Border trade - it matters

31 Jul, 2013

Pakistan's regional trade is in a critical situation due to various reasons like bad economical condition, bad law and order situation, terrorism, involvement in war on terror, smuggling, poor regulatory systems especially for regional trade, improper procedures, different policies for handling trade on all border points, infrastructure constraints, non-existence of banking systems at the borders to handle cross-border trade exchanges, no collaborative information system across the borders, no barter systems in absence of regular banking within the region, lack of standardised transportation system, poor logistics facilities and many other problems that traders face everyday.
How Pakistan is handing its regional trade in east and west, north and south?
Pakistan is doing different treatments at the borders than at the others. For example, with India at Wagha border, Indian open trucks are allowed to enter Pakistani side till no-man's-land for discharge of cargoes, containerisation is not allowed, even by train. Due to lack of proper infrastructure a lot of traffic constraints are there whereas all dry ports in the country are under-utilised and waiting for the cargoes to arrive. With Afghanistan, at Torkhum border Afghan trucks are allowed to bring cargoes till Peshawar and vice-versa and at Chaman border they are allowed to discharge cargoes in Customs House Chaman and load the cargoes as well whereas Pakistani trucks can carry cargoes inside Afghanistan to any destination and vice-versa. Afghanistan also allows cargoes to transit via its territory to third country carried on Pakistani trucks, likewise Iran also allows Pakistani trucks to enter its territory and carry cargo to any destination or transit through it. With China, at Sust border Chinese trucks are entering via Khunjerab pass and bring cargoes and vice versa and Pakistani trucks carry cargoes till Kashgar whereas under Quadrilateral agreement they can also transit via China to Kyrghizstan and Kazakhstan. At Taftan (Pak Iran) border two different kinds of systems are working: (1) Iranian or any other country's trucks are allowed to enter inside Pakistan and they can offload the cargoes at no-man's-land or customs house and/or (2) bring the cargo up to Quetta dry port(s) under customs escort and vice-versa. Iranian and other country's trucks entering Pakistan via Taftan border are also allowed to carry cargoes up to any destination in Pakistan. Interestingly, Pakistan operates regular trains to India for passengers and goods service and container train between Islamabad and Istanbul via Tehran, which is called ECO Container Train or Gul Express. However, it is closed now due to lack of locomotives with Pakistan Railways.
In the past we have signed many agreements with neighbouring countries like APTTA-Afghan Pakistan Trade and Transit Agreement, Quadrilateral Agreement with China, Kyrghizstan and Kazakhstan and bilateral agreement with Iran for carriage of goods and passengers. Moreover, we are signatory to ECO Transit Trade Framework to facilitate trade and traffic. These all agreements were signed by Pakistan with a will to increase and facilitate trade with our neighbouring countries but alas all these agreements were in vein due to closed mindsets of our policymakers and regulatory bodies and different other reasons. To handle regional trade especially via land borders, we need a comprehensive policy for the benefit of the economy, which covers all major aspects of trade.
Therefore, I propose the following policy paper to be adopted by the government to increase trading activities and standardising the procedures at all entry and exit points for betterment of the trade.
Proposed policy on handling border trade
Prime object of the policy: This policy is to define the role of regulatory bodies, handling security agencies and traders etc involved in border trade. The collaborative efforts of those bodies and agencies and infrastructure development, communication and transportation systems, security measures, financial transactions and safeguard of domestic trade are essential to bring people's confidence to normalising of trade with the bordering countries.
Short title, extent and commencement
i. This policy may be called the "Border Trade Policy-2013"
ii. It may extend to all the border checkpoints in Pakistan
iii. It shall come into force on such {date} as the {federal government} may, by notification in the official Gazette, appoint.
Basis of trading:
(1) Imports may be made against all modes of payment and barter.
(2) Private sector importers may enter into Commodity Exchange Arrangements with suppliers abroad.
(3) For imports of agri-produce may require approval by Economic Affairs Division or some other agency of the Government of Pakistan.
Tradable items:
Import of all goods may be allowed from bordering countries sources unless otherwise elsewhere specified to be banned, prohibited or restricted by law.
I. Import of goods shall be subject to the same national quality standards or regulations as are prescribed in respect of similar and domestically-produced goods.
II. Imports under Border Trade Agreements shall be made in accordance with procedure notified by the federal government from time to time.
Procedural requirement
-- Regulatory bodies
-- Pakistan Customs
-- The simplification, modernisation and harmonisation of procedures and documents are at the heart of the trade facilitation agenda with customs clearance being the main focus. Significant progress has been made already with the average customs clearance time reduced from seven to less than one day comparable with international standards. Full implementation of the new WEBoC system will allow clearance procedures to be moved away from the border while, at the same time, reducing opportunities for informal payments and providing incentives for importers and exporters to obey existing regulations.
-- Submission of advance information of items for cross-border trade:-
By filing GD for Import or Export in advance will help traders, customs, terminal operators, security agencies to determine the nature and volume of the traffic reaching the border for clearance purpose.
-- Pre-shipment inspection certificate:
Given by authorised inspection companies will be helpful in fast examination and clearance of goods at the borders.
-- Arrival and departure of conveyance/truck
Long dwell times for inbound or outbound trucks due to low port productivity and undue delays at customs (100 percent of trucks are examined physically). The result is congested terminals and the need is to allow containerised movement in addition to normal trucking facilities which could be avoided by taking actions which reduce dwell times and congestion.
The traffic information should be submitted 48 hours in advance to the terminal operator eg NLC and security agency eg Rangers so that the cargo at arrival or departure should not be left un-cleared at the terminal.
-- Trans-shipment
Import goods arriving at the border should be trans-shipped to the inland dry port as and where and when required. For example (1) Frozen meat and food items should be transferred to Reefer godown for clearance purpose. (2) Dry containers should be trans-shipped to CFS.
-- FIA-immigration
Role of FIA is essential as the drivers and traders must embark Pakistani territory on day to day basis. They must facilitate temporary visa for drivers and traders and control the immigration.
-- Handling agencies
-- National Logistics Cell (NLC)
NLC is an infrastructure developer and terminal operator at the borders. Due to their capacity the trade is restricted up to the capacity of space made available by them.
-- Pakistan Railways
Railways operates passenger and goods trains to India via Wagha/Attari border. Its regional operation is not up to the mark. Railways should be available and connected with various dry ports on its network.
-- Private sector
Private sector should be given its due share in infrastructure development to carry and handle border trade as they are facilitating on seaports. PICT, QICT, KICT and Al-Hamd Terminals are examples. This will create healthy competition which will ultimately benefit trade in terms of labour, warehousing, and other terminal operation charges or cost of doing business.
-- Security
-- Rangers
Rangers should be restricted to facilitate and secure the trade and traffic at the border like ASF, MSA etc. Beyond border areas they must not be involved. However, other security and control agencies like Customs Intelligence, FIA etc can be involved to curb the smuggling.
Infrastructure requirement:
b. Presently border terminal in Pakistani side is handling dry cargo mostly. Its capacity is not enough as the trade volumes are increasing rapidly. There is requirement of second scanner at the border to cope with the increasing traffic. Its capacity increase is not recommended due to national and border security reasons.
c. Railways network has to be made efficient to cope the increasing traffic.
d. Dry ports should be connected with all border terminals as they are connected in Balochistan with Taftan border. Likewise Karachi and Qasim ports are also well connected with upcountry dry ports and facilitating increasing import and export traffic.
e. Private sector should be given priority to develop customs bonded warehouses, CFS, special terminals for reefer cargoes, perishable goods, liquids, gases, export processing zone etc.
Communication:
Telecommunication system at Wagha border is restricted due to security reasons. Banks are not interested to open their branches at Wagha border due to lack of internet and broadband communication systems. Customs is also facing the same problem. Traders cannot use their mobile and cell phones. These are the hurdles in trade with India and other neighbouring countries. If traders are given access to transfer advance information to customs of both side of the border, it can reduce clearance time and cost of doing business.
Transportation
Road transport is largely operated by private sector in every part of the country. Poor performance of the logistics sector significantly reduces the competitiveness of the actual and potential export industries and ultimately hurts the country's overall economic growth. The transport system in Pakistan generates high economic losses from a mismatch between supply and demand for transport services and supporting infrastructure. It is estimated that the inadequate and inefficient transport system is imposing a cost to the economy of about 4 to 6 percent of the GDP, constraining economic growth, reducing export competitiveness and hindering social development. An efficient transport system is a pre-requisite for Pakistan to become globally competitive. High port costs, resulting in higher charges to users than might be considered desirable in terms of overall economic policy, increasing openness to the world economy and stimulating trade and allowing Pakistan to capture a share of the regional and global market share.
Warehousing/inland cargo and container depots
Instead of customs clearing the goods upon arrival at the border, it can also be stored in a warehouse under customs control in bonded warehouses (Chemical warehouse, liquid warehouse, frozen cargo warehouse, gas warehouse, container terminal, dry cargo warehouse etc) purposely built for border traffic control and facilitation. Goods can stay in bonded warehouses for a limited period of time, and no import duties and taxes will have to be paid until the moment they are actually cleared into free circulation in the country, eg to be transported to a customer.
Prevention of smuggling
Pakistan has porous borders with Iran and Afghanistan. Goods are being smuggled into Pakistan through Afghanistan and Iranian goods are also being smuggled into Pakistan. Afghan Transit goods are major source of smuggling as they are coming back from the borders into Pakistani markets. To curb the smuggling it is essential to improve tracking systems of transit goods and effective patrolling at the borders areas.
Transit trade
Import and export of goods for transit under the "Quadrilateral Agreement for Traffic in Transit among the Governments of Peoples Republic of China, The Kyrgyz Republic, The Republic of Kazakhstan and the Islamic Republic of Pakistan" and "Afghanistan Pakistan Trade Agreement" shall be subject to section 127, 128 and 129 of Customs Act, 1969.
As the customs control of transit goods is mostly administrative, there is usually no separation in the clearance between goods in domestic use and goods in transit except some papers from bonded transport carrier. If the final customer is located outside Pakistan, the goods can be transported under customs bond from the ports and border to the country where the buyer is located. In this way, customs duties and taxes at time of import are only guaranteed by the bonded transport carrier in the country of destination, and double payment is avoided.
Accession to TIR convention
ICC Pakistan besides being the National Guaranteeing and Issuing Organisation for ATA Carnets is also performing the role of facilitator and National Guaranteeing Organisation for the stakeholders in the regional trucking industry in Pakistan to implement the TIR Convention in Pakistan. ICC Pakistan is an Associate Member of the International Road Transport Union (IRU) and the IRT-TIR Commission of ICC Pakistan comprise of logistics and transport companies who need to avail the facilitation for transit trucking in the region. ICC Pakistan has been designated the National Guaranteeing and Issuing Organisation for the TIR Carnets in Pakistan by the Government of Pakistan. The accession to the TIR Convention by the Government of Pakistan is currently under process. Pakistan should adopt TIR convention for operating road transport in the region.
Implementation CIM note for export and import goods carried by railroad
The Convention concerning International Carriage by Rail (COTIF) applies in Europe, the Maghreb and in the Middle East. COTIF Member States apply the majority of the appendices to COTIF (CIV, CIM, RID, CUV, CUI, APTU and ATMF Uniform Rules). The accession procedure should be concluded by September 2013. Pakistan will therefore become the 49th Member State of OTIF. Pakistan's accession is linked to the initiative by the Economic Co-operation Organisation (ECO) to set up a rail link for trains carrying containers between Islamabad and Istanbul via Tehran, which might one day be extended to Western Europe and southern Asia. Various auxiliary lines will link up with this corridor.
(The writer is an entrepreneur and convenor of standing committee on National Transport and Logistics Facilitation in LCCI)

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