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Trade Facilitation Problems of Exporters: Evidence from a Primary Survey in India

Expert Meeting on Trade Facilitation as an Engine for Development 22 September 2005. Trade Facilitation Problems of Exporters: Evidence from a Primary Survey in India. Presentation by S.V.Divvaakar Ace Global Private Limited. About Ace Global.

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Trade Facilitation Problems of Exporters: Evidence from a Primary Survey in India

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  1. Expert Meeting on Trade Facilitation as an Engine for Development 22 September 2005 Trade Facilitation Problems of Exporters:Evidence from a Primary Survey in India Presentation by S.V.Divvaakar Ace Global Private Limited

  2. About Ace Global • A consulting firm providing international trade and investment development services, set up by trade practitioners • Works with governments, trade bodies, and private enterprises in competitiveness enhancement: at country, sector and enterprise levels • Region Focus: South Asia, South East Asia, China, and recently SADC.

  3. Survey Objectives • To identify specific trade facilitation problems faced in key destinations, relating to: • Article V (transit trade facilitation) • Article VIII (testing procedures, fees etc) • Article X (dissemination of regulations, appeal mechanisms) • Preponderance: Border-in or Border-out ? • Enterprise scale-specific issues (SMEs) • Expectations from negotiations

  4. Survey Coverage ~350 Sectors: 10 Business respondents: 325 of which: Exporters – 278 Trade Intermediaries – 47 Sector bodies – 22 International Port locations - 2 Initiated by: UNCTAD India/DFID

  5. Exporter Profile • More than 90% of India’s export processors are SMEs • More than 40% of exporters are SMEs • Export consignments are small (LCL) in many sectors • Considerable dependence on intermediaries for trade documentation and logistics planning

  6. Familiarity with import requirements

  7. Handling of Customs Clearances In India In Destinations

  8. Principal destinations of exports

  9. Country wise incidence of problems

  10. Nature of Problems Faced

  11. Key Issues in Trade Facilitation • Destination-specific Issues: • US: • Costs of security related measures CSI, ACD, C-TPAT, Bioterrorism Act (5-20,000 US$/year for forwarding agents) • Some factors beyond exporters’ control (Double window notices to US FDA) • Inadequate info about detention on security grounds (reverse follow up) • Importers benefit from security cooperation but bill exporters for their additional costs (screening charges)

  12. Key Issues in Trade Facilitation • Destination-specific Issues: • EU: • Excessive requirements, increasing amount of legislation • Lack of harmonization of procedures among member states • Unclear/discretionary procedures for detention and disposal • Import alert notifications and de-notifications follow different procedures • Absence of common EU level consultative/appeal mechanism

  13. Key Issues in Trade Facilitation • West Africa, Middle East: • Excessive consular charges • Non-transparency in application of measures • Actions without sufficient notice, including retrospective effect • Collusion and partiality • Business practices at destinations affect exporters • South America: • Excessive documentation including freight breakup • High intermediary costs in Banking/financial systems • Heavy penalties for minor errors in documentation • Japan/Far East: • Unclear English translations of technical prescriptions • Language barriers impede interventions/corrective action

  14. Costs of Compliance • Freight forwarders incur $ 5-20,000 per year for online filing systems • Clothing wholesalers levy screening charges of $ 0.5 per piece after arrival • ISPS charges $ 6-24 per container • Consular fees 6-7% of FOB value for cargoes to Mid East • Certification fees 3-4% of FOB value

  15. Impacts on small enterprises • Contrary to expectations, costs/risks are lower for smaller enterprises. • Small players are often not direct exporters • Shipment on C&F or FOB terms, so destination delays are not to shipper account • Financial terms: L/C, so minimal deductions • No recurrence of problems, as business links are often not long-term • Larger operators, being part of global chains, face more compliance related costs.

  16. Preponderance of trade-facilitation problems within India

  17. Expectations • Information dissemination standards • Sector level trade enquiry points should be created • Uniform application of procedures by members of customs union • Imposition of trade alerts and de notifications should follow similar procedures and time line • Procedures should be established for confirmatory tests and single appeal mechanisms • Normative charges should be specified for private service providers

  18. Thank You

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