Facilitating Trade:

Improving Customs Risk Management Systems

In the OIC Member States

have the responsibility for clearing cargo and for its loading/unloading; and local, regional and

national agencies, including those who have the responsibility for assuring security at various

levels, including responding to threats and abnormal condition

s 8 .

Reducing trade costs and times.

Time and costs remain important determinants of companies’

competitiveness and ability to integrate into regional and global value chains. The physical

infrastructures for trade, roads, and ports, have an impact on the time and costs for traders. A

World Bank study conducted in 2010 found that “only about a quarter of the delays in the sample

were due to the poor road or port infrastructure - in part because our exporter was located in

the largest business city. 75% of the delays were due to administrative hurdles-numerous

customs procedures, tax procedures, clearances, and cargo inspections-often before the

containers reach the port

.” Effective CRM can bring huge improvements and can, therefore, be

considered to enable trade facilitation

Trade costs are divided into two segments. The first segment is related to the expenses that are

liable for external factors rather than policy choices (such as the distance of the market,

(international and national); transport and insurance costs; transit fees, charges, and time;

expenses related to the transport and the insurance; and membership in the same economic

community, international agreements etc.). The second segment of trade cost is related to

internal factors, including:



The infrastructure for the free flow of the trading - land, air, and sea;



Quality of logistics services– freight forwarders, shipping agency, inland carrier,

terminal operator, port authority, etc.;



The international regular connections - sea, air, and land;



Trade facilitation systems – CDPS, SW, PCS, etc.;



Multiple productions of the same documents being presented at numerous agencies

(including CAs) different physical locations to obtain a variety of permits, certificates or

licenses;



Poor or non-existing Customs and OGAs coordination is resulting in multiple physical

interventions at different times and even on different days;



In many cases, customs officers require the trader to present the documents on paper

physically.



Tariff and non-tariff measures.

Current studies on trade facilitation and trade costs do not measure the impact of CRMas a single

factor. Instead, CRM is considered to be one of many possible TF reform measures that can

significantly reduce the trade costs. WTO Economists calculated the aggregated financial benefit

of implementing the Trade Facilitation Agreement (TFA) including the obligations regarding

CRM. “Trade costs could be reduced by an average of 14.3% and boost global trade by up to $1

trillion per year, with the biggest gains in the poorest countries“

Djankov, S., Freund, C., Pham C. S., Trading on time, The Review of Economics and Statistics, February 2010, 92(1): 166–

173 (Research conducted for World Bank).

Trade facilitation is a termused to describe efforts aiming at reducing these delays and creating better predictability through

simplification, transparency, cooperation, harmonization and standardization.

WTO (2015) World Trade Report 2015, page 73.