a long-term basis, typically involving the dispatch of long-term specialists for a period of 1-3 years, which enables closer cooperation with executing agencies. Therefore, sustainable and effective coordination of concerned local parties can be better achieved, with consequent benefits for effective capacity building.

• Collaboration with the industrial sector: Many of JICA’s technical assistance projects in recent years have involved the industrial sector to improve their motivation for participation through working group activities (including public-private partnerships).

• Overseas training for counterpart officials: Trainees are dispatched to Japanese companies over the long term. This program can also be applied to training programs of private freight forwarding companies.

• Development of border facilities (e.g., one-stop border posts, OSBPs): Since Japan’s commitment to assist OSBP development at 14 border crossing points under the Fourth Tokyo International Conference on African Developemnt (TICAD IV), JICA has proactively implemented OSBPs including both hard and soft aspects across Africa, and assisted model bilateral and regional agreements for OSBP implementation in EastAfrica.


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• Project “ownership”: Particularly in technical assistance projects, the relatively large number of government agencies and private organizations invited to seminars or workshops held by JICA lead to increased ownership of the project.

8.4 Asian Development Bank ADB has carried out a series of technical assistance projects since 1996 to formulate, negotiate, and implement the GMS Cross-Border Transport Agreement. These include: (i) Mitigation of Non-Physical Barriers to Cross-Border Movement of Goods and People in

the Greater Mekong Region (1996), which was an initial fact-finding exercise to identify the key constraints to cross-border transport;

(ii) Cross-Border Movement of Goods and People in the Greater Mekong Subregion (1998-1999), in which the CBTA was formulated, negotiated, and signed by Lao PDR, Thailand, and Viet Nam;

(iii) Facilitating the Cross-Border Movement of Goods and People in the Greater Mekong Subregion (1999-2004), during which Cambodia, the PRC, and Myanmar acceded to the CBTA, and 20 annexes and protocols were formulated and negotiated;

(iv) Implementing the Agreement for Facilitation of Cross-Border Transport of Goods and People in the GMS – Phase I (2004-2006), which facilitated implementation of the CBTA, e.g., by assisting negotiation of memoranda of understanding (MOUs) for initial implementation of the CBTA at priority (pilot) border crossing points;

(v) Implementation of the Greater Mekong Subregion Cross-Border Transport Agreement (2007-2010), which further facilitated implementation of the CBTA (e.g., regarding traffic rights, customs transit and temporary admission systems), with a pilot operation carried out along the East-West Economic Corridor in June 2009; and

(vi) Enhancing Transport and Trade Facilitation in the Greater Mekong Subregion (2008-2010), which also further facilitated implementation of the CBTA.

In addition, ADB has carried out two GMS transport sector strategy studies, one in 1993-1995 that prioritized improvement of the Southern, East-West, and North-South Corridors, and another in 2005-06, which provided a master plan for improvement of cross-border transport infrastructure as well as identifying a number of technical assistance projects to address “soft” infrastructure constraints to cross-border transport.2 Most recently, in November 2010, ADB’s Board of Directors approved a cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion. The first phase (“subproject”) is to last two years (2010-2012) with financing of USD 2.0 equivalent provided by the Government of Australia; assuming satisfactory progress, the second and third stages will be implemented in 2012-2014 and 2014-2016, respectively, at a cost of USD 1.85 million equivalent, for a total cost of USD 5.7 million equivalent, again provided by Australia. The cluster3 TA will have 10 outputs, divided into three categories: (i) transport facilitation (4

2 ADB has also assisted a Strategic Framework for Action on Trade Facilitation and Investment (SFA-TFI), which covered customs, quarantine and sanitary/phytosanitary (SPS) inspection, trade logistics, and business mobility. Under a TA to provide Support to Trade Facilitation and Capacity Building in the GMS (2006-2007), gap analyses were carried out in the four areas, which were being followed up by detailed assessments and the formulation of action plans. 3 A cluster approach was adopted by ADB since it (i) recognizes the need for sustained support with an agreed framework, but incorporates the flexibility needed to effectively address recognized difficulties; (ii) enables confirmation of continued political commitment and country ownership, which are necessary for successful TTF project results; and (iii) allows activities in subsequent phases or subprojects to be “fine tuned” based on the outcomes of the preceding efforts and evolving TTF initiatives as the countries implement the ASEAN economic


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outputs, including exchange of traffic rights, customs transit system and border procedures, a GMS freight transporters’ association, and support for the road transport industry in Cambodia and Lao PDR), trade facilitation (4 outputs, including coordinated border management, an enhanced SPS regime, national and subregional institutions for trade facilitation, and a regional trade logistics strategy), and others (2 outputs, capacity development and legal/regulatory development). Table 8-2 presents a description of the cluster TA outputs.

Table 8-2 Description of Outputs of the Upcoming ADB Cluster TA by Subproject (Phase)

Item Output Subproject 1 (2010–2012)

Subproject 2 (2012–2014)

Subproject 3 (2014–2016)

Transport Facilitation

1 Exchange of traffic rights

Exchange of traffic rights

Exchange of traffic rights

2 Improved CTS Improved CTS 3 GMS FRETA 4 Strengthened road

transport industry Trade Facilitation

5 Coordinated border management

Coordinated border management

Coordinated border management

6 Enhanced SPS regime

Enhanced SPS regime

Enhanced SPS regime

7 Strengthened national and subregional TTF institutions

Strengthened national and subregional TTF institutions

Strengthened national and subregional TTF institutions

8 Regional trade logistics strategy

Regional trade logistics strategy

Capacity Building and Regulatory Reform

9 Capacity development

Capacity development

Capacity development

10 Legal and regulatory improvements and harmonization

Legal and regulatory improvements and harmonization

Legal and regulatory improvements and harmonization

CTS = customs transit and temporary admission system, FRETA = freight transport association, GMS = Greater Mekong Subregion, SPS = sanitary and phytosanitary, TTF = transport and trade facilitation. Source: Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 10. As noted in the previous chapter, with respect to possible ADB support for Myanmar, a footnote in the ADB TA report for this project stated that “[t]he Government of Australia has indicated that TA implementation may support capacity building and technical advisory activities in all the six GMS countries subject to appropriate legal and other considerations.”4

community blueprint. Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 3, paragraph 11. 4 Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 5, footnote 6.


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8.5 World Bank While ADB has focused on assisting regional and border-level projects in customs and transport/trade facilitation, the World Bank focus has been on national projects.5 These projects have included the following: (i) In Cambodia, the World Bank has been assisting the USD 10.0 million equivalent

Trade Facilitation and Competiveness Project, which was initiated in 2005 and restructured in 2009. The project includes four components, the most relevant of which to the current study is Component 1 on trade facilitation. Funded with USD 6.15 million, it aims at the application of appropriate IT to border management to significantly streamline operations, improve the level of transparency and accountability, and facilitate the achievement of border-related government objectives. The option of a “pure customs project” was rejected by the World Bank because trade facilitation issues extended well beyond customs functions and was effectively an interagency problem as described in a value chain analysis and investment strategy project. Originally, the project was to finance (a) an electronic single window integrating all trade facilitation agencies, including the use of ICT for automation of customs functions linked to complementary improvements in systems, procedures, and developments in the organizations involved in product clearance; (b) adherence to the Revised Kyoto Convention including the adoption of risk management capability; (c) design of a merit-based pay system for Cambodia’s trade regulatory agencies; and (d) development of a customs integrity plan based on self-assessment.6 In the 2009 restructuring the project objectives remained the same, but resources were shifted from the original design of an electronic single window to a wider and more sustainable rollout of ASYCUDA and automation of certificates of origin. Additional resources were allocated for the IT support function to ensure sustainability. Also, more attention was to be paid to project management and quality assurance, including through a more output-based contract and through building the capacity of the General Department of Customs and Excise to manage this ambitious project. An in-depth review also recommended separating out the hardware and IT capacity development from the main contract of services for the implementation of the automated customs systems.7

(ii) In Lao PDR, the World Bank has been assisting the USD 6.0 million equivalent Customs and Trade Facilitation Project initiated in 2008 to (a) implement a well-tested and widely used fully automated customs IT system, (b) provide technical assistance in a small number of key areas that will assist the country in meeting WTO requirements particularly regarding implementation of the WTO Agreement on Customs Valuation, (c) provide detailed change and project management assistance to endure effective implementation and coordination of the inputs of various development partners, and (d) provide accurate baseline data to ensure effective implementation and coordination of various projects and development partner inputs. 8 Specific (sub)components of the project include: (a) implementation of ASYCUDA World,9 including preparation of the

5 The World Bank carried out a mission on trade and transport facilitation in the GMS in last quarter of 2008, but stopped the processing of a regional/border-level project in view of ADB’s activities in order to focus on national-level interventions. 6 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, pp. 8-9. 7 World Bank, Project Paper Supporting the Restructuring of the Grant H-165KH, Cambodia: Trade Facilitation and Competiveness Project (TFCP), 12 November 2009, p. 5, paragraph 12. 8 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, Annex 4, p. 32, paragraph 3. 9 The Government of France had provided a grant to assess alternative customs IT systems, on which basis the Lao


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Lao PDR Customs Department to receive the new system, and strengthening of its IT center; and (b) customs modernization support, including assistance to meet the requirements of the Agreement on Customs Valuation, implementation of a post clearance audit function, compliance improvement and management strategy, establishment of a client service charter, introducing a comprehensive advance ruling system, developing a system of administrative appeals, intelligence and risk management development, integrity and anticorruption support, and training and translation support.10

(iii) In Viet Nam, the World Bank has been assisting the USD 65.9 million equivalent Customs Modernization Project initiated in 2005. The objectives of the project have included facilitation of trade and increasing revenue collection, by improving effectiveness, efficiency, accountability, and transparency of the General Department of Vietnam Customs. In addition, the project was to be a key factor in facilitating the country’s accession to the WTO. Specific project components and subcomponents have addressed: (a) improvement of customs systems and procedures, including the legal framework, intervention by exception, harmonized and simplified business processes, transparency and consistency, and compliance and enforcement; (b) organizational restructuring and improved resource management, including institutional strengthening, human resource management and development, financial resource management, infrastructure maintenance, management support and governance, and integrity; and (c) information and communication technology, including management information systems, computer and telecommunications equipment, nationwide implementation, and capacity building.11 A recent “midterm” review found serious delays in implementation (only 3% of the project funds have been disbursed), and that the government is considering cancelling the project, which is currently scheduled to close in June 2011. While at the time of project appraisal Viet Nam was in the process of accession to WTO, post accession in January 2007 there has been resistance to a reform program in Customs and little progress.12

In addition, the International Monetary Fund (IMF) of the World Bank Group has from time to time provided resident customs advisors in Cambodia and Lao PDR. 8.6 Other Development Partners There are a number of other development partners assisting customs and related transport and trade facilitation projects in the Mekong Region, most notably the European Union, Australia, and the United States: (i) The ASEAN-EU Programme for Regional Integration Support—Phase II (APRIS II)

was supported by a three-year, EUR 8.4 million technical assistance co-financed by the ASEAN Secretariat and European Commission Co-operation Office and was recently completed. 13 APRIS II had five components, the most relevant of which was

PDR Ministry of Finance selected ASYCUDA, which it was noted has been implemented in over 80 countries, including “several” neighboring countries. See source in previous footnote, p. 4, paragraph 12 and footnote 1. 10 See source in previous footnote, Annex 4, pp. 33–40. The World Bank is also assisting a USD 6.8 million Trade Development Facility Project in Lao PDR, initiated it 2008, with components including trade facilitation (mostly other than customs, SPS, export competiveness, capacity building and trade agreements/policy. 11 World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, 17 October 2005, Annex 4, pp. 30-38. 12 As noted, one issue may be that the General Department of Vietnam Customs has two modernization entities within its organization, one under the World Bank project as well as their own internal one. 13 Phase I of the Programme (APRIS I), from September 2003 to September 2006, supported, among other things, the preparation of the programming document for ASEAN Integration over 2004-2010; and the design and development


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Component II on Customs and Trade Facilitation. Specific subcomponents of this component included: customs clearance (A), ASEAN single window (B), transit (C), and support to other strategic plans on customs development (D). Box 8-2 presents more details on these subcomponents.

Box 8-2: Specific Components of the APRIS II Project Related to Customs and Trade Facilitation

A. Customs Clearance

• Development and design of self-assessment and prepayment systems • Development of risk management techniques and systems; implementation and development of e-

Customs • Standardization of customs formalities and documents (ASEAN Customs Declaration Document,

ACDD) • Feasibility study of an ASEAN Harmonized Tariff Nomenclature (AHTN) • AHTN website project plan • Development of an ASEAN risk management framework • Assistance to the ASEAN single window technical working group on data • Development and design of self-assessment and prepayment B. ASEAN Single Window (ASW)

• Assistance for the development of ASEAN Single Window (national and regional) • Assistance to the ASEAN single window technical working group on data harmonization C. Transit

• Design and development of the ASEAN/GMS customs transit system • Support for the ASEAN customs declaration document

D. Support for Other Strategic Plans for Customs Development (SPCDs)

• Production of a training blueprint, needs analysis, and SPCD customs training plan • Implementation of the ASEAN training blueprint and training needs assessments, and development

of a human resources management blueprint and integrity program Source: ASEAN Secretariat

In addition, the EU has provided relevant country support, most notably its assistance to

establish and implement a national single window for the General Department of Vietnam Customs (one agency), including formal establishment of a working group (2006), revision of the legal framework and completion of a single window action plan (2009), preparation of (initial) procedures and guidelines for an AEO scheme (2009), and awareness raising activities with Customs and operators (2009).14

(ii) The Government of Australia and AusAID’s main initiative in promoting transport and trade facilitation in the Mekong Region is it multi-year funding of the upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, discussed in Section 8.4. Along with the PRC’s Regional

of the ASEAN Single Window for Customs and support to an interagency task force for the development of the single window, including pilot testing of the single window model in two pilot countries, the Philippines and Thailand. 14 European Technical Assistance Programme for Viet Nam – ETV 2, 2010, p. 7.


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Cooperation and Poverty Fund, it also co-financed with USD 250,000 equivalent the recent ADB TA for Enhancing Transport and Trade Facilitation in the Greater Mekong Subregion. The Government of Australia’s Mekong Connectivity: Development Cooperation Statement 2009-2010, published in November 2010, found a “mixed performance” in its evaluation of its subregional program (e.g., on a scale of 1 to 6, scoring the CBTA a 4 on relevance; a 3 on effectiveness, monitoring and evaluation, and gender equality; and a 2 on efficiency based on implementation progress). Over the medium term, as existing activities are completed, Australia will look to fund a smaller set of projects, each involving greater funding than at present, in order to lower management costs and allow AusAID to focus more closely on priority activities.15

(iii) The main initiative in promoting transport and trade facilitation in the Mekong Region of the United States Agency for International Development (USAID) has been its ASEAN Single Window (ASW) Program, which operates under its ASEAN Development Vision to Advance National Cooperation for Economic Integration (ADVANCE) project. Specifically, the aims of the five-year project (2008-2012) are to: (i) design, test, and evaluate an ASW Pilot Project; (ii) develop a regional data model; (iii) develop software applications to promote the electronic exchange of cargo clearance data; (iv) develop legal frameworks to support cross-border exchanges of electronic data; (v) build technical and legal capacity, and support development of NSWs; (vi) promote involvement of the private sector and the general public in ASW development. Legal gap analysis and development of a single window framework is ongoing (2010-2011), as well development of the ASW pilot project (2010-2011), including design of the technical architecture, technical testing of prototype, and evaluation of the pilot project.16

8.7 Lessons Learned from Recent/Ongoing Initiatives A number of lessons may be derived from the various recent/ongoing customs and related transport and trade facilitation initiatives undertaken by the governments, Japan, ADB, the World Bank, and other international development partners. These include the following: (i) Political will and ownership is essential. The original design of the World Bank’s

Trade Facilitation and Competiveness Project in Cambodia recognized the importance of political will, considering the project’s implications for public institutions and private sector behavior (e.g., a substantial decrease in opportunities to exploit public office for personal gain); the project was structured with sequencing decisions to demonstrate such political will (e.g., the passage of enabling legislation, the removal of CamControl from routine inspections). 17 However, to a large extent these ambitions proved unrealistic and unachievable. 18 The World Bank’s Customs Modernization Project in Viet Nam has met resistance since the country acceded to the WTO, removing the pressure from the top to reform. Similarly, implementation of the CBTA has lagged because there has been insufficient ownership by customs and other government agencies, even though under the CBTA customs officials are expected to play a key role in facilitating border crossing formalities, and in the establishment and implementation of a guarantee system for smooth transit (inland and international) of goods, containers,

15 Australian Government and AusAID, Mekong Connectivity: Development Cooperation Statement 2009–2010, November 2010 (downloaded from http://www.ausaid.gov.au/publications/pdf/2009dcrmekongconnectivity.pdf). 16 USAID, What You Need to Know About the ASEAN Single Window, October 2010; USAID, Draft Viet Nam National Single Window Master Plan Template, July 2009. 17 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p. 10. 18 World Bank, Project Paper Supporting the Restructuring of the Grant H-165KH, Cambodia: Trade Facilitation and Competiveness Project (TFCP), 12 November 2009, p. 3, paragraph 6.


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and vehicles. The World Bank’s Lao PDR Customs and Trade Facilitation Project may have reflected this lesson to some extent; the project was requested by the Minister of Finance with the direct support of the Prime Minister, and it is managed by the Lao PDR Customs Department Director General.19

(ii) A cross-agency perspective is required. While trade facilitation problems may appear to be mainly customs related (e.g., high informal payments), the World Bank found in Cambodia through a value chain analysis that the problem involved issues of role clarity across agencies and problems of information sharing and coordination between/among agencies and the private sector.20

(iii) There is a need for improved coordination between customs and other transport and trade facilitation initiatives. Consider, for example, that since the CBTA has been seen as largely driven and led by transport ministries in the countries, obtaining cooperation from Customs (and other concerned agencies) for the CBTA’s timely and effective implementation has proven to be challenging even though Customs is represented on the NTFCs, and customs officials have participated in all the negotiation meetings of the CBTA and its annexes and protocols.21

(iv) There is need to avoid trying to do too much. The World Bank’s restructured Trade Facilitation and Competiveness Project in Cambodia adopted a new approach that will achieve similar objectives, but at a slower pace and on a more sustainable basis. While gains will be more modest than originally envisaged, the changes in practices and procedures are expected to become internalized in the General Department of Customs and Excise.22 In the case of the CBTA, the MOU for initial implementation at Lao Bao-Dansavanh required completion of 55 actions by specific deadlines, which may have been overambitious and simply overwhelming for those charged with implementation of the CBTA “on the ground”. As stated by Customs Specialist Luc De Wulf at the Meeting of the Transport, Customs, and Immigration Subcommittees of the CBTA in Vientiane in June 2010, “pragmatism should prevail” since “the perfect is the enemy of the good”.

(v) There is a need to provide adequate human and financial resources to project implementation. With high levels of national government revenues generated by Customs (as high as 60-70% in Cambodia), customs officials are under enormous pressure to maximize revenue collection, by resorting to high rates of physical inspection, which results in significant delays in customs clearance and creates an operating environment that is vulnerable to corruption but which does not result in increase compliance. The scale and scope of the required changes in most of the Mekong Region countries is extensive, and adequate resources must be provided to achieve the changes required and sustainable results.23

(vi) Capacity building projects must be based on a presence in the beneficiary countries and regions. For example, JICA technical assistance projects are

19 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, p. 8, paragraph 29. 20 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p.10. 21 Both the GMS and ASEAN have single window and customs transit initiatives, but to date there has been limited coordination between the two to focus on the comparative advantages of each. Also worth noting, while the World Bank and the WCO’s Regional Office on Capacity Building have customs initiatives in various GMS countries, there has been limited coordination between these initiatives and ADB’s overall support for the CBTA and related TTF initiatives. 22 World Bank, Project Paper Supporting the Restructuring of the Grant H-165KH, Cambodia: Trade Facilitation and Competiveness Project (TFCP), 12 November 2009, p. 4, paragraph 10. 23 World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, 17 October 2005, p. 8.


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implemented on a long-term basis, typically involving the dispatch of long-term specialists for a period of 1–3 years, which enables closer cooperation with executing agencies. Support from the inside of the organization is particularly effective in the case of customs improvement projects. With such a presence, sustainable and effective coordination of concerned local parties can be better achieved, with consequent benefits for effective capacity building.

(vii) Achieving “quick wins”—new, visible contributions to customs and related transport and trade facilitation in the Mekong Region—will be vital to (re)establish credibility and to prepare for harder-won victories. This can be achieved by focusing on actions that have relatively low implementation constraints (i.e., “low-hanging fruit”). While there may be a tension between quick wins and strategic long-term solutions, quick wins may provide the “political capital” required to implement more difficult, but potentially more beneficial, initiatives. 24 The World Bank’s Lao PDR Customs and Trade Facilitation Project seeks to carry out immediate activities, to give credibility to customs reforms, and provide capacity for future change while not overwhelming the implementation capacity of the Lao PDR Customs Department.25

(viii) There is a need for all countries to benefit from customs and related transport and trade facilitation initiatives. A case in point is landlocked (“landlinked”) Lao PDR, which borders all other Mekong Region (and GMS) countries, but which may not necessarily benefit from customs and related transport and trade facilitation initiatives unless specific measures are taken. One concern is that the axle load limit in Lao PDR is 9.1 metric tons, which is lower than in the neighboring countries. While this problem has been raised on previous occasions, a satisfactory solution has yet to be found. Another issue is that the nascent stage of development of the country’s trucking industry may prevent the country’s road transport operators from fully sharing in the benefits of the CBTA.

(ix) There has been insufficient involvement by the private sector in customs and related transport and trade facilitation activities to date. Experience has shown the importance of securing long-term commitment and participation of the private sector in customs modernization. 26 As noted, many of JICA’s technical assistance projects in recent years have involved the industrial sector to improve their motivation for participation through working group activities (including public-private partnerships). A citizen scorecard approach can be useful for enhancing accountability to service users.27 In the case of the CBTA, in some countries private sector organizations (e.g., freight forwarders and other entities involved in transport and trade) have little or no awareness of the CBTA itself. While ADB has urged the countries to actively involve the private sector, and indeed there is some private sector representation on the respective national transport facilitation committees, in some countries they are invited only when there is a generally perceived need for their presence.

(x) It is important to reengineer processes before investing in IT improvements. Much of the gain in efficiency resulting for investment in IT comes from simplification and streamlining of underlying processes rather than from introduction of the technology

24 See, e.g., Mark E. Van Buren and Todd Safferstone, “The Quick Wins Paradox”, Harvard Business Review, January 2009. 25 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, p. 8, paragraph 29. 26 World Bank, Project Appraisal Document on a Proposed Credit to the Socialist Republic of Vietnam for a Customs Modernization Project, 17 October 2005, p. 9. 27 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p.10.


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itself. 28 It is important to business reengineer processes in advance of systems development so as to automate the systems of the future, not the manually based systems of the past.29 The pilot implementation of ASYCUDA World in Cambodia proved to be effective by simplifying document requirements and decreasing in the rate of physical examinations.30

(xi) An efficient project management mechanism is required to implement the Customs IT. In Cambodia, UNCTAD’s ASYCUDA World system was selected to automate Customs' border management and undertake implementation activities. A Project Steering Committee on Customs Automation was established in November 2006 to guide and monitor the implementation.31 While it was planned that the implementation would take 24–27 months in three phases, the actual implementation period was 42 months. In June 2009 June, a World Bank team undertook a project supervisory mission and made recommendations on how to facilitate the project.32

(xii) There is a need to acknowledge the pros and cons of off-the-shelf software packages and newly developed software. While newly developed software should provide the best-fit solutions according to the needs of the Customs administrations and stakeholders, the financial and human resources required for systems development, maintenance, and operations are generally higher than those of off-the-shelf solutions. Accordingly, it is better to purchase an off-the-shelf software package rather than develop new software when resources are insufficient. For example, this is especially true in Lao PDR, where with severe capacity constraints in the Customs Department and the need to implement procedures in line with international standards, a country-specific application would involve significantly greater risk.33

(xiii) Disbursement should be simplified. The use of a single contract for most of the World Bank’s Lao PDR Customs and Trade Facilitation Project achieves this objective.34

(xiv) WTO-compliant user fees should be implemented to ensure the sustainability of IT systems. The World Bank’s Lao PDR Customs and Trade Facilitation Project has a project effectiveness condition specifying that all revenue from the fee be retained in a special escrow account specifically dedicate for support of the ASYCUDA system. The fee will cover only the cost of processing import, export, and transit declarations and is expected to be modest.35

28 See source in previous footnote, p.10. 29 Scott Wilson in association with PADECO and BFC, Technical Assistance for Preparation of the Vietnam Customs Modernization Project, Project Implementation Plan, prepared for the General Department of Customs, March 2005, p. 14. 30 Dr. Kun Nhem, Deputy Director General of Customs, Status and Challenges of Single Window and Paperless Trade Implementation in Cambodia, p. 2. 31 See source in previous footnote, p. 1 32 World Bank, Follow-up Supervision Mission, Trade Facilitation and Competitiveness Project, June 2009. 33 World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, p. 9, paragraph 29 34 See previous footnote. 35 See previous footnote and World Bank, Project Appraisal Document on a Proposed IDA Grant to the Kingdom of Cambodia for a Cambodia Trade Facilitation and Competiveness Project, 4 May 2005, p. 10.

Survey on Improvement of Customs Procedures Chapter 9 Future Directions of Japanese Assistance for Trade Facilitation in the Mekong Region for Customs Facilitation

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Chapter 9 Future Directions of Japanese Assistance for

Customs Facilitation 9.1 Introduction The previous chapters assessed the present situation and issues related to customs facilitation in the Mekong Region, as well as ongoing and planned initiatives addressing the issues by national governments and international development partners. This chapter sets out opportunities for further assistance identified by: (i) examining the comparative strengths of Japanese official development assistance; (ii) preparing a long list of potential assistance projects; and (iii) selecting and elaborating priority assistance programs for future Japanese assistance. 9.2 Selection of Priority Programs/Projects (1) Preparation of Long List of Potential Assistance Based on the analysis of existing situation and issues, a long list of potential assistance projects was prepared for each of the five Mekong Region countries1 as well as for the region as a whole, in the following categories: (i) legal/institutional framework, (ii) customs procedures, (iii) customs IT, (iv) human resources management, (v) integrity, and (vi) border-level projects. In cases where ongoing or programmed projects by other development partners essentially “preempt” the field (e.g., as in the case of transit, where there are already major initiatives by ADB and the EU), no projects were included on the long list. Even when project names may be similar in different countries, the content of the project(s) would depend on the specific conditions in each country with respect to the areas to be addressed. Table 9-1 shows the number of assistance projects on the long list by country and category, with details presented in Appendix A.

Table 9-1 Number of Assistance Projects Identified for a Long List by Category and Country

Category Cambodia Lao PDR Myanmar Thailand Viet Nam Regional Legal/Institutional Framework 3 3 3 2 3 2 Customs Procedures 5 5 5 4 5 3 Customs IT 3 3 3 1 1 3 Human Resources Management 4 4 4 4 4 2 Integrity 1 1 1 0 0 0 Border Level 3 2 2 3 2 4 Total 19 18 18 14 15 14

Each of the potential assistance projects was then evaluated based on the criteria and methodology set out in the next section.

1 Due to time constraints that allowed for only one trip to the region, the specifics of the projects formulated were generally not discussed with the governments during the present study.


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(2) Criteria and Methodology for Selecting Priority Projects

The following four criteria were used to select priority projects. A. Expected Impact in Facilitating Freight Transport: Considering that the title Study of

Improvement of Customs Procedures for Trade Facilitation in the Mekong Region, the first criterion was an assessment of the probable magnitude of the projects to facilitate freight transport (e.g., based on the directness of the expected impact of the projects on freight transport improvement).

B. Degree of Harmonization with Japanese Assistance: This criterion was used to assess the

suitability of the projects for Japanese assistance schemes or programs (e.g., studies, technical cooperation projects, yen loans, and grant aid. Also, the comparative or competitive advantage of Japanese assistance relative to that of other international development partners was assessed in relation to the type of assistance (e.g., by considering the extent of Japanese assistance for similar projects in the region or elsewhere).

C. Degree of Harmonization with Assistance of Other Development Partners: This

criterion was used to assess the degree to which the project complements or supports ongoing or programmed assistance of other international development partners, e.g., ADB and the World Bank. It also considers whether another development partner has to some extent “occupied” the field, leaving little space for another development partner (e.g., Japan) to assist, especially in view of the need to avoid “donor arbitrage” on the part of the recipient countries, which may lead to wasted resources.2

D. Degree of Government/Regional Commitment: This last criterion was applied by

assessing governmental or regional support for a project (the latter through the GMS or ASEAN), either explicitly or implicitly. Higher scores were given for explicit statements of support for a project3

Each of the projects on the long list was qualitatively assessed and assigned scores of 1 (low), 2 (medium low), 3 (medium), 4 (high), or 5 (very high) for each of the four evaluation criteria. The scores were then summed to derive a single total score for each project (i.e., each of the criteria was weighted equally, or in other words, no weighting was applied). (3) Priority Projects The projects with the highest total scores were selected as priority projects for each country and the region as a whole. However, the scores are meant to be more indicative than definitive, i.e., the scoring process provided an effective means of initially screening a long list of projects based on relevant criteria, but the projects eventually to be implemented should not necessarily be those with the highest score(s). Accordingly, a “menu” consisting of several projects is presented for each country and the region as a whole on the basis of the initial screening. While there are cases where implementation of one project may contribute to the success of another project (e.g., the implementation of the a RFID/GPS regional tracking system may contribute to successful implementation of a customs transit system), all projects may be successfully

2 The phrase “donor arbitrage” was used by Mr. Pradeep Srivastava, Senior Regional Cooperation Specialist, Regional Cooperation and Integration Group, Southeast Asia Regional Department (SERD), ADB, in a videoconference with the JICA Study Team on 9 December 2010. 3 E.g., Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise, 2009-2013; the tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) Meeting (Bangkok, 22-25 November 2010).


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implemented on their own, although training (included in specific projects where necessary)

will often be a necessary project component. In some cases, issues common to most or all countries may be addressed more appropriately and effectively through regionwide assistance programs rather than addressed independently with country-specific programs (and therefore some of the country-specific projects could be re-categorized as regional projects, in addition to the regional projects already identified). 9.3 Priority Assistance Projects 9.3.1 Cambodia Table 9-2 presents priority projects for Cambodia. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.

Table 9-2 Priority Projects for Cambodia

Assistance Opportunities Total Score Code in

Appendix A C1. Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes 19 C2.1 C2. Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training 18 C2.3 C3. Study and/or Technical Cooperation for Risk Management Project 18 C2.2 C4. Study and Technical Cooperation for Introducing Coordinated

Border Management at Bavet and/or New Border Crossing Point 17 C6.2.1 C5. Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries 17 C6.3 C6. Technical Cooperation for Further Development of Customs-

Private Sector Cooperation 16 C1.3 C7. Technical Cooperation for Accession to/Implementation of the

Revised Kyoto Convention 16 C2.4 C8. Technical Cooperation for Sustainable Customs Training 16 C4.3 C9. Feasibility Study of Relocating Freight Traffic from the Poipet-

(Aranyaprathet) Border Crossing Point 16 C 6.1 (1) C1. Study and Technical Cooperation for Simplification/Standardization of

Customs Procedures/Processes Project Background: A number of problems relating to customs clearance in Cambodia were identified during interviews with the private sector (e.g., customs valuations not based on transaction values; inconsistency regarding customs classifications by officials in the customs headquarters and border offices; the necessity to lodge import/export applications at Phnom Penh and to also show them at the border; insufficient knowledge by customs officers on ASEAN Form D relating to certificates of origins, which results in additional waiting time at the border). Specific problems cited in a development sponsor assisted trade mapping study included: (i) complicated processes, with a “designed from scratch” process to meet the range of import/export objectives likely to involve fewer process steps; and (ii) process steps not providing valued added, with some sub-processes requiring multiple approval from different officials and administrators.


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Project Objective: To simplify/standardize customs procedures/processes.

Indicative Project Components: (i) Prepare guidelines for simplified/standardized procedures (manual), including document simplification, advance rulings (tariff, valuation, and rules of origin), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and (ii) design and implement training programs for targeted group(s). (2) C2. Technical Cooperation for the Development of Authorized Economic

Operator System and Associated Training Project Background: Lengthy customs clearance is a problem for the private sector. For example, a time release study at Poipet(-Aranyaprathet) conducted by ADB in 2005 surveyed exports from Thailand to Cambodia and found processing time of 55 minutes and elapsed time of 255 minutes on the Cambodian side. An issue is that economic operators (including both local and international businesses)4 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies. Project Objective: To explore a solution to pilot an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training; the project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach developed by WCO.5 During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Cambodia in the near term. Accordingly, the focus will be on providing a skills platform for GDCE to start preparing an AEO program at its own pace. Project Components: (i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project; (ii) revise definition and AEO system procedures; (iii) design and implement training programs for the AEO system; and (iv) explore possible mutual recognition arrangements. (3) C3. Study and/or Technical Cooperation for Risk Management Project Project Background: The General Department of Customs and Excise (GDCE) initiated a risk management program when the Government issued Sub-decree No. 21 on Facilitation of Trade through Risk Management, issued on 1 March 2006, which provides for interagency cooperation through service-level agreements in efficiently carrying out risk-based operating procedures. The current risk management program with assistance from JICA includes channel selectivity decisions using risk assessment and risk profiling. Also, the World Bank assisted Trade Facilitation and Competiveness Project includes a risk management (sub)component. However, no risk management is practiced at Poipet and only paper-based risk management is

4 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 5 See World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010, for a description of a similar problem and project to address it in another region.


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applied at Bavet. GDCE’s Strategic Objective 4.1 for 2009-2013 is to “continue implementation

of the CED [Customs and Excise Department] risk management strategy”, including implementation of Sub-Decree 21 and other legal instruments related to risk management, as well as development of a risk management framework including use of a customs intelligence program.”6 Project Objectives: To further develop appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures. Project Components: (i) Advise on further development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and (ii) design and implement training programs for targeted group(s). Specific subcomponents may include continued implementation of a trader credibility management system, developing a network between the risk management system and ASUCYDA, developing risk management networking between GDCE and the risk management systems of other competent authorities, and assisting implementation of a customs intelligence program. (4) C4. Study and Technical Cooperation for Introducing Coordinated Border

Management at Bavet and/or New Border Crossing Point Project Background: As noted above, lengthy border clearance is a problem for the private sector. Cambodian border agencies include the representative of the Governor of the Banteay Meanchey Province (who plays the lead role), Customs, Camcontrol (under the Ministry of Commerce and which acts as a duplicate customs agency in many respects), Police, Immigration, and Quarantine (including the ministries of Health and Agriculture). There is no area for joint inspection by the Cambodian border control agencies. There is a plan to develop a new permanent border crossing point for freight traffic, most likely 12 km south of Poipet, at Nong Auen (Thailand)-Stoung Bot (Cambodia). The profile of Project C9 provides more information. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management. Project Objective: To facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border agencies, while at the same time reducing compliance and enforcement costs, resulting in efficiency gains and lower operating costs. Indicative Project Components: In coordination with the ADB C-R-PATA, the project will support efforts at Bavet and/or the new border crossing point near Poipet to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for all border agencies 6 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 193.


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will be designed, for simplification and alignment to international standards including risk

management and joint data elements. (5) C5. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries Project Background: At neither Poipet (-Aranyaprathet) nor Bavet (-Moc Bai) is there interconnectivity between the border crossing agencies of Cambodia and the neighboring country, Thailand and Viet Nam, respectively. The lack of such interconnectivity, for example, constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border. Project Objective: To establish interconnectivity between customs (and other border crossing agencies) of Cambodia and the neighboring country, e.g., to fulfill a precondition for implementation of single-stop inspection. Indicative Project Components: (i) Prepare plan(s) for installing ICT equipment and a cable/wireless connection; and (ii) develop a program to improve software interconnectivity. There may also need to be an agreement between the two sides (Cambodia-Thailand, Cambodia-Viet Nam) on the type of information that can be exchanged between the customs (and other) agencies of the two countries. (6) C6. Technical Cooperation for Further Development of Customs-Private

Sector Cooperation Project Background: On 9 October 2009, Cambodia issued Sub-Decree No. 906 on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism to: (i) collaborate and seek mutual understanding between GDCE and the private sector, in terms of “enhancing fiscal ethics and maximum trade facilitation, in particular, the needs for understanding of existing regulations (e.g., enhancement of the level of legal compliance, simplification of customs procedures); (ii) resolve all issues and misunderstandings to effectively implement the government’s trade facilitation policy; and (iii) coordinate the private sector’s involvement in the development and revision of customs regulations (Article 6). Also worth noting, since 2009 Cambodia has introduced a registered (licensed) customs broker program, in accordance with Ministerial Decision No. 115 on Establishing and Functioning of Customs Brokers. Project Objectives: (i) Develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community. Indicative Project Components: (i) Advise on further signing of cooperation and assistance MOUs and development of public and private industry user/trade consultative partnership mechanisms; and (ii) design and implement training programs for targeted group(s).


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(7) C7. Technical Cooperation for Accession to/Implementation of the

Revised Kyoto Convention Project Background: The Revised Kyoto Convention provides for simplified and harmonized customs procedures, such as predictability, transparency, due process, maximum use of information technology, modern customs techniques (e.g., risk management, pre-arrival information, post clearance audit). To date, Viet Nam is the only Mekong Region country to have acceded the convention. The Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013) includes an activity to prepare an action plan for accession to the Revised Kyoto Convention, including technical assistance from ADB, although Cambodia has not yet moved forward this plan. Project Objective: To prepare for accession and implementation of the Revised Kyoto Convention, so that Cambodia is certified as practicing international customs standards, and to assure faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness. Indicative Project Components: (i) Conduct comprehensive Revised Kyoto Convention gap analysis; (ii) assist in formulation of national strategy and action plan for compliance and accession; and (iii) assist in implementation of the required actions. (8) C8. Technical Cooperation for Sustainable Customs Training Project Background: The human resource development component of GDCE’s Strategy and Work Program (2009-2013) calls for the training of over 1,000 managers and staff members. GDCE’s current training program includes 25 different courses. The current customs training courses do not include advanced training on certain topics (e.g., the WTO Customs Valuation Agreement, advance tariff rulings, rules of origin training). The current Customs Training Center infrastructure resources may be insufficient to fulfill the objectives of the 2009-2013 strategy. Project Objective: To provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management. Indicative Project Component: (i) Advise on development of skills to prepare new customs training programs, training plans, new training curricula, and training materials, including training of trainers; and (ii) implement training programs based on the training materials. (9) C9. Feasibility Study of Relocating Freight Traffic from the Poipet-

(Aranyaprathet) Border Crossing Point Project Background: In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic, most likely 12 km south of the current location, at Stoung Bot (Cambodia)-Nong Auen (Thailand). Development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads, e.g., from Route 5 in Cambodia, which is 10-12 km away from the proposed new BCP site. Project Objectives: To prepare for the development and operation of a state-of-the-art border facility at the newly relocated border crossing point at Stoung Bot (Cambodia)-Nong Auen


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(Thailand), to increase border management efficiency and reduce clearance times, and to serve

as a model for other border crossing points in the Mekong Region. Indicative Project Components: (i) Conduct BCP feasibility study including preparation of design guidelines, layouts, standards, and equipment; (ii) develop efficient and effective customs procedures; (iii) assess approaches to coordinated border management; (iv) improve traffic and parking management around the new BCP; and (v) implement associated BCP management training. 9.3.2 Lao PDR Table 9-3 presents priority projects for Lao PDR. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.

Table 9-3 Priority Projects for Lao PDR


Appendix A L1. Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes 19 L2.1 L2. Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training 17 L2.3 L3. Study and/or Technical Cooperation for Risk Management Project 17 L2.2 L4. Technical Cooperation for Introducing Coordinated Border

Management at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (and possibly Thanaleng) 17 L6.1.1

L5. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing Agencies of Neighboring Countries 17 L6.2

L6. Technical Cooperation for Further Development of Customs-Private Sector Cooperation 16 L1.3

L7. Technical Cooperation for Accession to/Implementation of the Revised Kyoto Convention 15 L4.4

L8. Technical Cooperation for Sustainable Customs Training 16 L4.3 (1) L1. Study and Technical Cooperation for Simplification/Standardization of

Customs Procedures/Processes Project Background: A number of problems relating to customs clearance in Lao PDR were identified during interviews with the private sector (e.g., a requirement for original documents for customs clearance at the borders; application of manual, paper-based process, lacking in harmonization across provincial offices; slow clearance procedures; long closures at lunchtime; the lack of an advance tariff or customs valuations ruling regime; a method of deciding customs valuations in relation to a customs headquarters list). A rigorous assessment by a time release study assisted by WCO and the World Bank completed in December 2009 found that moderately high clearance times and that the variation from the mean in all key steps of the clearance process at all major checkpoints and for all other government agencies in addition to customs was significant. Project Objective: To simplify and standardize customs procedures/processes.


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Indicative Project Components: (i) Prepare guidelines (manual) for simplified/standardized

procedures, including document simplification, advance rulings, and tariff classification; and (ii) design and implement training programs for targeted group(s). (2) L2. Technical Cooperation for the Development of Authorized Economic

Operator System and Associated Training Project Background: Economic operators (including both local and international businesses) 7 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies. Project Objectives: To explore a solution to pilot an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training; the project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the AEO approach developed by WCO. During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Lao PDR in the near term. Accordingly, the focus will be on providing a skills platform for the Lao PDR Customs Department to start preparing an AEO program at its own pace. Project Components: (i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project; (ii) revise definition and AEO system procedures; (iii) design and implement training programs for the AEO system; and (iv) explore possible mutual recognition arrangements. (3) L3. Study and/or Technical Cooperation for Risk Management Project Project Background: The Lao PDR Customs Department has not yet developed a risk management program. Project Objective: The project will assist development of appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and implementing international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures. The ongoing World Bank assisted Customs and Trade Facilitation Project is to include a risk management activity. Project Components: Complementing the risk management activity in the ongoing World Bank project, (i) advise on development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and (ii) design and implement training programs for targeted group(s).

7 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”.


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The Lao PDR Customs Department may wish to consider the option of using the ASYCUDA

risk management module after the Department as well as private industry users become acquainted with using the transit, import, and export modules of ASYCUDA, at which time the Department may decide to develop advance declarations using import and export pre-alert good-practice methods. A risk management database may be developed and the Department may consider joining the WCO Customs Enforcement Network (CEN). (4) L4. Technical Cooperation for Introducing Coordinated Border

Management at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (and possibly Thanaleng)

Project Background: As noted, moderately long border clearance times with high variability are an issue for the private sector. Pursuant to Prime Minister’s Office [PMO] Notice 406, issued on 13 March 2007, the only central agencies at the border are Customs, Immigration, and Quarantine. Border management is led by the head of the province. That said, there is scope for further progress in achieving coordinated border management between and among the remaining agencies at the border. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management. Project Objectives: To facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border agencies, while at the same time reducing compliance and enforcement costs, resulting in efficiency gains and lower operating costs. Project Components: In coordination with the ADB C-R-PATA, the project will support ADB’s efforts at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (as well as at Thanaleng if it is more actively included in the CBTA transport and customs facilitation regime) to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for the border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements. (5) L5. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries Project Background: At neither Savannakhet (Kaysone Phomvihane) nor Dansavanh is there interconnectivity between the border crossing agencies of Lao PDR and the neighboring country, Thailand and Viet Nam, respectively. The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border. Project Objective: To establish interconnectivity between customs (and other border crossing agencies) of Lao PDR and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection.


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Indicative Project Components: (i) Prepare plan(s) for installing ICT equipment and a

cable/wireless connection; and (ii) develop a program to improve software interconnectivity. There may also need to be an agreement between the two sides (Lao PDR-Thailand,8 Lao PDR-Viet Nam) on the type of information that can be exchanged between the customs (and other) agencies of the two countries. (6) L6. Technical Cooperation for Further Development of Customs-Private

Sector Cooperation Project Background: Relative to other Mekong Region countries, mechanisms for customs-private sector cooperation are underdeveloped in Lao PDR, perhaps reflecting the early stage of the country’s private sector. Project Objectives: (i) Establish the legal preconditions for consideration of the legitimate needs of the trading community when new customs laws, policies, and procedures are drafted; (ii) develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (iii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iv) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community. Indicative Project Components: (i) Advise on signing of cooperation and assistance MOUs and development of public and private industry user/trade consultative partnership mechanisms; and (ii) design and implement training programs for targeted group(s). (7) L7. Technical Cooperation for Accession to/Implementation of the

Revised Kyoto Convention Project Background: The Revised Kyoto Convention provides for simplified and harmonized customs procedures, such as predictability, transparency, due process, maximum use of information technology, modern customs techniques (e.g., risk management, pre-arrival information, post clearance audit). To date, Viet Nam is the only Mekong Region country to have acceded the convention. Lao PDR Customs Department officials indicated that at this stage they have limited knowledge of the benefits of accession to the Revised Kyoto Convention. Project Objectives: To prepare for accession and implementation of the Revised Kyoto Convention, so that Lao PDR is certified as practicing international customs standards, and to assure faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness. Indicative Project Components: (i) Conduct comprehensive Revised Kyoto Convention gap analysis; (ii) assist in formulation of national strategy and action plan for compliance and accession; and (iii) assist in implementation of the required actions.

8 E.g., it is understood that at present while Lao PDR Customs can provide the Lao PDR customs form for advance information sharing, the Thai side cannot provide this information to Lao PDR. Due to a Thai customs law provision on price confidentiality, Thai Customs can provide Lao PDR Customs only with the customs broker form, which does not specify sufficiently detailed prices of goods.


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(8) L8. Technical Cooperation for Sustainable Customs Training

Project Background: A recent report prepared by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce found that the reason for the country’s noncompliance with WTO trade facilitation measures is human resource constraints including the lack of expertise, insufficient personnel, and a lack of motivation and training. The limited availability of funds for training was another factor indicated as a constraint. Project Objective: To provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management. Indicative Project Components: (i) Advise on development of skills to prepare new customs training programs, training plans, new training curricula, and training materials, including training of trainers; and (ii) implement training programs based on the training materials. 9.3.3 Myanmar Table 9-4 presents priority projects for Myanmar. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.

Table 9-4 Priority Projects for Myanmar


Appendix A M1. Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes 18 M2.1 M2. Study and/or Technical Cooperation for Risk Management Project 18 M2.2 M3. Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training 18 M2.3 M4. Technical Cooperation for Introducing Coordinated Border

Management at Tachileik and/or Myawaddy 17 M6.1.1 M5. Technical Cooperation for Sustainable Customs Training 16 M4.3 M6. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries 16 M6.2 The highest priority may be accorded to M1, M2, and M5, followed by M4, M6, and M3. (1) M1. Study and Technical Cooperation for Simplification/Standardization of

Customs Procedures/Processes Project Background: A number of problems relating to customs clearance and related procedures were identified during interviews with the private sector (e.g., the need to obtain import/export licenses from Ministry of Commerce and licenses from other relevant ministries in Naypyidaw; the lack of inland customs bonded warehouses or dry ports). Also, the Myanmar Customs Administration uses its “real value” method rather than the transaction value prescribed by the WTO Agreement on Customs Valuation. An amendment of Article 30 Myanmar is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation, considering that Myanmar was an original member of the WTO. The Myanmar Customs Administration does not currently provide valuation, tariff, and origin rulings to traders.


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Project Objective: To simplify and standardize customs procedures/processes.

Indicative Project Components: (i) Prepare guidelines (manual) for simplified/standardized procedures, including document simplification, advance rulings (tariff, valuation, and rules of origin), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and (ii) design and implement training programs for targeted group(s). (2) M2. Study and/or Technical Cooperation for Risk Management Project Project Background: The Myanmar Customs Administration does not have a risk management program. While it currently carries out a high level of customs physical inspections based on a perceived need to detect narcotics smuggling, customs risk management at border crossing points requires different risk management methods using trader compliance programs and a customs risk management database, which should be linked to databases of intelligence agencies, enforcement agencies, and other border crossing point control agencies. Project Objective: The project will assist development of appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures. Indicative Project Components: (i) Advise on development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and (ii) design and implement training programs for targeted group(s). The project may be on a more basic level than the existing risk management assistance provided by JICA in Cambodia and Viet Nam. It will assist the Myanmar Customs Administration in achieving a more appropriate balance between facilitation and control, developing a clearer understanding of the nature of risks to the achievement of their objectives, and devising practical methods of mitigating those risks. Over time, the Myanmar Customs Administration might consider using the WCO Customs Enforcement Network (CEN) and developing a risk management database. For full-fledged implementation of a national customs risk management program, computer equipment, internet fiber optic cables and other communication lines and methods will need to be installed. Training for all border crossing point control agencies and for private industry users will also be required to develop the capacity of managers and staff before benefits from risk management can be achieved. (3) M3. Technical Cooperation for the Development of Authorized Economic

Operator System and Associated Training Project Background: Lengthy customs clearance is a problem for the private sector in Myanmar. An issue is that economic operators (including both local and international businesses) 9 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies.



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Project Objectives: To explore a solution to pilot an incentive-based approach to compliance

compliance, including a diagnostic feasibility study and implementation plan, with associated training; the project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the AEO approach developed by WCO. During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Myanmar in the near term. Accordingly, the focus will be on providing a skills platform for the Myanmar Customs Administration to start preparing an AEO program at its own pace. Project Components: (i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project; (ii) revise definition and AEO system procedures; (iii) design and implement training programs for the AEO system; and (iv) explore possible mutual recognition arrangements. (4) M4. Technical Cooperation for Introducing Coordinated Border

Management at Tachileik and/or Myawaddy Project Background: Lengthy border clearance is a problem for the private sector. Agencies on the Myanmar side of the border include the Department of Border Trade of the Ministry of Commerce, which is the lead agency, as well as the Customs Administration, Immigration and the National Registration Department, and the Police Force. Although daily coordination of activities is undertaken through joint agency teams, there is scope for further progress in achieving coordinated border management between and among the agencies. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management. Project Objective: To facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border agencies, while at the same time reducing compliance and enforcement costs, resulting in efficiency gains and lower operating costs. Project Component(s): The project will support efforts at Tachileik and/or Myawaddy to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for all border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements. (5) M5. Technical Cooperation for Sustainable Customs Training Project Background: The facilities for customs training and development in Myanmar include a training center created in 1981 that delivers ten courses (i.e., basic customs officer, advanced customs officer, basic WTO valuation, advanced WTO valuation, ASEAN harmonized tariff nomenclature, post clearance audit, township customs officer, basic computer, basic English language). However, it would be productive to develop additional training courses, e.g., HS


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code classification, rules of origin, advance tariff and valuation rulings, customs technical

English, risk management. Project Objective: To provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management. Indicative Project Components: (i) Advise on development of skills to prepare new customs training programs, training plans, new training curricula, and training materials, including training of trainers; and (ii) implement training programs based on the training materials. (6) M6. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries Project Background: At neither Tachileik(-Mae Sai) nor Myawaddy(-Mae Sot) is there interconnectivity between the border crossing agencies of Myanmar and the neighboring country, Thailand. The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border. Project Objective: To establish interconnectivity between customs (and other border crossing agencies) of Myanmar and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection. Indicative Project Components: (i) Prepare plan(s) for installing ICT equipment and a cable/wireless connection; and (ii) develop a program to improve software interconnectivity. There may also need to be an agreement between the two sides (Myanmar-Thailand) on the type of information that can be exchanged between the customs (and other) agencies of the two countries. 9.3.4 Thailand Table 9-5 presents priority projects for Thailand. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.

Table 9-5 Priority Projects for Thailand


Appendix A T1. Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training 18 T2.3 T2. Study and Technical Cooperation for Introducing Coordinated

Border Management at Aranyaprathet, Mukdahan, and Mae Sai (and possibly Nong Khai) 17 T5.2.1

T3. Study and Technical Cooperation to Improve Interconnectivity with Border Crossing Agencies of Neighboring Countries 17 T5.3

T4. Technical Cooperation for Further Development of Customs-Private Sector Cooperation 16 T1.2


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Appendix A T5. Study and Technical Cooperation for Simplification/Standardization

of Customs Procedures/Processes 16 T2.1 T6. Technical Cooperation for Sustainable Customs Training 16 T4.3 T7. Feasibility Study of Relocating Freight Traffic from the

Aranyaprathet-(Poipet) Border Crossing Point 16 T5.1 (1) T1. Technical Cooperation for the Development of Authorized Economic

Operator System and Associated Training Project Background: Economic operators (including both local and international businesses) 10 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies. The Thai Customs Department started a small pilot AEO project about two years ago that was joined by two companies. Project Objectives: To explore a solution to pilot an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training; specifically, the project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the AEO approach developed by WCO. Project Components: (i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project; (ii) revise definition and AEO system procedures; (iii) design and implement training programs for the AEO system; and (iv) explore possible mutual recognition arrangements.11 (2) T2. Study and Technical Cooperation for Introducing Coordinated Border

Management at Aranyaprathet, Mukdahan, and Mae Sai (and possibly Nong Khai)

Project Background: Moderately long border clearance times are an issue for the private sector. This problem may be addressed by improving coordination of border agencies concerned with the movement of goods, in particular the physical release of goods at border crossings or inland clearing facilities. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management. Project Objective: To facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border 10 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 11 See (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010.


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agencies, while at the same time reducing compliance and enforcement costs, resulting in

efficiency gains and lower operating costs. Project Components: In coordination with the ADB C-R-PATA, the project will support efforts at Aranyaprathet, Mukdahan, and Mae Sai (as well as at Nong Khai if it is more actively included in the CBTA transport and customs facilitation regime) to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for the border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements. (3) T3. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries Project Background: At present, there is no interconnectivity with the border crossing agencies of the neighboring country at Aranyaprathet(-Poipet), Mukdahan (-Savannakhet/Kaysone Phomvihane), Nong Khai (-Thanaleng), Mae Sai (-Tachileik), or Mae Sot (-Myawaddy). The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border. Project Objectives: To establish interconnectivity between customs (and other border crossing agencies) of Thailand and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection. Indicative Project Components: (i) Prepare plan(s) for installing ICT equipment and a cable/wireless connection; and (ii) develop a program to improve software interconnectivity. There may also need to be an agreement between the two sides (Thailand-Cambodia, Thailand-Lao PDR, and Thailand-Myanmar on the type of information that can be exchanged between the customs (and other) agencies of the two countries. (4) T4. Technical Cooperation for Further Development of Customs-Private

Sector Cooperation Project Background: Customs-private sector cooperation is longstanding and includes, e.g.: (i) a joint committee between customs and the private sector, which serves as a formal consultative mechanism with freight forwarders, shipping agents, customs brokers, and chambers of commerce, and which discusses changes in customs services, monitoring, and evaluation of customs performance, and provides advice on the streamlining of customs services; and (ii) a Transparency Partnership Project, the signing of an MOU between the Thai Customs Department and more than 100 companies to cooperate in the fight against corruption. Project Objectives: To further (i) develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish a service-oriented approach towards trade by way of transparent and predictable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.


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Indicative Project Components: (i) Advise on further signing of cooperation and assistance

MOUs and development of public and private industry user/trade consultative partnership mechanisms; and (ii) design and implement training programs for targeted group(s). (5) T5. Study and Technical Cooperation for Simplification/Standardization of

Customs Procedures/Processes Project Background: A number of problems relating to customs clearance were identified during interviews with the private sector (e.g., customs classification is not consistent among customs officials, rulings on HS classifications sometimes take too long, binding tariff rulings are not given and the staff reward system results too frequently in post-clearance audits and high additional duty payments in cases in which the declaration is judged to have been incorrect, printed documents and attendance at the physical inspection are required at the borders). Project Objective: To simplify and standardize customs procedures/processes. Indicative Project Components: (i) Prepare guidelines for simplified/standardized procedures (manual), including document simplification, advance rulings (tariff, valuation, and rules of origin), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and (ii) design and implement training programs for targeted group(s). (6) T6. Technical Cooperation for Sustainable Customs Training Project Background: A challenge facing the Thai Customs Training Center is that its annual budget of only THB 3 million is insufficient and it is difficult to obtain additional funds when the government has recently reduced the Customs Department’s budget by 60% from its request. Therefore, after designing new training courses and carrying out a sustainable train-the-trainers program, the training center may not be in a financial position to deliver extra or new training courses, which may provide an opportunity for development partners to provide training courses within the Thai Customs Training Center training program. Project Objective: Provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management. Indicative Project Components: (i) Advise on development of skills to prepare new customs training programs, training plans, new training curricula, and training materials, including training of trainers; and (ii) implement training programs based on the training materials. For sustainability in the medium to longer term, it will be important for the Thai Customs Department to find a way to allocate the budget for such necessary training, as well as to keep experienced trainers in the training center for a period of time. (7) T7. Feasibility Study of Relocating Freight Traffic from the Aranyaprathet-

(Poipet) Border Crossing Point Project Background: In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic, most likely 12 km south of the current location, at Nong Auen (Thailand)-Stoung Bot (Cambodia). Development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads, e.g., from Route 5 in Cambodia, which is 10-12 km away from the proposed new BCP site.


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Project Objective: Prepare for the development and operation of a state-of-the-art border

facility based on international good practice at the newly relocated border crossing point at Nong Auen (Thailand)-Stoung Bot (Cambodia), to increase border management efficiency and reduce clearance times, and to serve as a model for other border crossing points in the Mekong Region. Indicative Project Components: (i) Conduct BCP feasibility study including preparation of design guidelines, layouts, standards, and equipment; (ii) develop efficient and effective customs procedures; (iii) assess approaches to coordinated border management; (iv) improve traffic and parking management around the new BCP; and (v) implement associated BCP management training. 9.3.5 Viet Nam Table 9-6 presents priority projects for Viet Nam. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.

Table 9-6 Priority Projects for Viet Nam


Appendix A V1. Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes 18 V2.1 V2. Study and/or Technical Cooperation for Risk Management Project 18 V2.2 V3. Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training 17 V2.3 V4. Study and Technical Cooperation to Introducing Coordinated

Border Management at Moc Bai and/or Lao Bao 17 V5.1.1 V5. Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries 17 V5.2 V6. Technical Cooperation for Further Development of Customs-

Private Sector Cooperation 16 V1.3 V7. Technical Cooperation for Sustainable Customs Training 16 V4.3

(1) V1. Study and Technical Cooperation for Simplification/Standardization of

Customs Procedures/Processes Project Background: A number of problems relating to customs clearance were identified during interviews with the private sector (e.g., inconsistent customs classification among customs officials, customs clearance information in an electronic format not well utilized for establishing a consistent classification system, use of e-Customs only in the application process but not in the approval process, requirement for the original customs documents with appropriate signatures and seals still required at the border). The General Department of Viet Nam Customs (GDVC) is currently implementing “Project 30” to redcue [customs] administrative procedures by 30%. Project Objective: To simplify and standardize customs procedures/processes.


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Indicative Project Components: (i) Prepare guidelines for simplified/standardized procedures

(manual), including document simplification and advance rulings (tariff, valuation, and rules of origin); and (ii) design and implement training programs for targeted group(s). (2) V2. Study and/or Technical Cooperation for Risk Management Project Project Background: GDVC is implementing risk management. Since 2008, JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient so as to reduce the required time, as well as to improve the skills and systems for risk management and monitoring at the border crossing points in the region. Although the base of the project is in Thailand, GDVC as well as the customs administrations of Cambodia and Thailand has participated in the project, and training programs have been conducted covering a number of areas. Project Objective: To further develop appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures. Indicative Project Components: (i) Advise on further development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and (ii) design and implement training programs for targeted group(s). (3) V3. Technical Cooperation for the Development of Authorized Economic

Operator System and Associated Training Project Background: Economic operators (including both local and international businesses) 12 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies. GDVC has begun to implement a trusted-trader program, which is equivalent to an AEO program, to authorize compliant traders to benefit from expedited clearance, reduced inspection rates, and improved services; in exchange, traders will be required to maintain a high level of compliance, use e-Customs, and maintain transparent accounting practices. Initially, the program is expected to be open to several manufacturing and trading enterprises. Project Objective: To complement the ongoing WCO-assisted trusted-trader program and define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the AEO approach. This approach implies facilitation measures in exchange for verifiable compliance standards. Project Components: Building upon the ongoing trusted-trader program, assist GDVC in (i) revising definition and AEO system procedures; (ii) designing and implementing training programs for the AEO system; and (iii) exploring possible mutual recognition arrangements.



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(4) V4. Study and Technical Cooperation for Introducing Coordinated Border

Management at Moc Bai and/or Lao Bao Project Background: Lengthy border clearance is a problem for the private sector as has been confirmed by time release studies (e.g., at Moc Bai). Following Decree No 32/2005/ND-CP of 14 March 2005, agencies present at the border include Customs, Immigration, and Quarantine (Health, Plant, and Animal Inspection), and the Police. There is no lead agency. Coordinated border management would help reduce border clearance times. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management. Project Objective: Facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border agencies, while at the same time reducing compliance and enforcement costs, resulting in efficiency gains and lower operating costs. Project Components: In coordination with the ADB C-R-PATA, the project will support efforts at Moc Bai and/or Lao Bao to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for all border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements. (5) V5. Study and Technical Cooperation to Improve Interconnectivity with

Border Crossing Agencies of Neighboring Countries Project Background: At neither Moc Bai (-Bavet) nor Lao Bao (-Dansavanh) is there interconnectivity between the border crossing agencies of Viet Nam and the neighboring country, Cambodia and Lao PDR, respectively. The lack of such interconnectivity, for example, constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border. Project Objective: To establish interconnectivity between customs (and other border crossing agencies) of Cambodia and the neighboring country, e.g., to fulfill a precondition for implementation of single-stop inspection Indicative Project Components: (i) Prepare plan(s) for installing ICT equipment and a cable/wireless connection; and (ii) develop a program to improve software interconnectivity. There may also need to be an agreement between the two sides (Viet Nam-Cambodia, Viet Nam-Lao PDR) on the type of information that can be exchanged between the customs (and other) agencies of the two countries. (6) V6. Technical Cooperation for Further Development of Customs-Private

Sector Cooperation Project Background: GDVC has been working actively with the private sector. For example, as mentioned regarding project V3, GDVC is seeking to implement a trusted-trader program, to


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be piloted in 2011, with the aim of promoting grater trade facilitation and voluntary compliance,

as well as closer cooperation between GDVC and the local private sector stakeholders. Project Objectives: (i) Further develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community. Indicative Project Components: (i) Advise on further signing of cooperation and assistance MOUs and development of public and private industry user/trade consultative partnership mechanisms; and (ii) design and implement training programs for targeted group(s). (7) V7. Technical Cooperation for Sustainable Customs Training Project Background: GDVC has a total of 9,000 managers and staff, the largest personnel numbers of any customs department in the five-country Mekong Region. However, a 2008 assessment by the Hanoi-based Institute of World Economics and Politics identified a number of issues in human resources in customs (and other border control fields) in Viet Nam. It noted the lack of an efficient, long-term recruitment mechanism. It found that the current customs (as well as quarantine and immigration) staff lack advanced professional knowledge and skills to exploit modern technology. It also identified that these staff members are often weak in foreign languages (i.e., English and the languages of the neighboring countries) and computer skills. Senior staff members with professional experience are usually unable to speak foreign languages and use specialized computerization systems, while junior staff, which have these skills, often lack practical experience and professional skills. The Institute of World Economic and Politics assessment concluded that an overall strategy of staff training and re–training is needed. Project Objective: To provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management. Project Components: Based on informal indications from GDVC, components include: (i) designing a training master plan, (ii) formulating training policies, (iii) improving its train-the-trainer program (including train-the-trainer study tours perhaps to Japan and Malaysia and other national customs training centers or academies), (iv) preparing an induction training course for new customs officer recruits and for existing customs managers and staff tasked to carry out reform and modernization projects, and (v) upgrading of the Customs Training Center facility. 9.3.6 Regional Table 9-7 presents priority regional projects. Again, the details of the scoring and the bases for the qualitative assessment are given in Appendix A. The project background, objective(s), and indicative project component(s) are elaborated in the following subsections, and more details including expected impact(s), government/regional commitment, related action(s) by (other) development partners, indicative JICA input(s), and counterpart (executing) agency are provided in more detailed project profiles in Appendix B.


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Table 9-7 Priority Regional Projects


Appendix A R1. Master Plan and Feasibility Studies for Development of Efficient

Border Crossing Pairs on a Pilot Basis 17 R5.2 R2. Regional Assistance for Risk Management 16 R2.1 R3. Introduction of a Region-wide Radio Frequency Identification

(RFID)/Global Position System (GPS) Tracking System for Corridor Management 16 R2.2

R4. Support of Upcoming C-R-PATA by Providing CBTA-Related Training at the Central and Border Levels Cooperation 16 R4.2

R5. Annual Time Release Surveys and Measurement of Performance Indicators 16 R5.1

R6. Feasibility Study of Relocating Freight Traffic from the Aranyaprathet-Poipet Border Crossing Point 16 R5.3

(1) R1. Master Plan and Feasibility Studies for Development of Efficient

Border Crossing Pairs on a Pilot Basis Project Background: Although the target year for full implementation of the CBTA (2010) has now passed, multi-step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at border checkpoints in the region. Generally, only limited risk management techniques are employed at border crossings, although Thailand is an exception to some extent. Official operating hours range from 12-16 hours per day, but are effectively and perhaps unofficially shortened by lunch breaks. Also, at most locations the use of ICT is very limited, with the borders generally operating stand-alone systems unconnected to the national system, although Thailand and Viet Nam are exceptions. Japan has considerable experience in addressing such issues with its well-regarded program to assist the establishment of 14 one-stop border posts in Sub-Saharan Africa. Project Objective: To improve border management and reduce clearance times and costs at selected border crossing points. Indicative Project Components: (i) Assist preparation of master plan and implementation of selected (pre)feasibility studies, including design guidelines, layouts, equipment, building and maintenance standards; and (ii) design/implement training, as models for the entire Mekong Region. (2) R2. Regional Assistance for Risk Management Project Background: Since 2008, JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient so as to reduce the required time, as well as to improve the skills and systems for risk management and monitoring at the border crossing points in the region. Although the base of the project is in Thailand, the customs administrations of Cambodia, Thailand, and Viet Nam have participated in the project, and training programs have been conducted covering a number of areas. Project Objective: To further develop appropriate techniques for systematic risk identification and implement measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and


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information, analyzing and assessing risks, prescribing action, and monitoring outcomes in

order to facilitate, improve, and streamline control procedures. Indicative Project Components: (i) Advise on further development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and (ii) design and implement training programs for targeted group(s). (3) R3. Introduction of a Region-wide Radio Frequency Identification

(RFID)/Global Position System (GPS) Tracking System for Corridor Management13

Project Background: The development of the GMS transport corridors is vital for improving the economic competiveness of the Mekong Region. An effective working corridor requires the coordination of the activities of cargo owners, shipping lines, road transport, ports, and customs authorities. The realization of such coordination depends on the availability of reliable information reflecting the physical movement of cargo, as well as on the integration of the systems operated by these stakeholders. Delays at critical points along the supply chain have been identified as a key factor contributing to the lack of competitiveness of GMS corridors. Factors contributing to these delays include inefficient customs and border control processes, the inefficient transfer of cargo between different modes of transport, and inefficient handling of cargo within ports. It is therefore essential for the stakeholders along the supply chain to have a mechanism for monitoring the physical movement of cargo. In response, major freight forwarders have utilized electronic tags based on RFID technology for cargo tracking, and there have already been some attempts to examine the effectiveness and issues arising from the use of RFID technology for customs clearance including an experimental study conducted by the Japan External Trade Organization (JETRO). This study found that although introduction of RFID technology would contribute to reduced clearance time some issues should be addressed to maximize its effectiveness, including harmonization of RFID standards in the region, installation of e-Customs, infrastructure development at border checkpoints, simplification and standardization of procedures, and capacity building. Project Objectives: (i) Demonstrate a set of cargo handling and law enforcement processes applicable to customs authorities, ports authorities, and road agencies that are simple to implement, that combine a high level of security with the fast processing of freight, and that are sufficiently affordable to enforce onto all types of cargo; (ii) for customs operations, demonstrate the implementation of electronic declaration and acquittal processes that can for example be integrated into fast-track lane processes, and which would include the application of a customs transit control system; and (iii) demonstrate the application of cargo tracking to improve the efficiency of the operations of cargo owners and shipping lines by providing such stakeholders with end-to-end visibility regarding the current location and status of cargo, including processes handled by the respective authorities. Indicative Project Components: (i) Assist in the design and implementation of pilot project; (ii) evaluate the performance of pilot project; and (iii) prepare recommendation for region-wide implementation. The project should be considered as longer-term since (further) development of e-Customs is a prerequisite.

13 The project was modeled on: idCommerce Technologies (Pty.) Ltd., AdExcel CC, Tenacent (Pty.) Ltd., and Transport Logistics Consultants, Proposal to JICA for the Implementation of a Trade Corridor Cargo Tracking System for Corridor Management around the Port of Walvis Bay, November 2009.


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(4) R4. Support of Upcoming C-R-PATA by Providing CBTA-Related Training

at the Central and Border Levels Cooperation Project Background: A joint ADB-AusAID mission during April and May 2007 recommended a sustainable training management model to provide CBTA human resource skills. The mission estimated a requirement for training for 799 trainees from Customs (289), Immigration (327), Sanitary and Phytosanitary/Quarantine (97), and other border crossing point control agencies (86) over 21 months with about 90 training sessions delivered at 10 locations either at border crossing points or at a customs training center. While an upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) includes an output for training workshops/meetings, the budget available is insufficient to meet the requirement of AUD 12.1 million estimated in 2007. Project Objective: To develop sustainable capacity in the customs and other services at the border, in order to ultimately improve implementation of the CBTA, streamline procedures, and reduce clearance costs. Indicative Project Components: Assist formulation and implementation of a clear plan to develop the organizational and staff capacity to implement the CBTA and related border management practices (e.g., risk management, use of inspection technology and information technology, as well as even basic customs functions) at various levels. In carrying out the project, it will be important to recognize that: (i) CBTA training needs to be coordinated with, and complementary to, other regional and national initiatives; (ii) training and development programs should be aimed at development of the overall capacity of the concerned administrations; (iii) training and capacity development need to be directed towards all levels of government involved in the CBTA; (iv) on-site training courses need to be based on officially approved operational manuals and procedures based on the CBTA and its annexes; (v) training needs to be tailored to member countries’ needs based on their level of development and the capacity of the administrations; and (vi) to the extent possible, officials from member countries should take part in development and delivery of training courses in the local language. (5) R5. Annual Time Release Surveys and Measurement of Performance

Indicators Project Background: Some time release studies have been conducted to date at Mekong Region border crossing points, including: (i) a series of time releases studies in 2005 conducted by ADB at Poipet-Aranyaparthet, Bavet-Moc Bai, and Mukdahan-Savannakhet; (ii) a time release study at conducted at five border crossings in Lao PDR, assisted by the World Customs Organization (WCO) and the World Bank; and (iii) a multiple development partner assisted trade mapping study in Cambodia covering six locations. These studies provide valuable information on clearance times, but need to be conducted on a regular basis and with wider geographic coverage. Project Objective: To provide an incentive for improving border crossing agency performance, which will facilitate freight transport. Indicative Project Components: (i) Assist in the development of regular time release studies; and (ii) develop a program to measure customs administration performance using accepted indicators on a regular basis. Possible approaches rely on producing data (e.g., using WCO’s Release Study Methodology) or the gathering of existing data. Specific methodologies may include: (i) data collection from


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customs and other border control authorities, (ii) interviews with freight forwarders, (iii) driver

trip diaries, and (iv) surveys focusing on border crossing time. (6) R6. Feasibility Study of Relocating Freight Traffic from the Aranyaprathet-

Poipet Border Crossing Point Project Background: In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic, most likely 12 km south of the current location, at Nong Auen (Thailand)-Stoung Bot (Cambodia). Development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads, e.g., from Route 5 in Cambodia, which is 10-12 km away from the proposed new BCP site. Project Objective: To prepare for the development and operation of a state-of-the-art border facility at the newly relocated border crossing point at Nong Auen (Thailand)-Stoung Bot (Cambodia), to increase border management efficiency and reduce clearance times, and to serve as a model for other border crossing points in the Mekong Region. Indicative Project Components: (i) Conduct BCP feasibility study including preparation of design guidelines, layouts, standards, and equipment; (ii) develop efficient and effective customs procedures; (iii) assess approaches to coordinated border management; (iv) improve traffic and parking management around the new BCP; and (v) implement associated BCP management training. 9.4 Impacts of the Proposed Programs/Projects The impacts of a comprehensive customs assistance program may be assessed quantitatively. For example, applying the methodology used by the World Bank in the Customs and Trade Facilitation Project in Lao PDR, benefits in terms of reduced administrative costs, customs clearance (“compliance”) costs, and time costs may be assessed in each Mekong Region country and for the region as a whole, as shown in Table 9-814:

14 While the analysis, following an accepted methodology applied by the World Bank in the region, estimated reduced administrative costs, customs clearance (“compliance”) costs, and time costs, increases in freight transport volumes were not quantified. Application of the available transport model calibrated for the region to assess changes in freight transport volumes from a comprehensive customs assistance program would likely indicate only speculative results.


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Table 9-8 Indicative Impacts of a Comprehensive Customs Facilitation Program

Unit: USD million equivalent (2009)

Country

Reduced Administrative

Costs

Reduced Customs Clearance (Compliance) Costs

Reduced Time Costs Total Benefits

Cambodia 31.7 127.0 15.9 174.6 Lao PDR 12.7 50.6 6.3 69.6 Myanmar 31.0 124.0 15.5 170.5 Thailand 606.8 2,427.1 303.4 3,337.2 Viet Nam 342.8 1,371.3 171.4 1,885.6 Regional Total 1,025.0 4,100.0 512.5 5,637.5

Note: This table was prepared following assumptions applied in World Bank, Project Appraisal Document on a Proposed IDA Grant to the Lao People’s Democratic Republic for a Customs and Trade Facilitation Project, 15 May 2008, Annex 9, pp. 59-60, paragraphs 7-8 [assuming savings in administrative costs equal to 0.5% of import values, savings in compliance costs equal to 2.0% of import values, and savings in time costs equal to 0.25% of import values; the last-named percentage is considered a “lower bound”, and no benefit was estimated for the reduction in the variance of clearance time, which permits traders to keep lower inventory]. Import values (2009) were taken from Table 2-1, drawn from IMF, Direction of Trade Statistics, 2010. Source: JICA Study Team Total benefits for the region were estimated to be about USD 5.6 billion equivalent. About 59% of the benefits are for Thailand and 33% for Viet Nam. The largest benefit component is reduced customs clearance (compliance) costs (i.e., the costs incurred by declarants in presenting their declarations to customs administrations, including brokers’ fees), about 73% of the total. Assessments of the expected impacts of specific projects (in qualitative terms) are presented in the project profiles in Appendix B.


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Appendices

Survey on Improvement of Customs Procedures Appendix A for Trade Facilitation in the Mekong Region Evaluation of Long List Projects

A-1

Appendix A: Evaluation of Long List Projects

Criteria and Methodology for Assessing Project Priorities Criteria Assigned Values A. Expected Impact in Facilitating

Freight Transport 1. Low 2. Medium Low 3. Medium 4. High 5. Very High

B. Degree of Harmonization with Japanese Assistance

1. Low 2. Medium Low 3. Medium 4. High 5. Very High

C. Degree of Harmonization with Assistance of Other Development Partners


D. Degree of Government/Regional Commitment


Expected Schemes (Assistance Modalities) ST: Study（協力準備調査） TCP: Technical Cooperation Project（技術協力プロジェクト） YL: Yen Loan（円借款） GR: Grant Aid（無償資金協力）

Survey on Improvem


Appendix A for Trade Facilitation in the M

ekong Region Evaluation of Long List Projects

A-2

Potential Areas of Assistance and Priority Assessment—Cambodia (C) Potential Areas of Assistance A B C D Total

C1. Legal/Institutional Framework C1.1 (Further) improvement of organizational structure and management

3 Organizational improvements can improve the efficiency of customs department operations, but they may not be directly related to freight transport improvements.

3 TCP There is limited Japanese experience in assistance with organizational restructuring, both in general and in the customs sector. Also, Japanese assistance tends to avoid policy interventions.

2 Some organizational improvements are being assisted by the World Bank’s Trade Facilitation and Competiveness Project (e.g., design of a merit-based pay system).

3 Some limited measures included in 2009-2013 action plan(s) (e.g., establishment of a more transparent appeals system), but progress less than envisaged.

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C1.2 Assistance with (further) modernization of customs laws and implementing regulations

4 There is a need for additional regulations for the implementation of global and regional standards.

3 ST and/or TCP There is also limited Japanese experience in assistance with legal and regulatory reform. And, again, Japanese assistance tends to avoid policy interventions.

4 Further legal development will complement ADB’s upcoming C-R-PATA, e.g., for implementation of coordinated border management and a customs transit system.

3 While a number of customs laws and regulations have been enacted in recent years in Cambodia, legislative and regulatory initiatives may be focused more in other areas in the coming years.

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C1.3 Technical cooperation for further development of customs-private sector cooperation

3 Better public-private sector cooperation in customs can help ensure that the legitimate requirements of the private sector are taken into account, but they may not be directly related to freight transport improvements.

5 TCP JICA TCPs have increasingly supported public-private partnerships and other related activities in various fields, perhaps more than have other development partners. Also, the involvement of the private sector in JICA customs TCP projects has been successful.

4 Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Cambodian Freight Forwarders’ Association, CAMFFA, is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).

4 Prakas No. 906 on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism was issued on 9 October 2009.

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Survey on Improvem




A-3

Potential Areas of Assistance A B C D Total C2. Customs Procedures

C2.1 Study and technical cooperation for simplification/standardization of customs procedures/processes

5 Simplified/standardized procedures will directly improve freight transport by lowering clearance costs/times, e.g., by helping to eliminate the need to register documents with each provincial customs office.

4 ST and TCP Japan has some relevant experience in this field (but perhaps not much compared to other development partners). However, Japanese assistance schemes are relatively suitable for this type of assistance.

5 Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Trade Facilitation and Competiveness Project.

5 Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

19

C2.2 Study and/or technical cooperation for risk management project

4 More widespread adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm.

4 ST and/or TCP Japan has some relevant experience in this field, but again perhaps not much compared to other development partners. Japanese assistance schemes are relatively suitable for this type of assistance.

5 Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Trade Facilitation and Competiveness Project, which is to develop risk management capability. It will also complement the ongoing World Bank assisted Trade Facilitation and Competiveness Project, which includes an activity to promote adherence to the Revised Kyoto Convention specifically including the adoption of risk management

5 The General Department of Excise and Customs’ Strategic Objective 4.1 for 2009-2013 is to “continue implementation of the CED risk management strategy”, including implementation of Sub-Decree 21 and other legal instruments related to risk management, as well as development of a risk management framework including use of a customs intelligence program.1 On the regional level, training in risk management was included on ASEAN’s tentative priority list for technical assistance from

18

1 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 193.

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A-4

Potential Areas of Assistance A B C D Total capability. Japan presented at the 12th

ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

C2.3 Technical cooperation for the development of authorized economic operator system and associated training

4 The development of an AEO system would allow users including Japanese companies to qualify for faster clearance.

4 TCP The experience of the Japan Customs and Tariff Bureau is considered among the world leaders in the field. Moreover, Japanese assistance schemes are relatively suitable for this type of assistance.

5 AEO implementation in Cambodia has not been addressed by other development partners.

5 AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

18

C2.4 Technical cooperation for accession to/implementation of the Revised Kyoto Convention

4 Implementation of the procedures and practices mandated by the Revised Kyoto Convention will directly improve freight transport by lowering clearance costs/times.

4 TCP The comments for C2.1 above also apply here.

4 This TA will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management), as well as World Bank’s Trade Facilitation and Competiveness Project, which is to assist “adherence” to the Revised Kyoto Convention.

4 Training in the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although Cambodia has not yet moved forward with past plans to do so.

16

C2.5 (Further) development and training of customs brokers and freight forwarders

3 Better trained customs brokers and freight forwarders will result in fewer mistakes and lower clearance time.

3 TCP Japan has less experience in this field. JICA TCPs are difficult to be provided to only the private sector (although it is possible through freight forwarders’

3 Complementary, although in an indirect way, to ADB and World Bank customs initiatives.

4 Some measures included in 2009-2013 action plan(s).

13

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A-5

Potential Areas of Assistance A B C D Total associations).

C3. Customs IT C3.1 National single window system

4 Implementation of a national single window will reduce clearance time and costs for freight transporters.

4 ST and TCP Japan has no experience in this specific field (and neither do most development partners because this is a relatively recent field of assistance). JICA TCPs, which create ownership promote the activities of counterparts, are particularly suitable for consensus building/ coordination among various organizations in one country.

4 Particularly complementary with the coordinated border management component of ADB’s upcoming C-R-PATA (although the World Bank’s Trade Facilitation and Competiveness Project shifted from the original design of an electronic single window to a wider and more sustainable rollout of ASYCUDA and automation of certificates of origin).

2 While implementation of a national single window is an ASEAN target, Cambodia has apparently faced implementation bottlenecks and no longer assigns it a high priority. 14

C3.2 Improvement of customs IT infrastructure and equipment

4 Improved IT in customs will substantially increase department efficiency, which will benefit freight transport with lower clearance times, assuming that customs procedures are improved first.

4 GR Japan has considerable relevant experience with equipment provision through grants (considering the scale of budget and type of works). However, it has no specific preference or strength for this type of assistance.

3 The World Bank in assisting customs IT in Cambodia with its World Bank’s Trade Facilitation and Competiveness Project.

3 Customs automation is included in the 2009-2013 action plan(s), although certain aspects have met with resistance (e.g., single window implementation).

14

C3.3 Improvement of IT skills and IT support functions for sustainable operations of customs

4 See comment directly above.

4 TCP JICA has considerable project experience with TCPs in the IT field although there has been no specific customs IT project. JICA TCPs are suitable for this type of assistance because

4 No development partner is specifically targeting the development of IT skills and IT support functions for customs in the country.


15

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A-6

Potential Areas of Assistance A B C D Total and monitoring over a relatively long term (2-3 years) is necessary for sustainable implementation of this type of project. C4. Human Resources Management

C4.1. Modernization of human resources management

3 Improved human resources management will improve customs performance, which to some extent may improve the efficiency of freight transport (e.g., if compensation is linked to trade facilitation rather than revenue related objectives)

3 TCP Japanese assistance tends to avoid the types of policy intervention required for this type of project. Japan has no experience with such interventions for this reason.

3 No development partner is specifically targeting customs human resources development, although there is some indirect assistance in this respect under the World Bank’s Trade Facilitation and Competiveness Project.

3 Human resources development is included in the 2009-2013 action plan(s), although progress has been limited. 12

C.4.2 Completion of a comprehensive customs training needs assessment and development of training strategy

3 Identification of customs training needs and development of a training strategy will ultimately improve customs performance and therefore improve freight transport, but the effect is indirect.

4 ST Japan has considerable relevant experience both in general and the customs sector. However, there is no particular strength of JICA schemes for this type of project.

4 No development partner in the country is comprehensively targeting customs training.

4 Support informally expressed in interview with the JICA study team on 24 November 2010. 15

C.4.3 Technical cooperation for sustainable customs training

3 Sustainable customs training strategy will ultimately improve customs performance and therefore improve freight transport, but the effect is indirect.

5 TCP Japan has considerable relevant experience both in general and the customs sector. JICA TCPs are particularly suitable for sustainable training in one country. A previous train-the-trainers program was delivered during 2006-2009 by JICA trainers.


4 Support informally expressed in interview with the JICA study team on 24 November 2010.

16

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A-7

Potential Areas of Assistance A B C D Total C4.4 Development of new priority curricula on customs techniques including basic and advanced training in tariff classification, customs valuation, post clearance audit, risk management, and the Revised Kyoto Convention

3 More effective training in these areas will ultimately improve customs performance and therefore improve freight transport, but the effect is indirect.

4 TCP See the above comment.

4 No development partner in the country is comprehensively targeting development of these priority curricula.

4 Training in tariff classification, post clearance audit, risk management, the Revised Kyoto Convention, and valuation included on tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

15

C5. Integrity C5.1 Development and/or implementation of integrity plan

3 Improved integrity at the border will facilitate freight transport, but the link between adoption of an integrity plan and actual implementation may not be direct.

2 TCP This type of assistance requires considerable policy intervention, which Japanese assistance tends to avoid. Japan has no relevant assistance experience for this reason.

4 Other development partners in Cambodia are not directly addressing customs integrity.

3 Development and implementation of a customs integrity initiative based on the Revised Arusha Declaration included in 2009-2013 action plan(s), although interviews with the private sector and a Mapping of Trade Processes (March 2010) assisted by the EU, UNIDO, the World Bank, and DANIDA indicate that significant informal payments are required in Cambodia.

12

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A-8

Potential Areas of Assistance A B C D Total C6. Border Level

C6.1 Feasibility study of relocating freight traffic from the Poipet - (Aranyaprathet) border crossing point

4 Significant reduction in congestion and clearance times expected at newly relocated, state-of-the-art border crossing point, located along the GMS road originally designated as the having the highest priority. .

4 ST Japan has many relevant experiences of assisting feasibility studies for border facilities and more than most other development partners. However, there may be no specific strength of JICA schemes for this kind of assistance compared to other development partners.

4 Particularly complementary with the coordinated border management component of ADB’s upcoming C-R-PATA, at least for this one border crossing point covered by CBTA Protocol 1

5 Support for the relocation of the border crossing point for freight traffic has been given by the prime minister, although there has been no specific request yet for Japanese or other foreign assistance.

16

C6.2 Coordinated (combined) and more efficient border management between/among agencies within one country and improved cooperation between countries at the same BCP

C6.2.1 Study and technical cooperation for Introducing coordinated border management at Bavet and/or new border crossing point

4 Coordinated border management will reduce freight transport costs and time.

5 TCP JICA TCPs, which create ownership promote the activities of counterparts, are particularly suitable for consensus building/ coordination among various organizations at the border. (Such consensus building may be difficult to be realized through very short ADB training, for example.) JICA’s attempt in this field in Africa (e.g., at Chirundu) was highly valued.

5 Strongly supportive of coordinated border management component of ADB’s upcoming C-R-PATA

3 Anukret 21 on Facilitation of Trade through Risk provides for a degree of coordinated border management, but implementation has been difficult.

17

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A-9

Potential Areas of Assistance A B C D Total C6.2.2 Over the longer term, assist implementation of single-stop inspection at selected border crossing(s)

4 Single-stop inspection will reduce freight transport costs and time at each border crossing pair by about half.

5 ST, TCP, and GR See above comment. In addition, the combination of various schemes is another one of JICA’s strengths.

3 Supportive of aims of ADB’s upcoming C-R-PATA, although ADB seems to be backing away from achieving single-stop inspection in the short- to medium-term as it seems a “bridge too far” for many of the countries, including Cambodia.

3 Cambodia has ratified Annex 4 of the CBTA calling for single-stop inspection, but its commitment to implementation of this provision seems to be longer term.

15

C6.3 Study and technical cooperation to improve interconnectivity with border crossing agencies of neighboring countries

4 Improved interconnectivity with border control agencies of neighboring countries can substantially increase the efficiency of border clearance, which would benefit freight transport with lower clearance times

5 ST and TCP JICA TCPs are particularly suitable for consensus building/ coordination among various organizations of two countries at one border. JICA’s attempt in this field in Africa (e.g., at Chirundu) was highly valued. Assistance with IT aspects also a strength of Japanese assistance.

4 Supportive of aims of ADB’s upcoming C-R-PATA

4 Support informally expressed in JICA study team visits to Poipet and Bavet in November 2010

17

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A-10

Potential Areas of Assistance and Priority Assessment—Lao PDR (L) Potential Areas of Assistance A B C D Total

L1. Legal/Institutional Framework L1.1 (Further) improvement of organizational structure and management

3 Organizational improvements (especially centralization in the case of Lao PDR Customs) can improve the efficiency of customs department operations, but they may not be directly related to freight transport improvements.

3 TCP There is limited Japanese experience in assistance with legal and regulatory reform, both in general and in the customs sector. Also, Japanese assistance tends to avoid policy interventions.

3 Some limited organizational improvements are being assisted by the World Bank’s Customs and Trade Facilitation Project (e.g., development of a system of administrative appeals).

3 The minister of finance requested and the prime minister supported the World Bank’s Customs and Trade Facilitation Project, but more direct support of customs organizational change is required.

12

L1.2 Assistance with (further) modernization of customs laws and implementing regulations

5 Modernization of certain aspects of the 2005 Customs Law will provide substantial benefits to freight transport (e.g., amending Article 24, which requires 100% physical inspection)


4 Further legal development will complement ADB’s upcoming C-R-PATA, e.g., for implementation of coordinated border management and a customs transit system

3 More direct support of customs legal/regulatory changes is required.

15

L1.3 Technical cooperation for further development of customs-private sector cooperation



4 Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Lao International Freight Forwarders Association, LIFFA, is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).

4 Informal support expressed in a meeting with JICA study team on 12 November 2010.

16

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A-11

Potential Areas of Assistance A B C D Total L.2 Customs Procedures

L.2.1 Study and technical cooperation for simplification/standardization of customs procedures/processes

5 Simplified/standardized procedures will directly improve freight transport by lowering clearance costs/times, e.g., by reducing the wide latitude of discretion exercised by customs officers.


5 Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Customs and Trade Facilitation Project. While some areas such as advance ruling, valuation, and post clearance audit are being addressed in the World Bank project, other areas could be assisted in the proposed project (e.g., tariff classification).

5 Training in various customs techniques (e.g., tariff classification) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

19

L.2.2 Study and/or technical cooperation for risk management project

4 Adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm. The scope of possible benefits in Lao PDR is significant to the extent that the country can move away from 100% physical customs inspection.


5 Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Customs and Trade Facilitation Project, which is to develop risk management capability

4 Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010). However, the degree of commitment by Lao PDR may be less than in other ASEAN countries considering Article 24 of the Customs Law, which requires 100% physical inspection).

17

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A-12

Potential Areas of Assistance A B C D Total L.2.3 Technical cooperation for the development of Authorized Economic Operator system and associated training

3 Development of an AEO system would allow users including Japanese companies to qualify for faster clearance. However, there would be an enormous skills challenge to prepare and implement an AEO system in Lao PDR except in the longer term.


5 AEO implementation in Lao PDR has not been addressed by other development partners.

5 AEO-related training was including on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

18

L.2.4 Technical assistance for accession to/implementation of the Revised Kyoto Convention

4 Implementation of the procedures and practices mandated by the Revised Kyoto Convention would directly improve freight transport by lowering clearance costs/times.


4 This TA would complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management).

3 While training related to the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), Lao PDR Customs does not seem to prioritize accession to or implementation of the Revised Kyoto Convention at present.

15

L.2.5 (Further) development and training of customs brokers and freight forwarders


3 TCP Japan has less experience in this field. JICA TCPs are difficult to be provided to only the private sector (although it is possible through freight forwarders’ associations).


4 LIFFA has indicated support.

13

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A-13

Potential Areas of Assistance A B C D Total L3. Customs IT

L.3.1 National single window system



4 Particularly complementary with the coordinated border management component of ADB’s upcoming C-R-PATA.

2 While implementation of a national single window is an ASEAN target, Lao PDR has “not begun thinking about single window”. 14

L3.2 Improvement of customs IT infrastructure and equipment



3 The World Bank in assisting customs IT in Lao PDR with its World Bank’s Customs and Trade Facilitation Project.

4 Customs automation is the main component of the Customs and Trade Facilitation Project, requested by the Minister of Finance and supported by the prime minister, but it too early to assess and commitment during the implementation stage.

15

L3.3 Improvement of IT skills and IT support functions for sustainable operations of customs

3 See comment directly above, although limited numbers of people to be trained may keep benefits at a low level..

4 TCP JICA has considerable project experience with TCPs in the IT field although there has been no specific customs IT project. JICA TCPs are suitable for this type of assistance because and monitoring over a relatively long term (2-3 years) is



15

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A-14

Potential Areas of Assistance A B C D Total necessary for sustainable implementation of this type of project.

L4. Human Resources Management L4.1 Modernization of human resources

3 Improved human resources management will improve customs performance, which to some extent may improve the efficiency of freight transport (e.g., if compensation is linked to trade facilitation rather than revenue-related objectives)


3 No development partner is specifically targeting customs human resources development, although there is some indirect assistance in this respect under the World Bank’s Customs and Trade Facilitation Project.

3 The Lao PDR Customs Administration has a commitment to modernizing human resources, but progress has been limited to date.

12

L4.2 Completion of a comprehensive customs training needs assessment and development of training strategy





L4.3 Technical cooperation for sustainable customs training


5 TCP Japan has considerable relevant experience both in general and in the customs sector. JICA TCPs are particularly suitable for sustainable training in one country.



L4.4 Technical cooperation for accession to/implementation of the Revised Kyoto Convention

3 More effective training in these areas will ultimately improve customs performance and therefore


4 No development partner in the country is comprehensively targeting development of these priority

4 Training in tariff classification, post clearance audit, risk management, the Revised Kyoto Convention,

15

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A-15

Potential Areas of Assistance A B C D Total improve freight transport, but the effect is indirect.

curricula. and valuation included on tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

L5. Integrity L5.1 Development and/or implementation of integrity plan



4 Other development partners in Lao PDR are not directly addressing customs integrity.

3 Development and implementation of a customs integrity initiative based on the Revised Arusha Declaration included in 2009-2013 action plan(s), although interviews with the private sector indicate that some informal payments are required in Lao PDR.

12

L6. Border Level L6.1 Coordinated (combined) and more efficient border management between/among agencies within one country and improved cooperation between countries at the same BCP

L6.1.1 Technical cooperation for introducing coordinated border Management at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (and possibly Thanaleng)

3 Coordinated border management will reduce freight transport costs and time, but benefits may be less in Lao PDR than other countries because PMO Notice 406, issued on 13

5 TCP JICA TCPs, which create ownership promote the activities of counterparts, are particularly suitable for consensus building/ coordination among various

4 Supportive of coordinated border management component of ADB’s upcoming C-R-PATA, although less so in other countries because of the benefits already achieved

5 PMO Notice 406 is evidence of a strong governmental commitment. 17

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A-16

Potential Areas of Assistance A B C D Total March 2007, reduced the number of agencies at the border from about ten to three.

organizations at the border. (Such consensus building may be difficult to be realized through very short ADB training, for example). JICA’s attempt in this field in Africa (e.g., at Chirundu) was highly valued.

with PMO Notice 406.

L6.1.2 Over the longer term, assist implementation of single-stop inspection at selected border crossing(s)

4 Single-stop inspection will reduce freight and time at each border crossing pair by about half.


3 Supportive of aims of ADB’s upcoming C-R-PATA, although ADB seems to be backing away from achieving single-stop inspection in the short- to medium-term as it seems a “bridge too far” for many of the countries.

3 Lao PDR is ostensibly implementing single-stop inspection at Dansavanh (-Lao Bao), but in fact little evidence of implementation can be observed.

15

L6.2 Study and technical cooperation to improve interconnectivity with border crossing agencies of neighboring countries




4 Support informally expressed in JICA study team visits to Dansavanh and Savannakhet (Kaysone Phomvihane) in December 2010. 17

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A-17

Potential Areas of Assistance and Priority Assessment—Myanmar (M) Potential Areas of Assistance A B C D Total

M1. Legal/Institutional Framework M1.1 (Further) improvement of organizational structure and management

3 Organizational improvements can improve the efficiency of customs department operations, but they may not be directly related to freight transport improvements

3 TCP There is limited Japanese experience in assistance with organizational restructuring, both in general and in the customs sector. Also, Japanese assistance tends to avoid policy interventions.

4 There is no development partner active in this area, so the field is open.

2 There has been limited government initiative in this area to date.

12

M1.2 Assistance with (further) modernization of customs laws and implementing regulations

5 The basic Myanmar Customs legislation is quite dated: (i) the [India] Sea Customs Act of 1878 and (ii) the [India] Land Customs Act of 1924. Accordingly, modernization will provide substantial benefits to freight transport.


4 Further legal development will complement ADB’s upcoming C-R-PATA (e.g., for implementation of coordinated border management and a customs transit system); no other development partners are pursuing this activity in Myanmar.

3 Evidence of government commitment may be found in the proposed amendments to Article 30 of the Sea Customs Act, now before the Cabinet, which would introduce the transaction valuation method required by the WTO Customs Valuation Agreement. However, further significant revision of Myanmar’s customs laws are required (e.g., to bring them in line with the Revised Kyoto Convention).

15

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A-18

Potential Areas of Assistance A B C D Total M1.3 (Further) development of customs-private sector cooperation



4 Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Myanmar International Freight Forwarders Association), MIFFA, is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).

3 Some evidence of Myanmar’s support for private sector involvement is found in its participation in public-private consultations within ASEAN customs cooperation. 15

M2. Customs Procedures M2.1 Study and technical cooperation for simplification/standardization of customs procedures/processes

5 Simplified/standardized procedures will directly improve freight transport by lowering clearance costs/times, e.g., by reducing the wide latitude of discretion exercised by customs officers.


4 Progress in simplifying/standardizing customs procedures/ processes will complement the aims of ADB’s upcoming C-R-PATA; no other development partners are pursuing this activity in Myanmar.

5 Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.

18

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A-19

Potential Areas of Assistance A B C D Total M2.2 Study and/or technical cooperation for risk management project

4 Adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm. The scope of possible benefits in Myanmar is significant to the extent that the country can move away from its reliance on physical customs inspection.


5 Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system); no other development partners are pursuing this activity in Myanmar.

5 Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.

18

M2.3 Technical cooperation for the development of Authorized Economic Operator System and associated training

4 Development of an AEO system would allow users including Japanese companies to qualify for faster clearance.


5 AEO implementation in Cambodia has not been addressed by other development partners.

5 AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.

18

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A-20

Potential Areas of Assistance A B C D Total M2.4 Technical assistance for accession to/implementation of the Revised Kyoto Convention

4 Implementation of the procedures and practices mandated by the Revised Kyoto Convention would directly improve freight transport by lowering clearance costs/times.


4 This TA would complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management); no other development partners are pursuing this activity in Myanmar.

3 Training related to the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010. However, Myanmar Customs does not seem to prioritize accession to or implementation of the Revised Kyoto Convention at present (“they would like to consider accession to the Revised Kyoto Convention, but it is a very complicated accession process involving other government agencies”).

15

M2.5 (Further) development and training of customs brokers and freight forwarders



3 Complementary, although in an indirect way, to the ADB C-R-PATA; no other development partners are pursuing this activity in Myanmar.

4 MIFFA supports this initiative.

13

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A-21

Potential Areas of Assistance A B C D Total M3. Customs IT

M3.1 National single window system




2 While implementation of a national single window is an ASEAN target, Myanmar lags far behind in its implementation. Procurement of the Korean Customs UNI-PASS Information Association (CUPIA) system is considered a step in this direction, however.

14

M3.2 Improvement of customs IT infrastructure and equipment



3 Procurement of the Korean Customs UNI-PASS Information Association (CUPIA) is underway, but there may still be scope for Japanese involvement.

3 The government has demonstrated some commitment to customs automation but considering ASCYCUDA and CUPIA proposals.

14

M3.3 Improvement of IT skills and IT support functions for sustainable operations of customs


4 TCP JICA has considerable project experience with TCPs in the IT field although there has been no specific customs IT project. JICA TCPs are suitable for this type of assistance because and monitoring over a


3 The government has demonstrated some commitment in its recent consideration of proposals for customs automation. 15

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A-22

Potential Areas of Assistance A B C D Total relatively long term (2-3 years) is necessary for sustainable implementation of this type of project. M4. Human Resources Management

M4.1 Modernization of human resources management



4 No development partner is specifically targeting customs human resources management.

3 The Myanmar PDR Customs Administration has a commitment to modernizing human resources, including implementation of annual training plan supplemented by training assisted by external parties (e.g., the World Customs Organization) but progress has been limited to date.

13

M4.2 Completion of a comprehensive customs training needs assessment and development of training strategy




4 Support informally expressed in interviews with the JICA study team on 29-30 November 2010. 15

M4.3 Technical cooperation for sustainable customs training




4 Support informally expressed in interviews with the JICA study team on 29-30 November 2010. Their current customs training school is very small and poorly equipped; they have no specific trainers.

16

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A-23

Potential Areas of Assistance A B C D Total M4.4 Development of new priority curricula on customs techniques including basic and advanced training in tariff classification, customs valuation, post clearance audit, risk management, and the Revised Kyoto Convention




4 Training in tariff classification, post clearance audit, risk management, the Revised Kyoto Convention, and valuation included on tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.

15

M5. Integrity M5.1 Development and/or implementation of integrity plan



4 Other development partners in Myanmar are not significantly addressing the customs integrity issue.

2 The Myanmar Customs Administration recognizes the importance of customs integrity and the Revised Arusha Declaration, the main principles of which are prominently displayed at its headquarters. However, the private sector indicates that some informal payments are required in Myanmar.

11

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A-24

Potential Areas of Assistance A B C D Total M6. Border Level

M6.1 Coordinated (combined) and more efficient border management between/among agencies within one country and improved cooperation between countries at the same BCP

M6.1.1 Technical cooperation for introducing coordinated border management at Tachileik and/or Myawaddy



4 Supportive of coordinated border management component of ADB’s upcoming C-R-PATA.

4 Some evidence of governmental commitment with at least nominal implementation of “one stop service” at border points with Border Trade, Customs, Immigration, Police, Internal Revenue Department, and Myanmar Economic Bank.

17

M6.1.2 Over the longer term, assist implementation of single-stop inspection at selected border crossing(s)



3 Supportive of aims of ADB’s upcoming C-R-PATA, although ADB seems to be backing away from achieving single-stop inspection in the short- to medium-term as it seems a “bridge too far” for many of the countries, including Myanmar.

2 Myanmar has yet to ratify Annex 4 of the CBTA, which provides for single-stop inspection. 14

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A-25

Potential Areas of Assistance A B C D Total M6.2 Study and technical cooperation to improve interconnectivity with border crossing agencies of neighboring countries




3 The state of IT development at Myanmar’s borders makes the task of establishing such interconnections challenging.

16

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A-26

Potential Areas of Assistance and Priority Assessment—Thailand (T) Potential Areas of Assistance A B C D Total

T1. Legal/Institutional Framework T1.1 Assistance with (further) modernization of Customs Act and implementing regulations

5 The Thai Customs Act (1926, B.E. 2639) has been amended several times but further amendments are required for full modernization, which would provide substantial benefits to freight transport.

3 ST and/or TCP There is limited Japanese experience in assistance with legal and regulatory reform. Also, Japanese assistance tends to avoid policy interventions.

4 Further legal development will complement ADB’s upcoming C-R-PATA (e.g., for implementation of coordinated border management and a customs transit system); it is understood that no other development partners are pursuing this activity in Thailand.

3 Evidence of government commitment may be found in various recent and pending amendments to the Customs Act. However, enactment of such amendments is time consuming as it requires approval of the Cabinet, the Council of State, and ultimately the Parliament.

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T1.2 Technical cooperation for further development of customs-private sector cooperation



4 Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Thai Board of Trade is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).

4 A number of Customs-Business partnerships have been initiated in Thailand to date.

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T2. Customs Procedures T2.1 Study and technical cooperation for simplification/standardization of customs procedures/processes

4 Simplified/standardized procedures will directly improve freight transport by lowering clearance costs/times, although the scope for benefit may be less in Thailand than in other

4 ST and TCP Japan has some relevant experience in this field (but perhaps not much compared to other development partners). However, Japanese assistance schemes are

4 Progress in simplifying/standardizing customs procedures/ processes will complement the aims of ADB’s upcoming C-R-PATA. While some areas are being addressed, other

4 Training in various customs techniques (e.g., valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating

16.

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Potential Areas of Assistance A B C D Total Mekong Region countries. relatively suitable for this

type of assistance. areas could be assisted in the proposed project (e.g., valuation).

Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.

T2.2 Study and/or technical cooperation for risk management project

3 More widespread adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm. However, since Thailand is already relatively advanced in the field the benefits would be modest.


3 Progress in risk management will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), although Thailand is already relatively advanced in the field.

4 Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.

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T2.3 TA for the development of Authorized Economic Operator system and associated training

4 The development of an AEO system would allow users including Japanese companies to qualify for faster clearance.


5 AEO implementation in Thailand has not been addressed by other development partners (although APEC, of which Thailand as well as Viet Nam are members) has established a working group on the subject.

5 AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010). Staff of the Thai Customs Department specially expressed interest in Japan’s AEO experience in a meeting with the JICA study team on 8 December 2010.

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Potential Areas of Assistance A B C D Total T.2.4 Technical assistance for accession to/implementation of the Revised Kyoto Convention


4 TCP The comments for T2.1 above also apply here.

4

This TA will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management).

4 Training in the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.

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T3. Customs IT T3.1 National single window system




2 While implementation of a national single window is an ASEAN target, and Thailand is at Phase 2 of development is ahead of its Mekong Region partner countries, it still lags behind the implementation targets set by ASEAN. About three-quarters of the about two dozen other government agencies are not yet ready for paperless transactions.

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Potential Areas of Assistance A B C D Total T4. Human Resources Management

T4.1 Modernization of human resources management


3 TCP Japanese assistance tends to avoid the types of policy intervention sometimes required for this type of project. Japan has no experience with such interventions for this reason.

3 No development partner is specifically targeting customs human resources management.

3 The Thai Customs Department has a commitment to modernizing human resources, but the allocation of resources for customs human resources development to date has been insufficient to meet requirements (e.g., with an annual budgetary allocation of only THB 3 for the customs academy).

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T4.2 Completion of a comprehensive customs training needs assessment and development of training strategy


4 ST Japan has considerable relevant experience both in general and in the customs sector. However, there is no particular strength of JICA schemes for this type of project.


3 Support informally expressed in meeting with the JICA study team on 8 December 2010, but see above comment.

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T4.3 Technical cooperation for sustainable customs training




3 See above comment.

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Potential Areas of Assistance A B C D Total T4.4 Development of new priority curricula on customs techniques including advanced training in tariff classification, customs valuation, post clearance audit, risk management, and the Revised Kyoto Convention




3 Training in tariff classification, post clearance audit, risk management, the Revised Kyoto Convention, and valuation included on tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.

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T5. Border Level T5.1 Feasibility study of relocating freight traffic from the Aranyaprathet-(Poipet) Border Crossing Point

4 Significant reduction in congestion and clearance times expected at newly relocated, state-of-the-art border crossing point, located along the GMS road originally designated as the having the highest priority.

4 ST Japan has many relevant experiences of assisting feasibility studies for border facilities and more than most other development partners. However, there may be no specific strength of JICA schemes for this kind of assistance compared to other development partners.

4 Particularly complementary with the coordinated border management component of ADB’s upcoming C-R-PATA, at least for this one border crossing point covered by CBTA Protocol 1.

4 Support for the relocation of the border crossing point for freight traffic has received support from Thai governmental authorities and a preliminary study by the University of the Thai Chamber of Commerce, although there has been no specific request yet for Japanese or other foreign assistance.

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Potential Areas of Assistance A B C D Total T5.2 Coordinated (combined) and more efficient border management between/among agencies within one country and improved cooperation between countries at the same BCP

T5.2.1 Study and technical cooperation for introducing coordinated border management at Aranyaprathet, Mukdahan, and Mae Sai (and possibly Nong Khai)



5 Strongly supportive of coordinated border management component of ADB’s upcoming C-R-PATA

3 The Royal Thai Government sees benefits of more efficient border management in the region, but measures to make necessary amendments to existing laws to achieve more efficient border management have been difficult to enact due to lengthy legislative procedures.

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T5.2.2 Over the longer term, assist implementation of single-stop inspection at selected border crossing(s)

4 Single-stop inspection will reduce freight transport costs and time at each border crossing pair by about half.



3 Movement to amend the Thai Customs Act to allow Thai Customs officers to exercise their duties outside of Thai territory, but most neighboring countries appear reluctant to proceed with single-stop inspection.

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Potential Areas of Assistance A B C D Total T5.3 Study and technical cooperation to improve interconnectivity with border crossing agencies of neighboring countries


5 ST and TCP JICA TCPs are particularly suitable for consensus building/ coordination among various organizations of two countries at one border. JICA’s attempt in this field in Africa was highly valued. Assistance with IT aspects also a strength of Japanese assistance.


4 Support informally expressed in JICA study team visits to Aranyaprathet, Nong Khai, Mukdahan, and Mae Sai in November-December 2010 17

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Potential Areas of Assistance and Priority Assessment—Viet Nam (V) Potential Areas of Assistance A B C D Total

V1. Legal/Institutional Framework V1.1 (Further) improvement of organizational structure and management

3 Organizational improvements (especially centralization in the case of the General Department of Vietnam Customs) can improve the efficiency of department operations, but they may not be directly related to freight transport improvements.

3 TCP There is limited Japanese experience in assistance with legal and regulatory reform, both in general and in the customs sector. Also, Japanese assistance tends to avoid policy interventions.

4 Some organizational improvements were to be assisted by the World Bank’s Customs Modernization Project, but the project has not met its targets and may be canceled.

2 After accession by Viet Nam to the WTO in 2007, the governmental commitment to move the General Department of Vietnam Customs away from its traditional control orientation has lagged.

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V1.2 Assistance with (further) modernization of customs laws and implementing regulations

4 While the Law on Amendment of and Addition to a Number of Articles of the Law on Customs (2005) was a step toward modernization of the administration of customs and provided for transaction-based customs procedures, further modernization will facilitate freight transport.


4 Further legal development will complement ADB’s upcoming C-R-PATA, e.g., for implementation of coordinated border management and a customs transit system


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V1.3 Technical cooperation for further development of customs-private sector cooperation


5 TCP JICA TCPs have increasingly supported public-private partnerships and other related activities in various fields, perhaps more than have other development partners. Also, the involvement of the private

4 Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Vietnam Automobile Transport Association, VATA,

4 GDVC has been working actively with the private sector. For example, GDVC is seeking to implement a trusted-trader program, to be piloted in 2011, with the aim of promoting grater trade facilitation and voluntary compliance, as well as closer

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Potential Areas of Assistance A B C D Total sector in JICA customs TCP projects has been successful.

is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).

cooperation between GDVC and the local private sector stakeholders.

V2. Customs Procedures V2.1 Study and technical cooperation for simplification/standardization of customs procedures/processes

4 Simplified/standardized procedures will improve freight transport by lowering clearance costs/times.


5 Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Customs Modernization Project, although the latter project itself has not met its targets.

5 Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

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V2.2 Study and/or technical cooperation for risk management project

4 More widespread adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm.


5 Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Customs Modernization Project, which included an intervention by exception component although the project itself has not met its targets.

5 Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

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V2.3 Development of AEO system and associated training

4 The development of an AEO system would allow users including Japanese companies to qualify for

4 TCP The experience of the Japan Customs and Tariff Bureau is considered among the world

4 AEO implementation in Thailand has not been addressed by other development partners

5 GDVC has commenced implementation of a trusted-trader program. On the regional level,

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Potential Areas of Assistance A B C D Total faster clearance. leaders in the field.

Moreover, Japanese assistance schemes are relatively suitable for this type of assistance.

(although APEC, of which Viet Nam as well as Thailand are members has established a working group on the subject).

AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010.

V2.4 Technical assistance for implementation of the Revised Kyoto Convention


4 TCP The comments for V2.1 above also apply here.

4 This TA will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management).

4 Training in the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although after accession by Viet Nam to the WTO in 2007, the governmental commitment to move the General Department of Vietnam Customs away from its traditional control orientation has lagged.

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V2.5 (Further) development and training of customs brokers and freight forwarders




4 VATA has indicated support.

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Potential Areas of Assistance A B C D Total V3. Customs IT

V3.1 National single window system



2 USAID’s Single Window Program has assisted the development of a Viet Nam National Single window Template. Also, the EU previously provided assistance for single window development in Viet Nam.

4 The government’s active engagement with the EU and USAID to develop its National Single Window pursuant to ASEAN directives demonstrates comparatively greater commitment than shown by most other ASEAN countries.

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V4. Human Resources Management V4.1 Modernization of human resources management



4 Improvements in human resource management and development were to be assisted by the World Bank’s Customs Modernization Project, but the project has not met its targets and may be canceled.

3 Human resources development has been included in the plans of the General Department on Vietnam Customs, but progress has been limited.

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V4.2 Completion of a comprehensive customs training needs assessment and development of training strategy





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Potential Areas of Assistance A B C D Total V4.3 Technical Cooperation for Sustainable Customs Training


5 TCP Japan has considerable relevant experience both in general and the customs sector. JICA TCPs are particularly suitable for sustainable training in one country.


4 Support informally expressed in interview with the JICA study team on 16 November 2010 and in an answer to a questionnaire received on 24 December 2010.

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V4.4 Development of new priority curricula on customs techniques including basic and advanced training in tariff classification, customs valuation, post clearance audit, risk management, and the Revised Kyoto Convention




4 Training in tariff classification, post clearance audit, risk management, the Revised Kyoto Convention, and valuation included on tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).

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V5. Border Level V5.1 Coordinated (combined) and more efficient border management between/among agencies within one country and improved cooperation between countries at the same BCP

V5.1.1 Study and technical cooperation for introducing coordinated border management at Moc Bai and/or Lao Bao


5 TCP JICA TCPs, which create ownership promote the activities of counterparts, are particularly suitable for

5 Supportive of coordinated border management component of ADB’s upcoming C-R-PATA.

3 Some evidence of governmental commitment with early ratification of CBTA Protocol 4 covering single-window (and

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Potential Areas of Assistance A B C D Total consensus building/ coordination among various organizations at the border. (Such consensus building may be difficult to be realized through very short ADB training, for example). JICA’s attempt in this field in Africa (e.g., at Chirundu) was highly valued.

single-stop) inspection

V5.1.2 Over the longer term, assist implementation of single-stop inspection at selected border crossing(s)




3 Viet Nam is ostensibly implementing single-stop inspection at Lao Bao(-Dansavanh), but in fact little evidence of implementation can be observed.

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V5.2 Study and technical cooperation to improve interconnectivity with border crossing agencies of neighboring countries




4 Support informally expressed in JICA study team visits to Moc Bai and Lao Bao in November and December 2010.

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Potential Areas of Assistance and Priority Assessment—Regional (R) Potential Areas of Assistance A B C D Total

R1. Legal/Institutional Framework R1.1 Creation of a Mekong Region Directors General Forum, with fully staffed subcommittees (commencing with a regional workshop)

3 Better regional coordination of customs policies will lead to improved customs performance, but may only indirectly benefit freight transport.

3 TCP JICA’s schemes offer no particular strength for this potential area of assistance. JICA TCP would be more effective for projects with offices in each beneficiary country.

3 No other development partner is supporting such an initiative, although the overlap of with the ASEAN Directors General Meeting and other ASEAN institutional structures would have to be considered.

5 Strong support for at last a workshop supported by JICA as a means for at least increasing information exchange among the region’s customs administrations was expressed to the JICA study team.

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R1.2 Preparation of a trade rulebook to ensure that brokers and traders use the correct HS Tariff Code; combined information trade system (CITS)

4 Increased dissemination of trade rules will improve freight transport, e.g., due to increased transparency of trade rules.

4 ST While JICA’s schemes offer no particular strength for this potential area of assistance, there are no negative considerations. The experience of the Japan Customs and Tariff Bureau with this type of rulebook would be adapted to the Mekong Region.

4 No other development partner is believed to be assisting such an initiative.

3 No specific support from the region’s governments has been expressed.

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R2. Customs Procedures R2.1 Regional assistance for risk management

4 Adoption of risk management will improve freight transport by lowering clearance costs/times, as customs interventions (e.g., physical inspection) become the exception rather than the norm.

3 TCP A score 1 lower than the for the national program for this project was given because JICA TCPs with project offices in the central government office are more effective at the national level.

5 Progress in risk management will greatly complement the aims of both ADB’s upcoming C-R-PATA and the initiatives of other development partners (e.g., the World Bank). The project is a more advanced version of the regional “intervention by exception” program

4 As noted above, various governments in the region have demonstrated commitment toward improving customs procedures/processes

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Potential Areas of Assistance A B C D Total identified by ADB’s Strategic Framework for Action on Trade Facilitation and Investment (SFA-TFI) initiative.2

R2.2 Introduction of a region-wide radio frequency identification (RFID)/global position system (GPS) tracking system for corridor management

4 Not only would such a tracking system improve customs cargo of cargo in transit and thereby facilitate implementation of a customs transit system, they will allow for streamlining of processes through automated data collection reflecting the movement of freight

4 ST and TCP Under the assumption that the ST would be undertaken in regionwide and the TCP would be conducted in each country individually, JICA schemes are relatively suitable for this type of assistance. The Ministry of Economy, Trade and Industry (METI) of Japan has conducted a number of recent relevant studies in the Mekong Region for several years.

4 No other development partner is pursuing this technology in the Mekong Region, and there are complementarities with other initiatives, e.g., the upcoming C-R-PATA to be implemented by ADB.

4 There appears to be some level of governmental interest although the concept is relatively new.

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R3. Customs IT R3.1 Regional (ASEAN) single window


3 ST and TCP See the explanation for R2.1 above

2 USAID has provided assistance for the development of national windows, especially in Viet Nam.

1 Although ASEAN has called for development of a regional single window, support from individual governments for implementation of national single windows, a necessary precursor to a regional single window, has been lagging.

10

2 See Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 16.

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Potential Areas of Assistance A B C D Total R3.2 Regional information sharing platform (including a common trade rulebook)

4 A quick and convenient source of information on the trade and regulatory environment and other informational needs for trade and investment will facilitate freight transport.

4 ST and TCP Under the assumption that ST would be undertaken regionwide and the TCP conducted in each country individually, JICA schemes would be suitable for this type of assistance.

4 No other development partner has provided support specifically for such a project, although it was The project was proposed in the ADB Strategic Framework for Action on Trade Facilitation and Investment (SFA-TFI) in 2006-07.

2 No specific support from the region’s governments has been expressed. 14

R3.3 Data mining 3 Data mining will facilitate risk management, which as explained above will improve freight transport by lowering clearance costs/times, although the effect may be considered somewhat indirect.

4 TCP Under the assumption that one expert (or one project team) would be dispatched to each country in the region and they would cooperate with each other, JICA’s assistance schemes would be is suitable for this type of project. However, implementation may be difficult because JICA does not have TCP experience under such a regional framework with offices in different countries.



12

R4. Human Resources Management R4.1 Development of a joint Mekong Region customs research and training center

3 Development of customs administration capacity will assist the governments in meeting international standards and recommendations, which will facilitate freight transport, although indirectly.

4 ST, TCP and GR Assuming that not only capacity building but also TCP would be provided (after the building is provided), JICA assistance has the strength of allowing a combination of its various


3 There was some interest indicated in discussions with one Mekong Region country, although there was also some concern about possibly duplicating the role of ASEAN in the customs field.

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Potential Areas of Assistance A B C D Total schemes for implementation

as a package (e.g., the facility and equipment should be designed based on the content/program of the research to be conducted).

R4.2 Support of upcoming C-R-PATA by providing CBTA-related training at the central and border levels cooperation

3 Training of officials in implementation of the CBTA will improve freight transport as the CBTA is implemented, although the impact from the training in freight transport may be considered somewhat indirect.

4 TCP A JICA TCP would be suitable for this kind of assistance (training), although generally ADB has much more background in the CBTA.

5 This project would greatly complement the ADB’s upcoming C-R-PATA to jumpstart implementation of the CBTA.

4 Government support has been expressed through their years of “investment” in the CBTA and indirectly through their approval of ADB’s upcoming C-R-PATA.

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R5. Border Level Initiatives R5.1 Annual time release surveys and measurement of performance indicators

4 Monitoring border crossing and border control agency performance will provide incentives for improvement, which will facilitate freight transport.

4 ST A JICA ST with a national office is suitable for monitoring and evaluation of performance and to advise on further developments although JICA does not have such experience in the Mekong Region.

5 Greatly supportive of ADB’s upcoming C-R-PATA and other development partner initiatives; specifically mentioned in an interview with the ADB project officer for the C-R-PATA on 9 December 2010.

3 Government support indirectly expressed through their approval of ADB’s upcoming C-R-PATA. 16

R5.2 Master plan and feasibility studies for development of efficient border crossing pairs on a pilot basis

4 Significant reduction in congestion and clearance times would be targeted at improved border crossing points.

4 ST Although of course ADB has major project experience in this field in the Mekong Region, JICA has relevant experience especially in Africa where more comprehensive border development projects have

5 Strongly supportive of ADB’s upcoming C-R-PATA.

4 Government support has been expressed through their years of “investment” in the CBTA and indirectly through their approval of ADB’s upcoming C-R-PATA.

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Potential Areas of Assistance A B C D Total been conducted than in the Mekong Region (e.g., at Chirundu). In addition, there are a few border crossings with high development demands that are not currently included in CBTA Protocol 1, although Protocol 1 could be amended (even initially by MOU) for them to be included..

R5.3 Feasibility study of relocating freight traffic from the Aranyaprathet-Poipet border crossing point

4 Significant reduction in congestion and clearance times expected at newly relocated, state-of-the-art border crossing point, located along the GMS road originally designated as the having the highest priority.

4 ST JICA has comparatively more experience with border crossing development feasibility studies than other development partners. That said, there is no specific strength of JICA schemes for this kind of assistance compared to those of other major development partners.

4 Complementary with the coordinated border management component of ADB’s upcoming C-R-PATA, at least for this one border crossing point covered by CBTA Protocol 1

4 Support for the relocation of the border crossing point for freight traffic has been given by the Cambodian prime minister. Also, there has been support from Thai governmental authorities and a preliminary study by the University of the Thai Chamber of Commerce has been initiated. However, there has been no specific request yet for Japanese or other foreign assistance.

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R5.4 Other BCP improvement projects

4 Reduction in congestion and clearance times would be targeted at improved border crossing points.

4 ST, TCP and/ or GR See the explanation for R2.1 above.

3 Perhaps less complementary with the ADB’s upcoming C-R-PATA than the above projects to the extent that focus is on border crossing points not currently included in CBTA Protocol 1.

3 At this stage, perhaps less government than the above projects at least to the extent that focus is on border crossing points not currently included in CBTA Protocol 1.

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Survey on Improvement of Customs Procedures Appendix B for Trade Facilitation in the Mekong Region Project Profiles

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Appendix B: Project Profiles

Project Profiles - Cambodia Project Code Project Title Country C1 Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes Cambodia

Project Background

A number of problems relating to customs clearance in Cambodia were identified during interviews with the private sector (e.g., customs valuations not based on transaction values; inconsistency regarding customs classifications by officials in the customs headquarters and border offices; the necessity to lodge import/export applications at Phnom Penh and to also show them at the border; insufficient knowledge by customs officers on ASEAN Form D (certificate of origins), which results in additional waiting time at the border).

Specific problems cited in a development sponsor assisted trade mapping study included: (i) complicated processes, with a “designed from scratch” process to meet the range of import/export objectives likely to involve fewer process steps; and (ii) process steps not providing valued added, with some sub-processes requiring multiple approval from different officials and administrators.

Project Objective(s)

Simplify/standardize customs procedures/processes

Indicative Project Component(s)

(i) Prepare guidelines for simplified/standardized procedures (manual), including document simplification, advance rulings (tariff, valuation, and rules of origin1), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and

(ii) Design and implement training programs for targeted group(s) Expected Impact(s)

More transparent and predictable customs procedures, and reduced border clearance times and costs (relative to the baselines in (i) Mapping of Trade Processes, March 2010, assisted by the EU, UNIDO, the World Bank, and DANIDA; (ii) Time Clearance “Before” Studies conducted by ADB at Poipet and Bavet in 2007; and (iii) annual time release studies [see R5]); and therefore, more competitive exports.

Status of Government/ Regional Commitment

The General Department of Excise and Customs’ Strategic Objective 3 for 2009-2013 covers “customs procedures and techniques” to “establish and implement standards, systems, procedures, and techniques in accordance with international best practices”. Activity 3.2 covers implementation of a customs policy and procedures manual with simplified/standardized procedures (e.g., tariff classification, valuation), and implementation of international obligations (e.g., the WTO Agreement on Customs Valuation).2

Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010)

1 E.g., covering methods for determining substantial transformation, definition of preferential rules of origin, duty drawback, definition of rules of origin in existing agreements. 2 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 191-92.


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Related Action(s) by Development Partners

Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Trade Facilitation and Competiveness Project.

The ASEAN-China Cooperation Fund (ACCF) has proposed assistance for Strengthening Customs Reform and Modernization in CLMV [Cambodia, Lao PDR, Myanmar, and Viet Nam].

Indicative JICA Input(s)

Scheme: Study and Technical Cooperation Project Expert(s)/Expert(s)/Consultant(s): (i) Customs Administration (Team Leader), 24 person-months (ii) Training Design and Implementation, 12 person-months (iii) Customs Valuation, 3 person-months (iv) HS Classification, 3 person-months (v) Rules of Origin, 3 person-months (vi) Training Guidelines, 6 person-months

Counterpart Agency

General Department of Customs and Excise

Project Code Project Title Country C2 Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training Cambodia

Project Background

Lengthy customs clearance is a problem for the private sector. For example, a time release study at Poipet(-Aranyaprathet) conducted by ADB in 2005 surveyed exports from Thailand to Cambodia and found processing time of 55 minutes and elapsed time of 255 minutes on the Cambodian side.3

Economic operators (including both local and international businesses) 4 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies.


To explore a solution to pilot an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training. The project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach developed by the World Customs Organization (WCO). This approach implies facilitation measures in exchange for verifiable compliance standards.5


(i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for

3 Asian Development Bank, Time Release “Before” Study for the Poipet-Aranyaprathet Border Crossing Points, 2005, paragraphs 8-9. 4 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 5 For reference and “inspiration”, see (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010.


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penalties and removal of certification), and implementation of a pilot project6;

(ii) Revise definition and AEO system procedures; (iii) Design and implement training programs for the AEO system; and (iv) Explore possible mutual recognition arrangements.

During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Cambodia in the near term. Accordingly, the focus will be on providing a skills platform for GDCE to start preparing an AEO program at its own pace.

Expected Impact(s)

Reduced border clearance time and costs for frequent users of customs services are expected. Consider, for example, that a time release study by the Japan Customs and Tariff Bureau found a reduction in clearance time for from 3.1 hours for general cargo to 0.1 hours for AEO cargo (2009).7



Related Actions by Development Partner(s)

AEO implementation in Cambodia has not been addressed yet by other development partners.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/AEO System (Team Leader), 24 person-months (ii) Risk Management, 3 person-months (iii) Company Rating, 3 person-months (iv) Training Design and Implementation, 6 person-months

Counterpart Agency


Project Code Project Title Country C3 Study and/or Technical Cooperation for Risk Management Project Cambodia Project Background

GDCE initiated a risk management program when the Government issued Sub-decree No. 21 on Facilitation of Trade through Risk Management, issued on 1 March 2006, which provides for interagency cooperation (i.e., among the Customs and Excise Department, CamControl, Ministry of Commerce, Ministry of Industry Mines and Energy, Ministry of Health, Ministry of Agriculture and Fisheries) through service-level agreements (MOUs) in efficiently carrying out risk-based operating procedures. The current risk management program with assistance from JICA includes channel selectivity decisions using risk assessment and risk profiling.8 However, no risk management is practiced at Poipet and only paper-based risk management is applied at Bavet.

Planned activities now include: (i) putting into practice a traders’ credibility management system; (ii) developing a network between the risk management

6 See (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 7 Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010, p. 7. 8 The ongoing JICA-assisted Regional Cooperation Project on Risk Management for Customs in the Mekong Region, in Cambodia (February 2008-February 2011), Thailand (March 2008 to March 2011), and Viet Nam (January 2008 to January 2011) is: (i) carrying out a risk management action plan, (ii) setting the customs risk management procedures for central profiling, and (iii) developing the database for risk management.


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system and ASYCUDA; (iii) developing risk management networking between GDCE and the risk management systems of other concerned ministries and agencies; (iv) setting up risk management groups at provincial customs offices, to collect data, profile, analyze, and identify risks; (v) implement a customs intelligence program; and (vi) continuing with associated training of customs officers.9 Since 2008, JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient so as to reduce the required time, as well as to improve the skills and systems for risk management and monitoring at the border crossing points in the region. Although the base of the project is in Thailand, GDCE as well as the customs administrations of Thailand and Viet Nam has participated in the project, and training programs have been conducted covering a number of areas. Also, the World Bank assisted Trade Facilitation and Competiveness Project includes a risk management (sub)component.


Further development of appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures.10


(i) Advise on further development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and

(ii) Design and implement training programs for targeted group(s). Expected Impact(s)

Improved detection and compliance, as well as improved efficiency and reduced delays and cargo damage. Specific benefits of risk management include: (i) better human resource allocation since customs staff can concentrate efforts on fewer consignments, and staff can be deployed more efficiently; (ii) increased revenue, because despite fewer physical inspections, the improved efficiency and professionalism in customs control will lead to an increase in duty collection; (iii) improved compliance with laws and regulations, since improved efficiency in customs together with the traders’ incentive to achieve faster release through a green channel will bring about increased compliance on the part of the traders; (iv) improved collaboration between customs and the trading community since increased interaction between customs and traders is part of the process to assess the risks related to goods transported; (v) reduced release time, since on average only 10-20% of the goods are examined under efficient, risk-based clearance; (vi) and lower transaction costs, since risk management techniques will release 80-90% of goods within a few hours.11


The General Department of Excise and Customs’ Strategic Objective 4.1 for 2009-2013 is to “continue implementation of the CED risk management strategy”, including implementation of Sub-Decree 21 and other legal instruments related to risk management, as well as development of a risk management framework including use of a customs intelligence program.12

On the regional level, training in risk management was included on ASEAN’s

9 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 96. 10 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45. 11 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 12, November 2008, p. 2. 12 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, p. 193.


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tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).


Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Trade Facilitation and Competiveness Project, which is to develop risk management capability.


Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/Risk Management (Team Leader), 24 person-months (ii) Customs Information Technology, 12 person-months (iii) Training Design, and Implementation, 6 person-months

Counterpart Agency


Project Code Project Title Country C4 Study and Technical Cooperation for Introducing Coordinated

Border Management at Bavet and/or New Border Crossing Point Cambodia

Project Background

Lengthy border clearance is a problem for the private sector. For example, a time release study at Poipet(-Aranyaprathet) conducted by ADB in 2005 surveyed exports from Thailand to Cambodia and found processing time of 55 minutes and elapsed time of 255 minutes on the Cambodian side. 13 Also, the recent development partner assisted [Cambodia] Trade Mapping Study found that the process at Poipet required 2-3 hours and up to a day, at least four different documents, and at least THB 1,000 in informal fees, while that at Bavet required 1-2 hours and up to a day, at least five different documents, and USD 100-300 in informal fees. Specific problems included: (a) complicated processes, (b) process steps not providing valued added, (c) institutionalized unofficial fees, (d) a lack of private sector understanding and information; and (e) a lack of differentiation and risk management implementation.14

Cambodian border agencies include the representative of the Provincial Governor (who plays the lead role), Customs, Camcontrol (under the Ministry of Commerce and which acts as a duplicate customs agency in many respects), Police, Immigration, and Quarantine (including the ministries of Health and Agriculture). There is no area for joint inspection by the Cambodian border control agencies. A total of 44% of the steps in both the import and export process at Poipet are at the customs house, while 55% of the steps are at the customs house at Bavet.15

There is a plan to develop a new permanent border crossing point for freight traffic, most likely 12 km south of Poipet, at Nong Auen (Thailand)-Stoung Bot (Cambodia). The profile of Project C9 provides more information.

The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management.

13 Asian Development Bank, Time Release “Before” Study for the Poipet-Aranyaprathet Border Crossing Points, 2005, paragraphs 8-9. 14 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, pp. 3-4, 27-28. 15 See source in previous footnote, Figure 12, p. 29.


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To facilitate cross-border transport through the simplification and harmonization of formalities and required documents, and enhanced cooperation among border agencies, while at the same time reducing compliance and enforcement costs, resulting in efficiency gains and lower operating costs.


In coordination with the ADB C-R-PATA, the project will support efforts at Bavet and/or the new border crossing point near Poipet to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. 16 New operational procedures for all border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements.17

Expected Impact(s)

Coordination/cooperation of border crossing agencies will reduce compliance and enforcement costs, and result in efficiency gains and lower operating costs. Perhaps more importantly, for the trading community gains will include simplified document requirements and time to prepare declarations, reduced time spent for border controls, and a more predictable process flow. Specific benefits will include: (i) simplification of document preparation, resulting in lower compliance costs for the declarant; (ii) faster border crossing resulting from harmonization of physical inspections of crossing cargo, vehicles, and drivers, and better flow management; (iii) reduce pressure on the infrastructure; (iv) costs savings in administration, and streamlined procedures, improved working conditions for government officials (e.g., due to the use of shared information); and (v) reduced staff needs due to task sharing among agencies, thus freeing up skilled human resources for other activities.18


Sub-Decree 21 on Facilitation of Trade through Risk provides for a degree of coordinated border management, but implementation has been difficult.


The project is strongly supportive of the coordinated border management component of ADB’s upcoming C-R-PATA.


Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/Cross-Border Transport (Team Leader), 18 person-

months (ii) Risk Management, 3 person-months (iii) Single-Window/Single-Stop Inspection, 6 person-months (iv) Customs Laws and Regulations, 3 person-months (v) Human Resource Development, 3 person-months (vi) Customs Equipment Utilization, 3 person-months

16 The source in the previous footnote called for the development and selective application of a “micro single window” concept. Sub-processes with numerous steps would use common documents, consolidate document processing, and payment within a micro single window in order to provide a single point of payment and documentation submission/sign-off for these groups of steps. The concept could be piloted with selected sub-processes identified through benchmarking and with performance targets applied. Evaluate and rollout would be based on private sector satisfaction and benchmark improvements. A sub-process would be developed for non-approved documents, to deal with exceptions, enabling default (i.e., approved) transactions clear passage (i.e., “no process”). Time stamps would be introduced to record official sub-process starting times. European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010, pp. 6, 32-33. 17 Operational procedures may allow for moving certain operations to inland destinations, pre-arrival declaration using electronic data interchange, and increased use of post-clearance audits, AEO programs, pre-arrival clearance, and modern risk management, as provided for by the WCO SAFE Framework. UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 14, July 2008, p. 4. 18 See source in previous footnote, p. 3.


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(vii) Training Design, and Implementation, 6 person-months Counterpart Agency

General Department of Customs and Excise (lead agency) in association with Camcontrol, Police, Immigration, and Quarantine (including the ministries of Health and Agriculture)

Project Code Project Title Country C5 Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries Cambodia

Project Background

At neither Poipet(-Aranyaprathet) nor Bavet(-Moc Bai) is there interconnectivity between the border crossing agencies of Cambodia and the neighboring country, Thailand and Viet Nam, respectively. The lack of such interconnectivity, for example, constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border.


To establish interconnectivity between customs (and other border crossing agencies) of Cambodia and the neighboring country, e.g., to fulfill a precondition for implementation of single-stop inspection


(i) Prepare plan(s) for installing ICT equipment and a cable/wireless connection; and

(ii) Develop a program to improve software interconnectivity.

There may also need to be an agreement between the two sides (Cambodia-Thailand, Cambodia-Viet Nam) on the type of information that can be exchanged between the customs (and other) agencies of the two countries.

Expected Impact(s)

Improved border management efficiency and facilitated single-stop inspection, which will reduce clearance times and costs.


Support informally expressed in JICA study team visits to Poipet and Bavet in November 2010.


The project is supportive of the aims of ADB’s upcoming C-R-PATA and specifically of its coordinated border management component.



months (ii) Customs Documentation, 6 person-months (iii) Customs Information Technology, 9 person-months (iv) Training Design and Implementation, 3 person-months

Counterpart Agency

General Department of Customs and Excise possibly in association with Camcontrol, Police, Immigration, and Quarantine (including the ministries of Health and Agriculture)

Project Code Project Title Country C6 Technical Cooperation for Further Development of Customs-

Private Sector Cooperation Cambodia

Project Background

On 9 October 2009, Cambodia issued Sub-Decree No. 906 on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism, which consists of a customs-export-oriented garment industry working group, a customs-export non-garment industry working group, and a customs-domestic market oriented working group (Article 2). The Mechanism is to: (i) collaborate and seek mutual understanding between GDCE and the private sector, in terms of “enhancing fiscal


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ethics and maximum trade facilitation, in particular, the needs for understanding of existing regulations (e.g., enhancement of the level of legal compliance, simplification of customs procedures); (ii) resolve all issues and misunderstandings to effectively implement the government’s trade facilitation policy; and (iii) coordinate the private sector’s involvement in the development and revision of customs regulations (Article 6). Based on the results of quarterly meetings, requests for actions by competent authorities may be made, accompanied by relevant documentation (Article 7). 19 Also worth noting, since 2009 Cambodia has introduced a registered (licensed) customs broker program, in accordance with Ministerial Decision No. 115 on Establishing and Functioning of Customs Brokers.


(i) Develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.20


(i) Advise on further signing of cooperation and assistance MOUs and development of public and private industry user/trade consultative partnership mechanisms; and


Increased private sector participation in customs planning and policymaking, which will lead to trade facilitation mechanisms that minimize costs, data, and documentation requirements and the time necessary for customs and other border procedures for the trading community.21


As noted, Sub-Decree No. 906 on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism was issued on 9 October 2009.


Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Cambodian Freight Forwarders’ Association, CAMFFA, is likely to serve as an issuing and guaranteeing organization; the establishment of the GMS freight transport association).


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration (Team Leader), 12 person-months (ii) Customs-Private Sector Partnerships, 9 person-months (iii) Training Design and Implementation, 3 person-months

Counterpart Agency


19 Ministry of Economy and Finance, General Department of Cambodia Customs and Excise, Cambodia Chamber of Commerce, and Japan International Cooperation Agency, Customs-Private Sector Partnership Mechanism (CPPM), published with assistance from the Japan International Cooperation Agency, 2009. 20 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 31. 21 See previous footnote.


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Project Code Project Title Country C7 Technical Cooperation for Accession to/Implementation of the

Revised Kyoto Convention Cambodia

Project Background

The International Convention on the Simplification and Harmonization of Customs Procedures (as amended)(Revised Kyoto Convention, entering into force on 3 February 2006), which includes one general annex and ten specific annexes22 in addition to the main body, provides for simplified and harmonized customs procedures, such as predictability, transparency, due process, maximum use of information technology, modern customs techniques (e.g., risk management, pre-arrival information, post clearance audit). To date, Viet Nam is the only Mekong Region country to have acceded the RKC, having done so on 8 January 2008. The Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013) includes an activity to prepare an action plan for accession to the Revised Kyoto Convention, including technical assistance from ADB, although Cambodia has not yet moved forward this plan.23


To prepare for accession and implementation of the Revised Kyoto Convention, so that Cambodia is certified as practicing international customs standards, and to assure faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness (see expected impacts below).


(i) Conduct comprehensive Revised Kyoto Convention gap analysis; (ii) Assist in formulation of national strategy and action plan for compliance and

accession; and (iii) Assist in implementation of the required actions

Expected Impact(s)

Benefits from the Revised Kyoto Convention include an announcement effect, as a contracting party is certified as practicing international customs standards, as well as implementation effects, including faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness.24


Training in the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although Cambodia has not yet moved forward with past plans to do so.


This TA will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management), as well as World Bank’s Trade Facilitation and Competiveness Project, which is to assist “adherence” to the Revised Kyoto Convention.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Laws and Regulations (Team Leader), 12 person-months (ii) Training Design and Implementation, 12 person-months

Counterpart Agency


22 Covering arrival of goods in a customs territory (A), importation (B), exportation (C), customs warehouses and free zones (D), transit (E), processing (F), temporary admission (G), offences (H), special procedures, and origin (I). 23 General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 191-92. 24 Tadashi Yasui, Benefits of the Revised Kyoto Convention, WCO Research Paper No. 6, February 2010.


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Project Code Project Title Country C8 Technical Cooperation for Sustainable Customs Training Cambodia Project Background

The human resource development component of GDCE’s Strategy and Work Program (2009-2013) calls for the training of over 1,000 managers and staff members.25

GDCE’s current training program includes 25 different courses. The courses include a three-month induction course as well as several basic short courses lasting about a week (e.g., on the WTO Customs Valuation Agreement, HS code classification, rules of origin, risk management, Cambodian customs law and rules, penalty laws, and post clearance audit).26 The current customs training courses do not include advanced training on certain topics (e.g., the WTO Customs Valuation Agreement, advance tariff rulings, rules of origin training).

The GDCE work program for customs reform calls for a new approach to develop the 1,000+ staff members and managers, including the use of: (i) a comprehensive training program to strengthen management and technical customs skills; (ii) creation of a Customs Training Center with a training program requiring international technical assistance; and (iii) recruiting of 30-50 suitably qualified staff each year using a civil service open examination method.

The current Customs Training Center infrastructure resources may be insufficient to fulfill the objectives of the 2009-2013 strategy because: (i) there is no dedicated customs training center and the current training room cannot accommodate more than one training session at a time; (ii) a comprehensive customs training assessment has not been carried out; (iii) there are no training texts; (iv) there are no training curricula and syllabuses; (v) there is no coordinated training program; and (vi) there is no train-the-trainers (TTT) program and syllabus.

The current situation in which trained trainers are moved from the Customs Training Center to posts either in headquarters or at border crossing points needs to be addressed. In the future trained trainers might stay and commit to about four years in the Customs Training Center, providing sufficient time for another batch of experienced managers and staff to become trained trainers.


To provide sustainable customs training to support the implementation of customs procedures facilitation, complete with trained trainers and training center management


(i) Advise on development of skills to prepare new customs training programs, training plans, new training curricula, and training materials, including training of trainers; and

(ii) Implement training programs based on the training materials. Expected Impact(s)

Enhanced customs human resources, which will ultimately improve customs performance

25 The roles, functions, and job descriptions of staffs and managers working in the departments, branches, and border crossing points are to be clarified and determined; this will be a challenge because the strategy calls for GDCE to change its management style and redefine the roles, functions, and responsibilities of customs headquarters, branches, and local offices. GDCE will need to determine a new management style and decide the functions and responsibilities before the human resource management (HRM) department can commence preparation of new job descriptions, a new HRM Strategy, and a new training program with new annual training plans and new training curricula. General Department of Cambodia Customs and Excise, Strategy and Work Programs on Reform of the General Department of Cambodia Customs and Excise (2009-2013), published with assistance from the Japan International Cooperation Agency, 2008, pp. 103-05. 26 Interview at Bavet on 26 November 2010 with (i) Mr. Ying Sam An, Chief of Customs, Bavet; (ii) Mr. Huy Sineth, Deputy Chief of Customs, Bavet; (iii) Mr. Nhem Parthora, Bavet Customs Excise Official; and (iv) Mr. Khov Kyan, Bavet Customs Excise Official.


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Support informally expressed in interview with the JICA study team on 24 November 2010.


No development partner in the country is comprehensively targeting customs training. A previous train-the-trainers program was delivered during 2006-2009 by JICA trainers.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Human Resource Development (Team Leader), 24 person-months (ii) Training Design and Implementation, 12 person-months (iii) Short-Term Experts (e.g., Customs Valuation, HS Classification, Rules of

Origin, Advance Ruling, Customs IT, Customs Laws and Regulations), 12 person-months

Counterpart Agency


Project Code Project Title Country C9 Feasibility Study of Relocating Freight Traffic from the Poipet-

(Aranyaprathet) Border Crossing Point Cambodia

Project Background

In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic,27 most likely 12 km south of the current location, at Stoung Bot (Cambodia)-Nong Auen (Thailand). The proposal was originally made by Cambodia. A potential obstacle is that the streambed border is not well defined. The University of the Thai Chamber of Commerce is undertaking a preliminary study of the border crossing point relocation.28 If the border demarcation issue can be resolved, development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads, e.g., from Route 5 in Cambodia, which is 10-12 km away from the proposed new BCP site.


To prepare for the development and operation of a state-of-the-art border facility at the newly relocated border crossing point at Stoung Bot (Cambodia)-Nong Auen (Thailand), to increase border management efficiency and reduce clearance times, and to serve as a model for other border crossing points in the Mekong Region


(i) Conduct BCP feasibility study including preparation of design guidelines, layouts, standards, and equipment;

(ii) Develop efficient and effective customs procedures; (iii) Assess approaches to coordinated border management; (iv) Improve traffic and parking management around the new BCP; and (v) Implement associated BCP management training.

Expected Impact(s)

Significant reduction in congestion and clearance times expected at newly relocated, state-of-the-art border crossing point, located along the GMS road originally designated as the having the highest priority.

27 The new BCP may focus on containerized cargo traffic. The eventual operating practices have not yet been defined. 28 The Thai Ministry of Commerce wishes to develop the new BCP with a special economic zone with an inland checkpoint 30 km away together with a logistics center and container terminal.


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Support for the relocation of the border crossing point for freight traffic has been given by the prime minister, although there has been no specific request yet for Japanese or other foreign assistance.


The project is particularly complementary with the coordinated border management component of ADB’s upcoming C-R-PATA, at least for this one border crossing point covered by CBTA Protocol 1.


Scheme: Study Expert(s)/Consultant(s): (i) Border Crossing Transport (Team Leader), 12 person-months (ii) BCP Operation/Management, 9 person-months (iii) Border Crossing Facility Design, 9 person-months (iv) Transport Demand Analysis, 3 person-months (v) Traffic Management, 3 person-months (vi) Customs Information Technology, 3 person-months (vii) Economics and Finance, 3 person-months (viii) Public-Private Partnerships, 1 person-month

Counterpart Agency

Ministry of Public Works and Transport (Cambodia)


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Project Profiles – Lao PDR Project Code Project Title Country L1 Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes Lao PDR

Project Background

A number of problems relating to customs clearance were identified during interviews with the private sector (e.g., a requirement for original documents for customs clearance at the borders; application of manual, paper-based process, lacking in harmonization across provincial offices; slow clearance procedures; long closures at lunchtime; the lack of an advance tariff or customs valuations ruling regime; a method of deciding customs valuations in relation to a customs headquarters list).

A rigorous assessment by a time release study assisted by WCO and the World Bank completed in December 2009 found moderately high clearance times and a high variation from the mean in all key steps of the clearance process at all major checkpoints and for all other government agencies in addition to customs was significant, which suggests that the actual time for releasing goods varies significantly from shipment to shipment.29




(i) Prepare guidelines (manual) for simplified/standardized procedures, including document simplification, pre-arrival clearance, and tariff classification); and


More transparent and predictable customs procedures, and reduced border clearance times and costs (here and below, relative to the baselines in TRS Task Force, Time Release Study, December 2009, assisted by the World Bank, Time Clearance “Before” Study conducted by ADB at Savannakhet in 2005, and annual time release studies [see R5]; therefore, more competitive exports




Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Customs and Trade Facilitation Project. While some areas such as advance ruling, valuation, and post clearance audit are being addressed in the World Bank project, other areas could be assisted in the proposed project (e.g., tariff classification).



Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration (Team Leader), 24 person-months (ii) Training Design and Implementation, 12 person-months (iii) Customs Valuation, 3 person-months (iv) HS Classification, 3 person-months (v) Rules of Origin, 3 person-months (vi) Training Guidelines, 6 person-months

Counterpart Agency

Lao PDR Customs Department

29 TRS Task Force, Time Release Study, Lao PDR, December 2009, p. 15.


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Project Code Project Title Country L2 Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training Lao PDR

Project Background

Economic operators (including both local and international businesses)30 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies.


To explore a solution to pilot an incentive-based approach to compliance, including a a diagnostic feasibility study and implementation plan, with associated training. The project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach developed by the World Customs Organization (WCO). This approach implies facilitation measures in exchange for verifiable compliance standards.31


(i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project32;


During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Lao PDR in the near term. Accordingly, the focus will be on providing a skills platform for the Lao PDR Customs Department to start preparing an AEO program at its own pace.

Expected Impact(s)





AEO implementation in Lao PDR has not yet been addressed by other development partners.

30 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 31 For reference and “inspiration”, see (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 32 See (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 33 Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010, p. 7.


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Counterpart Agency


Project Code Project Title Country L3 Study and/or Technical Cooperation for Risk Management Project Lao PDR Project Background

The Lao PDR Customs Department has not yet developed a risk management program. Article 24 of the country’s Customs Law on the Inspection of Goods by Customs Officers provides that “after the completion of registration of detailed customs declaration, all or some of the goods are subject to physical inspection conducted by customs officers as they may deem appropriate”. This provision seems to require that all consignments must be physically inspected although some may be inspected only partially; it may explain why in most cases at least imports and exports are physically inspected by Lao PDR Customs.34


The project will assist development of appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures.35 The ongoing World Bank assisted Customs and Trade Facilitation Project is to include a risk management activity.


Complementing the risk management activity in the ongoing World Bank project: (i) Advise on development of risk management indicators and profiles (central

and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and

(ii) Design and implement training programs for targeted group(s).

Considering that the Lao PDR Customs Department is currently preparing a pilot project for ASYCUDA, it may be too early to roll out risk management. However, to some extent, “the principles of risk management can be applied by all customs administrations, whether or not they operate manual or automated systems, if they adopt strategies that incorporate the key elements of a risk-based approach to compliance management”.36 In any case, the Lao PDR Customs Department may wish to consider the option of using the ASYCUDA risk management module after the Department as well as private industry users become acquainted with using the transit, import, and export modules of ASYCUDA, at which time the Department may decide to develop advance declarations using import and export pre-alert good-practice methods. A risk management database may be developed and the Department may consider joining the WCO Customs Enforcement Network (CEN).

Expected Impact(s)

Improved detection and compliance, as well as improved efficiency and reduced delays and cargo damage. Specific benefits of risk management include: (i) better human resource allocation since customs staff can concentrate efforts on fewer consignments, and staff can be deployed more efficiently; (ii) increased revenue,

34 Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 35. 35 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45. 36 David Widdowson, “Managing Risk in the Customs Context”, in Luc De Wulf and Jose Sokol (ed.), Customs Modernization Handbook, 2005, p. 99.


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because despite fewer physical inspections, the improved efficiency and professionalism in customs control will lead to an increase in duty collection; (iii) improved compliance with laws and regulations, since improved efficiency in customs together with the traders’ incentive to achieve faster release through a green channel will bring about increased compliance on the part of the traders; (iv) improved collaboration between customs and the trading community since increased interaction between customs and traders is part of the process to assess the risks related to goods transported; (v) reduced release time, since on average only 10-20% of the goods are examined under efficient, risk-based clearance; (vi) and lower transaction costs, since risk management techniques will release 80-90% of goods within a few hours.37


On the regional level, training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).


Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Customs and Trade Facilitation Project, which is to develop risk management capability.


Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/Risk Management (Team Leader), 24 person-months (ii) Customs Information Technology, 12 person-months (iii) Training Design and Implementation, 6 person-months

Counterpart Agency


Project Code Project Title Country L4 Technical Cooperation for Introducing Coordinated Border

Management at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (and possibly Thanaleng)

Lao PDR

Project Background

Moderately long border clearance times are an issue for the private sector. For example, a time release study at Savannakhet assisted by the World Bank and WCO in 2009 found that the mean time from arrival to removal was 5 hours and 3 minutes (with a standard deviation of 11 hours and 52 minutes); the mean time from arrival to the end of unloading was 6 hours and 26 minutes (with a standard deviation of 12 hours and 54 minutes); and the mean time from submission to approval was 3 hours and 21 minutes (with a standard deviation of 11 hours and 37 minutes). Also, the time release study at Dansavanh found that the mean time from arrival to removal was 7 hours and 54 minutes (with a standard deviation of 7 hours and 50 minutes); the mean time from arrival to the end of unloading was 11 hours and 28 minutes (with a standard deviation of 7 hours and 33 minutes), partly due to the lack of a proper warehouse; and the mean time from submission to approval was 3 hours and 14 minutes (with a standard deviation of 5 hours and 14 minutes).38

Pursuant to PMO Notice 406, issued on 13 March 2007, the only central agencies at the border are Customs, Immigration, and Quarantine. Border management is led by the head of the province. That said, there is scope for further progress in achieving coordinated border management between and among the remaining agencies at the border.

37 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 12, November 2008, p. 2. 38TRS Task Force, Time Release Study, Lao PDR, December 2009, p. 17.


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In coordination with ADB’s C-R-PATA, the project will support efforts at Savannakhet (Kaysone Phomvihane) and/or Dansavanh (as well as at Thanaleng if it is more actively included in the CBTA transport and customs facilitation regime) to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for the border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements.39

Expected Impact(s)


However, while coordinated border management will reduce freight transport costs and time, the benefits may be less in Lao PDR than other countries because PMO Notice 406, issued on 13 March 2007, reduced the number of agencies at the border from about ten to three.


PMO Notice 406 is evidence of a strong governmental commitment.


Supportive of coordinated border management component of ADB’s upcoming C-R-PATA, although less so in other countries because of the benefits already achieved with PMO Notice 406.



months (ii) Risk Management, 3 person-months (iii) Single-Window/Single-Stop Inspection, 6 person-months

39 Operational procedures may allow for moving certain operations to inland destinations, pre-arrival declaration using electronic data interchange, and increased use of post-clearance audits, AEO programs, pre-arrival clearance, and modern risk management, as provided for by the WCO SAFE Framework. UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 14, July 2008, p. 4. 40 See source in previous footnote, p. 3.


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(iv) Customs Laws and Regulations, 3 person-months (v) Human Resource Development, 3 person-months (vi) Customs Equipment Utilization, 3 person-months (vii) Training Design, and Implementation, 6 person-months

Counterpart Agency

Lao PDR Customs Department (lead agency) in association with Immigration, Quarantine, and the Governor of Savannakhet Province

Project Code Project Title Country L5 Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries Lao PDR

Project Background

At neither Savannakhet (Kaysone Phomvihane) nor Dansavanh is there interconnectivity between the border crossing agencies of Lao PDR and the neighboring country, Thailand and Viet Nam, respectively. The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border.


To establish interconnectivity between customs (and other border crossing agencies) of Lao PDR and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection.




There may also need to be an agreement between the two sides (Lao PDR-Thailand, Lao PDR-Viet Nam) on the type of information that can be exchanged between the customs (and other) agencies of the two countries. For example, it is understood that at present while Lao PDR Customs can provide the Lao PDR customs form for advance information sharing, the Thai side cannot provide this information to Lao PDR. Due to a Thai customs law provision on price confidentiality, Thai Customs can provide Lao PDR Customs only with the customs broker form, which does not specify sufficiently detailed prices of goods.

Expected Impact(s)



Support informally expressed in JICA study team visits to Dansavanh and Savannakhet (Kaysone Phomvihane) in December 2010.






Counterpart Agency

Lao PDR Customs Department possibly in association with Customs, Immigration, and Quarantine)


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Project Code Project Title Country L6 Technical Cooperation for Further Development of Customs-

Private Sector Cooperation Lao PDR

Project Background

Relative to other Mekong Region countries, mechanisms for customs-private sector cooperation are underdeveloped in Lao PDR, perhaps reflecting the early stage of the country’s private sector.


(i) Establish the legal preconditions for consideration of the legitimate needs of the trading community when new customs laws, policies, and procedures are drafted; (ii) develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (iii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iv) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.41


(i) Advise on signing of cooperation and assistance MOUs and development of public and private industry user/trade consultative partnership mechanisms; and




Informal support expressed in a meeting with JICA study team on 12 November 2010.


Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Lao International Freight Forwarders Association, LIFFA, is likely to serve as an issuing and guaranteeing organization; establishment of the GMS freight transport association).



Counterpart Agency


41 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 31. 42 See previous footnote.


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Project Code Project Title Country L7 Technical Cooperation for Accession to/Implementation of the

Revised Kyoto Convention Lao PDR

Project Background

The International Convention on the Simplification and Harmonization of Customs Procedures (as amended)(Revised Kyoto Convention, entering into force on 3 February 2006), which includes one general annex and ten specific annexes43 in addition to the main body, provides for simplified and harmonized customs procedures, such as predictability, transparency, due process, maximum use of information technology, modern customs techniques (e.g., risk management, pre-arrival information, post clearance audit). To date, Viet Nam is the only Mekong Region country to have acceded the RKC, having done so on 8 January 2008. However, Lao PDR Customs Department officials indicated that at this stage they have limited knowledge of the benefits of accession to the Revised Kyoto Convention.


To prepare for accession and implementation of the Revised Kyoto Convention, so that Lao PDR is certified as practicing international customs standards, and to assure faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness (see expected impacts below).


(i) Conduct comprehensive Revised Kyoto Convention gap analysis; (ii) Assist in formulation of national strategy and action plan for compliance and

accession; and (iii) Assist in implementation of the required actions

Expected Impact(s)

Benefits from the Revised Kyoto Convention include an announcement effect, as a contracting party is certified as practicing international customs standards, as well as implementation effects, including faster release and lower trade costs, increased revenue, more foreign direct investment (FDI) and greater economic competiveness.44


Training in the Revised Kyoto Convention was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although Lao PDR Customs Department officials indicated that at this stage they have limited knowledge of the benefits of accession to the Revised Kyoto Convention.


This TA will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a coordinated border management), as well as World Bank’s Customs and Trade Facilitation Project, which is to assist “adherence” to the Revised Kyoto Convention.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Laws and Regulations (Team Leader), 12 person-months (ii) Training Design and Implementation, 12 person-months

Counterpart Agency


43 Covering arrival of goods in a customs territory (A), importation (B), exportation (C), customs warehouses and free zones (D), transit (E), processing (F), temporary admission (G), offences (H), special procedures, and origin (I). 44 Tadashi Yasui, Benefits of the Revised Kyoto Convention, WCO Research Paper No. 6, February 2010.


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Project Code Project Title Country L8 Technical Cooperation for Sustainable Customs Training Lao PDR Project Background

Lao PDR Customs has a Customs Training Center in Vientiane that can accommodate 50-60 trainees. Trainers sometimes visit the border crossing points to deliver basic level courses, e.g., in valuation, HS code classification, rules of origin, risk management, and physical inspection methods. Border checkpoint staff members have received basic single-stop inspection training.45 Ideally, customs training centers need smaller training rooms as well that can accommodate 10-15 trainees because training is best delivered using interactive rather than lecture methods. The lack of a suitably equipped Customs Training Center could be addressed by the development of a sustainable training center complete with fit-for-purpose training furniture (e.g., desks in a U-shaped configuration) and with training equipment (e.g., photocopiers, printers, computers, whiteboards, video camera, library of training materials). A recent report prepared by the Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce46 found that the reason for the country’s noncompliance with WTO trade facilitation measures 47 is human resource constraints including the lack of expertise, insufficient personnel, and a lack of motivation and training. The limited availability of funds for training was another factor indicated as an constraint. The report concluded that Lao PDR needs personnel training to assist the development of a legal framework particularly in relation to GATT Articles V (Freedom of Transit), VIII, and X, with the and training to be delivered nationally and regionally. The Lao PDR Customs Department has prepared a paper for the approval of the Minister of Finance requesting the creation of a separate training division. Training is now under the human resources management division, which uses meeting rooms, regional customs offices, and hotels for training.








Support informally expressed in interview with the JICA study team on 10 November 2010.


No development partner in the country is comprehensively targeting customs training.

45 Interview on 22 November 2010 with: (i) Mr. Soksavanh Bouapha, Deputy Director, Thanaleng Checkpoint, Lao PDR Customs, Thanaleng (First Friendship/Mittaphab Bridge), and (ii) Mr. Thanomsith Khaophibane, Chief of Multilateral Cooperation Unit, International Cooperation Division, Lao PDR Customs. 46 Lao PDR Department of Imports and Exports of the Ministry of Industry and Commerce, Technical Report: Lao PDR WTO Trade Facilitation National Self-Assessment of Needs and Priorities, February 2010, pp. 5-6 47 E.g., World Trade Organization, General Agreement on Tariffs and Trade, Article VIII (1)(c); Agreement on Rules of Origin; Technical Barriers to Trade Agreement; Sanitary and Phytosanitary Measures Agreement (SPS Agreement).


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Counterpart Agency



B-23

Project Profiles - Myanmar Project Code Project Title Country M1 Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes Myanmar

Project Background

A number of problems relating to customs clearance and related procedures were identified during interviews with the private sector (e.g., the need to obtain import/export licenses from Ministry of Commerce and licenses from other relevant ministries in Naypyidaw, the new national capital; the lack of inland customs bonded warehouses or dry ports).

The Myanmar Customs Administration uses its “real value” method rather than the transaction value prescribed by the WTO Agreement on Customs Valuation. An amendment of Article 30 Myanmar is now before the country’s Cabinet to adopt the valuation methodology set out in the WTO Agreement on Customs Valuation, considering that Myanmar was an original member of the WTO.

The Myanmar Customs Administration does not currently provide advance valuation, tariff, and origin rulings to traders.




(i) Prepare guidelines (manual) for simplified/standardized procedures, including document simplification, advance rulings (tariff, valuation, and rules of origin48), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and


More transparent and predictable customs procedures, and reduced border clearance times and costs (relative to annual time release studies [see R5]); and therefore, more competitive exports




Progress in simplifying/standardizing customs procedures/ processes will complement the aims of ADB’s upcoming C-R-PATA; no other development partners are pursuing this activity in Myanmar.



Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration (Team Leader), 24 person-months (i) Training Design and Implementation, 12 person-months (ii) Customs Valuation, 3 person-months (iii) HS Classification, 3 person-months (iv) Rules of Origin, 3 person-months (v) Training Guidelines, 6 person-months

Counterpart Agency

Myanmar Customs Administration

48 E.g., covering methods for determining substantial transformation, definition of preferential rules of origin, duty drawback, definition of rules of origin in existing agreements.


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Project Code Project Title Country M2 Study and/or Technical Cooperation for Risk Management Project Myanmar Project Background

The Myanmar Customs Administration does not have a risk management program. While it currently carries out a high level of customs physical inspections based on a perceived need to detect narcotics smuggling, customs risk management at border crossing points requires different risk management methods using trader compliance programs49 and a customs risk management database, which should be linked to databases of intelligence agencies, enforcement agencies, and other border crossing point control agencies.


Development of appropriate techniques for systematic risk identification and implementing measures required to limit exposure to risk, and to implement international and national strategies, in accordance with the relevant legislation, for the collection of data and information, analyzing and assessing risks, prescribing action, and monitoring outcomes in order to facilitate, improve, and streamline control procedures.50


(i) Advise on development of risk management indicators and profiles (central and local), risk management database, establishment of intelligence network, and electronic risk management enabling pre alert of export and import cargo; and

(ii) Design and implement training programs for targeted group(s).

The project may be on a more basic level than the existing risk management assistance provided by JICA in Cambodia and Viet Nam. It will assist the Myanmar Customs Administration in achieving a more appropriate balance between facilitation and control, developing a clearer understanding of the nature of risks to the achievement of their objectives, and devising practical methods of mitigating those risks. Over time, the Myanmar Customs Administration may consider using the WCO Customs Enforcement Network (CEN) and developing a risk management database. For full-fledged implementation of a national customs risk management program, computer equipment, internet fiber optic cables and other communication lines and methods will need to be installed. Training for all border crossing point control agencies and for private industry users will also be required to develop the capacity of managers and staff before benefits from risk management can be achieved.

Expected Impact(s)


49 The detection of narcotics smuggling uses different techniques from those used by customs managers and staff members processing import, export, and transit cargo at border crossing points. Antinarcotics programs use specialized risk management databases that should be used by skilled antinarcotics officers. 50 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45. 51 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 12, November 2008, p. 2.


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Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.


Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system); no other development partners are pursuing this activity in Myanmar.


Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/Risk Management (Team Leader), 24 person-months (ii) Customs Information Technology, 12 person-months (iii) Training Design and Implementation, 6 person-months

Counterpart Agency


Project Code Project Title Country M3 Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training Myanmar

Project Background

Lengthy customs clearance is a problem for the private sector in Myanmar. An issues is that economic operators (including both local and international businesses) 52 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies.


To explore a solution to pilot an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training. The project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach developed by the World Customs Organization (WCO). This approach implies facilitation measures in exchange for verifiable compliance standards.53


(i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, certification mechanisms mechanisms for removal of certification/penalties), and implementation of a pilot project54;


52 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 53 For reference and “inspiration”, see (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 54 See (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010.


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During implementation it will be especially important to recognize that there will be a skills challenge to prepare and implement an AEO system in Myanmar in the near term. Accordingly, the focus will be on providing a skills platform for the Lao PDR Customs Department to start preparing an AEO program at its own pace.

Expected Impact(s)



AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010) and which was presented to the JICA study team during interviews with the Myanmar Customs Administration on 29-30 November 2010.


AEO implementation in Myanmar has not yet addressed by other development partners.



Counterpart Agency


Project Code Project Title Country M4 Technical Cooperation for Introducing Coordinated Border

Management at Tachileik and/or Myawaddy Myanmar

Project Background

Lengthy border clearance is a problem for the private sector. The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management.

Agencies on the Myanmar side of the border include the Department of Border Trade of the Ministry of Commerce, which is the lead agency, as well as the Customs Administration, Immigration and the National Registration Department, and the Police Force. Although daily coordination of activities is undertaken through joint agency teams, there is scope for further progress in achieving coordinated border management between and among the agencies.



55 Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010, p. 7.


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In coordination with the ADB-C-R-PATA, the project will support efforts at Tachileik and/or Myawaddy to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for all border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements.56

Expected Impact(s)



There has been some evidence of governmental commitment with at least nominal implementation of “one stop service” at border points with Border Trade, Customs, Immigration, Police, Internal Revenue Department, and Myanmar Economic Bank.


The project would be supportive of coordinated border management component of ADB’s upcoming C-R-PATA. With respect to possible ADB support for Myanmar, a footnote in the ADB TA report for the C-R-PATA stated that “[t]he Government of Australia has indicated that TA implementation may support capacity building and technical advisory activities in all the six GMS countries subject to appropriate legal and other considerations.”58



months (ii) Risk Management, 3 person-months (iii) Single-Window/Single-Stop Inspection, 6 person-months (iv) Customs Laws and Regulations, 3 person-months (v) Human Resource Development, 3 person-months (vi) Customs Equipment Utilization, 3 person-months (vii) Training Design, and Implementation, 6 person-months

Counterpart Agency

Department of Border Trade the Ministry of Commerce (lead agency) in association with the Myanmar Customs Administration and other concerned agencies

56 Operational procedures may allow for moving certain operations to inland destinations, pre-arrival declaration using electronic data interchange, and increased use of post-clearance audits, AEO programs, pre-arrival clearance, and modern risk management, as provided for by the WCO SAFE Framework. UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 14, July 2008, p. 4. 57 See source in previous footnote, p. 3. 58 Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 5, footnote 6.


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Project Code Project Title Country M5 Technical Cooperation for Sustainable Customs Training Myanmar Project Background

The Myanmar Customs Administration has a staff of 2,387, a large portion of which are dedicated to preventative tasks and activities (i.e., control measures), which suggests an opportunity to retrain some managers and staff members in proactive trade facilitation measures to help increase Myanmar’s exports by reducing transaction costs and reducing the time to market. That said, the fundamentals of human resource management are in place.59

The facilities for customs training and development in Myanmar include a training center created in 1981 that delivers ten courses (i.e., basic customs officer, advanced customs officer, basic WTO valuation, advanced WTO valuation, ASEAN harmonized tariff nomenclature, post clearance audit, township customs officer, basic computer, basic English language). However, it would be productive to develop additional training courses, e.g., HS code classification, rules of origin, advance tariff and valuation rulings, customs technical English, risk management.






Enhanced customs human resources, which will ultimately improve customs performance.


Support was informally expressed in interviews with the JICA study team on 29-30 November 2010. Their current customs training school is very small and poorly equipped; they have no specific trainers.






Counterpart Agency


59 The HRM and personnel management process includes: (i) human resource planning, (ii) job and work design and analysis, (iii) staffing allocation, (iv) training and development; (v) performance appraisal and review; (vi) compensation and reward; (vii) employee protection and representation; and (viii) organizational improvement. The Myanmar Customs Administration’s HRM planning includes a needs forecasting method involving the analysis of external conditions (e.g., Government, customs activity, legislation, technology). Future human resource requirements and availability enable the Myanmar Customs administration to forecast human resource needs. HRM planning includes performance management and career management. The HRM job design includes the job content and organizational responsibilities. The HRM internal staffing process includes staffing transfer (rotation), promotion, and demotion.


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Project Code Project Title Country M6 Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries Myanmar

Project Background

At neither Tachileik(-Mae Sai) nor Myawaddy(-Mae Sai) is there interconnectivity between the border crossing agencies of Myanmar and the neighboring country, Thailand. The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border.


To establish interconnectivity between customs (and other border crossing agencies) of Cambodia and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection.




There may also need to be an agreement between the two sides (Myanmar-Thailand) on the type of information that can be exchanged between the customs (and other) agencies of the two countries.

Expected Impact(s)



Support informally expressed in JICA study team visit to Tachileik in December 2010.






Counterpart Agency

Department of Border Trade the Ministry of Commerce (lead agency) in association with the Myanmar Customs Administration and other concerned agencies


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Project Profiles - Thailand Project Code Project Title Country T1 Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training Thailand

Project Background

Economic operators (including both local and international businesses)60 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies. The Thai Customs Department started a small pilot AEO project about two years ago that was joined by two companies.


To explore a solution to further develop an incentive-based approach to compliance, including a diagnostic feasibility study and implementation plan, with associated training. The project will define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach developed by the World Customs Organization (WCO). This approach implies facilitation measures in exchange for verifiable compliance standards.61


(i) Advise on a diagnostic feasibility study, including definition of the AEO requirements (targeting the scheme), definition of the preferential treatment (e.g., scope, nature of the preferential treatment, quantification of the economic impact of the preferential treatment for compliant operators versus fraudulent operators), risk assessment (e.g., possibility and risk for customs officers to interfere with the system, and measures/incentives to ensure that the risks are avoided), certification (definition of standards, mechanisms for penalties and removal of certification), and implementation of a pilot project62;


Specific components will be determined after an assessment of the ongoing, small pilot project.

Expected Impact(s)



AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010). Staff of the Thai Customs Department specially expressed interest in Japan’s AEO experience in a meeting with the JICA study team on 8 December 2010.

60 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”. 61 For reference and “inspiration”, see (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 62 See (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 63 Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010, p. 7.


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AEO implementation in Thailand has not been addressed by other development partners (although APEC, of which Thailand as well as Viet Nam are members) has established a working group on the subject.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/AEO System Specialist (Team Leader), 24 person-

months (ii) Risk Management, 3 person-months (iii) Company Rating, 3 person-months (iv) Training Design, and Implementation, 6 person-months

Counterpart Agency

Thai Customs Department (Royal Thai Customs)

Project Code Project Title Country T2 Study and Technical Cooperation for Introducing Coordinated

Border Management at Aranyaprathet, Mukdahan, and Mae Sai (and possibly Nong Khai)

Thailand

Project Background

Moderately long border clearance times are an issue for the private sector.64 This problem may be addressed by improving coordination of border agencies concerned with the movement of goods, in particular the physical release of goods at border crossings or inland clearing facilities The MJ-CI Action Plan on Trade Facilitation/Logistics calls for providing technical and financial support to any two Mekong Region countries in order to facilitate cross-border trade and implementation of the CBTA when required. Also, an upcoming ADB-C-R-PATA to provide Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion includes an output on coordinated border management.




In coordination with the ADB C-R-PATA, the project will support efforts at Aranyaprathet, Mukdahan, and Mae Sai (as well as at Nong Khai if it is more actively included in the CBTA transport and customs facilitation regime) to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for the border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements.65

64 Consider, for example, that a time release study at Aranyaprathet conducted by ADB in 2005 surveyed exports from Thailand to Cambodia and found processing time of 12 minutes and elapsed time of 150 minutes at Aranyaprathet. Asian Development Bank, Time Release “Before” Study for the Poipet-Aranyaprathet Border Crossing Points, 2005, paragraphs 8-9. 65 Operational procedures may allow for moving certain operations to inland destinations, pre-arrival declaration using electronic data interchange, and increased use of post-clearance audits, AEO programs, pre-arrival clearance, and modern risk management, as provided for by the WCO SAFE Framework. UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 14, July 2008, p. 4.


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Expected Impact(s)



The Royal Thai Government sees benefits of more efficient border management in the region, but measures to make necessary amendments to existing laws to achieve more efficient border management have been difficult to enact due to lengthy legislative procedures.


The project is supportive of coordinated border management component of ADB’s upcoming C-R-PATA




Counterpart Agency

Thai Customs Department (Royal Thai Customs) in with other border agencies

Project Code Project Title Country T3 Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries Thailand

Project Background

At present, there is no interconnectivity with the border crossing agencies of the neighboring country at Aranyaprathet(-Poipet), Mukdahan(-Savannakhet/Kaysone Phomvihane), Nong Khai )-Thanaleng), Mae Sai(-Myanmar), or Mae Sot(-Myanmar). The lack of such interconnectivity, for example, prevents the advance exchange of customs clearance information and constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border.


To establish interconnectivity between customs (and other border crossing agencies) of Thailand and the neighboring country, e.g., to facilitate customs clearance with the advance exchange of information, and to fulfill a precondition for implementation of single-stop inspection.




There may also need to be an agreement between the two sides (Thailand- 66 See source in previous footnote, p. 3.


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Cambodia, Thailand-Myanmar, and Thailand-Myanmar on the type of information that can be exchanged between the customs (and other) agencies of the two countries. For example, it is understood that at present while Lao PDR Customs can provide the Lao PDR customs form for advance information sharing, the Thailand cannot provide this information to Lao PDR. Due to a Thai customs law provision on price confidentiality, Thai Customs can provide Lao PDR Customs only with the customs broker form, which does not specify sufficiently detailed prices of goods.

Expected Impact(s)



Support was informally expressed in JICA study team visits to Aranyaprathet, Nong Khai, Mukdahan, and Mae Sai in November-December 2010






Counterpart Agency

Thai Customs Department (Royal Thai Customs) possibly in association with other border crossing agencies

Project Code Project Title Country T4 Technical Cooperation for Further Development of Customs-

Private Sector Cooperation Thailand

Project Background

Long-standing customs-private sector cooperation in Thailand includes: (i) a joint committee between customs and the private sector, which serves as a formal consultative mechanism with freight forwarders, shipping agents, customs brokers, and chambers of commerce, and which discusses changes in customs services, monitoring, and evaluation of customs performance, and provides advice on the streamlining of customs services; (ii) under a Transparency Partnership Project, the signing of an MOU between the Thai Customs Department and more than 100 companies to cooperate in the fight against corruption; (iii) the establishment of a customs hotline to handle complaints on corruption and misconduct and solve problems encountered by the business community during cargo clearance; (iv) establishment of a licensed customs broker scheme; (v) establishment of a gold card scheme, by which an importer with a good record with customs for at least the past three years and possesses other qualifications is eligible; (vi) establishment of a customs clinic, to address all customs-related problems; (vii) establishment of a local private sector cooperation center; and (viii) implementation of a corporate social responsibility (CSR) project.67


Further (i) develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control

67 Thai Customs Department, Snapshot of Thai Customs, June 2010, pp. 40-41.


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methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.68






As noted, a number of customs-business partnerships have been initiated in Thailand to date.


Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Board of Trade of Thailand is likely to serve as an issuing and guaranteeing organization; the establishment of the GMS freight transport association).



Counterpart Agency


Project Code Project Title Country T5 Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes Thailand

Project Background

A number of problems relating to customs clearance were identified during interviews with the private sector (e.g., customs classification is not consistent among customs officials, rulings on HS classifications sometimes take too long, binding tariff rulings are not given and the staff reward system results too frequently in post-clearance audits and high additional duty payments in cases in which the declaration is judged to have been incorrect, printed documents and attendance at the physical inspection are required at the borders).




(i) Prepare guidelines for simplified/standardized procedures (manual), including document simplification, advance rulings (tariff, valuation, and rules of origin70), and implementation of the transaction method required by the WTO Agreement on Customs Valuation; and


More transparent and predictable customs procedures, and reduced border clearance times and costs (relative to the baselines annual time release studies [see R5]); and therefore, more competitive exports

68 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 31. 69 See previous footnote. 70 E.g., covering methods for determining substantial transformation, definition of preferential rules of origin, duty drawback, definition of rules of origin in existing agreements.


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Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.


Progress in simplifying/standardizing customs procedures/processes will complement the aims of ADB’s upcoming C-R-PATA. While some areas are being addressed, other areas could be assisted in the proposed project (e.g., valuation).



Counterpart Agency


Project Code Project Title Country T6 Technical Cooperation for Sustainable Customs Training Thailand Project Background

The Thai Customs Department had a staff of 4,347 government officials as of June 2010, with 887 deployed at the department’s 45 customs houses. The department’s organizational structure reflects proactive trade facilitation objectives, and accordingly it has allocated staff to trade facilitation functions and responsibilities (e.g., post clearance audit).

The Thai Customs Department’s training center with a staff of 30 arranges 16 different courses including basic WTO valuation, tariff classification, ASEAN customs value, rules of origin, GMS CBTA, and GMS customs transit system training courses. The customs training center also conducts training needs assessment for officers at border crossing points. Courses are then delivered by experienced officers who are not all trained customs trainers. Support to provide the training center staff with the skills to prepare and deliver new training syllabuses such as advanced valuation, advanced HS Code Classification, advanced rules of origin, AEO system, and other advanced training courses would be productive and was requested by the Thai Customs Department. A new customs training library with the equipment to provide officers in the provinces and at the land, sea, and air border crossing point distance access to the library using the internet was also requested. There is also an opportunity to prepare and deliver a new customs technical English language course because both managers and staff must be able to read manifests, invoices, and packing lists, which are often presented to them in the English language. Another training requirement involves training trainers in the provisions of the Revised Kyoto Convention and its Annexes so that customs managers and staffs.71

It may also be productive to carry out a train-the-trainer’s course in the training center. The Thai Customs Department may consider how they to keep experienced trainers in the training center for a certain period of time before eventually allowing another group of trained trainers to take their places. The solution, which could be

71 Training in the preparation and management of a binding tariff rule might also be another useful training objective with benefits for customs, traders, and foreign direct investors.


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facilitated with development partner assistance, may involve having a sustainable train-the-trainers program complete with syllabus, trainers’ handbook, and training materials, and development.

A challenge facing the Thai Customs Training Center is that its annual budget of only THB 3 million is insufficient and it is difficult to obtain additional funds when the government has recently reduced the Customs Department’s budget by 60% from its request. Therefore, after designing new training courses and carrying out a sustainable train-the-trainers program, the training center may not be in a financial position to deliver extra or new training courses, which may provide an opportunity for development partners to provide training courses within the Thai Customs Training Center training program.








The Thai Customs Department has a commitment to modernizing human resources and support for this project was informally expressed in interview with the JICA study team on 8 December 2010. However, as noted, the allocation of resources for customs human resources development to date has been insufficient to meet requirements (e.g., with an annual budgetary allocation of only THB 3 million for the customs academy). For sustainability in the medium to longer term, it will be important for the Thai Customs Department to find a way to allocate the budget for such necessary training, as well as to keep experienced trainers in the training center for a period of time.






Counterpart Agency


Project Code Project Title Country T7 Feasibility Study of Relocating Freight Traffic from the

Aranyaprathet-(Poipet) Border Crossing Point Thailand

Project Background

In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic,72 most likely 12 km south of the current location, at Nong Auen (Thailand)-Stoung Bot (Cambodia). The proposal was originally made by Cambodia. A potential obstacle is that the streambed border is not well defined. The University of the Thai Chamber of

72 The new BCP may focus on containerized cargo traffic. The eventual operating practices have not yet been defined.


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Commerce is undertaking a preliminary study of the border crossing point relocation.73 If the border demarcation issue can be resolved, development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads.


To prepare for the development and operation of a state-of-the-art border facility based on international good practice at the newly relocated border crossing point at Nong Auen (Thailand)-Stoung Bot (Cambodia), to increase border management efficiency and reduce clearance times, and to serve as a model for other border crossing points in the Mekong Region.




Expected Impact(s)



Support for the relocation of the border crossing point for freight traffic has received support from Thai governmental authorities and a preliminary study by the University of the Thai Chamber of Commerce, although there has been no specific request yet for Japanese or other foreign assistance.





Counterpart Agency

Not yet officially designated but possibly the Ministry of Transport

73 The Thai Ministry of Commerce wishes to develop the new BCP with a special economic zone with an inland checkpoint 30 km away together with a logistics center and container terminal.


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Project Profiles – Viet Nam

Project Code Project Title Country V1 Study and Technical Cooperation for

Simplification/Standardization of Customs Procedures/Processes Viet Nam

Project Background

A number of problems relating to customs clearance were identified during interviews with the private sector (e.g., inconsistent customs classification among customs officials, customs clearance information in an electronic format not well utilized for establishing a consistent classification system, use of e-Customs only in the application process but not in the approval process, requirement for the original customs documents with appropriate signatures and seals still required at the border).

A rigorous assessment by a time release study conducted by ADB at Moc Bai(-Bavet)) in 2005 surveyed exports from Cambodia to Viet Nam and found that total processing time averaged 101 minutes (total of Viet Nam export processing and Cambodia import processing), while total elapsed time averaged 143 minutes. The same study found that for exports from Viet Nam to Cambodia, the total processing time averaged 120 minutes (the total of Cambodia export processing and Viet Nam import processing), while total elapsed time averaged 181 minutes. A key finding was that while the entry and exit procedures on the Viet Nam side were already minimal, about 3-4 hours was required for the loading and unloading of cargo in the no-man’s land between the Cambodian and Viet Nam and Cambodia borders (and this was not included in the “total elapsed time”).74

The General Department of Viet Nam Customs is currently implementing “Project 30” to redcue [customs] administrative procedures by 30%.




(i) Prepare guidelines for simplified/standardized procedures (manual), including document simplification and advance rulings (tariff, valuation, and rules of origin75); and


More transparent and predictable customs procedures, and reduced border clearance times and costs (relative to the baselines in annual time release studies [see R5]); and therefore, more competitive exports.


Training in various customs techniques (e.g., tariff classification, post clearance audit, valuation) was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).


Progress in simplifying/standardizing customs procedures/ processes will greatly complement the aims of both ADB’s upcoming C-R-PATA and the World Bank’s ongoing Customs Modernization Project, although the latter project itself has not met its targets.


74 Asian Development Bank, Time Release “Before” Study for the Bavet-Moc Bai Crossing Points, 2005, paragraphs 7-8. 75 E.g., covering methods for determining substantial transformation, definition of preferential rules of origin, duty drawback, definition of rules of origin in existing agreements.


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Counterpart Agency

General Department of Vietnam Customs

Project Code Project Title Country V2 Study and/or Technical Cooperation for Risk Management Project Viet Nam Project Background

GDVC is implementing risk management. There are three levels of customs inspection: (i) a green stream exempted from detailed inspection of the dossier and physical inspection of the goods; (ii) a yellow stream in which detailed inspection of the dossier is made, but physical inspection of the goods is exempted; and (iii) a red stream in which detailed inspection of both the dossier and physical inspection of the goods is undertaken (5%, 10%, up to 100%). The classification into green, yellow, or red streams is implemented according to: (i) the Customs Law, the Law on Import and Export tariffs, and other related regulations; (ii) results of the risk management system, and (iii) other information available during the customs clearance process. The Customs Director may decide to change inspection levels; customs officers at steps 1, 2, or 3 may decide the clearance of consignments.76

GDCV has begun to carry out a low-risk customs due diligence program in which it is classifying businesses according to the risks they present. Post-entry audits are necessarily a feature of risk management programs although the trading community has complained that GDCV now aggressively conducts such audits “aggressively”.77

Since 2008, JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient so as to reduce the required time, as well as to improve the skills and systems for risk management and monitoring at the border crossing points in the region. Although the base of the project is in Thailand, GDVC as well as the customs administrations of Cambodia and Thailand has participated in the project, and training programs have been conducted covering a number of areas.

GDZC may welcome assistance in refining their risk management database in association with the WCO Customs Enforcement Network (CEN).



76 Site visit to Lao Bao undertaken on 3 December 2010, including an interview with Mr. Nguyen Ngoc Hai, Officer, Quangtri Provincial Customs, and a PowerPoint presentation by Quangtri Provincial Customs. Previously, the procedure involved: (i) no inspection if a company had no violation within 1-2 years and the commodity was on a “no inspection” list; (ii) random inspection up to 10%; and (iii) full inspection if the company had many violations or there was evidence of a violation regarding the consignment. 77 See, e.g., KPMG International, Adding Value to the Asia-Pacific Trade & Customs Environment, 2009, p. 41 [downloaded from http://www.kpmg.com/NZ/Lists/Copied%20Documents/Adding-Value-to-your-trade.pdf]. 78 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45.


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Training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010).


Progress in risk management will greatly complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system), as well as World Bank’s Customs Modernization Project, which included an intervention by exception component although the latter project itself has not met its targets.



Counterpart Agency


Project Code Project Title Country V3 Technical Cooperation for the Development of Authorized

Economic Operator System and Associated Training Viet Nam

Project Background

Lengthy border clearance is a problem for the private sector. For example, the results of a time release study conducted at Moc Bai were reported in the project background section of the project profile for V1. Economic operators (including both local and international businesses)80 face a number of challenges regarding transport and trade facilitation. One approach to addressing this issue is through authorized economic operator (AEO) programs, based on a concept developed by the WCO. These programs grant positive discrimination or incentives (e.g., streamlined procedures, fast-track lanes at borders, “white lists”) for economic operators that comply with customs regulations such as large companies.

79 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 12, November 2008, p. 2. 80 Extracting from the WCO definition of an AEO, an operator is “a party [local or international] involved in the international movement of goods in whatever function”.


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The private sector consultative group (PSCG) of the World Customs Organization recently launched a trilateral cooperation initiative to provide capacity building support to GDVC. The first area of cooperation focused on the development and implementation of a trusted-trader program, to be piloted in 2011, with the aim of promoting grater trade facilitation and voluntary compliance, as well as closer cooperation between GDVC and the local private sector stakeholders. A first work session, held in December 2010, focused on gathering input and recommendations from all concerned parties. The trusted-trader program, which is equivalent to an AEO program, is to authorize compliant traders to benefit from expedited clearance, reduced inspection rates, and improved services; in exchange, traders will be required to maintain a high level of compliance, use E-Customs, and maintain transparent accounting practices. Initially, the program is expected to be open to several manufacturing and trading enterprises.81


To complement the ongoing WCO-assisted trusted-trader program, to define a mechanism to provide positive discrimination to compliant operators (traders and related services), using the authorized economic operator (AEO) approach. This approach implies facilitation measures in exchange for verifiable compliance standards.82


Building upon the ongoing trusted-trader program, assist GDVC in (i) revising definition and AEO system procedures; (ii) designing and implementing training programs for the AEO system; and (iii) exploring possible mutual recognition arrangements.

Expected Impact(s)



As noted, GDVC has commenced implementation of a trusted-trader program. On the regional level, AEO-related training was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010.


As noted, WCO is assisting implementation of a trusted-trader program.


Scheme: Technical Cooperation Project Expert(s)/Consultant(s): (i) Customs Administration/AEO System Specialist (Team Leader), 24 person-

months (ii) Risk Management, 3 person-months (iii) Company Rating, 3 person-months (iv) Training Design, and Implementation, 6 person-months

Counterpart Agency


81 Participants at roundtable meetings included the International Federation of Customs Brokers Association (PSCG Chair), IBM, Hutchison Port Holdings, Limited Brands, Nissan, and Samsung Electronics. http://www.wcoomd.org/home_cboverviewboxes_cbnews1_cbarwcopscgvietnamcustoms.htm. 82 For reference and “inspiration”, see (i) USAID, Customs Modernization Handbook: Authorized Economic Operator Programs, March 2010; and (ii) World Bank, “West Africa Authorized Economic Operator Mechanism, Terms of Reference”, 2010. 83 Takashi Matsumoto (Director for International Affairs, Japan Customs and Tariff Bureau), Recent Development[s] in Japan on Trade and Customs Facilitation Matters, PowerPoint presentation to the 12th Meeting of the ASEAN Coordinating Committee on Customs, November 2010, p. 7.


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Project Code Project Title Country V4 Study and Technical Cooperation for Introducing Coordinated

Border Management at Moc Bai and/or Lao Bao Viet Nam

Project Background

Lengthy border clearance is a problem for the private sector. For example, the results of a time release study conducted at Moc Bai were reported in the project background section of the project profile for V1.

Following Decree No 32/2005/ND-CP of 14 March 2005, agencies present at the border include Customs, Immigration, and Quarantine (Health, Plant, and Animal Inspection), and the Police. There is no lead agency.





In coordination with the ADB C-R-PATA, the project will support efforts at Moc Bai and/or Lao Bao to build capacity and modernize border management, e.g., sensible and targeted use of existing equipment, mutual recognition of documents and findings, paperless single window processing for freight, and integration of risk management processes. New operational procedures for all border agencies will be designed, for simplification and alignment to international standards including risk management and joint data elements.84

Expected Impact(s)



There is some evidence of governmental commitment with early ratification of CBTA Protocol 4 covering single-window (and single-stop) inspection.


Strongly supportive of coordinated border management component of ADB’s upcoming C-R-PATA.

84 Operational procedures may allow for moving certain operations to inland destinations, pre-arrival declaration using electronic data interchange, and increased use of post-clearance audits, AEO programs, pre-arrival clearance, and modern risk management, as provided for by the WCO SAFE Framework. UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 14, July 2008, p. 4. 85 See source in previous footnote, p. 3.


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Counterpart Agency

General Department of Vietnam Customs in association with Customs, Immigration, and Quarantine (Health, Plant, and Animal Inspection), and the Police

Project Code Project Title Country V5 Study and Technical Cooperation to Improve Interconnectivity

with Border Crossing Agencies of Neighboring Countries Viet Nam

Project Background

At neither Moc Bai (-Bavet) nor Lao Bao(-Dansavanh) is there interconnectivity between the border crossing agencies of Viet Nam and the neighboring country, Cambodia and Lao PDR, respectively. The lack of such interconnectivity, for example, constrains the operation of single-stop inspection jointly by the two country authorities because of the inability to communicate with each other and access databases on the other side of the border.


To establish interconnectivity between customs (and other border crossing agencies) of Cambodia and the neighboring country, e.g., to fulfill a precondition for implementation of single-stop inspection




There may also need to be an agreement between the two sides (Viet Nam-Cambodia, Viet Nam-Lao PDR) on the type of information that can be exchanged between the customs (and other) agencies of the two countries.

Expected Impact(s)



Support informally expressed in JICA study team visits to Moc Bai and Lao Bao in November and December 2010.






Counterpart Agency

General Department of Vietnam Customs possibly in association with Immigration, Quarantine (including the ministries of Health and Agriculture), and the Police


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Project Code Project Title Country V6 Technical Cooperation for Further Development of Customs-

Private Sector Cooperation Viet Nam

Project Background

GDVC has been working actively with the private sector. For example, as set out in the profile of project V3, GDVC is seeking to implement a trusted-trader program, to be piloted in 2011, with the aim of promoting grater trade facilitation and voluntary compliance, as well as closer cooperation between GDVC and the local private sector stakeholders.


(i) Further develop trade partnerships to ensure that the organization and working methods of customs administrations take into account the needs of legitimate trade; (ii) formulate strategies, procedures, and methods for cooperation between and among customs, other government agencies, and trade, to facilitate trade flows and avoid duplication of work; and (iii) establish of a service-oriented approach towards trade by way of transparent and predicable procedures, regulations, and control methods, fully informing the trading community of its rights and obligations, while ensuring openness, mutual trust, and respect between the customs administration and the trading community.86






As noted, Sub-Decree No. 906 on Establishment and Functioning of a Customs-Private Sector Partnership Mechanism was issued on 9 October 2009.


Further developments in establishing public-private sector partnerships will complement ADB’s upcoming C-R-PATA (e.g., development of customs transit system, in which the Cambodian Freight Forwarders’ Association, CAMFFA, is likely to serve as an issuing and guaranteeing organization; the establishment of the GMS freight transport association).



Counterpart Agency


86 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 31. 87 See previous footnote.


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Project Code Project Title Country V7 Technical Cooperation for Sustainable Customs Training Viet Nam Project Background

GDVC has a total of 9,000 managers and staff, the largest personnel numbers of any customs department in the five-country Mekong Region. A total of 700 are located in Hanoi staffing 11 departments. Others are at Ho Chi Minh City (1,800) and Haiphong (700), among other locations.

A 2008 assessment by the Hanoi-based Institute of World Economics and Politics found that Viet Nam there was a lack of human resources in customs (and other border control fields). It noted the lack of an efficient, long-term recruitment mechanism. It found that the current customs (as well as quarantine and immigration staff lack advanced professional knowledge and skills) to exploit modern technology. It also identified that these staff members are often weak in foreign languages (i.e., English and the languages of the neighboring countries) and computer skills. Senior staff members with professional experience are usually unable to speak foreign languages and use specialized computerization systems, while junior staff, which have these skills, often lack practical experience and professional skills. The Institute of World Economic and Politics assessment concluded that an overall strategy of staff training and re–training is needed.88

The World Bank Customs Modernization Project has included human resource management and development subcomponents, to: (i) develop a human resources strategic plan, (ii) provide a computerized human resource system and database, (iii) conduct a detailed staffing requirements assessment, (iv) develop new personnel practices and policies (e.g., recruitment selection, mobility, remuneration, performance management, separation/redundancy), and (v) establish of a twinning arrangement with an internationally recognized provider of relevant vocational education designed to support the long-term development of the Ho Chi Minh City-based Customs College. However, the project has not been meeting its targets.

The GDVC has requested assistance for its Customs Training Center to assist its managers and staff in to designing a training master plan, formulating training policies, and improving its train-the-trainer program (including train-the-trainer study tours perhaps to Japan and Malaysia and other national customs training centers or academies), and preparing an induction training course for new customs officer recruits and for existing customs managers and staff tasked to carry out reform and modernization projects. Upgrading of the Customs Training Center facility was also requested.




Based on informal indications from GDVC, components include: (i) designing a training master plan, (ii) formulating training policies, (iii) improving its train-the-trainer program (including train-the-trainer study tours perhaps to Japan and Malaysia and other national customs training centers or academies), (iv) preparing an induction training course for new customs officer recruits and for existing customs managers and staff tasked to carry out reform and modernization projects, and (v) upgrading of the Customs Training Center facility.

Expected Impact(s)


88 Dr. Bui Quang Tuan, Institute of World Economics and Politics, Vietnamese Academy of Social Sciences, Hanoi, “Trade Facilitation Policy Analysis in the Greater Mekong Subregion: A Case from Viet Nam”, at the Regional Policy Dialogue on Trade Facilitation Policy Gap Analysis on Cross Border Transport Agreement (CBTA) in the Greater Mekong Sub-Region, GMS Regional Policy Dialogue, Mekong Institute, April 2008, p. 63.


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Support informally expressed in interview with the JICA study team on 16 November 2010 and in an answer to a questionnaire received on 24 December 2010.


No development partner in the country is comprehensively targeting development of priority curricula.

JICA has provided training support to the GDVC for about a decade. The training program from August 2004 to July 2007 (Training of Trainers Project for Customs Administration Modernization) focused on training trainers and developing training syllabuses and new training materials. For example, ten trainers were trained to develop customs valuation, HS code classification, and post clearance audit training skills. A three-year Project on Strengthening of Training Systems for Skills Development of Customs Administration Officials commenced in September 2009 focusing on border crossing point officers and assisting the development of customs training centers by preparing and delivering training plans and syllabuses. In addition, JICA has a risk management program based in Thailand but also working in Viet Nam (as well as Cambodia). The outputs have been delivered by two long-term experts from the Japan Customs and Tariff Bureau whose assignments end in March 2011.



Origin, Advance Ruling, Customs IT, Customs Counterpart Agency



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Project Profiles - Regional

Project Code Project Title Country R1 Master Plan and Feasibility Studies for Development of Efficient

Border Crossing Pairs on a Pilot Basis Regional

Project Background

A detailed assessment of border crossings in the Mekong Region was undertaken for the current study, including situational context, traffic, delay time, issues to be addressed, and development partner assistance. Although the target year for full implementation of the CBTA (2010) has now passed, this review confirmed that multi-step, sequential, redundant, and generally uncoordinated processing of goods, vehicles, and people by regulatory agencies remains the norm at border checkpoints in the Mekong Region. Generally, only limited risk management techniques are employed at border crossings, although Thailand is an exception to some extent. Official operating hours range from 12-16 hours per day, but are effectively and perhaps unofficially shortened by lunch breaks, and opposition to extended operating hours is strong among “frontline” officials. Also, at most locations the use of information and communication technology (ICT) is very limited, with the borders generally operating stand-alone systems unconnected to the national system, although Thailand and to some extent Viet Nam are exceptions.89 That said, with a more pragmatic approach under the upcoming ADB C-R-PATA and by other development partners, measurable results in reducing delays at borders can be expected. Japan has considerable experience in addressing such issues with its well-regarded program to assist the establishment of 14 one-stop border posts in Sub-Saharan Africa, which has included comprehensive assistance for improving border management efficiency within and between countries at critical border crossing points on the continent.


To improve border management and reduce clearance times and costs at selected border crossing points


(i) Assist preparation of master plan and implementation of selected (pre)feasibility studies, including design guidelines, layouts, equipment, building and maintenance standards; and

(ii) Design/implement training, as models for the entire Mekong Region Expected Impact(s)

To help achieve either: (i) the modest target of reducing “average transit time at border crossings” by

10% between 2010 and 2015 set by ADB90; or (ii) the more ambitious objective called for by ASEAN of (a) simplifying

customs procedures and practices of all member states with the target of reducing processing costs by 20% by 2013 and 50% by 2015; and (b) enhancing border management capabilities, including synchronizing procedures, formalities, and practices, and promoting joint border management (“One Single Inspection and Processing Point”), both by 2013.

It may be that a more modest target is preferable. As stated by Customs Specialist Luc De Wulf at the Meeting of the Transport, Customs, and Immigration Subcommittees of the CBTA in Vientiane in June 2010, “pragmatism should prevail” since “the perfect is the enemy of the good”.


Government (and regional) support has been expressed through their years of “investment” in the CBTA and indirectly through their approval of ADB’s upcoming C-R-PATA.

89 Also see Asian Development Bank, Strategy and Work Program for Transport and Trade Facilitation in the Greater Mekong Subregion (Draft), June 2009. 90 Asian Development Bank, Support for Implementing the Action Plan for Transport and Trade Facilitation in the Greater Mekong Subregion, Technical Assistance Report, Project No. 44174-01, November 2010, p. 7, Appendix 1.


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The project is strongly supportive of the coordinated border management component of ADB’s upcoming C-R-PATA.


Scheme: Study Expert(s)/Consultant(s): (i) Customs Administration/Cross-Border Transport (Team Leader), 12 person-

months (ii) Single-Window/Single-Stop Inspection, 6 person-months (iii) Risk Management, 3 person-months (iv) Customs Laws and Regulations, 3 person-months (v) Human Resource Development, 3 person-months (vi) Customs Equipment Utilization, 3 person-months (vii) Training Design and Implementation, 6 person-months

Counterpart Agency

Lead agencies for the CBTA National Transport Facilitation Committees in the five Mekong Region countries in association with the national customs administrations in each country

Project Code Project Title Country R2 Regional Assistance for Risk Management Regional Project Background

Since 2008, JICA has dispatched three long-term experts in its Project on Risk Management for Customs in Mekong Region to make border customs clearance procedures more efficient so as to reduce the required time, as well as to improve the skills and systems for risk management and monitoring at the border crossing points in the region. Although the base of the project is in Thailand, the customs administrations of Cambodia, Thailand, and Viet Nam have participated in the project, and training programs have been conducted covering a number of areas.






Improved detection and compliance, as well as improved efficiency and reduced delays and cargo damage. Specific benefits of risk management include: (i) better human resource allocation since customs staff can concentrate efforts on fewer consignments, and staff can be deployed more efficiently; (ii) increased revenue, because despite fewer physical inspections, the improved efficiency and professionalism in customs control will lead to an increase in duty collection; (iii) improved compliance with laws and regulations, since improved efficiency in customs together with the traders’ incentive to achieve faster release through a green channel will bring about increased compliance on the part of the traders; (iv) improved collaboration between customs and the trading community since increased interaction between customs and traders is part of the process to assess the risks related to goods transported; (v) reduced release time, since on average only 10-20% of the goods are examined under efficient, risk-based clearance; (vi)

91 See European Commission, Customs Blueprints: Pathways to Modern Customs, 2007, p. 45.


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and lower transaction costs, since risk management techniques will release 80-90% of goods within a few hours.92


On the regional level, training in risk management was included on ASEAN’s tentative priority list for technical assistance from Japan presented at the 12th ASEAN Coordinating Committee on Customs (CCC) meeting (Bangkok, 22-25 November 2010), although these requests may have been intended more for less advanced customs administrations in ASEAN.


Progress in risk management will complement ADB’s upcoming C-R-PATA (e.g., for implementation of a customs transit system) and the initiatives of other development partners (e.g., the World Bank). The project is a more advanced version of the regional “intervention by exception” program identified by ADB’s Strategic Framework for Action on Trade Facilitation and Investment (SFA-TFI) initiative.93



Counterpart Agency

Potentially all customs administrations in the Mekong Region

Project Code Project Title Country R3 Introduction of a Region-wide Radio Frequency Identification

(RFID)/Global Position System (GPS) Tracking System for Corridor Management94

Regional

Project Background

The development of the GMS transport corridors is a key element in improving the economic competiveness of the Mekong Region. An effective working corridor requires the coordination of the activities of cargo owners, shipping lines, road transport, ports, and customs authorities. The practical realization of such coordination is dependent on the availability of accurate and reliable information reflecting the physical movement of cargo, and also relies on the integration of the systems operated by these stakeholders.

Delays at critical points along the supply chain have been identified as a key factor contributing to the lack of competitiveness of GMS corridors. Factors contributing to these delays include inefficient customs and border control processes, inefficient transfer of cargo between different modes of transport, and inefficient handling of cargo within ports. While most logistics service providers involved in the physical movement of cargo run relatively efficient operations when viewed in isolation, the factors mentioned above result in a low effective speed of movement of freight, which results in a high overall cost of doing business. It is therefore essential for the stakeholders along the supply chain to have a mechanism for monitoring the physical movement of cargo. In response, major freight forwarders have utilized electronic tags based on RFID technology for cargo tracking, and there have already been some attempts to examine the effectiveness and issues arising from the use of RFID technology for customs clearance including an experimental study conducted by the Japan External Trade Organization (JETRO). This study found that although introduction of RFID technology would contribute to reduced

92 UNCTAD Trust Fund for Trade Facilitation Negotiations Technical Note No. 12, November 2008, p. 2. 93 See Asian Development Bank, SFA-TFI Action Plan Technical Report on Customs, TA 6328-REG, August 2007, p. 16. 94 The project was modeled on: idCommerce Technologies (Pty.) Ltd., AdExcel CC, Tenacent (Pty.) Ltd., and Transport Logistics Consultants, Proposal to JICA for the Implementation of a Trade Corridor Cargo Tracking System for Corridor Management around the Port of Walvis Bay, November 2009.


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clearance time some issues should be addressed to maximize its effectiveness, including harmonization of RFID standards in the region, installation of e-Customs, infrastructure development at border checkpoints, simplification and standardization of procedures, and capacity building.

Adding to the overall challenge is the lack of efficient systems to enforce governance onto the management processes of the various authorities involved in controlling the movement of freight from source to destination. In at least some cases, underdeveloped human resources combined with corrupt practices result in delays in customs control, leaks in revenue collection, and inefficient protection of road infrastructure.95


(i) Demonstrate a set of cargo handling and law enforcement processes applicable to customs authorities, ports authorities, and road agencies that are simple to implement, that combine a high level of security with the fast processing of freight, and that are sufficiently affordable to enforce onto all types of cargo;

(ii) For customs operations, demonstrate the implementation of electronic declaration and acquittal processes that can for example be integrated into fast-track lane processes, and which would include the application of a customs transit control system; and

(iii) Demonstrate the application of cargo tracking to improve the efficiency of the operations of cargo owners and shipping lines by providing such stakeholders with end-to-end visibility regarding the current location and status of cargo, including processes handled by the respective authorities.


(i) Assist in the design and implementation of pilot project; (ii) Evaluate the performance of pilot project; and (iii) Prepare recommendation for a region-wide implementation

Key elements in (i) above will include (a) identification of the problem areas that can practically be improved through an electronic cargo identification and tracking system, (b) the definition of an operational management concept that can support all important processes related to the management of the corridor, and that will optimally harness currently available technology to address the identified problem areas; (c) evaluation of the most suitable technology alternatives (e.g., satellite-based vehicle tracking combined with active RFID electronic seals, passive RFID) on which such a cargo tracking system should be based, based on functionality, ease of use, practicality and cost, and the identification of the combination of technologies that will most effectively support the deployment of the system.

Expected Impact(s)

Benefits will include: (i) a reduction in cross-border delay times for consignments moving between countries or leaving port areas; and (ii) improvements in the efficiency and security of freight handling processes.


There appears to be some level of governmental interest although the concept is relatively new.


No other development partner is pursuing this technology in the Mekong Region, and there are complementarities with other initiatives, e.g., the upcoming C-R-PATA to be implemented by ADB.


Scheme: Study Expert(s)/Consultant(s): (i) RFIS/GPS Tracking Specialist (Team Leader), 12 person-months (ii) Customs IT Specialist, 6 person-months (iii) Evaluation Specialist, 3 person-months

95 The National Electronics and Computer Technology Center (NECTEC) of has a five-year RFID roadmap to promote the local RFID industry and to serve potential business sectors such as transport.


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Counterpart Agency

Potentially all customs administrations in the Mekong Region as the lead agencies from the public sector since they will determine the extent to which the proposed concepts will be incorporated into future customs systems and procedures96

Project Code Project Title Country R4 Support of Upcoming C-R-PATA by Providing CBTA-Related

Training at the Central and Border Levels Cooperation Regional

Project Background

A joint ADB-AusAID mission during April and May 2007 recommended a sustainable training management model to provide CBTA human resource skills, including: (i) a regional training and development coordinator, (ii) a local CBTA training and Development Coordinator, (iii) CBTA border agency training officers, (iv) international training and development experts, and (v) the development of vocational education and training programs in border management97 within the GMS. The mission estimated a requirement for training for 799 trainees from Customs (289), Immigration (327), Sanitary and Phytosanitary/Quarantine (97), and other border crossing point control agencies (86) over 21 months with about 90 training sessions delivered at 10 locations either at border crossing points or at a customs training center. While an upcoming ADB cluster regional—policy and advisory technical assistance (C-R-PATA) includes an output for training workshops/meetings, the budget available is insufficient to meet the requirement of AUD 12.1 million estimated in 2007.98


Develop sustainable capacity in the customs and other services at the border, in order to ultimately improve implementation of the CBTA, streamline procedures, and reduce clearance costs.


Assist formulation and implementation of a clear plan to develop the organizational and staff capacity to implement the CBTA and related border management practices (e.g., risk management, use of inspection technology and information technology, as well as even basic customs functions) at various levels.

In carrying out the project, it will be important to recognize that: (i) CBTA training needs to be coordinated with, and complementary to, other regional and national initiatives; (ii) training and development programs should be aimed at development of the overall capacity of the concerned administrations; (iii) training and capacity development need to be directed towards all levels of government involved in the CBTA; (iv) on-site training courses need to be based on officially approved operational manuals and procedures based on the CBTA and its annexes; (v) training needs to be tailored to member countries’ needs based on their level of development and the capacity of the administrations; and (vi) to the extent possible, officials from member countries should take part in development and delivery of training courses in the local language.99

Expected Impact(s)

Development of customs and other border agency human resources and ultimately reduce clearance time and costs


Government/regional support has been expressed through their years of “investment” in the CBTA and indirectly through their approval of ADB’s upcoming C-R-PATA.

96 The benefits that will be passed on to cargo owners and transporters based on more efficient customs processes will determine the level of enthusiasm from private sector participants to become involved and bear the cost of compliance. 97 The Organization for Security and Co-operation in Europe (OSCE) under the United Nations is currently preparing a new Best Practices at Border Crossing Handbook that might serve as a useful training tool for customs training centers. 98 The AUD appreciated by about 21% from the time of the ADB-AusAID mission to January 2011. 99 See report of joint ADB-AusAID mission during April and May 2007.


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Greatly supportive of ADB’s upcoming (AusAID-funded) C-R-PATA and other development partner initiatives; specifically mentioned in an interview with the ADB project officer for the C-R-PATA on 9 December 2010.


Scheme: Study and Technical Cooperation Project Expert(s)/Consultant(s): (i) Cross-Border Transport Agreement (Team Leader), 12 person-months (ii) Coordinated Border Management, 3 person-months (iii) Customs Procedures, 3 person-months (iv) Traffic Rights, 3 person-months (v) Training Design and Implementation, 6 person-months

Counterpart Agency

Potentially all customs administrations in the Mekong Region and related border agencies in the respective countries

Project Code Project Title Country R5 Annual Time Release Surveys and Measurement of Performance

Indicators Regional

Project Background

Some time release studies have been conducted to date at Mekong Region border crossing points, including: (i) a series of time releases studies in 2005 conducted by ADB at Poipet-Aranyaparthet, Bavet-Moc Bai, and Mukdahan-Savannakhet; (ii) a time release study at conducted at five border crossings in Lao PDR, assisted by the World Customs Organization (WCO) and the World Bank;100 and (iii) a multiple development partner assisted trade mapping study in Cambodia covering six locations.101 These studies provide valuable information on clearance times, but need to be conducted on a regular basis and with wider geographic coverage.


To provide an incentive for improving border crossing agency performance, which will facilitate freight transport.


(i) Assist in the development of regular time release studies; and (ii) Develop a program to measure customs administration performance using

accepted indicators on a regular basis.

Possible approaches rely on producing data (e.g., using WCO’s Release Study Methodology) or the gathering of existing data. Specific methodologies may include: (i) data collection from customs and other border control authorities, (ii) interviews with freight forwarders, (iii) driver trip diaries, and (iv) surveys focusing on border crossing time. Specific indicators should be easy to measure and collect, based on consistent and defined parameters that are readily understood, capture excessive transport costs and/or time, and be as much as possible already measured by the main logistics stakeholders.102 Periodic reporting should be undertaken at a frequency to be determined but reporting periods more frequent than quarterly are likely to be cost prohibitive given survey requirements. Target performance indicators should be identified at the outset; while targets can be adjusted at the beginning of each reporting period to reflect earlier experience and expectations, original targets should be maintained to provide continuity and an overview of implementation progress as compared with expectations.

Expected Impact(s)

Monitoring border crossing agency performance will provide incentives for improvement, which will facilitate freight transport.

100 TRS Task Force, Time Release Study, Lao PDR, December 2009. 101 European Union, World Bank, UNIDO, and DANIDA, Trade Development Support Program, Mapping of Trade Processes – Cambodia, prepared by Emerging Markets Consulting, March 2010. 102 See, for example, Gaël Raballand, Jean-François Marteau, Charles Kunaka, Jean-Kizito Kabanguka, Olivier Hartmann, Sub-Saharan Africa Transport Policy Program, Lessons of Corridor Performance Measurement, World Bank, May 2008.


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Government support indirectly expressed through their approval of ADB’s upcoming C-R-PATA.


This project is greatly supportive of ADB’s upcoming C-R-PATA and other development partner initiatives; specifically mentioned in an interview with the ADB project officer for the C-R-PATA on 9 December 2010.


Scheme: Study Expert(s)/Consultant(s): (i) Time Release Study Specialist (Team Leader), 12 person-months (ii) Evaluation Specialist, 3 person-months

Counterpart Agency

Potentially all customs administrations and related border agencies in the respective countries

Project Code Project Title Country R6 Feasibility Study of Relocating Freight Traffic from the

Aranyaprathet-Poipet Border Crossing Point Regional

Project Background

In a joint communiqué issued in August 2010 during a Thai-Cambodian joint commission meeting, the two governments announced an agreement to develop a new permanent border crossing point for freight traffic,103 most likely 12 km south of the current location, at Nong Auen (Thailand)-Stoung Bot (Cambodia). The proposal was originally made by Cambodia. A potential obstacle is that the streambed border is not well defined. The University of the Thai Chamber of Commerce is undertaking a preliminary study of the border crossing point relocation.104 If the border demarcation issue can be resolved, development of this new border crossing point (BCP) presents opportunities for a feasibility study, BCP design and layout training, development of national and regional BCP building and maintenance standards, the bringing of the different national BCP agencies under one roof, interagency IT connectivity, and training in state-of-the-art border management to maximize efficiency and the performance of the new building assets. Both sides of the new BCP will need new access roads.


To prepare for the development and operation of a state-of-the-art border facility at the newly relocated border crossing point at Nong Auen (Thailand)-Stoung Bot (Cambodia), to increase border management efficiency and reduce clearance times, and to serve as a model for other border crossing points in the Mekong Region.




Expected Impact(s)



Support for the relocation of the border crossing point for freight traffic has received support from Thai governmental authorities and a preliminary study by the University of the Thai Chamber of Commerce, although there has been no specific request yet for Japanese or other foreign assistance.

103 The new BCP may focus on containerized cargo traffic. The eventual operating practices have not yet been defined. 104 The Thai Ministry of Commerce wishes to develop the new BCP with a special economic zone with an inland checkpoint 30 km away together with a logistics center and container terminal.


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Counterpart Agency

Not yet officially designated but possibly the Ministry of Transport (Thailand) and Ministry of Public Works (Cambodia)

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