ASEAN Regional Integration Support from the EU

ASEAN CUSTOMS TRANSIT SYSTEM (ACTS)

Background overviewofthe ACTS

  1. Introduction

In the early 1990s ASEAN began a process of economic deepening and widening that has picked up speed over time. Building on the ASEAN Free Trade Area (AFTA) and with the accession of Vietnam, Laos, Myanmar and Cambodia (the “CLMV” countries), ASEAN’s aim is the creation of an economic space comprising all of Southeast Asia based on outward-orientation and consistent with market-driven globalisation. The objective is the creation of the ASEAN Economic Community (AEC), a single market and production base within which goods and services would flow freely and where there would be freer flows of capital and skilled labour.

For the AEC to function properly, goods and transport must, above all, move freely within the region with as little administrative hindrance as possible but always bearing in mind the need to protect potential Government revenues due on goods in transit and ensure the security of the supply chain.

In these terms, although at first sight ASEAN is partly archipelagic (where maritime transport is key), seven of the ten ASEAN Member States (AMS) are geographically located on strategic transport corridors - from Singapore, through Malaysia and Thailand, up to the border between Lao PDR, Myanmar and Vietnam with China - and as such the integration of land-based transport networks within South East Asia is of vital importance. With this in mind, ASEAN established its ASEAN Framework Agreement on Facilitation of Goods in Transit (AFAFGT - Ha Noi 1998) which sets out a package of Trade Facilitation measures designed to facilitate transportation of goods in transit, to support the implementation of the ASEAN Free Trade Area and to further integrate the region’s economies. More specifically the intention of the AFAFGT is to simplify and harmonize transport, trade and customs regulations and to establish an effective, efficient, integrated and harmonized transit transport system in ASEAN.

Given the experience of the EU on the creation of its own Economic Community and the establishment of working systems for the movement of goods and transport, the AEC process has been actively assisted by Technical Co-operation programmes under the EC-ASEAN Programmes for Regional Integration Support (APRIS) and now, since November 2012, by ASEAN Regional Integration Support by the EU which will last four the next four years.

  1. Customs Modernisation, Reform, Transit and IT development at the national level

AMS Customs Administrations have undertaken considerable Customs reform and modernisation programmes over recent years and much progress has been made, most notably at national level. Law and regulations are based on the Revised Kyoto Convention, ICT systems have either been installed or are being installed, and modern technique for improved operational risk management is being introduced.

However, there are still substantive differences in terms of documents, procedures and information requirements that result in considerable inefficiency for the Trade, in particular where goods are required to move in Transit across the international transport corridors. Here, the movement of goods and transport for goods in transit internationally now requires different Customs declaration documents, separate Customs guarantees (either of the single or multi-journey type) to secure potential Customs debt and different IT systems must be addressed. In other words, reform needs now to be extended in particular, and quickly, to the regional level if the target of the AEC is to be reached.

Consequently, implementation of the AFAFGT and an ASEAN Customs Transit System (ACTS), the ICT element of which is the subject of a full international tender, has now become a priority towards the ASEAN Economic Community.

Customs ICT systems have been in place in Malaysia, Singapore and Thailand for many years. These started as import and export processing systems but now all three countries have modules on their national systems that control the national Transit Procedure from a point of entry to a point of departure. All Customs offices in each country are inter-connected via a system of leased lines between Customs Headquarters and the main Customs clearance offices at ports, airports and land borders. All three countries are well-funded and secure from the point of view of hardware, software, upgrades required to the systems and on-going maintenance. All significant Customs offices at ports, airports and land borders are equipped with the full range of modules. Selectivity modules are in place to assist the clearance control process although improvement is required in this area. All three countries have cargo scanners available at major points of entry and clearance.

Customs in Cambodia, Lao PDR and Vietnam are for the moment less well served in terms of Customs IT systems but nevertheless progress is occurring. Cambodia is completing the implementation of ASYCUDA (UNCTAD’s Customs declaration processing software package) and the same project is underway in Lao PDR. Vietnam has is currently undergoing a business re-engineering phase prior to a call for tender for a turnkey declaration processing system. None of these three countries yet has a fully extended national telecommunications network where all Customs offices are linked together but this will be completed within the life of the ACTS project. Transit in these three countries is thus managed manually at the national level.

  1. The ASEAN Customs Transit System proposals

The AFAFGT consists of nine separate Protocols, seven of which relate to Transport harmonisation where the work towards implementing standards for the movement of trucks is on-going. Two Protocols relate to Customs harmonisation requirements: Protocol 7 covers the legal, procedural and documentary requirements and Protocol 2 the use of border posts and transport corridors.

Protocol 7, which forms the basis for the implementation of the ACTS, has been revised by the countries in its entirety and an extensive Technical Appendix has been produced that sets out regulatory requirements and procedures. The work on the revision of the Protocol 7 and the production of the Technical Appendix has taken place with the assistance of the EC-ASEAN Programme for Regional Integration Support (APRISII) since the most successful and most up-to-date International Customs Transit System is that which exists in the European Union (the New Computerised transit System – NCTS) and ASEAN wished to make use of this know-how. Nonetheless, whilst the proposal has been based squarely on the principles of the NCTS, the detailed proposals for the ACTS have been adapted necessarily to take account of the situation in the ASEAN region as necessary.

In terms of the requirements of the ICT Systems, which are a crucial feature of the ACTS, a Feasibility Study was completed at the end of 2008 that concluded that there was no technical impediment to the implementation of the ACTS as envisaged in the Protocol 7. The High-Level Functional Specification produced as the main part of this work was reviewed by the Member States at special Working Group meetings and the final version has been approved by the Member States in its Customs Procedures and Trade Facilitation Working Group (CPTFWG) meeting in October 2010.

In terms of implementation strategy, the ASEAN Directors’ General of Customs have approved the implementation of the ACTS starting with a pilot project across the North – South corridor (Malaysia, Thailand and Singapore). This reflects the practical situation on the ground since these three countries are in a position to test and implement the ACTS technically right away.

When the pilot is proven, the ACTS will be rolled out in a phase 2 across the East – West corridor from Thailand to Vietnam through Lao PDR and Cambodia. This will provide sufficient time for these three countries to catch up with their infrastructure.

This said, the ACTS (including both its ICT application and its computer network[1] is a project to be developed for use in all Member States. Brunei and Indonesia have land borders with each other and Malaysia where the ACTS can be used to control the inter-state movements of goods in Transit between Customs offices more effectively. Furthermore, the Philippines may also wish to implement the ACTS to manage its internal Transit transaction. However, these potential arrangements are much less significant in Transit terms for the AEC and, as such, are for the future. They are not part of the current project proposal but can be implemented later using the know-how gained by the AMS.

The Member States are aware that in addition to building and implementing the application software, there is a need for a Central Management Team (CMT) to support the ACTS on an on-going basis and the intention is to have this up and running within three to six months after the start of programming work on the ACTS application. The CMT will manage the central database depositories that are required, the help desk, on-going requirements for training and user documentation and so on. Discussions have already taken place at the SWG and it has been calculated that a small charge per ACTS transaction will enable the AMS to cover their costs.

  1. Key components in the ACTS(included in the legal basis)

4.1 Basic principles

Traders will make a single, standard, electronic declaration (a sub-set of the ACDD) for each movement of goods (say from Singapore to Vietnam) which will be covered by a single guarantee valid in all countries that is provided, as is customary, by Banks and other approved financial institutions. Separate declarations and other documents or guarantees at national level are not required. In other words the transactions are managed at international level, not national level and the whole system is controlled by a computerised network that links Customs across the region.

No separate declarations or guarantees are required for the means of transport or the container. Means of transport will not be approved “technically” by Customs.

Simplified procedures will be available to traders with good revenue records able to demonstrate their competence in the Customs Transit environment. Global guarantees that cover a number of transactions will be used in the majority of instances and these may be reduced or waived in the context of the approval to use simplified procedures, as will sealing of vehicles and compulsory inspection at the office of departure and destination.

4.2 Risk management

Traders may apply to use the ACTS and a number of the simplifications available that will be judged and approved or denied by the national Customs authority in whose national territory the trader is based. This will consist of a rigorous examination of the financial circumstances of the trader, the business in which he is engaged, the goods that will be moved across which routes and to which destinations, the transporters to be used and sub-contracted, his current revenue record and the level of secure IT system that can be provided to link with the Customs ACTS network. Based on this analysis the trader will be accorded an appropriate level of approval and simplification.

4.3 The ICT system environment

Declarations will normally be made on-line from traders’ premises and will be approved and processed by the ACTS ICT application. Each transaction will be processed by the RM engine of the national Customs system before clearance to proceed is given.

Information about each and every transaction is sent electronically from the office of departure to border posts en route and to the office of destination. Triggers are applied to the system to ensure that if the means of transport and the load do not arrive at the offices en route within a reasonable time then action can be taken swiftly to contact the trader concerned.

The office of destination will provide the acquittal of the transaction to the office of departure when the goods arrive intact. An inbuilt trigger is provided that will initiate a formal enquiry if the goods do not arrive. Equally, any problems can be notified to the office of departure immediately through the system. In summary, each transaction and its associated risk is managed in real time.

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[1] The intention is to develop a single network ASEAN-wide for Customs and Trade data. In other words there will be a single network carrying information required under the ASW and the ACTS and any other application required in the future, for example Tariff, intelligence, trade and transport data and so on.