Cross-Border Logistics Operations

Effective Trade Facilitation and Border Management

Andrew Grainger

• Éditeur: Kogan Page
• Année: 2021
• ISBN:
  9781789666748
• Édition: 1
• Sujet: Business
• Sous-sujet: International Business

With considerable turmoil in international trade and logistics it is more important than ever to understand trade and customs issues and their impact on logistics operations. At every port and border international freight operations are exposed to trade and customs procedures. Cross-Border Logistics Operations serves as a comprehensive guide and companion to the cross-border trade and customs environment and its implications for international business supply chains and their control. Inspired by the World Customs Organization's Professional Standards (also known as the WCO PICARD Standards), it provides key insights into transporting goods across borders and effectively managing the requirements for compliance and enforcement.International students, business operators and government officials will find the book rich in detail with practical examples that include the political, administrative, regulatory, technological and economic context throughout. It covers all the critical operational and legal aspects of cross-border logistics operations, including:
-prevailing trade, customs and border policy
-tariffs and import taxes
-border management and supply chain security practices
-prohibitions and restrictions
-enforcement and compliance practices
-supply chain and logistics arrangements
-disaster relief operations
-frictionless trade and trade facilitation principles.

01

Cross-border logistics operations

On most maps borders between countries are easy to find. They are depicted as lines separating one country from the other. Political maps add even more contrast by using different colours to highlight the space that is commanded by the respective countries around the world. The legends of maps and atlases provide yet further context; for example, by explaining that thick lines depict international boundaries and dotted lines the state (federal) and provincial boundaries (Informa, 2019). Google Maps uses solid grey lines for undisputed international boundaries, while dashed grey lines are used for treaty boundaries (which are defined by a treaty or similar agreement, but not finalized in law), de facto boundaries (not set by treaty but used by all states involved), and disputed boundaries (Google, 2021). Thus, when viewing maps, we have become accustomed to viewing borders as boundaries which set countries apart.

However, those very same maps also depict geographic features such as rivers and oceans. These types of boundaries, in our modern world, do not have to divide, and are the backbone to global trade. About 80 per cent (by volume) of global trade is carried by sea (Benamara et al, 2017). Oceans and rivers – just like roads, railway lines, tunnels, bridges and airports – connect. The easier and cheaper connections are, the greater are the trade opportunities. And connecting businesses that trade with each other is what logistics and transport operations are about. Goods in the hands of sellers are converted into items of value in the hands of buyers. Without logistics and transport, trade would not take place. Without goods finding themselves in the right amount, in the right condition, at the right place, at the right time and at the right cost, there would be no sale!

A key principle within economic geography is that the lower the costs for moving goods are, the greater the catchment of the market. With increasing size and scope for competition this in turn helps bring down the price of goods sold on that market. Adam Smith, for example, writes that:

Good roads, canals and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. They are upon that account the greatest of all improvements.

SOURCE Smith, 1776, Book 1, Chapter XI, Part 1

However, markets are normally subject to rules that must be followed to gain access. Moving on from the time of Smith, even today market inspectors in towns across the world are likely to check that stall operators use weights and measures correctly, follow sanitation and hygiene guidelines, and that relevant fees and taxes have been paid. Crucially, though, in today’s modern state, the trade rules that once might have been associated with individual market towns, and thus local in nature, now tend to be part of a body of rules that apply to the entire country. Trade and customs tariffs, amongst many other aspects of business regulation, apply.

Subsequently, the challenge in global cross-border logistics is not just one of transporting goods at a low cost, but also one of managing the necessary compliance requirements. Commonly these are enforced at the borders. The image that comes to mind is one of a boom barrier, where authorities such as Customs stop traffic and only let goods through once satisfied that all regulatory requirements have been met. Indeed, the United Nation’s Convention on Road Signs and Signals (UN, 1968) recommended sign for border controls is a black horizontal line framed within a red circle, notifying any driver approaching a border that they may not pass without stopping at the Customs’ boom barrier. Logistics practitioners around the world, with very little prompting, are usually able to share stories of significant border-related delays. Likewise, customs and border officials are often quick to highlight success stories, where they have managed to intercept illegal trades – the media frequently celebrates such stories (AAP, 2020).

However, as countries move together, not all borders are the same. Trade agreements between countries help bring down trade obstacles. This has a direct impact on the border arrangements. Some borders, such as those between the members of the European Union, are without any border control facilities at all. In line with global efforts towards trade-led economic growth there is also a lot of attention on trade and border formalities. Associated costs are to be reduced in the form of trade facilitation. Likewise, the enforcement of shared rules should be effective and in line with good border management practice.

Compliances requirements

The regulatory requirements that apply to the trade in goods between countries can be extensive. The World Trade Organization (WTO), however, sets two fundamental principles that apply to all of its members – which at more than 160 member states encompasses all of the world’s largest markets – to make sure that trade is fair:

• The first is the Most Favoured Nation (MFN) principle for the trade in goods. It holds that countries cannot normally discriminate between their trading partners (GATT, 1947, Article 1). Any favours granted to one partner must be extended to all other WTO members – they are as such all ‘most favoured’. But exceptions within the framework of more comprehensive preferential trade agreements (including free trade agreements, FTAs) are allowable (Trebilcock et al, 2013); and with another 300 of them in place, they are a key feature in today’s global business environment (WTO, 2020).
• The second principle is ‘national treatment’, where any imported and locally produced goods should be treated equally (GATT, 1947, Article 3).

Despite these principles, trade is seldom ‘free’. Import tariffs frequently apply to protect certain industries from foreign competition.

Most countries also have concerns about safety and security and will seek to protect themselves from risks that are associated with the cross-border movement of goods. These can, to give a few examples, relate to the smuggling of arms or to making sure that the vehicles used to carry goods are safe and operated in line with national transport legislation (Lowe and Pidgeon, 2020). Likewise, most countries enforce strict measures to safeguard against environment- and health-related risks. Such measures frequently apply to foods, products of animal origin and of the soil. Compliance requirements with such sanitary and phytosanitary requirements can be particularly complex. Inspections along with tests and mandatory border checks are often necessary. Many types of business regulations concerning market and consumer protection frequently spill over into border compliance requirements, too (see Box 1.1).

BOX 1.1

Regulatory regimes frequently applied at national borders: examples

The collection and payment of import tax, including tariffs

• Customs tariffs, which are usually a percentage figure based on the value and origin of the goods.
• Value added tax (VAT), which applies in many countries around the world and requires businesses to pay tax when selling goods, including imports (so-called Import VAT); VAT regimes often also allow businesses to claim back VAT that has been paid on inputs and zero-rate (ie not charge VAT) when exporting goods.
• Excise duties, which are additional taxes that apply to some types of goods and need to be paid when sold to customers whether domestically produced or imported; the range of goods subject to excise duties depends on the country concerned, but typically includes mineral oils (like petrol), tobacco and alcohol products.

Tariff quotas and restrictions (economic trade policy measures)

• Anti-dumping and countervailing measures which are designed to offset the advantages of unfairly priced imported goods; for example, because they are sold for export at prices lower than at home, or where the manufacturer has benefited unfairly from financial subsidies.
• Tariff quotas, where importers may temporarily benefit from tariff suspensions or tariff rates that are below the normal rate. These are subject to application and often come into play where domestic production can bear some limited competition from foreign producers, or where goods are seasonal, and the protection of domestic production conferred through customs tariffs is not required when out of season.

Safety and security

• Export controls and licences that are often enforced by countries that seek to restrict or prohibit certain types of exports. Often this applies to goods that can have military uses (even if designed for civilian use) or are at risk of being diverted to countries against which trade sanctions have been imposed; they often also apply to goods of national heritage.
• Interventions to stop clandestine and deliberately mis-declared ...