1. Introduction

2. Forecasts of Air Cargo Movement and Import/Export Imbalances

2.1. Introduction

2.2. ICAO

2.3. IATA

2.4. Import/Export Balancing

2.5 Potential Solutions to Adjust Import/Export Imbalances

3. Best Practices and the Changing Role of Major Players

3.1. Introduction

3.2. Annex 9 to the Convention on International Civil Aviation

3.3. United Nations Recommendations and Guidelines for Trade Efficiency

3.4. WCO Guidelines for Clearance of Express Consignments

3.5. The Changing Role of Major Players

3.5.1. Airport Authorities

3.5.2. Ground Handling Agents

3.5.3. Airlines

3.5.4. Air Express Operators

3.5.5. Customs

3.5.6. Freight Forwarders and Customs Brokers

3.5.7. Other Government Agencies

4. Electronic commerce

4.1. Introduction

4.2. Trade Community Systems

5. Education and Skills Transfer

I. Questionnaire

II. World Customs Organization Guidelines for Clearance of Express Consignments

III. Draft Policy Discussion Document: Deferred Payment of Customs Revenue

IV. Electronic Commerce Implementation Methodology (Outline)

V. Participating Organizations

VI. Bibliography

A more detailed analysis of selected countries in the region clearly illustrates that significant imbalances on key regional air freight routes, particularly those between economies of North-East and South-East Asia, are forecast for the future.

Import/Export Air Freight Movements to Year 2000 - Country by Region (ton)

The extent of current imbalances is highlighted by statistics prepared by the World Trade Organization (WTO) and reported by the Far Eastern Economic Review, which show while total Asian exports rose by 10 per cent in 1994, while the region's import growth rates accelerated by 13.5 per cent. Major factors behind this import expansion were identified as including a growing appetite for foreign goods in Japan and increased imports by the Republic of Korea and Malaysia. At the same time, the WTO noted sharp increases in export volumes from China, Singapore and the Republic of Korea.

Within the region, the WTO highlighted the ascendancy of the six most dynamic East Asian trading locations: Taiwan Province of China, Hong Kong, the Republic of Korea, Malaysia, Singapore and Thailand. Imports by these six were reported as rising by 18.8 per cent to US$ 443 billion, compared with an 8.1 per cent increase in 1993. The six countries' exports were up 18.1 per cent to US$ 418 billion, up from an 8.8 per cent increase in 1993.

Japan's imports were also reported as growing by 14 per cent in 1994 to US$ 275 billion, with exports rising by 9.6 per cent to US$ 397 billion. China was noted as importing goods worth US$ 116 billion, a rise of 11.3 per cent, while its exports rose 31.9 per cent to reach US$ 121 billion.

The Financial Times recently reported that the Philippines' exports had grown by almost 20 per cent in the first half of 1996 compared to a 26 per cent growth in imports. This export growth was faster than that experienced by other South-East Asian economies including Thailand and Malaysia, which had suffered from a global slowdown in demand for electronic products.

It was also noted that electronics and textile sales accounted for over 50 per cent of the Philippines' total exports, and that imports were almost entirely made up of raw materials and capital goods for subsequent re-export, thus reflecting the country's growing industrial base, and is indicative of many developing economies within the region.

As a further illustration, it was also noted in the Financial Times that exports from Philippines' export processing zones (EPZs), excluding Subic Bay Freeport and the Clark special economic zone, rose by 50 per cent in the first six months of 1996 to US$ 2.75 billion as a result of higher foreign direct investment.

These figures serve to highlight the economic benefits of establishing EPZs or Freeport facilities to encourage foreign investment in export related industries. Given the greater thrust towards just-in-time processing, and regional logistics distribution warehouse operations, the establishment of EPZ or freeport operations at airports, or close to major airport facilities, is a proven means of attracting investment for the creation of regional logistics distribution hubs, if they are well serviced by timely and frequent aircraft markets.

In special economic zones however, it is necessary for industry to quickly establish strong commercial foundations to support future cost increases which will surely follow as labour markets mature, initial tax breaks are wound back, and product quality becomes the deciding factor by consumers.

Accordingly organizations in special economic zones need to ensure they established long-term business strategies aimed at taking their manufacturing base into higher-value technology-intensive ventures, or consider relocation to lower-cost areas as the economic climate changes.

This is the dilemma that is now being faced by industry in the Shenzhen Special Economic Zone in southern China for example.

Various solutions exist to positively adjust import/export imbalances in the region. These range from policies to attract flow of direct foreign investment to major strategic investments in capital works to encourage a growth in air freight traffic. The application of individual solutions, or combinations thereof, in any particular region, country, or economic zone will of necessity be subject to political, economic, and/or commercial aspirations and growth strategies. A number of potential solutions are noted below so as to encourage debate in this area:

(a) Encourage growth of EPZs and Freeport to encourage foreign investment in export related or regional distribution industries. Integrate these with dedicated cargo airports and multi-modal operations to create universal manufacturing, distribution oriented "transport parks";

(b) Encourage a growth in the express consignment industry by permitting the establishment of dedicated on airport sorting, despatching and clearing facilities for international express operators;

(c) Enhance air passenger facilitation procedures in all areas to encourage a growth in tourism with its consequential increase in aircraft movements, thereby increasing the available capacity for movement of air freight;

(d) Enhance cargo movement, facilitation, storage, and clearance facilities at all international airports to bring them into line with international trade facilitation expectations, thereby encouraging trade growth by offering efficient cargo handling and processing facilities;

(e) Simplify, modernize, standardize and automate customs cargo clearance procedures across all modes of transport, for both import and export cargoes;

(f) Where significant trade volumes already exist, or regional/subregional markets can justify the investment, establish dedicated air cargo villages at key regional airports. It is possible in some regions, e.g., north-east Asia, that "super" cargo distribution centres or "transport parks" could evolve and take the place of several smaller congested cargo centres. This is a potential scenario for servicing the Chinese, Japanese and future Mekong Delta markets. It is noted however that some European commentators believe the cargo village concept is more suited to airports developing their cargo infrastructure, and to those where there is still a heavy reliance on customs clearance procedures;

(g) To reduce air corridor and air freight handling congestion at major regional airports, other national airports in the same regions could be enhanced to become major regional, subregional or national cargo hubs for freighter and dedicated air express aircraft. Cargo carried on passenger aircraft would continue to be serviced at international passenger gateway airports, but dedicated could be diverted to dedicated airports designed predominately for processing freight. This would remove pressure on air corridors at existing major regional gateway airports, reduce apron and taxi way congestion, and reduce pressure on existing cargo clearance facilities. To accommodate future projected growth on routes such as Japan-China this would increase the options for handling and processing the expected increases in freight traffic;

(h) Investing in multi-modal operations at major distribution locations as a means of moving air freight to and from customers faster. Significant cargo congestion and delivery delays occur at many airports throughout the region where air freight is transferred to and from road transportation. Given the congested road networks in many countries, opportunities exist for the aviation industry to consider investing in railway systems and rolling stock as a means of improving cargo through put and delivery to customers. In some situations air freight "flights" could in fact be dedicated fast freight trains, delivering and taking cargoes directly to and from an airport cargo complex, with off airport distribution centres at the other end of the line. Obviously standardization of freight handling facilities and containers becomes a necessity, however the carriage of Unit Load Devices (ULDs) on dedicated fast trains is a potential solution to weight, speed and standardization issues in such an environment.

During the course of this review existing trade practices and procedures for air cargo movement in various locations throughout the region were researched, compared with acknowledged "best practices", and where appropriate recommended measures to overcome shortcomings identified. Some shortcomings relate directly to the content of published "best practices" while others relate to application of "best practices" in the field.

This review did not involve a detailed examination of procedures in operation in all countries throughout the region, but relied on selective sampling to obtain a good cross section of economies. The changing nature of the roles undertaken by major participants in the international trade cycle in the region were also noted.

The Asian and Pacific region embraces the full range of highly developed economies, developing economies, and economies in various stages of transition. In highly developed economies, extensive use is being made of automation and new technologies ranging from use of Electronic Data Interchange (EDI), bar codes, inferred scanners, wireless communications, and mechanised logistics warehouse facilities to process international airfreight. Such significant advances are found in Singapore, Japan, Hong Kong and Australia for example, and are also incorporated in major new airports under construction throughout the region.

At the other end of the scale some economies in transition, such as those in the Mekong Delta subregion, are trying to catch up with public sector process reform and change management in many areas, including those areas affecting airfreight handling and clearance operations.

Consequently the implementation of recommended "best practices" for the handling and clearance of airfreight in Asia and the Pacific is more effectively approached if addressed on a country or subregional basis, while taking into account cultural sensitivities and national development issues.

Currently air cargo clearance procedures were discussed with a number of customs administrators throughout Asia and the Pacific, and progress on use of enhanced trade facilitation initiatives at national and regional levels was noted. Many countries in the region are exploring or implementing electronic commerce based initiatives for the pre-lodgement and clearance of international cargoes.

Most countries however remain focused on using individual transaction based processing systems, and have merely created an electronic version of historical practices. Few initiatives exist where the speedy clearance of low risk consignments is being achieved based on minimum information. Where they do exist they are notably associated with the clearance of express consignments.

It is noted in some countries that key officials have little knowledge of the existence or content of Annex 9 to the Convention on International Civil Aviation, nor do they have a working knowledge of published United Nations Recommendations and Guidelines for Trade Efficiency.

Most of these and other important and well founded documents relating to international trade efficiency merely continue to exist as research material and generally fail to have any significant impact on actual operational procedures in individual countries.

This was reconfirmed in Nepal where no knowledge exists amongst key officials of the WCO Guidelines for Clearance of Express Consignments, nor the published United Nations Recommendations and Guidelines for Trade Efficiency. While only the Department of Civil Aviation and senior airport management had any knowledge of Annex 9 to the Convention on International Civil Aviation.

This observation confirms that a major impediment to the growth of international trade efficiency in the region is the general lack of awareness by key decision makers of published recommendations and guidelines for trade efficiency.

It is therefore evident that some sort of campaign is required to promote these documents amongst key policy makers in various national agencies, as a means of fostering the growth of trade facilitation to cope with the projected future growth in international passenger and freight traffic in the region.

A review of Annex 9 to the Convention on International Civil Aviation has resulted in identification of a number of areas where updating of this Annex should be considered by ICAO and Contracting Parties to the Convention. Furthermore no reference is made to the existence of the World Customs Organization's Guidelines for the Clearance of Express Consignments as a means of facilitating one of the fastest-growing sectors in the air freight industry.

Consequently it may be appropriate for ICAO to enhance Annex 9 to the Convention on International Civil Aviation to include reference to the World Customs Organization's Guidelines for the Clearance of Express Consignments, and to promote their introduction at all international airports throughout the region.

Furthermore, Annex 9 appears to need amending in the following areas to bring these recommended best practices into line with modern operations, and to ensure that the existing restrictive wording is not used by Contracting States as justification for delaying specific facilitation initiatives.

Paragraph 2.4.2 of Annex 9 requires a General Declaration to be "...signed by the authorising agent or pilot-in command, on one page only of the Cargo Manifest, while allowing...". The attestation on the Cargo Manifest to be provided by use of a rubber stamp.

Such wording prevents the transmission of such attestation by any future form of electronic means and should be modified accordingly.

Paragraph 2.4.3 of Annex 9 also assumes that the General Declaration will always by in a physical format which can be "signed" by human hand. Rewording of this paragraph to facilitate the future electronic transfer of such authentication is recommended.

Paragraph 2.5 of Annex 9 assumes the existence of a physical document by reference to "this information shall be provided in the column headed "total number of crew".

It is suggested that this wording could be amended by replacing the words "provided in the column headed" with the words "included under "total number of crew".

Paragraph 2.6 of Annex 9 caters for the provision of a Passenger Manifest, when required, to be provided "in an alternative and acceptable manner".

The opportunity has been lost here to promote the idea of pre-processing or pre-screening of inbound passengers by control authorities through the use of Advance Passenger Information Systems (APIS).

The existence of such systems has a marked impact on the speedy clearance of inbound international passengers but requires the electronic transfer of information found on passports and identity documents, which collectively could make up an enhanced passenger manifest. The information contained on the sample Passenger Manifest as set forth in Appendix 2 to Annex 9 is insufficient to enable control authorities to readily identify and process passengers by itself.

The Recommended Practice contained within paragraph 2.8.1 of Annex 9 advocates that "Contracting States dispense with the requirement for information concerning the nature of goods in the Cargo Manifest".

By following this Recommended Practice Contracting States will find it difficult to introduce facilitation initiatives aimed at pre-clearance of low risk, low value international freight based solely on information contained on the Cargo Manifest. This will limit the scope of facilitation initiatives that could be made available to better service full freighter aircraft. It also limits the scope for customs administrations to proceed with pre-screening or pre-clearance initiatives based solely on air waybills or Cargo manifest information, and limits the options for systems based on pre-lodgement of customs goods declarations ahead of arrival of aircraft.

If airlines can agree to include the universal Harmonised Tariff code on Cargo Manifests in the area set aside for "nature of goods", then automated systems operated by customs administrations and other agencies, could use this information in conjunction with the air waybill for pre-processing of low risk consignments without the need for formal lodgement of goods declarations.

The note to paragraph 3.4 of Annex 9 could be further expanded to show that it is not the intention to limit the possibility of using other identification means as an aid to pre-processing of passengers. For example, the future use of universal travel "smart cards" to replace passports; the use of frequent flier membership cards as a means of identification with subsequent transfer of passenger details between airlines and clearance authorities; or the potential future use of credit cards as universal travel identification cards.

Although the Recommended Practice contained within paragraph 3.9 of Annex 9 advocates Contracting States not to require "...any information in writing supplementary to...that already presented in their identity documents", many countries, including most of those in Asia and the Pacific, still require international passengers to complete embarkation or disembarkation cards for all international flights.

The Nepal mission highlighted the fact that although no formal reservations had been entered by Nepal against any of the recommendations in Annex 9, all arriving passengers are still required to complete embarkation or disembarkation cards. On-arrival visa application forms for automatic issuance of a visa are also completed by most passengers. Furthermore no flexible techniques are being employed by immigration officials to facilitate passenger throughput within acknowledged facilitation targets, and a similar situation occurs on departure with extensive processing delays being experienced as a result.

This observation points to the need for Contracting Parties to international Conventions to be encouraged to translate political acceptance of such Conventions and their Annexes into practical operational improvements at the work face.

For example, where control authorities are operating computerised immigration procedures at international airports, the information required to process an international passenger can be readily obtained directly from travel identity documents. Where additional information is required on embarkation or disembarkation cards the use of this information typically is secondary to the prime purpose of processing the passenger. Consequently, in many countries throughout the region's embarkation or disembarkation cards could be dispensed with to facilitate passenger throughput, and encourage growth in future passenger traffic.

Similarly, with the extensive introduction of the customs red/green self declaration system now in operation at most international airports, passengers are making their customs declaration with their feet by choosing either the red or green exit path. Consequently the continued use of written Customs Declarations for individual arriving passengers could also be dispensed with as an outdated historical practice.

Recommended Practice 4.47 of Annex 9 assumes the Cargo Manifest will always be a manual document. It makes reference to including information on "a separate page" together with a suitable recommended endorsement.

This Recommended Practice should be enhanced so that it applies equally to a situation where electronic lodgement of the Cargo Manifest is contemplated.

Recommended Practice 6.50 could be enhanced by replacing the words "under customs supervision" in the third line with "in a customs controlled area".

The current wording can be interpreted to imply that there must be a customs officer present during all break down, sorting, and reassembly activity in such areas. Whereas, the real intent of this facilitation initiative is to ensure that operators can work unhindered in a customs controlled area, without placing either customs revenue, national security, or health issues at risk.

Recommended Practice 6.52 should also be made available to international air express operators.

It is interesting to note that separation of markets between postal authorities and international air express operators in a number of countries have already overlapped, and business partnerships have been established between postal authorities and express operators to leverage each others strengths and market coverage.

It was noted the United Nations Recommendations and Guidelines for Trade Efficiency combine a range of facilitation related recommendations and guidelines with guidelines for the successful operation of "Trade Point" centres as part of UNCTAD's thrust for a global Trade Point network.

Consideration could be given by the appropriate United Nations agency to the supplementing this document with three complementary but smaller publications. The first deals with detailed recommendations and guidelines for governments, government agencies, and parastatal organizations; the second with recommendations and guidelines for private sector organizations; and the third with recommendations and guidelines for the establishment and operation of national Trade Point centres.

Where these documents promote an international or industry "best practice", acknowledged performance indicators for each "best practice" should be developed and incorporated together with realistic benchmarks, against which trade efficiency performance at national levels can be measured.

As an example, it is reasonable to expect that inbound air express consignments should be available for processing within one hour (if not earlier) of aircraft arrival. Similarly it is reasonable to expect high value or high dutiable air freight items to be cleared of customs for delivery within a maximum of four hours from aircraft arrival.

Where policy recommendations are included for consideration by governments and government agencies, detailed policy discussion papers could be developed and included as Annexes to the base documents so that policy issues surrounding the recommendations can be explored in depth at government levels.

As an illustration of the benefits of such an approach, a detailed policy discussion document relating the introduction of deferred payment of customs revenue, has been developed and included in the appendices to this report for information.

To promote trade facilitation initiatives in specific industry sectors, such as air cargo, it may be beneficial to consider producing an abridged, industry specific version of the United Nations "Recommendations and Guidelines for Trade Efficiency" for a particular industry sector. These publications should include appropriate industry benchmarks, performance measures and performance indicators for recommended best practices, and be promoted to the specific industry sectors throughout the Asian and Pacific region.

Recommendation 13 of the United Nations Recommendations and Guidelines on Trade Efficiency, Chapter I paragraph 47, advocates for governments to set minimum standards for, and closely regulate the performance of, shipping agents, freight forwarders and Customs brokers.

Such a recommendation is inappropriate in a climate where closer working relationships and cooperation with industry is also being promoted as the preferred solution to encourage economic growth. The providers of such "professional" services should instead be encouraged to establish their own industry service levels and performance criteria through deregulation of such services, placing greater reliance on market forces, and promotion of commercial competitiveness to bring about performance improvement.

It therefore appears appropriate for the relevant United Nations agency to consider deleting Recommendation 13 in Chapter I from the "Recommendations and Guidelines for Trade Efficiency", and replace it with wording recommending deregulation and introduction of market competition into industry sectors associated with the handling, storage, movement, and processing of international cargoes.

Given the explosive development of the Air Express industry over the last decade and its significant impact on customs airport operations, the World Customs Organization (WCO) in conjunction with industry representatives, developed international Guidelines for the Clearance of Express Consignments by Customs Administrations. These guidelines recognize the changing nature of the customs business and note that all consignments are not of high risk to authorities.

Consequently the guidelines incorporate acceptable modern customs management practices for the clearance of consignments based on value rather than commodity classification. While the guidelines are yet to be implemented in major trading nations, their existence should be taken into account in the design and development of future cargo clearance procedures by both customs administrations and the Air Express industry, so that consignments can be sorted and cleared on the basis of value and/or commodity classification.

The WCO guidelines, details of which are contained in the appendices to this report, create an opportunity for express operators to consider sorting consignments into the same four categories as defined in the guidelines.

Unfortunately these guidelines do not contain advice on drafting enabling national legislation to give effect to the spirit of the guidelines, nor do they acknowledge that in some economies, customs administrations still undertake the role of tax gatherer and provide the major source of Government revenue.

Nevertheless continued promotion of these guidelines is being undertaken, with greater pressure being applied in those countries offering hub type operations for major Air Express operators.

Accordingly it is recommended that the WCO Guidelines for the Clearance of Express Consignments be examined with a view towards national implementation of recommendations throughout the Asian and Pacific region at the earliest opportunity.

It is further recommended that appropriate United Nations agencies consider including the World Customs Organization's Guidelines for the Clearance of Express Consignments in future editions of published Recommendations and Guidelines for Trade Efficiency.

The changing role of a number of key players in the air transport sector has been noted and these changes, together with their likely impact on implementation of facilitation "best practices", have been documented for further debate.

The extent to which these facilitation "best practices" have been implemented throughout the region is directly related to the maturity of national economies; the level of national trade intensity; the competitiveness of nations and commercial organizations; the availability of investment capital; and ready access to project management, project implementation, and change management expertise.

In a number of cases published "best practices" have already become dated and in need of modification, as indicated in the previous section to this paper.

It was estimated that in 1995 2.6 billion arrivals and departures were handled by the world's airports. Given projected traffic increases it is anticipated that by the year 2010 airports will have to handle 5.2 billion passengers a year.

While the aviation industry is moving towards resolving some of the congestion on the tarmac and in the holding patterns above key airports, through the planned introduction of a new generation of Boeing and Airbus super-jumbos, these new aircraft will compound the already crowded, and in many cases inefficient processing systems and facilities already in place to handle passengers and freight. Consequently the need for more streamlined passenger and freight handling procedures has never been greater.

It is anticipated that major airports such as Singapore, will in the future also compete for regional traffic through the strategic application of information as a value added commodity. In effect they could become information hubs as well as transport hubs for the region.

Such a move could see key airports becoming information hubs for all parties involved in the air transport sector, including government agencies. Instead of individual airlines collecting additional Advance Passenger Information Systems (APIS) related information on their own dedicated reservation systems at the check-in stage, such information collection and distribution could become a common feature on future SITA Common User Terminal Environment "CUTE" systems, that could be provided as a service to all airlines by airport authorities.

The appropriate passenger information could then be transmitted by the airport authority at the departure point to the airport authority of destination airport(s) for flights, and subsequently made available to interested parties for pre-processing of the inbound aircraft. Hence, in some economies it would be possible to see airport-to-airport exchange of passenger and trade-related information.

In locations such as Hong Kong, China, Australia, the Republic of Korea and Japan multi-modal operations are also expected to flourish with key airports operating as transport hubs for transfer of passengers, baggage, and freight between aircraft and other modes of transport, e.g., road and rail.

Major airports particularly in developed economies have already become more commercial and less like public utilities, and although some countries have privatised their airports few have been able to match the commercial success of those airports controlled by Britain's BAA, which is now seen as the industry's pacesetter and a major retail operator.

In the meantime a number of airports throughout the region currently operate procedures and facilities which are likely to discourage future growth in air freight traffic, or at the least restrict throughput such traffic. Restrictive facilities or procedures need to be identified at national levels and measures developed to promote economic growth in the aviation sector. Current restrictive practices include:

i. Restrictive passenger processing facilities;

ii. Limited use of on-airport retail facilities to help offset high landing charges;

iii. Poor baggage handling facilities;

iv. Inefficient or inadequate freight storage and handling facilities;

v. Little or no cold storage facilities for perishable freight;

vi. Multiple, antiquated security screening facilities;

vii. No on-airport facilities for processing express consignments;

viii. Limited facility for on-airport repacking and distribution of regional freight;

ix. Tightly regulated ground handling environment, often with parastatal organizations operating in a monopolistic fashion;

x. Widely dispersed and uncoordinated cargo processing facilities;

xi. Limited capacity for growth with no provision for off-airport container processing and handling facilities;

xii. Lack of integrated information processing systems capable of supporting either direct communications with all airport users, or electronically interfacing with information processing systems of major airport users.

Some economies restrict provision of ground handling services to selected parastatal organizations or airport affiliated companies. In such situations significant inefficiencies are often evident, open tarmac storage is rife, and freight availability is protracted.

Governments are encouraged to deregulate ground handling services at major international airports to encourage commercial competition to drive through productivity efficiencies in this important area.

Furthermore governments are hereby encouraged to permit major freight and air express carriers to provide their own ground handling services if so required.

To stay competitive, major carriers in the region are undertaking various actions to utilise technology more efficiently so as to save on labour costs, while diversifying their interests into related businesses where permitted. This includes investments in cargo-handling operations, catering services, and engineering facilities at key airports.

In this regard, it is worth noting Singapore Airlines' investments in cargo-handling operations at Hong Kong's new airport, a catering venture with the Evergreen Group in Taipei, and an engineering facility in China. Singapore Airlines is also lowering its cost structure by moving some services from Singapore to lower cost countries. To date this has included: moving data processing operations to Madras, India; and outsourcing many of the airline's accounting activities to Beijing.

To stay competitive carriers have extended operational hours to the maximum permitted by governments and airport authorities. In such cases they are also requiring on-demand ground handling services at competitive rates coupled with extensive on-airport freight handling facilities. Where freight volumes dictate, major carriers have introduced full freighter services and have partnered with other carriers to develop complementary global information processing services.

Where such services are being employed however, they are often hampered by the inability of key government agencies to provide extended official coverage to guarantee continuous processing and clearance of cargoes. This has an immediate effect on the commercial viability of some operations such as express consignments, where "Asia overnight" services are being marketed and sought.

Governments are therefore encouraged to facilitate "out of hours" processing and clearance of freighter and express consignments through the extension of "official hours" to cover the period 0600-2200 hours.

The introduction of modern customs risk management techniques; systems based processing facilities; electronic commerce based pre-screening and pre-processing systems; clearance of consignments based on minimal information; and introduction of suitable regimes to support deferred payment of customs duties for low risk shippers and goods, can all be deployed to effectively improve cargo clearance throughput and facilitate economic growth, while still retaining necessary control elements to detect and manage high risk shipments.

In some locations where electronic commerce based cargo community systems are in place, the use of secure on-board computers on freighter aircraft may in the future be utilised to completely process consignments while en route, as a means of reducing EDI network costs and accelerating clearance procedures on arrival. The resultant information can be downloaded to control agencies at the arrival airport while the aircraft is in-bound thereby facilitating clearance on arrival and aircraft turn around times.

National carriers could therefore be encouraged to explore the potential for the future use of secure on-board computers, particularly in freighter aircraft, for preparation, pre-processing, and transmission of information pertaining to on-board cargoes while the aircraft is en route.

Furthermore, carriers when enhancing or developing computer systems in support of processing air freight consignments, should be encouraged to incorporate the six digit Harmonised Tariff code on Cargo Manifests.

This will enable control agencies to pre-screen and release cargoes against electronic versions of Cargo Manifests.

Boeing recently announced that it expected the international air express market to increase at an average annual growth rate of 18 per cent over the period 1996-2015, giving it a 37 per cent share of the expected total world air freight market, compared with just 5 per cent in 1995.

The air express industry in Nepal is reported to be experiencing an annual average increase of 20 per cent.

Because of such significant growth rates, together with the industry move towards carriage of heavy freight items, air express operators are pushing for dedicated express clearance facilities at key gateway airports throughout the region. This places significant pressure on governments, airport authorities, and government agencies to respond positively within acceptable time frames required by the industry.

It is however necessary to understand that there are a number of customs operational initiatives which can readily be introduced without legislative change, dedicated equipment, or dedicated facilities while the air express industry continues to operate with on-board couriers (OBC) on selected routes.

The following chart illustrates the evolutionary nature of the air express industry, and places in context major express facilities that are available in major hub operations such as Singapore, Hong Kong, Japan, Brussels and London. For example it is possible to clearly show that it is not necessary for customs to provide an immediate 24-hour clearance operation until such time as the express industry moves to the far right of this chart with hub operations.

It is also possible to illustrate that as long as customs provide resources to coincided with movement of the bulk of flights, this will go a long way down this evolution path. Only when the industry seeks to move beyond the heavy line indicated on this chart, by moving into a full freight mode are customs administrations likely to be faced with procedural issues associated with clearance on little or no documentation. Up to that point, continued use of the "passengers baggage facility" (outside of the arrival hall), will usually be tolerated by customs authorities provided all express consignments are handled upon arrival and are not subject to unaccompanied baggage clearance procedures.

Finally this chart illustrates the evolutionary nature of the express industry, and shows how the various facilitation initiatives being sought by the industry are part of an overall evolutionary pattern leading towards fully automated express handling facilities.

A number of major international airports are already suffering from passenger congestion, and as a consequence airport authorities and customs administrations are applying pressure on the air express industry to cease using on-board couriers so as to eliminate courier baggage from already congested airport arrival halls.

At the same time it is also being argued by the freight forwarder industry that express consignments should not receive any preferential treatment during customs air cargo clearance operations. In addition the air express industry frequently argues for parity with postal authorities for the speedy release of document shipments on the same basis as applied to bulk mail.

A closer examination of the WCO Guidelines for Clearance of Express Consignments will show, however, that the suggested procedures can equally be applied to all consignments regardless of carrier or mode of transport. It is therefore evident that the suggested procedures should not be restricted to "express consignments", but should be applied to all consignments which meet the criteria set down for the four different categories of goods.

In effect this means that while the express industry will continue to seek and enjoy the benefits derived from dedicated clearance facilities, based on the volume of shipments alone, it is unnecessary for customs administrations to develop special procedures or computer applications for the clearance of express consignments.

Any new automated customs cargo clearance system should accommodate fast clearance of any consignment based on the principles enshrined within these WCO guidelines. That is, clearance on partial information for low-value items, preferably through pre-clearance of manifest data only, and clearance of high value/high risk items being effected through receipt of supplementary information in electronic format.

The WCO guidelines categorise shipments into four levels of risk, namely:

Category 1: Documents

Category 2: Low value non-dutiable consignments

Category 3: Low value dutiable consignments

Category 4: High value consignments

Category 1 consignments could quite easily be released from customs control without the need for any formal customs documentation in much the same way as that applying to clearance of bulk mail.

Categories 2 and 3 consignments both require information pertaining to commodity classification to help determine their liability for duty. It is therefore anticipated that these two categories could be processed based in minimal information, leaving category 4 (high value) items as being the only commodities requiring preparation of full customs declarations.

National customs administrations should be encouraged to enhance their customs cargo clearance systems to accommodate fast clearance of consignments based on the principles enshrined in the WCO Guidelines for Clearance of Express Consignments.

Although much is said about promoting internationally accepted, modern customs management practices there is no single document which explores in-depth what each of these "best practices", how they should be implemented, what legislative environment is required, or the various change management issues that must be considered during any policy development phase.

Furthermore, there are no published benchmarks, performance criteria, or performance indicators identified for each of these acknowledged "best practices". This lack of comprehensive information makes it very difficult to convince policy makers that the "best practices" have been adequately thought through, or that they actually work.

To illustrate the sort of wide-ranging policy issues that must be addressed in order to implement these "best practices", a sample policy discussion paper has been produced in support of the "best practice" of introducing a deferred payment of revenue regime and is included in the appendices to this paper. This is the sort of material that should be produced for each recommended "best practice" and incorporated into a single publication along with agreed international performance measures, and suggested legislative environment.

It is therefore considered desirable that the World Customs Organization develop and produce acknowledged industry benchmarks, performance measures and indicators for each acknowledged international customs "best practice", supported by detailed policy discussion papers relating to those "best practices" which requires policy consideration at government levels.

One of the most significant trends having a marked impact on customs administrations through out the region is the continued emergence of logistics management systems.

With the size of individual shipments decreasing in volume as a result of just-in-time type processes, and the urgency for delivery accelerating, a greater move towards the use of air freight and air express services eventuates. In turn this increases the work pressure on customs clearance procedures at airports, mainly because such historical clearance procedures remain transaction based.

National customs administrations and other organizations involved in the movement and clearance of international freight should be encouraged to move away from historical transaction based processing philosophies and procedures, and adopt modern, unobtrusive, system-based solutions relying extensively on risk management techniques.

It is also noted that many historical customs activities are typically performed at the border prior to delivery of consignments, when such activities can be better handled after the event, as part of post event company audits. Issues such as valuation, classification, testing or sampling, are all capable of being undertaken as part of a regular post entry audit programme. By removing some of these activities from front-line operations, and supported by appropriate computer-based systems capable of providing details about past shipments, customs clearance procedures can easily be simplified, become system based, and help to ease pressure on existing facilities and resources.

National customs administrations should be encouraged to adopt post event audit techniques and transfer historical pre-clearance activities such as valuation, classification, and sampling into a post-event regime.

A global analysis will also show that in most developing countries where there is a high reliance upon customs administrations to act as tax gatherers, cargo clearance procedures using manifest acquittal prior to delivery of goods remains the established norm. At the other end of the spectrum in the more advanced economies, customs administrations have abandoned this practice and now rely on pre-clearance of shipments, scanning of source documents such as air waybills, and greater utilisation of risk management techniques for targeted examinations and audits.

As long as manifest acquittal prior to clearance remains part of the cargo clearance process, customs administrations will continue to suffer from information overload, with its consequential delays on clearance times.

Consequently national customs administrations should be discouraged from retaining procedures which rely on manifest acquittal prior to clearance of consignments.

In the country/area such as Singapore and Taiwan Province of China, Governments have already introduced extensive electronic commerce based environments as national strategic initiatives to facilitate international trade competitiveness. In other countries with high levels of trade intensity, such as Hong Kong, China, Malaysia, the Republic of Korea, the Philippines, and Thailand, Governments are also introducing electronic commerce based initiatives for the processing of import/export documentation.

Carefully nurtured, this period of accelerated change and public sector process reform can create a window of opportunity for industry and the public sector to work together to develop new innovative, business practices that will foster greater economic development, while permitting government agencies to discharge their legal duties.

Before seeking significant procedural changes in customs clearance and revenue collection procedures however, a fairly detailed review of national customs legislation must be undertaken. Such a review will help to determine the extent of flexibility which exists for procedural reforms to take place without the need for further legislative rewrite. Often such legislation will be found to be rigid, draconian, and very specific in relation to document contents, duty payment prior to delivery, examination prior to delivery, hours of operation etc.

In many economies local customs management remain unable to implement process reforms such as clearance prior to arrival, clearance on minimum or no documentation, deferred payment of duty, and other risk management initiatives without first obtaining some form of legislative amendment.

Consequently where opportunities arise to influence the design of future national customs legislation, the following key points should be accommodated to ensure maximum flexibility for future process reforms and enhanced facilitation initiatives:

i. It is unnecessary to define invoice contents or specify the extent or nature of supporting documentation for cargo clearance, by legislative dictate. Most modern customs administrations are now accepting commercial invoices as evidence of the transaction (if required). If the shipment is suspicious or the shipper is suspected of valuation fraud, then adequate provision should be contained elsewhere in the legislation to permit customs to undertake complete, post event audits of the shipper's records.

ii. Reference to the extent of supporting documentation should be avoided so that customs can reduce the volume of documents required in support of each shipment, while retaining the authority to call for further documentation on a selective risk management basis.

iii. Wording such as "All imported goods shall be discharged and examined at the time and place as designated by Customs..." should be avoided if possible as this implies that goods should be examined before delivery is permitted, resulting in customs policies which demand high random examination rates.

While random examinations are a viable risk management tool for customs, random examination rates in excess of 3-5 per cent quickly become counter productive. Customs history around the world has shown that extensive use of random examinations have failed to generate sufficient additional revenues to justify the resources employed. This is particularly true in environments where a low tariff regime exists.

Most modern customs administrations are now deploying systems and procedures based on extensive risk management techniques. A small percentage of random examinations are also being undertaken but usually only as a quality control measure or as part of an overall physical deterrent programme such as use of roving examination teams.

iv. Legislation should not prevent procedures from being introduced which enable customs duty to be paid after clearance of consignments.

v. If possible, provision should exist to enable duty payments to be paid in bulk, rather than on a consignment by consignment basis, thereby laying the foundation for payment on monthly consolidated duty statements so as to reduce the number of bank of EFT transactions, simplify operations, enable systems based processes to be introduced, and remove cash handling from the physical cargo clearance process. This is a major initiative for improving "customs integrity" in areas where un-receipted payments are prevalent.

vi. Provision should exist to accommodate the concept of clearance on minimum or no documentation, thereby permitting clearance directly on "house" air waybills, or by merely using x-ray examination with little or no supporting information for low risk consignments.

vii. Any specific requirement for a physical signature on a customs declaration should be avoided at all costs. This will then enable future systems to be introduced in that support use of electronic commerce based initiatives, bulk clearance of multiple low risk shipments, use of periodic returns, and developments of high technology clearance systems using scanners, with minimum human intervention.

viii. Personal reward schemes should be avoided where ever possible as they frequently undermine other facilitation initiatives and encourage development of unauthorised practices as a means of boosting personal income.

ix. Provision should exist to support valuation audits "after clearance" of goods on an informed and scheduled basis as part of a total Customs audit programme of shipper's records.

Freight Forwarder and Customs Broker Associations in the region have recently combined resources to provide a common industry voice. Typically this industry is driven by the information demands of government agencies, banks, handling agents, airport companies, shippers, and carriers, with much of the work being undertaken via fax, e-mail, and in more developed economies EDI enabled computer systems.

This industry is very predatory and many smaller organizations have been taken over by larger players. Big multi-national freight forwarders have invested heavily in common global systems that are EDI enabled and capable of tracking consignments throughout most of the international trade cycle. A number of these multi-national and one or two smaller players, handle both the export and the import side of the same trade transaction thanks to extensive investments in electronic commerce based initiatives, and international presence.

175. At the other end of the scale many smaller national organizations in this sector, operating in developing and emerging economies, still employ totally manual, paper based, historical systems. Where such organizations have invested in some form of automation, it is often only for administrative and financial activities together with international e-mail.

It is also noted that many smaller organizations in this industry remain fearful of customs administrations introducing electronic commerce based initiatives as they believe their corporate viability will suffer as a result. In reality this fear is unjustified.

Where such systems are contemplated however, they should be preceded and accompanied by extensive public education campaigns to reduce industry concerns, if successful implementation of the project is to be assured.

The continued expansion of "non-tariff" trade barriers brings with it additional burdens on clearance procedures as such barriers typically involve some form of "quota control", additional "licence" or "permit" requirement, or an increased level of surveillance activity. Often these "non-tariff" trade barriers require customs administrations to rely on other government agencies, often in diverse locations, to issue appropriate documentation before clearance can be effected.

However such agencies often do not apply the same degree of urgency to the issuance of such documentation, or they are located some distance away from border control points, resulting in delays in the clearance of shipments.

Customs cargo clearance systems of the future need to better accommodate this multi-agency interaction which accompanies the use of non-tariff trade barriers in an unobtrusive manner, to ensure all parties involved in the clearance of international consignments are working to the same agenda and time frame.

Significant effort is now being made by some countries to develop systems and procedures whereby customs administrations in exporting countries can receive import clearance notification from the importing country prior to granting approval for export. If import clearance is denied due to quota restrictions etc., then approval to export should also be denied. Such close cooperation between nations is obviously time sensitive, and will eventually change the way in which certain export consignments are processed in the future.

Many government agencies, including customs administrations, have become important users of electronic commerce based facilities. This trend will continue and such government agencies will continue to take their place alongside larger multi-national organizations at the leading edge of developments in electronic communications media.

Electronic commerce based initiatives incorporating the use of Electronic Data Interchange (EDI) techniques, has become an important tool for customs administrations as they seek to reconcile the two seemingly contradictory trends between more facilitation and more protection. These customs administrations have been quick to understand the potential benefits and importance of electronic commerce to their work and are either implementing EDI based projects, developing EDI based systems, or developing strategies for future implementation of such systems.

Organizations however still need to be encouraged to look upon the use of electronic commerce based enabling technologies as an opportunity to re-engineer core business practices and simplify business practices.

It is noted that a number of customs administrations in the Asian and Pacific region have already embarked upon some form of automation or electronic commerce based initiative for the clearance of international cargoes. A number of these initiatives are quite advanced, while others are in the investigative or pilot stages of development.

It is also noted that a number of intraregional EDI pilot initiatives are under way between selected participants under the APEC and Asia EDIFACT Board umbrellas. In many cases these initiatives have simply been developed to prove that the concept of international exchange of clearance information is a possibility. However for extensive commercial use of such systems to become a reality within the immediate planning horizon, a competitive advantage must also be available before commercial participants will commit to the significant change management issues that arise during the introduction of such electronic commerce initiatives.

When governments are investing in the modernisation and automation of their national customs administration and in the widespread reduction of import tariffs, significant future capacity exists for using electronic documents in all aspects of air cargo clearance operations. However, not only must government agencies be willing and legally able to accept and process such documents electronically, but the commercial sector must also be prepared to make the necessary investment and commitment to introduce complementary process reforms to operate in such an electronic environment.

Where commercial organizations are multi-national in nature such as airlines, the introduction of information processing systems must be viewed on a global basis. In such cases the pace of change to core business systems is typically slower and the cost of initiating such changes significantly higher. This is particularly relevant when addressing issues associated with content and structure of airline cargo and passenger information systems.

For governments to successfully influence such changes it is necessary to ensure that multi-nationals are offered standardised, coordinated, simplified clearance facilities in a number of countries concurrently, to justify the significant investment involved in changing such major information processing systems.

In the future greater focus on reducing EDI message traffic and costs through consolidation of consignment information and periodic lodgment of information will become a necessity. As more organizations get involved in the use of electronic commerce based initiatives for clearance of international trade transactions, attention will turn towards attempting to reduce the cost of EDI network traffic itself. This re-focus will come from either the commercial community, the local EDI community operator, or from government agencies.

It will force a rethink of existing transactional based clearance procedures with a view towards consolidation or elimination of information and introduction of periodic returns for low risk shippers instead of individual customs declarations for each consignment. It will also encourage the introduction of periodic duty payments, and the abolition of duty receipts.

A number of electronic commerce based trade community systems have been developed throughout the region.

There are many architectural variations to these implementations, such as the centralised, national strategic initiatives as developed in Singapore, highly integrated and dedicated clearance facilities such as the NACCS system in Japan, totally deregulated and loosely coupled clearance facilities such as in New Zealand, dedicated air cargo distributed processing systems for local operations, and local cargo community clearance facilities for individual air or sea ports.

Each implementation is different. There are different drivers, different circumstances, different expectations, and different investment sources. They all, however, require active participation of government agencies such as customs where they are involved in the cargo clearance process. The implementation of a nationwide cargo community system, however, typically involves substantial investment of public funds in telecommunications, computerisation, process reform, education and marketing. Such situations appear to be restricted to highly regulated affluent economies where ready access to extensive public funds may be more freely available.

In comparison, it would be inappropriate at this stage to consider development of an integrated national electronic commerce community system in Nepal, where basic infrastructure is lacking, funding is limited, significant process reform is required, and extensive investments required in modernising and automating the workforce. A more likely solution for this country would be to rationalize air cargo clearance procedures in a single air freight processing centre, which is already in the planning stages, and introduce the same environment at Inland Clearance Depots that are being developed for road/rail freight with the aid of the World Bank. With the use of client server technology localised customs clearance facilities could be installed at each of the three locations and, if the telecommunications infrastructure is adequate, they could be linked together to facilitate maintenance of a common approach and the production of national trade statistics.

It is proven, however, that successful implementation of electronic commerce based initiatives requires extensive management vision, commitment and drive, clear understanding of business drivers and associated practices, sound project management and change management capabilities, experienced Value-Added Network partners, access to enabling technologies and skills, teamwork, extensive public and staff education programmes, and a great deal more time and coordination than implementing other internal information technology project.

An outline of a proven electronic commerce implementation methodology incorporating many lessons learned from practical experience is included in the appendices to this paper for future reference.

Electronic commerce is a catalyst for change. It is a change agent that should be used to re-engineer core business practices, simplify historical procedures, and create new opportunities for the future. Such an environment, therefore, demands that senior corporate managers ensure the implementation team is adequately empowered to drive through enterprise-wide changes, and that the team leaders and project managers are also experts in managing change.

However, electronic commerce implementation will never be problem free if leveraged correctly, despite the relatively cheap cost of enabling technologies and its overall simplicity. It quickly exposes internal weaknesses and constraints, and brings them out into the open where they must be dealt with. Available reaction time to deal with operational problems is reduced, thereby requiring greater emphasis on quality of service to minimise downstream problems that need to be addressed.

Electronic commerce initiatives are reliant upon a number of key factors for success to be achieved within the first 12 months of a project's life cycle. These are:

(a) Availability of adequate funding;

(b) Total support from senior management, including active participation, ownership of business problems and solutions, and pro-active assistance;

(c) Mutual trust amongst all parties;

(d) Agreement for process reform, and simplification or removal of historical transaction based procedures where necessary;

(e) Successful implementation and commissioning of an electronic commerce corporate gateway, together with associated communications capabilities and support expertise;

(f) Agreed EDI message definitions and data sets together with support of a reputable Value Added Network provider, EDI clearing house, or experienced in-house staff capable of supporting agreed standards;

(g) Installation of adequate electronic commerce audit and billing mechanisms together with appropriate administrative and management reporting capabilities and interfaces to existing systems;

(h) Development and delivery of appropriate marketing strategies, promotion material, pricing policies, and educational materials etc;

(i) All participants working to agreed time schedules and receiving additional support when needed; and

(j) Decisions being made when requested.

As mentioned elsewhere in this paper a general lack of awareness by some key decision makers of the existence of published material on trade facilitation related "best practices" exists throughout the region.

There also appears to be a general lack of adequate project management and change management expertise incorporating detailed knowledge of cargo processing requirements, public sector process reform issues, and practical expertise of implementing information technology and electronic commerce based initiatives.

It was noted that general awareness of trade facilitation related initiatives, issues relating to the implementation of change, major project management implementation, and development and implementation of electronic commerce based initiatives is limited throughout the region.

Consequently it is recommended that ESCAP gives consideration to hosting seminars or workshops for senior policy makers and operational managers from both public and private sectors to promote greater awareness of trade efficiency related initiatives, discuss issues relating to the implementation of associated process reforms, explore major project management implementation issues and discuss issues associated with the development and implementation of electronic commerce based initiatives.

It is also considered beneficial if ESCAP could lend support to, and encourage existing regional initiatives aimed at promoting public sector process reform throughout the region with special focus on developing economies and economies in transition.

1.1 In 1992 IATA predicted that worldwide scheduled and charter international freight traffic would grow to 6.9 per cent (on average) annually over the next five years. What has been the actual national trends experienced in international air cargo movements since 1992 relating to both imported and exported cargoes?

1.2 Is this trend considered likely to continue, or significantly change over the next five to ten years?

1.3 What are the key factors that appear to be driving current trends, and are there any indication that these factors will significantly alter over the next decade?

1.4 Has there been any significant variation or change in the type of cargoes that are being carried by operators in the air cargo sector. If yes, does this appear to be a local, regional or seasonal trend?

1.5 Has there been experienced any noticeable change in the size, volume, weight, or values of air cargo movements as a result of changing economic patterns and economic development amongst trading partners in the region? (In answering this question please provide a separate response for both inwards and outwards freight movements).

1.6 Has there been experienced any noticeable change in the destinations and timings of air cargo movements as a result of changing economic patterns and economic development amongst trading partners in the region? (In answering this question please provide a separate response for both inwards and outwards freight movements).

1.7 If possible, can you provide forecast traffic volumes for the next five years on the basis of thousand tons per year for each of imported and exported air cargoes?

1.8 If possible, can you provide forecast traffic volumes for the next five years on the basis of number of consignments per year for each of imported and exported air cargoes?

1.9 Are there any noticeable trends in the proportion of air cargoes that are being handled by air freight forwarders, air express operators, or total logistics integrators? If so, please elaborate.

1.10 Has there been experienced any change in the variety, frequency, and capacity of international air cargo carriers servicing the country over recent years, and if so, is it anticipated that such rationalisation will continue?

1.11 Is there adequate international carrier capacity available to service national business needs taking into account time, cost, frequency, destination, flexibility, and special freights etc.?

1.12 What suggestions or recommendations could be made at national or regional levels for enhancing economic development through improved international air cargo movements?

2.1 Is your country a contracting party to the Convention on International Civil Aviation (Chicago, 1944)?

2.2 Has your country entered any reservation, or notification of difference, to any of the provisions of Annex 9 to the Convention on International Civil Aviation? If so, please elaborate on areas were such reservations or notifications of differences have been made?

2.3 Is your organization aware of the content of Annex 9 to the Convention on International Civil Aviation, concerning International Standards and Recommended Practices in the area of Facilitation?

2.4 Is your organization aware of the United Nations Recommendations and Guidelines for Trade Efficiency?

2.5 Are the national Customs documentation requirements relating to the entering and clearance of aircraft, aligned to the formats contained within the appendices to Annex 9 to the Convention on International Civil Aviation? If not, are there any plans to align these documents in the near future?

2.6 Are the national Customs goods declarations for clearance of imported and exported goods aligned with the United Nations Layout Key for Trade Documents?

2.7 Does your national Customs Administration operate an automated cargo clearance system for processing of goods declarations relating to air cargo movements? (If so, please provide a information on the system that is in place. If no computerised system exists in this area, are there any national plans to introduce such a system?)

2.8 At international airports, is there an integrated cargo clearance operation in place where all commercial operators and government agencies are generally available in the same location?

2.9 What are the general hours of operation available for clearance of international air cargoes, both inbound and outbound?

2.10 Do these hours of operation meet the current business needs of the economy, and if not, what measures are being taken to extend or adjust the hours of operation to suit?

2.11 Are there any external constraints which make it difficult to adjust hours of operation to suit market needs, and if so please elaborate?

2.12 Is national customs legislation keeping with international customs "best practices"? (If in English is available, please provide a copy).

2.13 Would the current customs legislation inhibit the introduction of an enhanced electronic commerce based cargo clearance system in any way? If so, please elaborate.

2.14 Are the World Customs Organization's Guidelines on the Clearance of Express Consignments being applied at international airports, nationally and within the region?

2.15 What are the general problems, if any, being experienced in relation to the speedy turn around of international air cargo shipments?

2.16 What suggestions or recommendations could be made at national or regional levels for enhancing trade efficiency in the context of air cargo movements in the Asian and Pacific region?

3.1 Is there an electronic commerce based air cargo clearance system in place at all of your international airports? If so, is the national Customs Administration actively partaking in such systems?

3.2 If an electronic commerce based cargo community system is in operation for air cargo shipments, what documents are being transferred electronically? Between what category of trading partners? What plans exist to expand the scope, functionality, and usage of such a system over the next five years?

3.3 Is it possible or permissible to electronically pre-lodge Customs documentation ahead of arrival or departure of the aircraft? If not please elaborate as to why, and if possible identify any inhibiting factors.

3.4 Is it possible or permissible to electronically lodge inwards cargo manifest data with Customs for pre-screening? If not, please elaborate as to why?

3.5 Is bar coding being used on external freight packages, or in any other manner to assist with the processing, movement, and clearance of air cargo shipments? If so, please elaborate.

3.6 What role is the national Customs Administration playing to act as a catalyst for change within the air cargo clearance environment? Could this role be improved, and if so in what direction?

3.7 Are risk management practices and facilitation related initiatives in operation and being promoted by the national Customs Administration?

3.8 In the event that a national electronic commerce based cargo community system does exist at national gateways, please provide general description of what international connection exist with similar systems within the Asian and Pacific region, or with carriers.

3.9 What are the general problems, if any, being experienced in relation to the continued spread of electronic commerce based initiatives in the air cargo sector, both nationally and internationally?

3.10 What suggestions or recommendations could be made at national or regional levels for enhancing the spread of electronic commerce based initiatives in the context of air cargo movements in the Asian and Pacific region?

Subject to the relevant national legislation, these Guidelines and any specific arrangements for expedited clearance/release made thereunder apply equally to all consignments for which expedited release or clearance is requested, regardless of weight, value, size, type of operator or carrier (e.g., courier companies, airlines, freight forwarders, postal services) or of mode of transport. In these Guidelines, all services conveying such consignments are referred to as "operators".

(i) Consignments may be divided into four categories for the purpose of expediting Customs clearance or release.

(ii) The description and attributes of each category and the related clearance/release procedures and information requirements are as given below. The categorisation of consignments and the clearance or release procedures will apply both at time of exportation and importation.

(iii) However, at point of exportation Customs administrations may reduce the information requirements and use the most simplified procedures as goods are not normally subjected to duties and taxes at time of exportation and very few prohibitions and restrictions apply.

(i) This category includes any message, information or data recorded on any media (paper, cards, photographs and magnetic or electromagnetic media) and of no commercial value which, under national legislation, is subjected neither to duties or taxes nor to prohibitions or restrictions.

(ii) The shipper's or consignor's declaration of value may be accepted for clearance/release purposes as indicated in Guideline 9.

(iii) In determining the value of these consignments, transport costs shall be excluded as indicated in Guideline 10 (i).

(iv) Customs if it deems necessary, shall conduct selective documentary and/or physical examination of consignments prior to release.

(v) Normally, clearance or release procedures should be on the basis of a bulk declaration. The following procedures may be considered :

(a) Immediate clearance or release on oral declarations made to Customs.

(b) Immediate clearance or release on presentation to Customs of bags specially designed to transport such documents.

(c) Immediate clearance or release if the consignments have the required information for clearance or release affixed to them (e.g., the postal green label or similar label or a bar code containing the required information).

(d) Immediate clearance or release on presentation to Customs to a manifest and/or waybill, house waybill or an inventory of such items prepared by the carrier, operator, agent or freight forwarder. Such documents or messages should contain the necessary information for granting Customs clearance or release.

(e) Clearance or release following the presentation of a simplified Goods declaration.

(vi) Depending on the method of clearance or release outlined above, the following data elements may be required :

(a) Exporter or consignor: name and address

(b) Importer or consignee: name and address

(c) Description of the goods

(d) Number of parcels

(e) Value

(f) Weight

(g) Consignment identification number

(h) Country whence consigned

(i) Date of arrival

(j) Place of arrival

(k) Name of carrier

(l) Movement number (e.g. flight number etc.)

(m) Place of loading

(n) Customs broker's name and address

(o) Customs procedure (e.g. temporary importation)

(p) Marks and numbers of packages

Notes:

(1) In certain countries the only information required for the clearance or release of documents is the total weight of such documents arriving in the same consignment.

(2) In certain cases, the Customs authorities may require the subsequent furnishing of more detailed information.

(3) All individual consignments or packages in a bulk consignment should have affixed to them the data elements required for the clearance or release of the individual consignments or packages, which should be available to the Customs on request in advance, at the time of sorting or examination, when deemed necessary.

(vii) In all the above clearance or release procedures there would normally be no requirement for further post-release documentation or procedures.

(i) This category comprises consignments where duties and taxes are remitted or waived as the amount of duties and taxes applicable would be negligible, e.g, unsolicited gifts below a defined value, trade samples, etc. This category also covers low value goods which are not dutiable in their own right. Any items which are prohibited or restricted are excluded.

(ii) Customs has to specify the minimum value of a consignment or the minimum duty payable below which no duties and taxes will be levied. One or both criteria may be used.

Notes:

(1) For example, the value of a consignment should be less than US$ 10 or the duty less than US$ 3 or the consignment should be both less than US$ 10 in value and the duty less than US$ 3.

(2) Customs administrations may carry out regular reviews of the minimum value or the minimum duty payable below which no duties and taxes will be levied.

(iii) The shipper's or consignor's declaration of value may be accepted for clearance/release purposes as defined in Guideline 9.

(iv) In determining the value of these consignments, transport costs shall be excluded as indicated in Guideline 10 (i).

(v) Customs if it deems necessary, shall conduct selective documentary and/or physical examinations prior to the release of such consignments.

(vi) If Customs, however, requires information for statistical purposes a manifest, waybill or other document may be presented to Customs after clearance or release has been granted in instances where clearance/release is given without the presentation of a document.

(vii) Normally, clearance or release procedures may be on the basis of a bulk declaration. The following procedures may be considered :

(a) Immediate clearance or release on oral declarations made to Customs.

(b) Immediate clearance or release on checking the information affixed to a consignment as in the case of postal parcels or documents.

(c) Immediate clearance/release on presentation to Customs of a manifest and/or a waybill, house waybill, or an inventory of items prepared by the operator or his agent. Such documents should contain the necessary information for granting customs clearance/release.

(d) Clearance or release following the presentation of a simplified Goods declaration.

(viii) Depending on the method of clearance or release outlined above, the following data elements may be required:

(a) Exporter or consignor: name and address

(b) Importer or consignee: name and address

(c) Description of the goods

(d) Tariff heading number

(e) Number of parcels

(f) Value

(g) Weight

(h) Consignment identification number

(i) Country whence consigned

(j) Country of origin

(k) Date of arrival

(l) Place of arrival

(m) Name of carrier

(n) Movement number (e.g. flight number etc.)

(o) Place of loading

(p) Customs broker's name and address

(q) Customs procedure (e.g. temporary importation)

(r) Marks and numbers of packages

Notes:

(1) In certain cases, the Customs authorities may require the subsequent furnishing of more detailed information.

(2) All individual consignments or packages in a bulk consignment should have affixed to them the data elements required for the clearance/release of the individual consignments or packages which should be available to the Customs on request in advance, at the time of sorting or examination, when deemed necessary.

(ix) In all the above clearance or release procedures there would normally be no requirement for further post-release documentation or procedures.

(i) This category comprises consignments which are above the value and/or duty/tax limits of category 2 consignments or do not qualify for duty and tax remission or waiver. Any items which are prohibited or restricted are excluded.

Note:

(1) These consignments must, however, be of a value that is not considered high value e.g. consignments valued over US$ 50 but below US$ 1,000.

(ii) Customs shall specify the value and/or the tax limits for consignments in this category.

Note: Customs administrations may carry out regular reviews of the value and/or duty or tax limits used for determining whether consignments fall into this category.

(iii) In determining the value of these consignments, transport costs may be excluded, as indicated in Guideline 10 (ii).

(iv) The following clearance or release procedures may be considered :

Immediate outright clearance or release

(v) Consignments may be granted immediate outright clearance/release subject to any Customs selective documentary and/or physical examination of the goods and provided that :

(a) Information required by Customs is given in advance of the arrival of the goods for the purposes of processing information, calculating the amount of duties and taxes payable and for selecting consignments for documentary and/or physical examination, if deemed necessary.

(b) An abbreviated Goods declaration containing the information required by customs is presented prior to the arrival of the goods.

(c) The information required by customs is as indicated in Guideline 5 (vii) below.

(d) All duties and taxes are paid or deferred payment terms are accepted.

Immediate conditional clearance/release

(vi) Immediate conditional clearance/release may be given provided that :

(a) A manifest and/or a waybill or an inventory prepared by the operator or agent containing the information required by customs as indicated in Guideline 5 (vii) is presented to the customs.

(b) Adequate financial guarantees are given to the customs for securing payment of duties and taxes which are deferred at time of clearance/release.

(c) Customs, if it deems necessary, subjects such consignments to any documentary and/or physical examination prior to clearance/release.

(d) An abbreviated or full periodic Goods declaration containing details of all items cleared/released is presented to the Customs during a specified period.

(e) All duties and taxes are paid on finalising the clearance or release of the consignments concerned.

(vii) Depending on the method of clearance or release outlined above, the following data elements may be required:

(a) Exporter or consignor: name and address

(b) Importer or consignee: name and address

(c) Description of the goods

(d) Tariff heading number

(e) Number of parcels

(f) Quantity of each item in the consignment

(g) Value

(h) Weight

(i) Consignment identification number

(j) Country whence consigned

(k) Country of origin

(l) Date of arrival

(m) Place of arrival

(n) Name of carrier

(o) Movement number (e.g., flight number etc)

(p) Place of loading

(q) Customs broker's name and address

(r) Customs procedure (e.g., temporary importation)

(s) Marks and numbers of packages

(t) Identification number of invoice

(u) Identification number of other accompanying documents and certificates

(v) Importer's number

(w) Transaction number

(x) Taxation number

(y) Deferred payment request

(i) This category comprises consignments not falling under the other three categories described above and all consignments which are subjected to prohibitions and restrictions.

(ii) Duties and taxes are payable on these consignments at normal tariff rates and normal clearance/release procedures apply.

(iii) However, such consignments may be granted immediate clearance or release on condition that:

(a) A simple document such as an abbreviated Goods declaration or invoice is presented to Customs with the minimum information required by Customs to grant clearance or release.

(b) Adequate financial guarantees are provided to Customs for securing the payment of duties and taxes which are deferred at time of clearance or release.

(c) Any permits, certificates etc. required for clearance/release are presented at time of clearance or release.

(d) Release is granted subject to any documentary and/or physical examination deemed necessary by Customs.

Note: If the information required by Customs for granting immediate conditional clearance or release is received by Customs in advance of the arrival of the goods it will further expedite the clearance or release process.

(e) A consolidated or periodic Goods declaration, containing the details of all consignments cleared or released within a period specified by Customs is submitted and all duties and taxes are paid, on finalization of the Goods declaration.

(i) Subject to the provisions of national legislation, Customs authorities may allow sorting and transhipment operations to take place with the minimum of controls in a place designated by Customs, provided that adequate security has been furnished.

(ii) Additional security need not be provided when the sorting and transhipment operations are carried out at such designated places if security has already been provided.

(iii) The documents accompanying the consignments should be sufficient for such sorting and transhipment operations.

Operators may pre-advise Customs of the shipment or arrival of consignments. This pre-advice could be in the form of a manifest or summary report in either electronic or hard-copy form and should contain the information required by Customs for the clearance or release of the different categories of consignments. The provision of such information in advance may enable Customs to:

(i) ascertain the category of consignments, prior to arrival, so that the appropriate clearance or release procedures can be applied;

(ii) identify high-risk consignments requiring more scrutiny;

(iii) process information in respect of these consignments and pre-select consignments for more detailed documentary or physical examination;

(iv) release immediately documents and low value non-dutiable consignments on which there are no restrictions and prohibitions. Normally, there should be no further Customs intervention nor any subsequent submission of consolidated or periodic Goods declarations.

Notes:

(1) Where the clearance or release procedures are not automated, operators may be authorised to lodge with the Customs the appropriate documentation required for clearance or release of the different categories of consignments prior to the shipment or arrival of consignments.

(2) The documentation required for clearance or release may be, according to the circumstances, the manifest and/or the waybill, any other official document or an abbreviated Goods declaration depending of the category of the consignment and the clearance or release procedures applicable.

(3) Advance lodgement of information and documentation should not affect the point in time to be taken into consideration in determining the rate of duties and taxes, where applicable, as this will always be the point in time which is specified in national legislation.

(i) The shipper's or consignor's declaration of contents and value may be accepted by Customs for purposes of ascertaining the correct category of consignments where relevant, for the calculation of duties and taxes or for waiving such duties and taxes.

(ii) The acceptance of such a declaration may be limited to documents (category 1) and low value non-dutiable consignments (category 2) as no duties and taxes will be chargeable on these consignments and as restricted or prohibited goods will be excluded.

(iii) The operator, broker or importer in the country of importation may be required to corroborate the shipper's declaration of the contents and value.

Note: The shipper's or consignor's declaration may be affixed to the package as a label or be contained in a waybill, house waybill or invoice which should be signed by him, and if required be attached to the relevant consignment. The shipper's or consignor's declaration may also be electronically transmitted.

(i) For computing the value of consignments in category 1 (documents) or in category 2 (low value non-dutiable consignments), transport costs may be excluded.

(ii) The exclusion of transport costs in computing the value of consignments in category 3 (low value dutiable consignments) may also be considered.

(i) Customs has the right to examine all consignments to ensure compliance with the laws and regulations that Customs authorities are responsible for enforcing.

(ii) However, Customs authorities should not as a matter of course examine all consignments but may carry out examinations on a selective or random basis. In determining whether to examine consignments, Customs should have regard to the category of the consignment.

Customs authorities and operators may, if they so desire, conclude formal or informal agreements at the national level or local level in order, inter alia:

(a) to define in general the responsibilities of operators vis-a-vis Customs;

(b) to provide for the binding nature of any Customs declaration in whatever form for obtaining the clearance or release of consignments;

(c) to provide for cooperation between operators and Customs in maintaining security in those areas or places designated for the clearance or release of consignments;

(d) to provide for cooperation in the interdiction of narcotic smuggling and commercial fraud;

(e) to institute facilitated and expeditious Customs clearance or release procedures for consignments, provided that operators conform to certain Customs requirements such as payment for additional or extra services, the provision of financial guarantees, and the provision of advance information or documentation;

Documentation or its electronic equivalent which is sufficient to establish, for example, such details as the value, content, consignor and consignee could be accepted by Customs;

(f) to ensure that Customs is provided with premises and other facilities for their operations, if so required, in place designated for the clearance/release of consignments;

(g) to provide for timely notice to be given by either party to the agreement if amendments or abrogation of the agreement is contemplated.

Note:

(1) Since the volume of consignments in some countries may be very large and since operators exercise control over these consignments from point of collection to point of delivery, such agreements or arrangements should make provision for operators to institute their own measures, thus assisting Customs in the interdiction of smuggling and fraud, and in maintaining adequate security at places designated for the clearance or release of consignments. The supply of timely information for expeditious Customs clearance or release and other relevant matters could also be formalised under such agreements.

(2) National legislation may, if appropriate, provide for such agreements, in such a way that they are legally binding on all parties.

(i) Customs authorities shall designate the Customs offices or other places at which consignments may be cleared or released.

(ii) Customs authorities may, when considered necessary and depending on the volume of consignment traffic, direct such traffic to designated areas so that its clearance or release can be treated as separate from that of other baggage or general cargo.

(iii) The following places may be designated for the Customs clearance or release of export, transit and import consignments, depending on the volume of consignment traffic:

(a) At Customs offices where the volume of consignments is small, goods may be cleared or released as accompanied baggage in the passenger hall when brought as on-board courier consignments, and at the freight sheds in the case of consignments carried as freight.

(b) At Customs offices with low to medium levels of traffic, special areas may be set aside, e.g., in the passenger halls or freight sheds, for clearance/release and for authorised operations connected therewith.

(c) At Customs offices where there is a sufficiently large volume of traffic, joint Customs and operator facilities (eg hubs) may be provided.

(iv) In the above cases and particularly where there are joint Customs and operator facilities, operators may be required to provide Customs, free of charge, with certain prescribed facilities, e.g., premises, equipment, supplies and adequate Customs security.

The means of implementing these provisions are governed by the agreements or arrangements concluded between the two parties, as indicated in Guideline 12.

(i) At the request of the operators and where the level of business so justifies, Customs may, insofar as its resources permit, allow the clearance or release of consignments to take place outside Customs offices' business hours for commercial traffic. Any expenses which this entails may be charged to the operators.

(ii) Customs officers may be stationed permanently at those places specially designated for clearance or release, or attend as and when required. Any expenses which this entails may be charged to the operators.

When Customs authorities cannot release a consignment, they should notify the operator as soon as possible.

Where consignments are not delivered to, or are refused by, the addressee, repayment or remission of import duties and taxes may be granted in accordance with national legislation.

The Customs authorities shall ensure that all relevant information regarding the Customs formalities in their country in respect of consignments is readily available to any person interested.

The concept of deferred payment of Customs duties and charges is not new, nor is its application to a particular national environment unique. Deferred payment of excise duties is already often catered for in an Excise Act together with the concept of auditing of client records.

Deferred payment of Customs duties has become a facilitation tool available to Government to encourage economic development of the wider trading community, and to remove significant cash handling and associated temptations from day to day Customs activities.

Combined with electronic lodgement of Customs declarations and provision of electronic Customs delivery, together with provision of adequate legal authority and expertise to undertake post event audits of clients business records, deferred payment becomes a catalyst for enhanced quality of service to Customs clients including the tax payer and the Government.

The operational authority to introduce a deferred payment of duties regime should be vested in the Director General of Customs, being the senior officer ultimately charged with the effective and efficient collection of Customs revenues. This authority needs to be enshrined in legislation, together with all of the other supporting provisions to enable commercial policing of Customs business, prior to, during, and after customs clearance.

The concept of deferred payment of duties is endorsed and promoted by the World Customs Organization under the umbrella of the Kyoto Convention and other international guidelines to Customs administrations around the world today. The IMF and the World Bank are also promoting deferred payment of such duties as part of their ongoing process reform package with various developing nations. Accordingly governments should be encouraged to accede to the Kyoto Convention at their earliest opportunity so as to create an effective umbrella under which deferred payment and other modern Customs management practices can be introduced.

To ensure that Customs have adequate legislative backing to effectively enforce, and administer a deferred payment regime, the local Customs Administration must also be able to rely on adequate and effective legislative backing to operate a very clearly defined and enforceable Customs Valuation regime. Such a regime can be found within the GATT Valuation Code. Accordingly governments should be encouraged to tighten up Customs capability to adequately police and deal with valuation fraud through introduction of the GATT Valuation Code. This of course also needs to be complemented with enhanced professional training for Customs staff who are required to ensure compliance with these new valuation procedures.

Operation of a deferred payment regime effectively moves a Customs Administration into the arena of operating standard commercial management practices re the credit risk of its client base. Concurrently, it also provides the Customs with access to significantly enhanced compliance tools and places greater incentive on effective self compliance by industry.

A typical deferred payment regime would incorporate the following general components, but should always be tailored to meet local revenue risks, the economic environment, and the ability of Customs to effectively implement significant process reforms in the areas of entry processing, valuation policing, and commercial auditing of clients business records in a post event situation.

The authority to introduce deferred payment of duties should be invested in the Director General of Customs, to be offered on a selective basis to low risk cliental, under terms and conditions as may be determined by the Director General. Such terms and conditions should not be enshrined in legislation, but should be as determined by the Director General with sufficient flexibility for such terms and conditions to be easily modified, enhanced, or replaced in reaction to commercial trends and changing client risk and market conditions.

Potential clients for deferred payment should be of low revenue risk, and low Customs enforcement risk. As Customs are heavily into managing the revenue risk of a particular country, various tools and techniques are already in place to identify and react to importations/exportations by high risk clients. Revenue risk could be determined by use of standard commercial credit checking (if appropriate), or by internal intelligence on knowledge of past revenue risk for a particular client. Customs enforcement risk is a known factor within Customs and should be used as a prime criteria in deciding whether a particular client should be permitted to operate a deferred payment account (regardless of overall credit worthiness).

It is obvious that for Customs Administrations to effectively offer a deferred payment system they must also be operating an effective and efficient risk management regime for identifying, monitoring, and policing activities of higher risk clients. This means effective use of intelligence analysis techniques within Customs, pro-active use of informed examinations, and significant reduction in the use of random exams. Such a regime can not be developed over night and, depending upon the Customs Administration, will or may require extensive retraining of Customs management and staff in the use of the more outward looking techniques associated with post event auditing, and enhanced commercial auditing for Customs valuation purposes.

Depending upon the local economic climate, the extent of revenue contribution through customs duties, and the Government’s need to sustain an adequate balance of payments situation, the payment of customs duties could be deferred on a monthly basis.

This would see approved taxpayers being allocated a revenue accounting period by the Director General of Customs so as to stagger the taxpayers over a four-week cycle. Each week a Customs Revenue invoice would be issued to clients in that accounting cycle, with payment required in full, one month and 15 working days after the date of the invoice.

Failure to pay the amount due on time should result in the client being automatically withdrawn from the deferred payment system (without acceptance of any excuse) for a pre-determined period. Such a period could typically be six months, or what ever period was more appropriate for the local economic environment of the country concerned. This would mean that the defaulting client would be required to pay Customs duties on future imports, prior to clearance of the goods from Customs control.

Penalty duties should be applied on default of payment of the account, and approval to rejoin the scheme could be conditional on the client also providing a bank guarantee equivalent to one months revenue payment with Customs. The continuing need for such a bank guarantee should be reviewed after a predetermined period, possibly 12 months. If the client has not defaulted again over this period the need for a bank guarantee should be withdrawn, in order to reduce the financial burden on the taxpayer.

Bank guarantees could also be applied for higher risk cash clients, who have been denied access to the deferred payment system. This would be an added incentive to comply with Customs business requirements and move closer to being approved as a lower risk client.

Any deferred payment scheme should incorporate the need for payment to be made by way of direct credit into a Customs bank account at a nominated bank. Failure to incorporate importer initiated direct credit facilities as a prerequisite for operation of a deferred payment system, will result in extensive down stream difficulties being experienced when attempts are made to convince to trading community to pay by direct bank credit. There remains little commercial advantage to the importing community to make revenue payments by direct credit, as such a technique effectively provides access to their funds earlier than normal cheques clearing processes would.

The benefit to the importer lies in his or her ability to gain access to a deferred payment regime, whereas the benefit to the tax gatherer (e.g., Customs) lies in being able to get at taxpayers funds earlier through direct bank credit. There is no incentive for importers to provide earlier access to their funds through direct bank credit, unless such a facility is a prerequisite to a wider deferred payment system.

Failure to link these two facilities in the same package, will have a negative impact on development of any electronic commerce based cargo community system, and should be avoided where ever possible.

The onus of responsibility for ensuring that payment to the Customs account is made on time should be clearly vested in the importer so that the ability to terminate deferred payment access in the event of defaulting, is not jeopardised by the use of other banking services such as direct debit. Direct debit facilities should not be included as a component of a deferred payment system for Custom revenues as this will undermine the compliance capability to initiate cancellation of deferred payment privileges, and also have a significant impact on development and growth of the electronic commerce community base. (No one likes other people having access to their bank accounts - least of all tax gatherers.)

The concept of deferred payment incorporates significant elements of self- compliance and leverages various aspect of standard commercial operations which Customs Administrations typically have not taken into account in their normal compliance related activities.

The major element of self compliance leverages is the client's ability to adapt their internal cash handling facilities to service Custom revenue debt on a regular systems based monthly approach, rather than on a spasmodic transaction based approach relating to each and every shipment. Once an organization adjusts its internal cash flows to accommodate deferred payment, there is little commercial interest or desire to revert back to the old system of cash handling for each and every shipment. This commercial reality plays a significant role in ensuring that clients do not default in meeting their monthly revenue account with Customs.

The compliance aspects of a deferred payment system rely heavily on the principles of self compliance and on the potential to leverage such a regime for a short-term commercial competitive advantage. In addition various other compliance factors must be incorporated to discourage defaulting clients and to create an environment where it is not worth the risk of defaulting.

This package approach should incorporate the potential use of bank guarantees, provision of penalty duties in the event of defaulting clients, establishing Customs duties as a government debt over the goods in question, provision of adequate investigative tools and techniques to audit clients business records prior to, during, and after importation or exportation. This extends Customs compliance capabilities to reach beyond historical wharf or airport boundaries, and to apply anywhere in the country in relation to international trade transactions. The use of such wide ranging investigative authority must however be catered for by appropriate legislation, with various rights and obligations to protect basic human rights clearly spelled out. Further more such legislation must ensure that all officers and directors of body corporates are collectively and severally responsible for the actions of their employees and agents who are operating on their behalf.

In the event that a deferred payment client defaults on their monthly payment penalty duties should be automatically applied on an accumulative basis, and such penalty taxes or duties should be recoverable in exactly the same manner as other Customs dues, ie. as a Government debt over the goods. Such additional penalty duties or taxes should be applicable in addition to any fine etc. that may be imposed by a Court of Law under the various compliance provisions of the Customs legislation.

An acceptable penalty regime for failing to meet one's deferred payment obligations could be: immediate imposition of an additional duty of 5 per cent of the amount of duty unpaid, and an additional 2 per cent of the amount of duty unpaid plus the additional duty mentioned above, if the debt is not honoured within one month after the due date. In addition a further duty of 2 per cent of the cumulative balance of duties and penalties remaining unpaid after each succeeding period of one month should be imposed.

Such a regime will discourage default on the original debt, provided this penalty regime is rigidly enforced.

Post event audit is the key component to a deferred payment system. It is under this component that we are able to accommodate clearance of Customs entries with little or no supporting documentation, and acceptance of the fact that the bulk of trade is legitimate.

To do this the Customs Administration must be empowered by legislation to audit client business records before, during, and after the event of importation, exportation or manufacture. As the bulk of Customs technical fraud is valuation related, it is also necessary that the valuation provisions of the Customs legislation be very specific and readily enforceable. In this respect countries which have not implemented the provisions of the GATT Valuation Code place themselves at a disadvantage to their neighbours, and make effective policing of Customs valuation fraud impossible. Consequently the introduction of the GATT Valuation Code should be regarded as a high priority on any Government's legislative calendar.

Effectively Customs investigative staff under a deferred payment regime, are required to have the same skill set and training as Police fraud investigators, Sales Tax Auditors and other taxation auditors such as income tax. They are all involved in system based post event audit of client records, with merely a different focus on a particular tax.

Training in computer based audit techniques, commercial documentation processes, accounting, evidence collection and retention, operating as an expert witness, and prosecution of complex commercial fraud cases should be common training for all of these professional investigators, across all departments involved.

Given the complex nature of the international trading cycle, and the integral role that Customs plays in this process, significant arguments could also be made for Customs Administrations to prosecute their own cases in commercial courts. Experience has proven that often this leads to a more productive success rate with cases brought to trial.

In countries where the contribution to government coffers via Customs duties is significantly high (e.g., greater than 40 per cent of government revenue) there is arguably a case for incorporating bank guarantees as a prerequisite for a deferred payment system. However recognizing that access to such a system should be limited to low risk cliental. The question must be posed as to why Customs should force a further financial burden, via the cost of bank guarantees, on clients who are of low risk. In such a situation this would discourage such client from joining a deferred payment scheme.

There is more logic in the argument of imposing the need for bank guarantees on those higher risk clients to whom access to the deferred payment system has been denied.

If the revenue risk is high in a particular country, and the benefits of deferred payment have not been fully accepted by the authorities, then bank guarantees could be applied across the board. Such guarantees should be general over all future transactions, and set at a figure at least equal to the average of one month’s revenue payment by the taxpayer. In such a situation however, the need for bank guarantees for deferred payment clients should be reviewed after 12 months operation of the scheme, and removed on a case by case basis where ever the client has shown a willingness to comply fully with all of the compliance requirements of Customs.

In the event that a client defaults on their deferred payment account, the requirement to produce a bank guarantee covering one months average revenue contribution, should be a prerequisite for being allowed back on the deferred payment system. The requirement for such a bank guarantee should remain in force for 12 months and then reviewed if no further default has taken place.

Other pre-requisites that should also be imposed as conditions to be met before a client can rejoin the deferred payment scheme are: payment in full of all outstanding Customs revenues, duties, additional duties, fees, fines, charges etc.; or expiry of a pre-determined penalty period during which time the client must continue to operate as a cash account holder for Customs duties. Such a period should typically be for six months after default as a deferred payment account holder.

It could be argued that deferred payment clients should be required to pay interest on the duties that have been deferred. Such a move however would have a negative impact on the ability to convince low risk clients to move to a deferred payment regime, as it would be an additional cost of trade. It should also be remembered that deferred payment of duties is a facility that should be offered to Customs "low risk" cliental. If such clients are "low risk" why should they be penalised with the imposition of having to pay interest.

Accordingly interest on deferred payment account holders should not be a component of a deferred payment system as its inclusion will have an overall negative impact on the benefits and success of the scheme.

With the widespread introduction of deferred payment there will be a corresponding reduction in the commercial need to place goods into bonded warehouses. With the faster turn around of goods and the change in transport mode from sea to air with smaller more frequent shipments, goods are able to reach the consumer faster. Over time this will see the demise of the bonded warehouse in certain economic situations.

On the other hand however, while the need for bonded warehouses will undoubtedly diminish under a regime which gives fast Customs cargo clearance, this same environment creates the ideal economic situation for the evolution and development of regional logistics distribution centres, regional hubbing of express consignment operations, expansion of export processing zone operations, and other time sensitive commercial activities, all of which have a positive economic impact on the national economy.

Deferred payment regimes have the effect of taking the bulk of cash handling out of the Customs House. In situations where the practice of speed money, tea money, or any other variation on the theme is in operation, and where effective policing and accounting for monies collected is in question, a deferred payment regime can help to reduce the amount of human intervention associated with some of the revenue.

Other issues such as simplification of Customs entry processing procedures, reduction in human intervention, physical separation of importers/agents etc. from Customs personnel in the entry processing location, and separation of duties associated with cash handling, can all assist in reducing the opportunities for such practices to exist.

Without the support of senior management, electronic commerce cannot happen. The most successful implementations occur when there is top-down pressure with specified expectations of numbers of trading partners and expectations for business growth. electronic commerce cannot be successfully implemented from bottom-up.

It may also become apparent that certain attitudes towards success and productivity may need to change for an electronic environment where managers are able to achieve greater productivity with less staff.

Electronic commerce may be implemented in distinct and separate parts of an organization in response to external pressures, and improved performance within those divisions and departments. However, such a reactive policy, in the absence of any overall strategy giving strategic direction and coordination, is likely to lead to replication of costs and effort, and a failure to achieve optimum contribution to profit or real corporate benefit. In contrast, electronic commerce can be applied in a manner that is entirely consistent with, and supportive of, organizational and divisional objectives. In this case electronic commerce systems design, changes in business practices, and the level of individual and corporate learning required, may be phased in line with the direction and future requirements of the organization. This second approach generally leads to the formulation of an enterprise-wide electronic commerce strategy, to be used as a central point of reference as electronic commerce is progressively developed throughout the organization.

If critical success factors (CSFs) vital to the well-being of the organization have previously been identified, then the activities under pinning these CSFs need to be analysed in relation to the content, flow and management of the associated information. If the business process is critical to corporate success and requires accurate and timely data to enhance service quality, then there is obvious scope for employing electronic commerce within that business process.

It should be emphasised that this stage is important in both pro-active and re-active electronic commerce modes. Where an organization is reacting to pressure being placed upon it by a dominant trading partner, the opportunity should be taken to assess the value of electronic commerce in relation to this and other trading partners. The question of why this particular trading partner is implementing electronic commerce should be asked. How can the organization benefit from doing electronic commerce with this particular partner? How can the organization benefit from doing electronic commerce with its other trading partners (i.e. turning the organization's position around from being re-active to becoming pro-active)?

The electronic commerce strategic planning process cannot be over emphasised. Investigating the project from the corporate perspective is the first step towards incorporating electronic commerce into the strategic planning processes of an organization. Each business area feasibility study brings to light another facet of the complete electronic commerce picture and aids the development of a long-range, phased approach towards implementation. It is unwise to assume that electronic commerce will work for you without first recognising the business problems that need to be addressed.

The following steps need to be performed for each business area under consideration for electronic commerce implementation.

i. Develop a list of the business transactions that are currently performed in the business area and list the paper, telephone, telex, facsimile, and oral "transaction sets" that exist to facilitate these transactions. Be sure to note transactions that circulate only within the business area, and also account for all copies of a transaction set.

ii. Perform an analysis of the current "gateway" application. The one that would generate or receive electronic commerce data, and develop a data flow diagram showing:

a. How data is currently input into the system;

b. What manual procedures are performed from the time the paper transaction set is received in-house or generated by the application;

c. What data is required for the application and how they flow into subsequent applications.

Make note of the number of staff currently required to perform the manual tasks previously identified and the time it takes to perform them. Obtain figures on current error rates being experienced. Such figures will help evaluate the current costs being experienced and can be used to determine cost savings as a result of implementation of an electronic commerce based solution.

iii. Develop a revised data flow for the business area as it would work with electronic commerce. This should include:

a. Automated data entry of formatted electronic commerce data for receipt of a transaction, and automated generation of a machine-readable, formatted data file to replace the current outbound transaction;

b. Application link and translation software to map from the standard machine-readable data format to the format required by the application, or from the application format to the standard data format;

c. Control mechanisms designed to keep track of your electronic commerce activity, either to generate or accept and reconcile standard functional acknowledgments and to read and interpret third party reports and reconcile them with the electronic commerce transmission figure.

d. Consider additional functionality to give functional business managers, auditors and corporate administrators access to selected data in order to improve planning, auditing, and tracking efficiency and effectiveness.

This revised business area plan will show the long term picture, which does not preclude the development of a phased approach to implementation. However, without the "big picture" future implementation plans may be limited by missing opportunities to identify and plan for integration of internal systems, or changing procedures that provides important information. Furthermore, unless several business areas are evaluated at the same time, opportunities may be missed to integrate the underlying systems.

iv. Develop a list of potential trading partners with contact names and telephone numbers of functional business managers, and include details of key information technology and communication support staff.

v. If necessary calculate the "electronic commerce potential" by undertaking a cost/benefit analysis.

vi. Develop business area recommendations as to whether and how to proceed towards implementation. Focus on business considerations such as:

a. Is electronic commerce viable at this time?

b. Are trading partners interested and ready to implement electronic commerce?

c. What procedural changes will be needed for the new environment?

d. How will staffing requirements change?

e. What new functionality and what data requirements will systems have to support to transact business electronically?

f. How much funding will be needed and over what time frame?

g. What benefits can be reasonably expected?

h. What is the next step?

vii. Review, standardise, rationalise, simplify and modernise, then automate core business processes before embarking on electronic commerce initiatives.

viii. Simplify and get rid of old historical practices, and create an environment which is comparable with good modern business practices and which is appropriate for future generations to live with.

i. Before considering electronic commerce, re-examine current procedures and business practices and streamline as much as possible. Challenge everything which is currently being performed and ask "Is it the best way of doing it, and is it really necessary to do at all?".

ii. Most successful electronic commerce implementations have generally been preceded by the introduction of electronic mail into the organization. This tends to remove inhibitions to working in an environment with less paper, and helps staff perceive potential future benefits that could arise through use of electronic commerce based solutions.

iii. Modernize management business practices.

iv. Eliminate any unnecessary, historical steps from the trading cycle.

An enterprise-wide Information Technology Strategic Plan totally integrated with the corporate Business Plan, should already be in place for any organization contemplating extension into electronic commerce based services. Such an Information Technology Strategic Plan should outline the future technological infrastructure that will be in place over the next five years, the standards that are supported within the industry sector concerned, and the standards that will be supported corporately. Ideally a section pertaining to an electronic commerce strategy should also be incorporated, or alternatively this can co-exist as a separate but related document.

The corporate electronic commerce Strategy provides the business case and acts as a central point of reference for electronic commerce within the organization. This senior management document should identify a coherent plan for electronic commerce, consistent with the organization's corporate business strategy, and identify the following:

i. Current status of electronic commerce within the industry;

ii. Strategic implications of electronic commerce for the organization;

iii. Identification and assessment of potential applications for electronic commerce within the organization;

iv. Short and long-term requirements, both nationally and internationally;

v. Areas of application, prioritised;

vi. Assessment of benefits;

vii. Assessment of risks, including the risk of doing nothing;

viii. Assessment of obstacles and likely developments;

ix. Outline action plan;

x. Cost and pay back estimates.

It should be noted at this point that the implementation of electronic commerce differs in a few important ways from other standard information technology projects. First, the system requirements are based on a standard data format. Usually the data processing staff are not familiar with this format, so either extensive education must precede any development work or consideration must be given to buying a translation product to do the job. Even in this latter case there is still some programming that must be undertaken to link the existing application to a fixed field length interim file required as input or generated by the translation software.

Second, the system must contain various control features such as:

i. An adequate message tracking facility to capture all information necessary to develop and maintain a complete audit log of electronic commerce activity.

ii. It must be able to generate standard format interchange group and transaction set headers and trailers for outgoing electronic commerce data files, and to read and interpret the control envelopes on the incoming data files.

iii. It should contain a reconciliation routine to compare the electronic commerce activity information that is retained in-house with incoming third party reports and functional acknowledgments from trading partners and to develop exception reports to handle discrepancies.

Third, while internal system requirements are based on intra-company considerations, electronic commerce requirements for transaction set data and for communications are inter-company in nature. That means that staff from two or more different companies and corporate cultures must come to agreement and co-ordinate activities and testing schedules in order to implement the project. As a rule this introduces a great deal of complexity to the process, and must be accounted for and accommodated in the electronic commerce strategic and specific project implementation plans.

All successful electronic commerce implementations require a significant investment in time and effort to develop and deliver a comprehensive educational campaign to staff and potential business partners.

This general awareness campaign needs to precede any associated process reforms, and run concurrently throughout the implementation life cycle in order to help break down pockets of resistance to change, and to solicit feedback and ideas for future enhancements.

Such an educational programme that encourages contributions and constructive debate is critical to the successful implementation of such projects, and to the acceptance of associated process reforms.

The electronic commerce Strategic Plan laid the groundwork for the decision to proceed. It is now necessary to select an appropriate business process in which to introduce an initial trial for electronic commerce. Two major considerations should influence this choice:

i. Anticipated benefits following successful implementation. Benefits should ideally be large, clearly understood by all, and measurable (refer to step 2.3 for possible success criteria).

ii. Ease of implementation and consequent likelihood of success. Electronic commerce must be feasible and provide a win-win situation for all parties involved in an electronic commerce implementation.

There will need to be many compromises to produce the most favourable outcome of the above. To achieve this, several factors should be borne in mind:

i. Keep it simple. Electronic commerce is likely to make radical changes in the way the business operates, requiring a significant degree of change management experience and education within the organization. The chance of success is increased if the size and scope of the pilot is kept simple and tightly coordinated.

ii. Do not underestimate the extent of consultation and awareness training that will be required internally, and externally by all trading partners.

iii. The greatest workload is likely to be in adapting in-house applications for electronic commerce connectivity. Application changes associated with accepting incoming electronic commerce messages will involve significantly more complexity than those relating to production of outgoing messages.

iv. Assess the current state of in-house software applications, packages and hardware for their ease of linking or converting to electronic commerce.

v. It must be remembered that electronic commerce is predominantly a batch process, and that existing applications may have been written for on-line data entry only.

Where electronic commerce is viewed pro-actively as part of the overall business strategy, organizations need to take an objective look at trading relationships in order to establish which partners are best suited to form early electronic commerce links. Trading volumes and values will probably dictate whether one or several partners are required for the initial electronic commerce trials, and ideally the outcome of this process should be a priority listing of trading partners for implementation. However, the strategic importance of such trading partners should also be taken into account, and could become the deciding factor in selecting preferred pilot participants.

Several other factors need to be taken into account when assessing trading partners, namely:

i. the benefits identified during the business analysis in phase 1, and the value of these to the organization;

ii. trading partners need to be selected in order of perceived importance;

iii. select suppliers in order of their impact on the organization's business;

iv. if possible, choose trading partners who have already implemented electronic commerce systems, preferably with the same message type;

v. choose trading partners who have the available resources (money, technical staff etc.) and management commitment;

vi. choose trading partners with whom a good working relationship already exists. If existing relationships are healthy, there is a much better chance of withstanding problems which will arise along the way.

To obtain commitment from trading partners, discussions will need to be supplemented with presentations, the services of a Value Added Network provider, or independent electronic commerce consultant can be very useful in selling the concept of electronic commerce to wary partners. These discussions will need to take place at several levels within an organization prior to obtaining a signed commitment to proceed, namely:

i. The commercial level.

ii. The technical level.

iii. The coordinator level.

The discussions will lead to an agreement to commit resources to develop an electronic commerce initiative towards a specified goal and date. The agreement should cover:

i. Information scope;

ii. Electronic commerce standard to be used;

iii. Transmission route;

iv. The purpose of the electronic commerce trial;

v. The scope of the trial;

vi. The project management mechanism;

vii. The project liaison staff;

viii. The overall project planning and implementation timetable;

ix. Ongoing support for trading partners must be provided throughout the life of the project. Deciding who is to provide such support is a critical factor;

x. Establish help desk facilities, procedures, resources, problem resolution, access (phone, fax, electronic commerce, e-mail etc.). It is necessary to decide on whether the help desk is to be all embracing or limited in its offering;

xi. It is necessary to decide on what technical support can be given to clients in mapping, program design, communications interface, hardware selection, software selection, business process reform, training, and documentation. Who will be providing such support? Will it be provided in-house or contracted in from a third party?;

xii. It is necessary to determine what support services will be provided to the help desk operation to monitor work performance, work statistics, problem resolution, problem analysis, quality assurance etc.?

From the outset it is important to determine and agree the objectives, expected benefits, and success criteria with all pilot participants. These form the benchmark against which the success of the pilot will be measured. Possible successful criteria may relate to:

i. number of transactions or messages handled per day;

ii. volume and type of errors;

iii. shorter lead-time to receipt of transactions or messages;

iv. adequacy of system performance;

v. improved control of operations through better management information;

vi. adequacy of audit of transactions, overall integrity and security;

vii. operator acceptance;

viii. observed or measured benefits in terms of speed or cost;

ix. improvements in working practices;

x. better customer service;

xi. enhanced flexibility to improve service offerings.

These parameters can now be used as a brief to network and software suppliers. But there is now a need to also reach agreement on:

i. Duration of the pilot;

ii. Transitional arrangements from the pilot to full production so that expectations are known and understood;

iii. Costing for message traffic during pilot and beyond. Who pays what and to whom?

Ideally, the pilot programme should be undertaken with no more than five or six trading partners and two or three electronic documents. Furthermore it should be scheduled with a maximum specified duration of two to four months. Each prospective trading partner has a great deal of internal work to undertake prior to the electronic commerce implementation, and must also estimate the time and effort required to provide realistic target dates for accomplishing each and every step in the pilot process.

What is the extent of support services that will be provided during the pilot, and subsequent roll out process? This will need to be identified and agreement reached as to individual areas of responsibility for provision of such services as:

i. Preparation of educational material and participation in conferences, seminars, work shops etc. for all parties involved.

ii. The level and extent of "free" support, that is to be provided to trading partners.

iii. What problem resolution procedures will be in place, and who is responsible for what?

iv. Document tracking within the electronic commerce service. How and by whom is this to be provided?

v. What change management support will be required, and where is it be obtained from? Will it be provided free of charge during the pilot, or is this an additional cost that participants will need to carry?

Determine network topology and availability. Remember that network dependent services must be available when any party wishes to conduct business.

The main decision to be reached here is whether a Value Added Network option is preferred. In effect this amounts to a decision between using a third party network provider to handle the requirements for electronic commerce communications, or managing these communications in-house by establishing direct point-to-point telecommunications links with trading partners, or exploring the potential for using Internet services.

Value Added Network (VAN) options are generally seen as an attractive electronic commerce communications option by many organizations and it is worthwhile to briefly summarise the major advantages and disadvantages of this approach.

i. Provision of mailbox store and forward services, which effectively de-couples the sender and receiver of data, and provides a security blanket against direct access to an organization's in-house computer systems by a third party;

ii. Support for multiple telecommunications protocols. Sender and receiver can use different communications protocols since the VAN operator can be expected to support multiple protocols and effectively handle protocol conversion;

iii. Simplification of network management problems. Only one communication line and port is required for each VAN service, irrespective of number of trading partners. Ideally VAN operators should be required to provide a seamless inter-connection with other VAN operators (with revenue offsets negotiated between the VAN operators, but not passed on to clients. In reality this happens rarely, and the client is generally required to pay an interconnect charge as an uplift on the cost of message traffic). While initially it is prudent for an organization to obtain its electronic commerce communications service from a single VAN operator, this should only be seen as a short term measure and electronic commerce strategies should be developed to move towards a corporate electronic commerce gateway capable of providing access to more than one authorised network, thereby providing access to a greater number of trading partners, and ensuring that the organization is able to adopt an open system approach, and not get "locked-in" by any one VAN operator.

iv. Vigorous promotion of the service by the VAN operator including provision of training and awareness.

v. Pool of experience to draw upon, which can often be used to help establish an organization's initial electronic commerce operation (including value added services), and should generally entail an element of skills transfer so that ultimately sufficient electronic commerce expertise is retained in-house.

vi. Support available for multiple electronic commerce standards.

vii. Additional mailbox services, including:

a. archiving of messages;

b. audit trail;

c. summary transaction totals and reporting;

d. automated billing based on class of message;

e. standards conversion;

f. global coverage irrespective of time zones;

g. enabling software and consultancy services.

i. Cost;

ii. Perceived and real loss of control of information flows;

iii. Third party handling of potentially sensitive information;

iv. Perceived security and cost problems associated with having the electronic commerce mailboxes located offshore.

At this stage it is sufficient to decide whether to buy-in a packaged electronic commerce software product or to undertake bespoke software development (either in-house or contracted out). It is important to recognise that to fully develop electronic commerce within a particular business unit or organization, there may be a need to connect to more than one VAN provider and to support more than one message standard. Any software developed or bought should therefore have this capability built into it. Although it may add additional expense initially to the project (most packaged software support multiple networks and multiple standards anyway), it will be far more expensive to make changes midway through the electronic commerce development.

The types of electronic commerce software that may be bought or developed can be categorised as follows:

i. electronic commerce corporate gateway;

ii. message management or electronic commerce work station;

iii. application specific.

The following tasks should now be undertaken:

i. investigate potential software on the open market;

ii. establish contact with existing electronic commerce users operating in the business area under investigation, as their experience of particular software products will be invaluable;

iii. establish contact with vendors about selected products and obtain details of reference sites for closer evaluation;

iv. publish standards that will be applied in the project e.g. OSI, X.25, X400 and X500;

v. complete communications tests with trading partner(s) including network interfaces and proving all standards that are to be supported;

vi. each party of a trading pair must make contact with the other via telephone connection, using agreed protocols, line speeds, and receive "ready" through the handshake of protocols;

vii. each party of a trading pair must make contact as before and transmit a predetermined data stream containing all letters, numbers, other characters, and spaces;

viii. the receiving party must analyse the data stream received for completeness and correctness and report the results to other parties;

ix. each party of a trading pair must make contact as before and send a predetermined stream in standard format containing data in all mandatory and optional fields;

x. the receiving party must analyse the standard data stream for adherence to standard syntax rules and report the results to the sender.

Dependent on the outcome of step 3.2, this step will lead to a decision on the VAN provider.

Factors which will need to be taken into account in making such a selection are:

i. Market sectors and customer base. Which network currently supports the bulk of the organization's current and planned trading partners ?

ii. Additional facilities and services available.

iii. Cost. Who pays for the service (sender or receiver)? Or does the VAN provider offer variable billing options which supports flexibility to accommodate different business arrangements per trading partner ? What is the cost structure used and is it meaningful to your organization?

iv. Inter working. What is the vendor's policy in this area? What is the vendor's policy in relation to X400 message handling protocols, and the Open System Interconnect philosophy? What is the vendors policy and business strategies in relation to Internet access and future facilities?

v. Geographical coverage. Is it adequate to provide the level of service where it is required, when it is required?

vi. Access. Does the vendor offer appropriate communication protocols that are common in the industry?

vii. Security and resilience. Is a "Service Level Agreement" offered, and what is the network's history in relation to "Mean Time Between Failures"?

viii. What is the level of start-up support offered by the vendor?

ix. What is the level of technical competence and professionalism of the vendor and its staff?

i. What electronic commerce standards exist in the selected industry for example, do they fully support UN/EDIFACT?

ii. What is the relevant standards progression in the required industry sectors?

iii. Obtain the latest standard message formats for the documents that you wish to transmit.

iv. Keep it simple and do not try and re-invent the wheel.

Assignment of an electronic commerce coordinator is critical to the successful implementation of any electronic commerce Strategic Plan. But it is first necessary to clarify the role of the coordinator and to distinguish it from that of the electronic commerce Project Manager, although the two roles could easily be undertaken by the same person. The responsibilities of an electronic commerce coordinator should encompass the following:

i. maintain an awareness of electronic commerce developments;

ii. represent the organization's interests with relevant trade associations;

iii. monitor developments in message standards;

iv. monitor developments in communications, Value-Added Network offerings, and competitors use of electronic commerce. Provide advice on the best choice for future application areas and monitor trends;

v. provide in-house electronic commerce awareness and training;

vi. market and promote the organization's electronic commerce activities, both internally and externally to increase the organization's profile and promote the acceptance of electronic commerce within the industry;

vii. develop an organization-wide electronic commerce strategy;

viii. update the electronic commerce strategy in response to internal and external factors;

ix. assess the legal and commercial implications of electronic commerce for the organization.

The electronic commerce coordinator typically acts as a central point of reference for all electronic commerce matters within an organization, providing knowledge, guidance and coordination across all functional boundaries. The coordinator needs to act as an "electronic commerce champion", promoting the role and value of the electronic commerce initiatives across the organization with the full support of senior management at the highest level.

On the other hand, the electronic commerce Project Manager should ideally be the line manager responsible for the business function under immediate review. At the very least this person must understand the core business functions concerned to ensure that the project remains on focus for delivery of core business solutions that will bring positive benefits to the organization. The Project Manager's responsibilities cover managing the development of electronic commerce from inception to post implementation review, and include:

i. ensuring business requirements are met by the adopted electronic commerce messages;

ii. ensuring that electronic commerce is legally and contractually sound;

iii. drafting and negotiating the electronic commerce Interchange Agreement;

iv. ensuring that changes to business practices are specified, agreed and established;

v. identifying and giving effect to training for electronic commerce;

vi. coordinating discussions with trading partners;

vii. establishing procedures for testing and signing-off the electronic commerce services;

viii. ensuring that the electronic commerce services are secure, audible, and that all business and legal requirement are met;

ix. establishing procedures for the continuing development of electronic commerce, including the expansion of the electronic commerce trading community.

The extent of involvement by the Project Manager should not be underestimated. Many computer projects (including those involved with electronic commerce) have made little progress because the Project Manager has been required to undertake both his Project Management responsibilities and his normal line duties at the same time. Project Management is not a part-time job.

Once the network provider and the pilot participant(s) have been chosen, detailed plans need to be formulated to ensure all parties carry out the necessary work in step and in agreement with each other. At this stage the characteristics of electronic commerce project management differ fundamentally from purely in-house systems projects. The electronic commerce project is now between multiple organizations, each with possible separate development methodologies, priorities, and standards. There can be no single manager of the project as a whole, and the respective project managers will need to ensure that they reach the necessary understanding and arrange tasks to be carried out by corresponding team members.

These planning sessions should address the following issues:

i. formulation of the implementation timetable;

ii. negotiation of an electronic commerce Interchange Agreement;

iii. reach agreement and exchange of contracts with network provider(s).

An electronic commerce pilot implementation plan has a predefined structure containing all of the steps or tasks needed to set up, test, and evaluate the hardware, communications connection, translation software, applications software and procedures with each pilot trading partner. Each step relates to a specific activity with a specific trading partner and should be defined in terms of criteria for success and time period. Milestones covering groups of related tasks with each specified trading partner should also be identified and time stamped. The end result being a list of tasks and milestones with descriptions, responsibilities, anticipated and actual completion dates.

Successful project implementation is dependent upon senior management ensuring that:

i. adequate resources are identified and made available;

ii. a Project Manager(s) is identified and empowered to deliver the end results;

iii. obstacles to success are identified and appropriate circumvention's or solutions found;

iv. various working groups necessary to deliver key tasks are identified and established;

v. the Project Manager(s) are provided with access to all decision makers.

The key to successful implementation lies in pre-planning and preparation.

Now is the time to determine what documents are to be traded electronically. What are the anticipated volumes, frequency, urgency, content, data accuracy, source, and business processes that are applied to them? And finally, why do the documents exist at all? Answers to these questions will help determine the initial and long term shape of the organization's electronic commerce initiatives and form the basis for future process reform and system re-engineering as business practices are streamlined and simplified.

It will be necessary to obtain agreement on the electronic commerce syntax and message standards to be used now and in the future. This could include making provision for migration from one standard to another over time, or the support of more than one standard depending upon views and needs of trading partners.

Tasks requiring attention at this point include:

i. Obtaining the relevant approvals or agreements from third party organizations involved in the trading cycle.

ii. Deciding how long information needs to be stored once it is received or has been despatched electronically.

iii. Commercialisation issues associated with running the pilot, and with full production running. For example who pays for traffic during and after the trial? What other value added services are to be offered? Are such services to be provided free of charge, at cost, or for a commercial gain? What pricing policies are to apply to the various service elements on offer? What marketing strategies are to be followed to initiate commercial roll out and to maintain an adequate ramp up of future trading partners? How can the electronic commerce service offering be packaged, bundled, or combined with other commercial product offerings to secure client interest and commercial growth?

If critical company information is being consigned to an electronic commerce environment then it is essential that the implementation is seen to be secure and auditable. Even where legislation does not dictate a formal audit requirement, organizations should ensure that procedures either exist or are formulated to provide audit trails, data archives etc. to the required minimum accounting and legal standards.

It must be remembered that electronic commerce is the combined application of computing, telecommunications and agreed standards to meet a business need, where that need involves the transfer of information between two or more trading partners or business functions. Data is the raw material of electronic commerce. Individual data items are structured together to form a message, where that message relates directly to the information requirements of the business function. The more direct the match between the electronic commerce message and the information requirements, the greater will be the impact of electronic commerce. Too much data, or data in the wrong form, will lead to data redundancy and unnecessary transmission and processing costs. Too little data will result in a failure to meet the basic business needs with the resultant expense of chasing-up, cross-checking etc.

Equally important is the need to harmonise the data and message requirements and their representation within the industry, and across industries. Adherence to agreed and recognised electronic commerce standards during the implementation process will maximise the chance of harmonisation.

The data analysis and message design step is required to ensure that the above requirements are met, i.e. the messages are selected or designed to meet real business requirements, and agree with recognised national or international standards.

The steps involved are briefly outlined below:

i. identify by title the electronic commerce requirement (e.g. invoice, waybill);

ii. obtain the following electronic commerce standards documentation:

a. electronic commerce message formats;

b. data element directory;

c. segment directory;

d. syntax rules;

e. message design guidelines.

iii. decide who the message is from, and who it goes to;

iv. analyse the functional requirements of the business transaction;

v. analyse the data requirements of the business transaction;

vi. agree on the use of recognised data element definitions and code sets;

vii. group data elements into appropriate segments.

viii. when mapping organizational data requirements onto these standard message formats, the following will require close attention:

a. missing mandatory data;

b. conditional data considered mandatory for organizational use;

c. local code definitions, e.g., industry codes;

d. global code definitions, e.g., units of measure;

e. element length discrepancies;

f. element attribute discrepancies, e.g., alpha and numeric discrepancies;

g. segment structure discrepancies.

ix. draw up the required message, then check it against any standard messages available. Always use standard messages unless there is an over riding reason for no doing so. Standards support will need to be ongoing and kept abreast of international developments

x. review all procedures.

While initial benefits will come once the electronic commerce messages start to flow, the real benefits will accrue when electronic commerce is integrated fully with other business applications.

Existing commercial arrangements should not be affected by the move towards electronic commerce, however while paper based transactions carry with them a reaffirmation of conditions and terms in the form of small print on the front or back of the document, no such vehicle is available in an electronic environment. Consequently many organizations agree to reaffirm the conditions and terms of trade in a separate contract for electronic commerce usage, or in an electronic commerce rider to existing contracts. Often this rider is merely a reiteration of the existing terms and conditions with only some timing expectations changed for the new environment.

Electronic commerce users, either bilaterally or as part of an electronic commerce user group, may adopt the format of an electronic commerce Interchange Agreement to lay down the ground rules under which the members will operate. There are many examples of electronic commerce Interchange Agreements in existence and organizations would be well advised to study the content of established electronic commerce Interchange Agreements for guidance.

Change management issues such as fear of the unknown, fear of losing one's job security, fear of losing access to unauthorised funds, fear of technology, fear of computers, fear of change, fear of loss of control, and over coming passive resistance to change, will all be encountered and need to be carefully managed.

These will represent the biggest challenge and will be the hardest aspect to resolve, especially fear of the unknown, as staff can not actually see electronic commerce.

The following tasks also need to be undertaken and programmed if successful implementation is to be achieved.

i. Design training material for seminars, counselling, workshops etc;

ii. Determine audiences, e.g., media, government departments, chambers of commerce, trade groups, trade unions, trialists, vendor staff, corporate executives, line managers, operational staff, consultants staff etc;

iii. Select and obtain key speakers;

iv. Identify audiences and key influencers;

v. Determine education timetables and schedule of courses. Determine who runs what course? Are they to be run by a third party? At what cost? Decide whether courses are to be free or rolled out as an additional value-added service;

vi. Prepare course material covering managerial, supervisory, operational, technical, general purpose, and change management issues;

vii. Prepare documentation, training material, User Manual etc. Involve client organizations in preparation and delivery of the training. This material must be flexible, upgradable, and easy to follow;

viii. Roll out the courses, get feedback and modify where necessary. Train the trainers.

If a network provider has been chosen to provide the electronic commerce communications services, as opposed to establishing direct point-to-point connection or using Internet based services, then advice on procedures for connecting to their network need to be followed. The log on, hand shaking and house keeping operations may vary for each network vendor, but the following basic considerations will arise in each case:

i. Manner of connection. Direct connect to existing computer system, or via a PC or communications front end processor;

ii. Communications protocols. Which protocol does each trading partner wish to support. A VAN operator will have to support all of the nominated protocols and provide seamless conversion facilities. For dial up connections the speed of the protocol should be borne in mind, the slower the protocol, the longer the phone call and the greater the cost;

iii. Physical link. Public telephone, direct leased line, or public packet-switched data networks;

iv. Hardware requirements (e.g., modems, cables, communications cards, telephone points etc.). All need to be to predefined specifications. Try to avoid use of internal switchboards where ever possible, in order to ensure a reasonable clean connection.

Whether an 'off-the-shelf' package is being purchased, or bespoke software is being written, organizations will need to draw up system specifications which should consider the following:

i. application interface;

ii. electronic commerce message library and data elements directory, together with corresponding decode and encode facilities;

iii. network interfaces;

iv. access security;

v. accounting interface for billing where commercial value added services are to be provided;

vi. audit, control and backup or recovery procedures;

vii. disaster recovery and risk management procedures;

viii. archive procedures.

The major requirement for all electronic commerce software is that it should be as flexible as possible and easily to cope with:

i. multiple standards (both syntax and message);

ii. multiple versions of the same standard;

iii. multiple trading partners;

iv. multiple networks, both VANs and PTTs;

v. multiple changes.

Electronic commerce will result in changes to operational procedures for both the business and information technology areas of an organization. These new procedures will require specifying, detailed analysis, and implementation. They will require extensive project management expertise in change management, process reform, problem resolution, and inter-personal problems. Step 4.8 deals with this in more detail.

Factors which should be taken into account at this stage however include:

i. Timing associated with data transfer and receipt. How can this new timing be engineered to deliver enhanced business practices?

ii. Establishment of new procedures which improve the quality of information within the business system.

iii. Establishment of new fall-back procedures and contingency plans for system outage.

iv. With electronic commerce totally automating procedures and business practices originally designed for high volume transactional systems, what opportunities now exist for re-engineering business practices to take advantage of error free systems based processing solutions aimed at reducing transaction volumes, simplifying processes, and ultimately reducing electronic commerce network usage costs?

v. Other procedures e.g. access control house-keeping, daily account handling, and manual procedures originally intended to complement physical handling of paper based informational needs, should all now be reviewed as to their necessity in an electronic environment.

Many publications have been written on factors to take into consideration when purchasing computer hardware and software, and at this point it is assumed that the reader already has access to this sort of expertise in-house.

Prior to installation one or two points should be fully clarified. The first is to establish that the user and vendor are in complete agreement as to the business needs that are being addressed, and each other's individual requirements and roles. This agreement should be spelled out on paper and signed off by senior personnel on both sides.

The second important step is to agree on a realistic timetable for the installation. This should be aimed at satisfying the needs and capabilities of both parties to provide the necessary resources as and when needed.

The most important factor that is critical to a successful installation is user training. It does not matter how sophisticated or simple the electronic commerce solution may be. If the clients (i.e. users) cannot or will not use it, its implementation will be a failure.

It must be remembered that any computer system, and all the solutions and facilities they provide, are just tools to simplify the business process.

After successful installation, both the computer system and the staff should be given time to settle-in before looking to place the blame on the vendor for non-performance.

Once the in-house software of trading partners is installed and functioning correctly on its own, tests should be carried out to ensure the complete suite of programs and procedures performs as expected. Test procedures should be reviewed with trading partners and must be well planned, mutually agreed, and formally documented.

A structured approach should be adopted for the testing, with all tests documented, expected and actual results noted, and any problems resolved at source.

Leading up to the trial, user training will become more intense, and all parties must fully understand exactly what the trial is trying to prove. Procedures to be used during the trial must be clearly understood and documented together with early termination procedures, circumstances in which this may occur, and upon whose authority such termination may be invoked.

The purpose of the trial is to ensure that electronic commerce delivers, or is capable of delivering, the requirements previously agreed in step 2.3. A parallel run of the electronic commerce system alongside the original paper based system will allow the necessary degree of learning to take place, and confidence to build up, whilst retaining the option of re-instating the previous manual procedures if necessary.

The exact duration of the trial will vary from project to project but should typically be no more than three to four months duration.

The trial should be assessed against the success criteria identified in step 2.3. This may be undertaken just prior to completion of the trial period, since if the trial is deemed a success, it can easily be continued into full scale production.

It is unlikely that the trial will reveal no or little benefits from carrying out electronic commerce. If however such is the case, then the electronic commerce should be abandoned within the trial period. It is quite possible that some or all of the reasons for lack of benefits will be due to the network supplier, the software chosen, or the application. In this situation there is a strong case for a second trial using a different supplier, software or application.

Modifications may be required to in-house software in light of experiences gained during the pilot. It may be desirous to review and simplify other associated manual procedures prior to full scale production running. Once all changes have been made and associated procedures simplified and integrated, the electronic commerce pilot needs to be officially signed-off at executive level and handed over to line management to implement.

Serious consideration should also be given to abandoning the old paper based system as early as possible, and to placing complete trust in the new electronic commerce based environment. Many organizations unfortunately hang onto the old procedures for a great length of time, which tends to undermine a number of change management issues and corporate reliance on the new system. In turn this undermines realisation of the full benefits that electronic commerce can bring to the organization.

Ongoing user support will continue to be required. At this point it is necessary to consider provision of a fully functional "help desk" facility, not just for electronic commerce communication issues, but as a one-stop reference point for problem resolution in all matters associated with the organization's business. If it is decided to offer such a service to clients, location and training of support personnel in both technical and operational matters associated with the electronic commerce operation is essential, as well as provision of sufficient expertise to assist in wider business matters.

The electronic commerce support team will need to ensure that routine maintenance and enhancements are planned and effected as smoothly as possible. Problems may arise after the system has gone into production, and the temptation may be to find ways around them. This should be avoided at all costs. Problems should be solved at source, even if it means taking extra time to understand the full nature of the problem. But they must be resolved and not circumvented!

An implementation check-list will prove useful in negotiating with new trading partners so they can quickly benefit from existing electronic commerce experience. This may be incorporated into an electronic commerce Information Pack to be provided to new and potential electronic trading partners and should include:

i. statement of commitment from the organization's electronic commerce sponsor;

ii. benefits obtainable from participating in electronic commerce;

iii. implementation options, including configuration requirements;

iv. network and other charges;

v. key contact names and telephone numbers; and

vi. a Question and Answer section, whereby concerns may be allayed by providing answers to anticipated questions.

Undertake Quality of Service reviews.

The level of client expectation as a result of electronic commerce will increase and become harder and harder to maintain as new clients are ramped on to the service. This then needs to be measured against the total quality of service that can be provided by the organization.

Identify new value added service offerings to enhance the commercial environment for clients and generate a greater return on investment. This becomes an ongoing function.

The following organizations were contacted, interviewed, and/or contributed to the findings of this paper, and the author wishes to formally acknowledge all advice and assistance given by them:

CargoNet Transportation Community Network Ltd, Hong Kong

Department of Civil Aviation, Nepal

Department of Commerce, Nepal

Department of Customs, Nepal

DHL Worldwide Express, Hong Kong

DHL Worldwide Express, Nepal

EAN New Zealand Inc., New Zealand

Electronic commerce World Institute, Canada

Ministry of Commerce, Nepal

Ministry of Works and Transport, Multi-modal Project, Nepal

Nepal Transit and Warehouse Management Company Ltd, Nepal

Singapore Network Services Pte Ltd, Singapore

Société Internationale de Télécommunications Aéronautiques (SITA), France

Trade Promotion Centre, Nepal

TradeVan Community Network Services, Taiwan Province of China

Tribhuvan International Airport, Nepal

United Nations Development Programme (UNDP), Nepal

Various Customs Administrations throughout the Asian and Pacific region

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