domestic regulation in transport...a freight forwarding industry perspective vincent f. valentine...

Domestic Regulation in Transport

A Freight Forwarding industry perspective

Vincent F. Valentine

Division on International Trade (DITC)

UNCTAD

Contents

• Part I – Freight forwarding regulations

• Part II – Education and Training

• Part III – Capacity to improve Logistics & eCommerce

DisclaimerThe maps illustrated in this work do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

Part IFreight forwarding regulations

A freight forwarder

• “services of any kind relating to the carriage, consolidation, storage, handling, packing or distribution of the Goods as well as ancillary and advisory services in connection therewith, including but not limited to customs and fiscal matters, declaring the Goods for official purposes, procuring insurance of the Goods and collecting or procuring payment or documents relating to the Goods.”

Source: http://fiata.com/uploads/media/Model_Rules_07.pdf

Agent v Principal

Source: UNESCAP (2013) Guidelines for Minimum Standards and Codes of Professional Conduct for Freight Forwarders, Non-Vessel Operating Common Carriers and Multimodal Transport

Not all countries use the term Freight Forwarder

Source: Watanuki, M. (2015) Review of Logistics Service Regulations for Freight Forwarding Businesses What Should Be Addressed for a Better Logistics Regulatory Framework? World Bank, WPS7401

Top 25 FF

Source: https://www.mmh.com/article/top_25_freight_forwarders_strong_grouth_abundant_opportunity

Provider HQGross

Revenue ($m)

Ocean TEU's

Air Metric Tons

DHL Supply Chain & Global Forwarding Germany 27,598 3,259,000 2,248,000

Kuehne + Nagel Switzerland 22,574 4,355,000 1,570,000

DB Schenker Germany 18,560 2,169,000 1,300,000

Sinotrans China 9,530 3,360,300 533,300

DSV Denmark 11,374 1,389,611 635,655

Expeditors United States 6,921 1,070,424 985,549

Panalpina Switzerland 5,621 1,520,500 995,900

Nippon Express Japan 16,720 600,000 835,755

UPS Supply Chain Solutions United States 7,981 600,000 935,300

Bolloré Logistics France 5,012 864,000 640,700

CEVA Logistics Switzerland 6,994 729,000 480,000

Hellmann Worldwide Logistics Germany 3,305 897,379 654,104

GEODIS France 6,255 690,000 330,000

Kintetsu World Express Japan 4,752 663,915 580,228

Yusen Logistics Japan 3,914 774,822 368,198

Kerry Logistics Hong Kong 3,951 1,053,485 313,800

DACHSER Germany 6,911 522,300 335,500

C.H. Robinson United States 14,869 698,000 175,000

Agility Switzerland 3,500 740,000 415,000

Hitachi Transport System Japan 5,935 500,000 280,000

Damco The Netherlands 2,700 664,000 206,000

Toll Group Australia 4,660 434,000 91,000

XPO Logistics United States 9,506 131,500 72,600

CJ Logistics South Korea 4,454 310,850 57,014

NNR Global Logistics Japan 1,735 144,483 321,704

The freight forwarding market is expected to achieve a CAGR of 4 - 4.5% through to 2020 driven principally by e-commerce

Source: https://www.eft.com/3pl/global-freight-forwarding-market-forecast-grow-cagr-4-45-until-2020

Freight forwarding – regulatory framework

• World Bank studies have revealed that a weak regulatory framework has been the root of the challenges that countries have faced in the transport and logistics service industry. For example:• In Greece, multiple administrative agencies that do not interact with each

other has created duplication of regulations and resulted in overregulation (WB, 2013).

• In the East Africa Community, due to insufficient regulatory oversight, low-skilled operators easily enter the industry with the lack of professionalism, quality, and efficiency of their services (Arnold, et al., 2011).


Freight forwarding – regulations governed in multiple sectors • Rare that licensing requirements for logistics service operators are

published in one place. For instance,• Regulations on trucking business licenses under a ministry of transport,

regulations for a bonded warehouse license for the same operator still has to comply with customs. Even for warehousing, the operator is subject to follow a fire regulation monitored by a fire department. Furthermore, licensing requirements for foreign operators are often more strict than those for domestic operators. The regulations for foreign operators are stipulated by foreign direct investment laws, which are often prepared by a ministry of commerce.

• There is no “one stop shop”, such as a ministry of logistics


A. Regulated – Market Access

1) Establishment • Minimum capital / Asset requirement• Physical presence (Person, Address) • Staff (minimum qualifications for the management staff, etc.)• Others (having liability insurance at the time to start business, etc.) • Discriminative measure for foreign operators

2) Scope of activities• Separate licenses are required for each logistics activity (e.g. license or permit

required for freight forwarding, warehousing, carriage of bonded goods) • Limited activities in the first years, then will be allowed to expand • Foreign operators may not be able to compete with local operators in certain

areas of business (such as carriage of oil, etc.)


(…cont) Regulated – Market Access

3) Other requirements that do not fall into the previous categories may include but not limited to: • Additional permits (such as mayor’s or provincial permit, etc.)

• Taxation

• Membership in an industry association (national logistics association, freight forwarders association, etc.)


B. Regulated – Operations

1) Liability• Liability and its exception• General Terms and Conditions for contracting (often self regulated)• Liability insurance

2) Staffing• Professional qualifications

3) Quality control for freight forwarding services• Operational manual for the industry • Establishment of standards / criteria for logistics services

4) Disclosure of information• Publication of freight rate and fee • Reporting on mitigation effort to environment (CO2 reduction)


Comparison of Requirements for Market Access in Freight Forwarding - Europe

Source: Poliak, M., Šimurková, P., Jaśkiewicz, and M. Hernandez, S. (2018), Unification Proposal on Market Access for Freight Forwarding In the European Union, DOI 10.2478/ntpe-2018-0025

Regulation in Asia

Source: UNESCAP (2013) Guidelines for Minimum Standards and Codes of Professional Conduct for Freight Forwarders, Non-Vessel Operating Common Carriers and Multimodal Transport

Regulation

No (government) regulation

No data Source: compiled by UNCTAD (2019) from Poliak, M. et al, (2018), Watanuki, M. (2015), UNESCAP (2013) and TRACECA (2007)

Part IIEducation and Training as a means to stimulate trade in services

FIATA - Diploma

• FIATA (International Federation of Freight Forwarding Associations) diploma• Syllabus by FIATA

• Delivery by national association

• Recipients – junior employees

• FIATA ToT programme• To help national FF associations deliver their own programmes

• Financing – initially FIATA Foundation

HRDF Levy – Malaysia – (Ministry of HR)

PSMB Act 2001 (Amendment of the First Schedule came into effect 1 April 2017)

• A mandatory levy payment collected by the Human Resources Development Fund (PSMB) imposed on employers from certain industries. The purpose is to enable employee training and skills upgrading of the Malaysian workforce.• 5-9 employees - 0.5 % of the monthly wages of each of their Malaysian

employees

• 10 > employees - 1 % of the monthly wages of each of their Malaysian employees

HRDF Levy - Service Sectors covered

1. Energy2. Hypermarket/Supermarket/Departmental Store3. Direct Selling4. Commercial Land Transport and Railway Transport Services5. Warehousing Services6. Port Services7. Hotel Industry8. Freight Forwarding9. Shipping10. Air Transport11. Tour Operating Business (In-bound only)12. Postal or Courier13. Telecommunication14. Research & Development15. Engineering Support & Maintenance Services16. Security Services17. Computer Services18. Advertising19. Private Hospital Services

20. Higher Education21. Training22. Gas, steam and air-conditioning supply23. Water treatment and supply24. Sewerage25. Waste management and material recovery services26. Food and beverage services27. Production of motion picture, video and television programme, sound recording and music publishing28. Information service29. Tourism enterprise30. Building and landscape services31. Event management services32. Early childhood education33. Health support services34. Franchise35. Sale and repair of motor vehicles36. Private broadcasting services37. Driving school38. Veterinary services

The Sectorial Training Committee (STC)

TotalEmployers – 3,195

Employees - 296,409

Source: https://www.hrdf.com.my/services/sectorial-training-committee/

Similar Schemes (inc. proposed)Country Organization Details of Fund

China Training Funds (provincial level) Exemption-based scheme

Fiji Training Fund run by the National Training

and Productivity Centre

Levy-grant mechanism.

Indonesia Proposed Skills Development Fund

Korea Training Fund Exemption-based scheme: Employers above a certain size required to conduct training or pay a

levy

Lao PDR Proposed National TVET and Skills

Development Fund

Malaysia Human Resource Development Fund Levy-reimbursement scheme.

Mongolia Employment Promotion Fund Almost half of its funding comes from payments from employers for hiring foreign citizens

Myanmar Proposed Skills Development Fund Expected to be levy-based.

Papua New Guinea Training Fund Training levy (hybrid:

exemption-based, levy-grant), and also used as a general source of funds for TVET

Singapore Skills Development Fund Levy is imposed only on the lower-wage workers. Levy rate is 1% of the monthly remuneration.

Thailand Skills Development Fund Levy-reimbursement scheme.

Vietnam Proposed Training Fund Proposed to be levy funded.

Source: Palmer, R (2017) Financing Technical and Vocational Education and Training (TVET) in the East Asia, and Pacific Region: Current Status, Challenges and Opportunities

1/3rd of firms globally offer formal training

Large variation by country

• China 79.2%

• Samoa 79.1%

• Papua New Guinea 73.7%

• Myanmar 5.9%

• Jordan 3.4%

• Timor-Leste 1.9%

Source: https://www.enterprisesurveys.org/en/data/exploretopics/workforce accessed 31/10/2019

0 5 10 15 20 25 30 35 40 45 50

All Countries

East Asia & Pacific

Europe & Central Asia

Latin America & Caribbean

Middle East & North Africa

South Asia

Sub-Saharan Africa

Percent of firms offering formal training

https://www.enterprisesurveys.org/en/data/exploretopics/workforce

Part IIICapacity to improve Logistics and eCommerce

Factors of Production

LandLabourCapital

Enterprise

B2C LPI TAB

Account ownership The efficiency of customs and border managementclearance

Documentary compliance

Individuals using the Internet The quality of infrastructure Border compliance

Postal Reliability Index The ease of arranging competitively priced international shipments Domestic transport

Secure Internet servers The competence and quality of logistics services

The ability to track and trace consignments

Reliably of delivery time

GNI HAI EVI

Income per capita Education Agricultural production

Health Natural disasters

Exports of goods and services

Population in low elevated coastal zones

Agriculture, forestry and fishing in GDP

Merchandise export concentration

Remoteness

Population

Measuring E-commerce & Logistics Capacity

Inputs

Outputs

Efficiency rankings of countries in eCommerce and Logistics using Data Envelopment Analysis

40%

50%

60%

70%

80%

90%

100%

Sub-SaharanAfrica

East Asia Europe andCentral Asia

South Asia LatinAmerica &Caribbean

Middle East& North

Africa

Source: Wang, T., Kang, J.W. and Valentine, V.F. (2020) A Holistic Analysis of National E-commerce and Logistics Development, Maritime Economics & Logistics, Forthcoming

Measuring E-commerce & Logistics Capacity

Source: Wang, T., Kang, J.W. and Valentine, V.F. (2020) A Holistic Analysis of National E-commerce and Logistics Development, Maritime Economics & Logistics, Forthcoming

References

• ILO (2017) Upskilling SMEs: How governments fund training and consulting. Comparing experiences from Asia, Europe and North America

• Lim, A.K. and De Meester. B (2014) WTO Domestic Regulation and Services Trade: Putting Principles into Practice, Cambridge University Press

• Watanuki, M. (2015) Review of Logistics Service Regulations for Freight Forwarding Businesses What Should Be Addressed for a Better Logistics Regulatory Framework? World Bank, WPS7401

• UNESCAP (2013) Guidelines for Minimum Standards and Codes of Professional Conduct for Freight Forwarders, Non-Vessel Operating Common Carriers and Multimodal Transport

domestic regulation in transport...a freight forwarding industry perspective vincent f. valentine...

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