Leveraging Public-Private Partnerships for Trade Facilitation in the CAFTA-DR

Private Sector Views and Priorities

April 12, 2013

Bobby Fraser, Soledad Feal-Zubimendi, Jack Herron, Belma Ambrose

United States Chamber of Commerce

 

Table of Contents Executive Summary……………………………………………………………………………...3 Acknowledgements………………………………………………………………………………5 Acronyms and Abbreviations …………………………………………………………………..6 Section I – Introduction………………………………………………………………………….8 Section II – Country Profiles…………………………………………………………………..14

A. Costa Rica…………………………..……………………………………………......15 B. The Dominican Republic………………………………………………....................18 C. El Salvador..…………………………………………………………………………21 D. Guatemala……………………………...…………………………………………….24 E. Honduras………………………...…………………………………………………...28 F. Nicaragua……………...……………………………………………………………..31

Section III – Public Private Partnership Recommendations……………………….………..34

A. Corporate Trade Facilitation Council……………………………………………...34 B. Defining of Public Private Partnerships……………………………………………37 C. Harmonization of Border Controls………………………………………………...39 D. Electronic Documentation Systems………………………………………………...45 E. Sanitary and Phytosanitary Standards…………………………………………….50 F. Authorized Economic Operators.…………………………………………………..56 G. Single Window Systems……………………………………………………………..61

Section IV – Quantitative Analysis…………………………………………………………….64 Section V – Appendix and References…………………………………………………….......73

1

2

Executive Summary

Our International Trade and Investment Policy (ITIP) capstone project, Leveraging Public-Private Partnerships for Trade Facilitation in the CAFTA-DR: Private Sector Views and Priorities, is graciously sponsored by the U.S. Chamber of Commerce, International Division – Americas. In June 2012, our ITIP capstone group met with representatives from the Chamber’s Americas Division of the International Division. Dr. José Raúl Perales, the Director of the Americas division, offered to serve as the sponsor of this project. Dr. Perales is also a lecturer at the George Washington University’s Elliott School of International Affairs. After conducting a private sector survey on trade facilitation priorities in the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), the Chamber, Association for American Chambers of Commerce in Latin America, and Inter-American Development Bank issued a report, Competitive Advantage: Moving Ahead of The Global Competition, which can also be found in appendix AA of this report. The report includes recommendations based upon private sector priorities identified within the survey. The Chamber expects to establish a CAFTA-DR regional Corporate Trade Facilitation Council (CTFC), which will serve as a platform for public-private sector collaboration in assisting CAFTA-DR governments in implementing the identified trade facilitation priorities. Our project report’s goals are to assist the Chamber in identifying potential ways in which the private sector trade facilitation report’s recommendations can be implemented as projects through the Council, specifically with a focus on establishing public-private partnerships (PPPs). This report’s PPP project recommendations focus upon:

Establishing the CTFC Electronic Documentation System Harmonization of Border Controls Sanitary and Phytosanitary Standards (SPS) Authorized Economic Operators (AEOs) Single Window Trade Systems

The report is structured as follows: Section I includes the report introduction, background on the U.S. Chamber of Commerce and IDB’s trade facilitation project, our participation and Chamber’s sponsorship of our project, and general information on the concept of trade facilitation and its benefits. Thereafter, Section II is composed of country profiles that provide general economic background information, including the Logistics Performance Index of the World Bank, for each of the countries of CAFTA-DR along with some country-specific highlights from the private sector trade facilitation survey. Section III includes our analysis of the Council and ideas for potential PPPs that can be implemented through the Council. We include the recommendation from the original report, survey details, identify public and private sector stakeholders and their respective roles, assess how the Corporate Trade Facilitation Council can support their implementation, and examine the benefits of implementing the particular project. Section IV includes our quantitative analysis, which consists of a gravity equation model to assess the impact of trade facilitation efforts of CAFTA-DR nations on

3

imports to these countries. Section V is the bibliography and appendix, including charts, graphs, and associated reports.

4

Acknowledgements: First and foremost, we greatly thank Dr. José Raúl Perales, Director of the Americas division at the U.S. Chamber of Commerce, for allowing us to work with the Chamber and for sponsoring our capstone project. We also thank Reuben C. Smith-Vaughan, Manager of Americas Policy and Advocacy at the Chamber, for his assistance and updates throughout the project. At the George Washington University, we are grateful for Dr. Steven Suranovic, director of the ITIP Program at the Elliott School of International Affairs, for his strong program leadership, support, and constructive feedback throughout our project. In addition, we would like to thank the following individuals for taking the time out of their busy schedules to provide us with feedback and guidance:

Dr. Michael Moore, Professor of Economics and International Affairs at the George Washington University’s Elliott School of International Affairs

Erick Feijóo, Integration and Trade Sector, Inter-American Development Bank Laura Dachner, Deputy Chief of Mission and Minister Counselor for Economic and

Trade Affairs, Embassy of Costa Rica in Washington, D.C. Jose Carlos Quirce, Director at Ministry of Foreign Trade of Costa Rica in Washington,

D.C. Tania Casco, First Secretary, Embassy of Honduras in Washington, D.C. Felipe Herrera, Counselor, Economic & Trade Section, Embassy of Dominican Republic

in Washington, D.C. Abel Moreno, Head of Commercial and Economic Section, Embassy of Dominican

Republic in Washington, D.C. Sara Hagigh, Team Leader, Office of North, Central American and Caribbean, Market

Access and Compliance Division, International Trade Administration

Disclaimer: The views represented in this report only represent those of the authors named above. The points of view offered within this report do not represent those of the Americas Division of the U.S. Chamber of Commerce, Integration and Trade Sector of the Inter-American Development Bank, the Association of American Chambers of Commerce of Latin America, or the International Trade and Investment Policy Program at the George Washington University’s Elliott School of International Affairs.

5

Acronyms and Abbreviations: APHIS United States Department of Agriculture Animal and Plant Health Inspection

Service AACCLA Association of American Chambers of Commerce in Latin America AEO Authorized Economic Operator AGEXPORT Guatemalan Exporters Association APEC Asia Pacific Economic Cooperation BASC Business Anti-Smuggling Coalition CACU Central American Customs Union CADEXCO Costa Rica Export Chamber CAFTA-DR The Dominican Republic-Central American-United States Free Trade Agreement CARCCC Central Asia Regional Customs Cooperation Committee CAUCA Código Aduanero Uniforme Centroamericano CBPNCC Australian Customs and Border Protection National Consultative Committee CCIE Consejo Consultivo de la Integracion Economica CECATEC-RD Central America-Dominican Republic Apparel and Textile Council CEIMSA Comisión Especial Interinstitucional de Modernización del Servicio Aduanero of

Honduras CENPROMYPE Center for the Promotion of Micro and Small Enterprises in Central America Chamber United States Chamber of Commerce CIFCO Comisión Interinstitucional Facilitadora del Comercio CIMA Comisión Intergremial de Modernización de Aduanas CIMCO Comisión Interinstitucional de. Mejoramiento de Comercio COAC U.S. Advisory Committee on Commercial Operations of Customs and Border

Protection CNMSF Comite Nacional Para la Aplicacion de Medidas Sanitarias Y Fitosanitarias COEXPORT El Salvador Export Corporation COFACECA Comisiones de Facilitacion del Comercio Exterior de Centro America COHEP Honduran Private Enterprise Council CONAFACIL Comisión Nacional de Facilitación de Comercio Internacional CONAFI Comisión Nacional Asesora Fitosanitaria COO Certificate of Origin COSEP Private Enterprise High Council of Nicaragua CTFC Corporate Trade Facilitation Council CTR USAID CAFTA-DR Regional Trade Program ESCAP Economic and Social Commission for Asia and Pacific EU European Union FDA United States Food and Drug Administration FDI Foreign direct investment FECAEXCA Panama and Caribbean Federation of Chambers and Exporters’ Associations FSCF APEC’s Food Safety Cooperation Forum FSIS United States Department of Agriculture Food Safety and Inspection Service GDP Gross Domestic Product GEDOEL Electronic Document Generator ICC International Chamber of Commerce

6

IDA International Development Association IDB Inter-American Development Bank IMF International Monetary Fund IPPC International Plant Protection Convention JCCC U.K. Joint Customs Consultative Committee LPI Logistic Performance Index MAGFOR Nicaragua’s Ministry of Agriculture and Forestry NTM Non-tariff measures OECD Organization for Economic Co-operation and Development OIE World Organization for Animal Health OIRSA Organismo Internacional Regional de Sanidad Agropecuaria OSCE Organization for Security and Co-operation in Europe PACE Programa Aduanero de Cumplimiento Empresarial PPP Public-Private Partnership PROFAC Programa de Facilitación Aduanera para el Comercio Confiable en Costa Rica PTIN Partnership Training Institute Network RECAUCA Reglamento del Código Aduanero Uniforme Centroamericano RedVUCE Inter-American Network of International Trade Windows RIAC Inter-American Competitiveness Network RKC Revised Kyoto Convention ROO Rules of Origin SAFE WCO Framework of Standards to Secure and Facilitate Global Trade SECIPRO Southeast Europe Cooperative Initiative SIECA Secretaría de Integración Económica Centroamericana SPS Sanitary and Phytosanitary Standards TBT Technical Barriers to Trade TIM Mesoamerican Procedure for the International Transit of Goods TRIPS Trade-related aspects of intellectual property rights UN United Nations UNCEFACT United Nations Centre for Trade Facilitation and Electronic Business UNCTAD United Nations Commission on Trade and Development UNECE United Nations Economic Commission for Europe UNFAO United Nations Food and Agricultural Organization UNNEXT United Nations Network of Experts for Paperless Trade in Asia and Pacific USTR Office of the United States Trade Representative USAID United States Agency for International Development VUCE Ventanilla Única de Comercio Exterior of Costa Rica WCO World Customs Organization WHO World Health Organization WTO World Trade Organization

7

SECTION I - Introduction CAFTA-DR Trade Facilitation Initiative and Project Background On August 5, 2004, the U.S. joined the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR). Subsequently, on July 28, 2005, Congress passed the CAFTA-DR, which enacted the trade agreement with Costa Rica, El Salvador, Honduras, Nicaragua, and Guatemala.1 In 2007 and 2009, respectively, the Dominican Republic and Costa Rica also enacted the agreement. CAFTA-DR, a reciprocal trade agreement, eliminates both tariff and non-tariff barriers and includes chapters to enhance government procurement, intellectual property rights (IPR), and investor protections. Among CAFTA-DR’s many provisions, the agreement includes a Committee on Trade Capacity Building, with a specific focus on improving customs procedures and trade facilitation.2 On February 2011, during the first meeting of the CAFTA-DR Commission, in San Salvador, El Salvador, the Ministers of Trade in attendance launched a Trade Facilitation Initiative, which instructed government agencies of the six CAFTA to evaluate and share best practices for the facilitation of trade.3 The CAFTA-DR Free Trade Commission instructed member governments to consult with the relevant stakeholders to assess methods to enhance trade facilitation efforts. According to the Office of the United States Trade Representative (USTR), at the Commission meeting:

“We endorsed a regional trade facilitation initiative to foster greater regional integration, enhance competitiveness and expand the benefits of the trade agreement, with special attention to promoting greater participation by SMEs… Therefore, we instructed our senior officials to undertake a process of consultation with stakeholders and self-assessments to identify remaining challenges and to share best practices, including policies, programs and practices that countries can adopt to facilitate trade.”4

The CAFTA-DR Commission’s Trade Facilitation Initiative focused on three priority areas: customs, logistics and supply chain issues, and technical standards, including sanitary and phytosanitary measures. In accordance with the renewed efforts to focus on trade facilitation, the Chamber of Commerce, in partnership with the Inter-American Development Bank (IDB), and the Association of American Chambers of Commerce in Latin America (AACCLA), established a private sector trade facilitation survey to identify priorities of the private sector companies doing business in the CAFTA-DR region with regard to trade facilitation. The private sector trade facilitation survey received approximately 325 responses from 311 companies of different industries, sizes, and sectors. All companies surveyed conducted or held operations within Central America and the Dominican Republic and the United States.

8

The survey defined trade facilitation as consisting of six main areas:

Customs administration Risk management Logistics and infrastructure Integrated border management Procedural requirements Strategic planning

The U.S. Chamber of Commerce, along with AACLA and the IDB, then organized focus groups to conduct the survey between April and November 2012. Focus groups were held in San Jose, Costa Rica; San Salvador, El Salvador; Guatemala City, Guatemala; Tegucigalpa, Honduras; Managua, Nicaragua; Santo Domingo, Dominican Republic; and Washington, D.C. In March 2013, after receiving and analyzing the results of the private sector trade facilitation survey, the Chamber, AACLA, and IDB released a report presenting the survey findings with respect to the six areas referenced above. The report, Competitive Advantage: Moving Ahead of the Global Competition: Private Sector Priorities for Trade Facilitation in the CAFTA-DR Region, provides seven horizontal, or CAFTA-DR-wide, recommendations based on the priorities identified by the private sector. The full report can be found in appendix AA. The Competitive Advantage report recommendations are:

Greater follow-up on trade facilitation commitments, including permanent channels for public-private sector consultation, and independent evaluation of progress in trade facilitation issues.

Implementation of a fully electronic entry documentation system. Harmonization of border controls. Implementation of a harmonized tariff system in the region. Mutual recognition of sanitary and phytosanitary (SPS) and SPS-related registrations. Adoption of authorized economic operator (AEO) programs and risk systems. Transparency and capacity building, including permanent capacity-building

mechanisms taking into consideration all the different public sector agencies involved in international trade issues.

The report also includes analysis of the recommendations at the country level, and provides insight into the specific concerns of businesses within each country. Capstone Group Project and Participation with Chamber This report is sponsored by the U.S. Chamber of Commerce, International Division – Americas. In the June 2012, our capstone group met with representatives from the Chamber’s Americas Division of the International Division. Dr. José Raúl Perales, the Director of the Americas division, offered to sponsor this project. Dr. Perales is also a lecturer at the George Washington University’s Elliott School of International Affairs.

9

With regard to the first recommendation of the report, the Chamber expects establish a CAFTA-DR regional Corporate Trade Facilitation Council (CTFC), which will serve as a platform for public-private sector collaboration in assisting CAFTA-DR governments in implementing the identified trade facilitation priorities. Our goals with this project are to assist the Chamber in identifying potential ways in which the private sector trade facilitation report’s recommendations can be implemented as projects through the Council, specifically with a focus on establishing public-private partnerships (PPPs). In accordance with these goals, our recommendations are furnished with the intent of being established and administered by PPPs through the CTFC, which will also work in conjunction with the IDB to structure and implement improvement projects. In addition, we provide further recommendations on how the CTFC can most effectively work, given its status as a platform for private and public sector engagement. While our recommendations are intended for horizontal application to the entire region, we understand that particular members of CAFTA-DR may be at different stages of development for any given trade facilitation project. In addition, our project includes country profiles that provide highlights of the private sector’s priorities and background information on each country’s trade facilitation and business climate. We also provide a quantitative analysis that presents a gravity equation with data on trade facilitation’s impact on trade flows. The Concept of Trade Facilitation Efficiency improvements and reductions of non-tariff measures (NTMs) facilitate trade. Policy measures that reduce the cost of trade transactions, or promote trade facilitation, can positively impact a country’s level of economic activity and ability to attract trade flows and generate future investments. Overall, the reduction of time-increasing trade procedures assists both firms and country governments within the trade process. The concept of trade facilitation includes logistical improvements, modernization of customs and documentation procedures, efficiency in regulatory licensing requirements, and reliable and quality governance.5

The World Trade Organization (WTO) conceptually defines trade facilitation as, “the simplification and harmonization of international trade procedures… for collecting, presenting, communicating, and processing data required for the movement of goods in international trade.”6 Essentially, trade facilitation measures are meant to reduce trade transactions costs at each level of the exporting and importing process.

In fact, trade facilitation is not only related to the at-the-border customs procedures of importing and exporting, but it also encompasses behind-the-border elements, such as infrastructure reliability and transparency within government. Some studies have even broken down trade facilitation into more specific policy actions. According to a World Bank study by John S. Wilson and Alberto Portugal Perez, “trade facilitation measures can be undertaken in two dimensions: a “hard” dimension related to tangible infrastructure, such as roads, ports, highways, telecommunications, as well as a “soft” dimension related to transparency, customs management, the business environment, and other aspects that are intangible.”7

10

As referenced above, trade facilitation is widely defined. One pragmatic interpretation of the term encompasses policies related to promoting efficiency and reducing NTMs, including logistical infrastructure and port improvements, efficiency improvements in customs procedures, reductions in licensing requirements, and improvements in the quality of governance.8 Policy improvements in each of these areas can concretely help to facilitate trade within countries.

Logistical infrastructure and port improvements include the privatization of ports, reforms to domestic highway infrastructure, improving electricity, water and sanitation standards, and a competitive telecommunications market.9 These at- and behind-the-border necessities are imperative for developing nations in attracting firms’ exports and foreign direct investment (FDI) to generate economic growth. Infrastructure reform has proven necessary for development in Latin America.

Efficiency improvements in customs procedures include customs modernization reforms and the use of technology. Some Latin American countries, like Chile, have invested in electronic data interchange systems to facilitate their customs process.10 These systems decrease processing time and improve the rates of customs payment as a result of more accurate monitoring.

Reductions in licensing requirements and improvements in quality of governance both serve to increase predictability and transparency as well. Decreased regulatory and licensing procedures provide firms with more focus on their end goals towards the consumer market. In the same light, transparency and clarity in governance creates a better business climate with less concern for an inadequate or unreliable legal system, bribery from government officials, or other government-related costs of doing business.

Time also plays a key role in trade facilitation. Increased time for importing and exporting products raises costs and creates uncertainty for firms. Time is also an implicating factor for firms’ decisions as to where to export their products. According to David Hummels, “each day saved in shipping time is worth .08 percent ad-valorem for manufactured goods.”11 Further, Hummels also finds that that sea travel time of 20 days is associated with an 8 percent tariff on traded goods and reducing travel time by 1 day reduces the probability of trade by 1 percent on average.12 Time is a vitally important factor, if not the most important, that firms consider when determining where to ship their products for export.

The benefits from trade facilitation reforms are also mutually appropriated to the private sector exporters and government agencies. Several studies by multilateral organizations show that the effects for generating economic activity and attracting imports, albeit at different levels of gains. Benefits exist in the form of efficiency for firms and savings for governments. According to the United Nations, potential savings for countries from trade facilitation could be an estimated $490 billion globally in the form of increased revenues and decreased expenses.13 Customs modernization programs can decrease costly paper and documentation requirements.

In addition, automated and technological reforms to the customs process can benefit governments by providing more certainty of the collection of processing fees. Investment costs are associated with customs modernization reforms and trade facilitation policies; however,

11

benefits for governments in the form of increased revenues and efficiency gains also clearly exist.

For firms, efficient trade procedures at-the-border and beyond-the-border can reduce transaction costs and expedite the timely travel of products. Reforms to decrease transactions costs and customs-related procedures provide firms with reliability and certainty in their export process. On the aggregate level, several studies explain the benefits of trade facilitation to the global economy.

According to studies by the Organization for Economic Co-operation and Development (OECD), trade transaction costs can account for anywhere between 1 to 15 percent of the total trade transaction value.14 In addition, the Asia Pacific Economic Cooperation (APEC) estimates that a 5 percent reduction in trade transaction costs by the 21 APEC member states would add approximately $154 billion dollars to their economies.15 Further, a 2003 OECD study found that inefficient trade transaction costs represent deadweight loss and could bring annual gains of $40 billion globally, most of which would be accrued to developing nations.16 Finally, a 2001 study by the United Nations Commission on Trade and Development (UNCTAD) estimated that a 1 percent reduction in the cost of maritime and air transport services in developing nations could potentially increase global GDP by $7 billion. According to these studies and many others, trade facilitation measures can create efficiencies for firms and provide cost savings and revenues for governments. With specific regard to the CAFTA-DR nations, trade facilitation can decrease costs for the private sector, thereby generating economic activity for the region as a whole. According to the private sector trade facilitation report, “A better trade and logistics infrastructure would transform Central America into a more attractive region for investing and doing business, and, at the same time, it would allow small and medium-sized firms, which form the backbone of the region’s economies, to have greater opportunities to trade.”17 Delays in customs clearance processes in the CAFTA-DR region can result in an increase in transport costs between 4 and 12 percent, while an increase in distance can raise transport costs by between 8.5 and 18.7 percent.18 Moreover, if Central America were to improve infrastructure and logistics to EU15 levels, intra-regional exports would double. The CAFTA-DR region has already experienced a tremendous growth, in which trade facilitation has the ability to expand upon the growth. Since 2006, with the inception of the trade agreement, intraregional trade has grown from $9 billion to approximately $14.2 billion in 2011—an increase of 55 percent.19 The Central American region has also served as an expanding market for U.S. exports. As chart 1A of the appendix expresses, U.S. merchandise exports to the CAFTA-DR region have seen tremendous growth since the implementation of the FTA in 2006. By 2012, U.S. merchandise exports to the region totaled over $30 billion dollars.20 In the appendix, Chart 1B provides insight into where U.S. exporters are sending the merchandize. As expressed by the chart, U.S. exports were distributed evenly throughout the region in 2012. Each country imported almost 20 percent or more, with Nicaragua importing only 4 percent and El Salvador 10 percent.21

12

For more in-depth analysis on the expansion of trade between the U.S. and CAFTA-DR nations, chart 1C of the appendix, constructed by the Congressional Research Service, provides more information on the growth in exports and imports between the two regions. Notably, U.S. exports grew from $13.5 billion in 2000 to over $30 billion in 2011, whereas U.S. imports from the region grew from $16.2 billion to $28 billion.22 Any gains in efficiency or time improvement for trade facilitation can act to expand the already impressive growth in trade between the U.S. and CAFTA-DR countries.

13

SECTION II – Country Profiles

Within this section our report provides general economic background information on the CAFTA-DR nations examined within the private sector trade facilitation survey. In our analysis, among other related indicators, we primarily include information from the Heritage Foundation’s Index on Economic Freedom and the World Bank’s Logistics Performance Index (LPI). The Heritage Foundation, in partnership with the Wall Street Journal, conducts an annual analysis of the trade, business, investment climates and property rights of 185 countries across the globe. The World Bank annually calculates the LPI based on a global survey of shipping firms.23 The international LPI ranks countries based on both qualitative and quantitative factors in six key dimensions: customs, infrastructure, international shipments, logistics competence, tracking and tracing, and timeliness.24 Countries are ranked on a scale of 1 (worst) to 5 (best). Appendix AA includes full rankings for both indices.

Thereafter, we provide selected highlights from the private sector trade facilitation survey about each country in the six topic areas. For the full results of the trade facilitation survey of private firms, readers can turn to the appendix AA, where the Competitive Advantage report is provided.

14

A. Costa Rica Costa Rica is an upper middle-income country with a GDP of $40.87 billion and population of 4.7 million.25 The groundwork for Costa Rica’s economic success was laid in the 1980s, when the nation’s policymakers abandoned state-led development and began emphasizing trade liberalization, through the reduction of taxes and trade barriers, the promotion of the exporting sector, and the institution of solid platforms for foreign trade and FDI.26 As a consequence of these policies and Costa Rica’s strong commitment to public education, Costa Rica has developed a diversified economy that emphasizes tourism, insurance, telecommunications and health care.27 Despite its small size, the presence of political stability, strong rule of law, and high levels human capital have made Costa Rica an economic force within Central America. Over the last three decades, Costa Rica’s economy has consistently performed well above the regional average and peaked at 8.8 percent GDP growth in 2006.28 Like most globally integrated economies, Costa Rica was not immune to the global financial crisis and saw a 1.3 percent GDP growth decrease in 2009. 29 To mitigate the adverse effects of the crisis, the government increased social sector and labor-intensive infrastructure spending in order to help stabilize GDP growth, which reached a rate of 4.7 percent growth by 2010.30 Current projections predict that GDP will grow at a rate of 3.7 percent and 4.1 percent over the next few years—largely propelled by consumption and investment.31 The 2013 Index of Economic Freedom ranks Costa Rica’s economy as the 49th freest in world. Per the Index’s findings, Costa Rica’s overall regulatory framework and business procedures have become more streamlined while regulatory compliance remains costly given the high monetary costs and 160 days needed to obtain business permits. Labor codes are also growing increasingly stringent and labor costs remain high. Conversely, Costa Rica’s government has successfully eased the upward pressure on inflation and kept public debt under control but continues to control prices.32 The Index also emphasizes that Costa Rica continues to support entrepreneurship, but notes that Costa Rica has yet to implement effective rule of law. Specifically, the judicial system is very susceptible to political influence and fails to adequately protect property rights, while a high prevalence of corruption hinders economic activity. In relation to the support of open markets, Costa Rica’s trade-weighted average tariff rate is currently 2.4 percent—very few non-tariff barriers exists, investment remains transparent, and investors, both domestic and foreign, are treated evenly. Finally, the financial sector continues to develop and welcome more competition despite the supremacy of state-owned banks over the sector.33 With regard to the 2012 LPI, Costa Rica performs among the highest in Central America, ranking 82 out of 155 countries. Costa Rica received an LPI score of 2.75 out of 5, suggesting there is room for improvement in the trade facilitation categories examined. Highlights from Private Sector Trade Facilitation Survey:

Customs Administration: Costa Rica could improve its accessibility to inquiries from private companies involved in the customs process.

15

Only 4 percent of respondents said that points of inquiry are always available, while 19 percent responded that they are often available. A combined 67 percent responded that there were sometimes or rarely points of inquiry available.

Again, only 4 percent of the respondents said that there are always training sessions for new regulations and laws, while 30 percent responded that there are sometimes sessions and approximately 55 percent responded that there are rarely or never sessions.

Risk Management: Generally, private sector survey respondents expressed favorability towards Costa Rica’s risk management system. Survey responses suggested that Costa Rica’s risk management system facilitated trade, while providing an adequate level of security.

Respondents were asked whether information technology and automated systems to worked in favor of trade operations. Of the firms surveyed, 56 percent answered that automated systems were excellent or good. Another 30 percent answered that they were fair, while a combined 13 percent responded that they were poor or very poor.

In addition, respondents were asked their views on the options to use electronic filing for paperwork and transactions. 39 percent responded that electronic filing was either excellent or good and 26 percent claimed that the option to file paperwork electronically was fair. Also, 26 percent of respondents said that the electronic filing was poor, while only 9 percent said that it was very poor.

The survey also asked respondents to score effectiveness and implementation of one single electronic interface to complete import/export related paperwork. A combined 33 percent said they thought that Costa Rica’s implementation of this factor was excellent or good. 30 percent said that they thought it was fair and a combined 26 percent said that it was poor or very poor.

Survey respondents were asked to rank Costa Rica’s effectiveness of implementation tariff and related information/data available from an automated system, and the provision of automated systems to implement the payment of duties, taxes, and fees. An overwhelming 60 percent ranked automated systems as excellent or good.

Logistics and Infrastructure: Respondents generally noted that Costa Rica could improve infrastructure, particularly as it relates to border facilities and controls. However, respondents also gave more positive rankings for government coordination with the customs administration.

24 percent of respondents ranked Costa Rica as good in the area of harmonization of border controls. Another 24 percent ranked the country as fair, while 29 percent responded that Costa Rica was poor in this area. 24 percent ranked Costa Rica as very poor in border control harmonization.

16

Integrated Border Management: Respondents to the survey generally said that Costa Rica’s integrated border management was fair. Several areas existed for improvement, such as harmonizing customs administrative procedures and the processing of documents.

The survey asked: To what extent does the customs administration issue written advance

rulings at the request of an importer, exporter, or producer? 15 percent responded written advance rulings are always issued. A plurality of 45 percent of those surveyed responded that this usually happens in Costa Rica. Another 20 percent said that this happens about half of the time. Also, 20 percent said that written advance warnings never come.

Respondents were also asked to respond on how well Costa Rica’s customs administration and personnel perform in three areas. For harmonization and standardization, 38 percent of respondents rated Costa Rica as good, 33 percent ranked Costa Rica as fair, and 29 percent responded poor. For coordinated processing at border points, 29 percent of those surveyed said that Costa Rica was good, 38 percent ranked fair, and a combined 34 percent ranked Costa Rica as poor or very poor. As for international cooperation, a combined 45 percent ranked Costa Rica as poor or very poor.

Procedural requirements: Costa Rica’s procedural requirements, including paperwork requirements and processing time, were generally ranked by respondents to be efficient. The number of documents required was low (3-7) and the customs administration was considered relatively efficient.

In the survey, nearly 80 percent of respondents said that Costa Rica’s customs administration only requires between three to seven documents. Regarding processing time, respondents overwhelmingly (approximately 60 percent) said that Costa Rica takes between two and seven days for customs clearance and technical control. Another 40 percent claimed that the clearance process takes less than one day. Similarly, respondents said that the total time needed to clear customs was overwhelmingly between two and seven days, while approximately 25 percent said that it took less than one day.

Strategic planning: For Costa Rica, respondents generally gave poor rankings to the country’s strategic planning with the private sector. Respondents also ranked strategic priorities, based on their importance to business operations.

When asked to what extent has the customs administration made a public strategic plan that describes overall strategy and key priorities, 40 percent of respondents said does not at all happen, while 20 percent said somewhat, 30 percent said to some extent, and 10 percent responded to a great extent.

Approximately 95 percent said that implementation of the harmonized tariff system was important to business operations.

Also, 94 percent said that the implementation of the World Customs Organization (WCO) agreement on the simplification and harmonization of customs procedures was important.

17

B. The Dominican Republic

The Dominican Republic is an upper middle-income country located on the island of Hispaniola with a population of 10.06 million and a GDP of $55.61 billion (2011).34 For much of the 1990s and early 2000s, the country’s economy experienced fairly stable growth. In 2003, however, the economy lost much of its stability, when a bailout of the country’s three largest banks—after a $2.2 billion defrauding of investors—placed a large strain on public finances.35 The instability over public finances was further exacerbated when President Mejía failed to accept IMF loan conditions—a decision leading to inflationary levels of nearly 42 percent, unemployment levels of about 16.5 percent and the peso’s loss of over half of its value.36 The road to recovery for the economy did not begin until the election of Leonel Fernández and the signing of a three-year $665 million agreement with the IMF.37 While the IMF praised Fernández’s commitment to economic recovery and to reducing public spending, it also made clear that the government had to reduce energy subsidies, increase taxes, and implement social programs to address the country’s growing poverty issue.38 In contrast to other Latin American countries, the Dominican Republic’s economy was not heavily impacted by the 2008 global financial crisis. In fact, GDP grew by 3.5 percent in 2009 and by 7.8 percent in 2010—in large part because of Fernandez’s decision to sign a $1.7 billion stand-by agreement with the IMF in 2009. The agreement assisted the Dominican Republic in investing in infrastructure and implementing social safety net programs.39 Currently, the country is enjoying the largest inflows of FDI and the most diversified exporting system among all CAFTA-DR countries.40 Nevertheless, despite the recent successes in trade and FDI, the Dominican Republic remains susceptible to external financial shocks, a vulnerability directly resulting from the government’s inability to reform the economic structures of the country—to increase tax revenue and to reduce superfluous public spending on subsidies.41 Finally, remittances continue to contribute significantly to the country’s foreign exchange stock.42 In the last two decades, the country’s economy has transitioned from having a traditional agricultural base to one largely focused on tourism and export sectors affected by FTAs. The transition to a more modern and competitive market system has been further facilitated by a relatively high degree of openness to trade and investment, while modest tax rates have enhanced the country’s competitiveness.43 As previously noted, while the government has made a number of minimal reforms, the overall shallowness of the reforms means the Dominican Republic still has work to do in reforming its economy. According to the 2013 Index on Economic Freedom, the Dominican Republic is home to the world’s 87th freest economy with a score of 59.7 percent. Launching a business in the Dominican Republic has become less burdensome on individuals due to a reduction in the cost of completing license requirements and procedural requirements. However, at a rate of at least half the average annual income, the monetary cost of starting a business remains high. In addition, the labor market’s non-salary costs have stabilized but rigidities in work hours remain while government price controls continue to affect competitiveness among a number of products and services. Per the Index, the country’s trade weighted tariff is currently 6.1 percent, but the actual cost of trading is often higher because of the presence of non-tariff barriers. Furthermore, while FDI is encouraged in certain sectors, the investment climate at large lacks transparency and is

18

susceptible to corruption. Finally, the Dominican Republic’s financial sector remains limited in scope, confidence in banking is volatile and long-term financing remains difficult to acquire.44 As for the 2012 LPI, the Dominican Republic received a ranking of 85 of the 155 countries within the survey. The Dominican Republic’s score was 2.7 out of 5, just below that of Costa Rica. Highlights from Private Sector Trade Facilitation Survey:

Customs administration: Survey respondents concluded that the Dominican Republic’s customs administration has generally done a fair job in reforming customs laws to make them transparent to the public and private sector. The Dominican Republic has also worked to consult with the private sector and has provided sufficient time for stakeholders to comment on new regulations.

Despite the progress made by the Dominican Republic, respondents found that many customs administration officials are not sufficiently trained.

Furthermore, although there are processes in place to minimize corruption, there is not sufficient protection for those who report corruption. Nearly 61 percent of respondents surveyed noted that there were never or rarely any protection from retaliation.45

Risk management: Respondents were pleased with the amount of technology and

automation used for customs within the Dominican Republic. They were also pleased with the electronic systems available, such as the single electronic interface and the provision of tariff-related information in an online, transparent setting.

When asked if the customs administration makes effective, fair, and uniform use of compliance and risk analysis information, 35 percent of respondents said they disagreed, while 26 percent said they agreed, the remainder neither agreed nor disagreed.

48 percent of respondents agreed that the customs administration employs an intelligence-based compliance and risk management system.

Logistics and infrastructure: Respondents were generally pleased with the interaction

between the customs administration and other government agencies. They also noted that transportation infrastructure was fair, but that the harmonization of cross border controls was poor.

57 percent of respondents said that cross border facilities and procedures were fairly implemented by the customs administration, while 29 percent said that they were poorly or very poorly implemented.

41 percent of respondents answered that the Dominican Republic usually issues advance written warnings at the request of an importer, while 24 percent said that this happens about half of the time.

19

Integrated border management: According to the survey, respondents were not

impressed with the implementation of a single window. They were, however, pleased with the implementation of harmonized standards and the cooperation with international agencies.

The survey asked respondents to assess the harmonization of border controls by the Dominican Republic. 19 percent of respondents said that this is poorly done by the Dominican Republic, while 67 percent said that this goal was fairly executed by the government.

Regarding the simplification of customs procedures 19 percent said that this was implemented poorly, while 24 percent answered fair, and a combined 58 percent said that this was good or very good in the Dominican Republic.

Procedural requirements: Respondents positively assessed the Dominican Republic’s

processing of goods through customs. They also noted that there were relatively low numbers of documents requested (between 3-7). However, there does not exist a single entry coverall for importers.

When asked if the customs administration allows goods to be withdrawn without

prejudice before determination of duties, taxes, or fees, 61 percent of respondents said that this never happens. Another 33 percent said that this only sometimes happens.

Strategic planning: Overall, respondents were not pleased with the lack of consultation

with the private sector in creating an annual strategic plan. They also noted that AEO programs are not completely effective and should be improved.

Regarding transparency and predictability, a combined 56 percent of respondents said that the Dominican Republic performs good or excellent.

In terms of consultation with the business community during annual plan formation, 33 percent of respondents claimed that this was very poor or poor. 44 percent ranked the Dominican Republic as fair in this regard.

20

C. El Salvador El Salvador is a lower, middle-income country located in Central America with a population of 6.2 million and a GDP of $23.05 billion (2011).46 Since emerging from a bitter, twelve-year civil war in 1992 that resulted in the deaths of approximately 75,000 El Salvadorians, steady leadership and an emphasis on free-market policies have assisted economic growth and alleviated poverty in the country.47 In fact, El Salvador’s transformation in the post-civil war period is characterized by impressive annual GDP growth rates near 6 percent.48 Furthermore, steady economic growth has contributed to a decline in the nation’s overall poverty rate by 27 percent between 1991 and 2002, and has reduced the extreme poverty rate by nearly 50 percent.49 Coinciding with El Salvador’s economic growth, the government’s social policies have reduced the infant and maternal mortality rate, increased enrollment in primary and secondary education, and expanded access to health care and clean water. 50 Largely due to the political stability of the late 1990s and early 2000s, annual economic growth in El Salvador peaked in 2007 with a 4.7 percent growth rate, only to fall precipitously with the onset of the 2008 global financial crisis.51 As a result of the crisis, both exports and remittances from El Salvadorians living abroad dropped, while, domestically, the country confronted higher levels of unemployment, rising food costs, and higher energy prices. As a consequence of the crisis, the poverty rate expanded from 35.5 percent to 42.3 percent by the end of 2008. By 2009, GDP contracted by nearly 3.1 percent.52 In order to cope with the significant downturn, the government initiated the “Anti-Crisis Plan,” which included a stimulus package of $600 million for the purpose of creating jobs, developing basic infrastructure, and increasing social services.53 As a result of the plan, the economy began to slowly recover and is presently forecasted to grow by 2.3 percent in 2013.54 A number of factors specific to El Salvador continue to threaten internal development and long-term economic growth. First, a culture of gang violence continues to permeate throughout El Salvadorian society, causing social instability and violence.55 Second, El Salvador remains highly susceptible to natural disasters—further exacerbated by environmental degradation and climate change.56 Finally, rising food prices adversely affect the nation’s economy given its heavy dependence on the importing of corn and wheat. 57 With a score of 66.7 by the Index of Economic Freedom, El Salvador’s economy is ranked as the 53rd freest economy. The Index notes that the capital requirement for starting a business has recently become less onerous, but attaining the obligatory permits to do so still takes more than 150 days and costs significantly more than the average annual income. In addition, the labor market is largely rigid, inefficient, and characterized by a disparity in the supply and demand of skilled workers. The Index also states that inflation is on the rise and that price controls are negatively affecting the competitiveness of a number of goods and services.58 At the same time, the trade weighted average tariff is a relatively high 5.5 percent, but non-tariff barriers remain low. Concurrently, investment is characterized by openness, transparency and an equal treatment of both foreign and direct investors. Recent environmental regulations aimed at the mining industry have been very aggressive and have been considered “creeping” expropriation.59 Moreover, four private banks account for nearly 70 percent of all assets, rendering the banking sector very concentrated in the hands of very few.60

21

El Salvador ranked 93 of the 155 countries examined for the 2012 LPI. With a score of 2.6 it performed behind several of its CAFTA-DR partners. Highlights from Private Sector Trade Facilitation Survey:

Customs Administration: Regarding customs administration, exporters and importers operating within El Salvador responded that information about customs laws, regulations and procedures is only sometimes easily available.

Respondents to the survey also indicated that the private sector is largely not consulted prior to the initiation of new technology, examination processes or policy changes. Respondents also found that customs regulations are rarely published in advance with a comment period prior to the adoption of a rule.

Furthermore, over half of respondents answered that the customs administration employs a workforce that is inadequately staffed, trained, screened for enforcement risks, and who lack a “high level of understanding of applicable laws and regulations.”

Risk Management: Survey respondents find El Salvador’s “use of information

technology throughout the customs matrix, including the use of automated systems, electronic filing, single interface, and electronic signatures” adequate for business.

On the question of the risk management sector’s coordination with other customs authorities to facilitate data exchange, a large percentage of respondents found need for improvement, with 16 percent answering that there was no coordination whatsoever, 21 percent answering that there was barely any coordination and 26 percent answering that there was coordination only sometimes.

More than half of respondents also answered that the “country’s ability to allow for Trusted Trader/AEOs” was very low.

Logistics and Infrastructure: Overall, respondent’s answers regarding the logistics and

infrastructure sector were mixed.

More specifically, 60 percent of respondents found the airport infrastructure to be good or very good. At the same time, 30 percent of respondents were unhappy with the simplification of customs procedures while 55 percent were neutral.

When asked to rate how well other government agencies interact with the customs administration, respondents were largely neutral in their answers. Although, “survey respondents frowned upon the customs authority’s interaction with the agricultural agencies and the police.”

Integrated Border Management: Survey respondents were generally positive and

noted that there was an effective way to appeal customs decisions. Nevertheless, they

22

were also concerned about El Salvador’s harmonization and customs standardization and creation of an electronic management system.

Approximately 50 percent of those surveyed said that El Salvador does a fair job of harmonizing customs administrative procedures and documents, and a combined 35 percent said that El Salvador does a poor or very poor job.

Procedural Requirements: Respondents said that El Salvador’s customs administration

performed well at moving goods through the customs process in an efficient manner. However, single entry coveralls are still not allowed and would prove helpful in expediting the processing time.

Respondents were asked to rate how the customs administration performs when goods are

released promptly, within 48 hours of arrival when possible. 50 percent of respondents found that goods were released promptly while 44 percent indicated that this promptness existed only some of the time.

In addition, 65 percent of respondents found that goods were only sometimes released without temporary transfer.

Respondents also answered that 83 percent of the time, goods were withdrawn with prejudice before the determination of duties, taxes, or fees.

Strategic Planning: According to the private sector survey, “the customs authority was

rated as fairly poor in terms of transparency and predictability, as well as its use of indicators or performance measurements. The Salvadorian customs authority was also rated poorly with regard to their consultations with the private sector.”

When asked to rank the customs administration’s transparency and predictability, 41

percent of respondents ranked the country as poor or very poor. About 35 percent of respondents answered fair while only 24 percent were satisfied with transparency and predictability.

On the use of indicators or performance measurements, 47 percent or respondents were unhappy with customs, while 52 percent were satisfied (answered fair or good). Finally, a majority of respondents answered that the customs administration rarely consulted the business community during the process of formulating the annual plan, with 67 percent ranking consultation as poor or very poor.

When asked to rank the importance that the Harmonized Tariff System and TRIPS play

to their business, respondents overwhelmingly responded that these two components are very important or extremely important.

At the same time, exemption from payment of duties, penalty assessment for inadvertent errors, and declarant rights all received mixed reviews—with respondents suggesting that these procedures are slightly effective in El Salvador.

23

D. Guatemala

Guatemala is bordered by Mexico to the northwest, Belize to the northeast, and Honduras and El Salvador to the southeast. With a GDP of $46.90 billion and a population of 14.76 million (2011), the World Bank qualifies Guatemala as a lower middle-income country.61 Guatemala began its transition towards a more representative government in the 1980s and succeeded in ending a civil war that ravaged the nation for 36 years by the signing of Peace Accords in 1996.62 Since achieving peace, the nation has made great strides in further integrating macroeconomic and democratic principles into its economic and government institutions.63 While Guatemala is currently Central America’s biggest economy, it is also home to some of Latin America’s highest levels of income inequality, especially among its rural and indigenous populations. Furthermore, the country’s social indicators are well below those of other countries with similar per capita incomes. Particularly telling of Guatemala’s struggle to cope with income inequality is its ranking on the 2011 Human Development Index, which places Guatemala 131st among a group of 187 countries—only ahead of Haiti in the Western Hemisphere.64 Since the mid-1990s, Guatemala has implemented sound macroeconomic policies resulting in annual GDP growth rates well over 5 percent. Like most other CAFTA-DR nations, Guatemala’s economy experienced deep declines in economic growth as a result of the 2008 global financial crisis. Guatemala saw significant declines in exports, remittances, and FDI, which slowed from 6.3 percent in 2007 to 3.3 percent in 2008 and lowered to 0.5 percent in 2009.65 The Guatemalan economy began to recover in 2010 with a growth rate of 2.8 percent and 3.8 percent growth in 2011.66 Export demand and the implementation of a fiscal stimulus largely drove growth and cushioned the impact of the global financial crisis. Unfortunately, natural disasters between 2010 and 2011 caused damages estimated at $2 billion.67 Guatemala’s dependence on the agricultural sector has recently given way to an increased reliance on the manufacturing of processed foods and apparel for the purpose of exporting.68 Currently, Guatemala is ranked as the world’s 85th most free country according to the 2013 Index of Economic Freedom with an economic score of 60.0. According to the Index, Guatemala is cited as lacking an efficient regulatory environment, while starting a business remains especially cumbersome—taking over 40 days and with 10 procedural requirements. At the same time, attaining the licenses for starting a business costs approximately five times the average annual income. Researchers also found that the labor market is largely inefficient and a large proportion of the labor force employed by the informal sector. On a more positive note, the Index found that Guatemala’s inflation rate has abated in comparison to previous years. The government does not interfere in pricing, but does subsidize a number of economic activities and products.69 In trade and investment indicators, the current trade-weighted average tariff rate of 2.4 percent is considered low; however, non-tariff barriers continue to increase the cost of trade. Regulatory barriers also hinder investment from foreigners. Finally, Guatemala’s banking sector is a bright spot given its stability, capitalization, and decline in the rate of non-performing loans.70 Surprisingly, Guatemala received the highest LPI ranking of all CAFTA-DR countries examined, with a rank of 74 out of the 155 total countries examined in 2012. Guatemala’s LPI score was 2.8 out of five.

24

Highlights from Private Sector Trade Facilitation Report:

Customs Administration: With regard to Guatemala’s customs administration, respondents generally found little consultation with the private sector. They also expressed concern about transparency and a lack of training to address new regulations. Finally, corruption in the customs administration was noted as a concern.

Respondents were asked if Guatemala’s government conducted consultations with the

private sector prior to implementing new measures or policy changes. Only 7 percent of respondents claimed that Guatemala always or often consulted with the private sector before implementing new laws, while an overwhelming 59 percent responded that Guatemala rarely or never consults with the private sector prior to implementing new customs laws.

In addition, survey respondents were asked if Guatemala has points of inquiry via internet

to address customs issues. In total, 18 percent said that Guatemala’s customs administration always or often includes points of inquiry to address customs by internet, while a combined 61 percent responded that there are rarely or never online points of inquiry to address customs matters.

In terms of corruption, respondents were asked if there is protection from retaliation in

instances of corruption. Approximately 75 percent of respondents claimed there are never or rarely any protection from retaliation in instances of corruption.

Risk Management: Guatemala generally received fair ratings in the area of risk management, particularly in relation to using information technology and automated systems to support trade operations. Nevertheless, there existed concerns from the private sector trade respondents over coordination.

Respondents were asked if the risk management system allows a trust trader or

authorized economic operator program. A combined 20 percent said that trusted traders were completely allowed or a good amount allowed. An overwhelming 59 percent responded that they are somewhat or barely allowed.

Respondents were also asked if the customs administration provides for electronic

submission of processing information and data before arrival. In total, 66 percent of the respondents said that this happens completely, a good amount, or somewhat in Guatemala. Only 19 percent of the respondents answered barely to this question.

Logistics and Infrastructure: With regard to logistics and infrastructure, Guatemala

also receives generally fair rankings by the private sector survey respondents. However, there were some concerns with governmental coordination and logistics.

Regarding their views on cross border facilities and procedures, 52 percent of

respondents said that this was fair, while 6 percent responded that they were good. 26

25

percent of respondents said that cross border facilities and procedures were poor and 17 percent said very poor.

In terms of the simplification of customs procedures, 9 percent said that this was good in Guatemala and 36 percent said that the simplification of customs procedures was fair. 34 percent said that this was poor and 21 percent said that the simplification of customs procedures in Guatemala was very poor.

Integrated Border Management: Guatemala received poor ratings from the survey

respondents with regard to its integrated border management.

Respondents were asked about the harmonization and standardization of customs administrative procedures and documents. Guatemala received the majority of responses as poor or fair with relation to administrative procedures.

The respondents were asked about international coordination between customs administrations and consultations with major traders to develop electronic systems. For both areas, the majority of respondents ranked Guatemala as fair, poor, or very poor.

When asked if there is an independent judicial authority for appeals, 27 percent of the respondents said yes, while 73 percent of the respondents said there was not an independent judiciary for appeal of customs decisions.

Procedural Requirements: Guatemala’s customs administration received good ratings regarding paperwork requirements. Regardless, survey respondents still held concerns about the Guatemalan customs administration’s implementation of mandates and approval of express shipments.

Respondents were asked the length of time that it takes for goods to be available for carrier pick-up from port authority or terminal operator. 26 percent of respondents said that goods are available in one day or less, while 56 percent said that it takes between two and seven days. A combined 18 percent said that it takes between eight and 14 days, or more than 14 days.

Regarding the preparation of documents by the importer, exporter, carrier, or broker, 38 percent of survey respondents said that it took one day or less. At the same time 54 percent said it takes between two and seven days.

When asked how long it takes for the receipt of documents necessary to request the release of goods, 38 percent of respondents said one day or less. Another 51 percent said that this takes between two and seven days.

Respondents were also asked about the time it takes for offloading goods by truck, rail car, vessel, or aircraft. According to the survey, 41 percent said that it takes one day or less to offload goods, while 48 percent said between two and seven days.

26

With regard to the time for customs clearance and technical control for release to carrier, only 19 percent of respondents said that Guatemala’s customs administration takes one day or less, while 61 percent said that it takes between two and seven days.

When asked about the customs administration’s compliance with mandates to provide for

clearance of express shipments within six hours after submission, 9 percent said that this always happens and 20 percent said that this often takes place. 31 percent said that this mandate is sometimes complied with and a plurality of 41 percent said that this mandate is never complied with.

Strategic Planning: Survey respondents gave Guatemala’s customs administration

mixed ratings when it came to strategic planning. Especially of concern was Guatemala’s lack of consultation and information sharing with the private sector and the lack of implementation of the Harmonized Tariff System.

Respondents were asked if the customs administration developed and made public a strategic plan that describes its overall strategy and key priorities. 52 percent of those surveyed said that Guatemala did this in an excellent or good fashion. Another 42 percent said that they did made public strategic plans in a poor or very poor manner.

With regard to transparency and predictability of the Guatemalan customs administration, 53 percent of respondents said that Guatemala performed good or fair. 26 percent of the respondents said poor and another 22 percent said Guatemala was very poor at transparency.

When asked about consultation with the business community during formulation of the annual plan, 34 percent responded that Guatemala’s customs administration was good or fair. An overwhelming 66 percent said that Guatemala was poor or very poor in this category.

27

E. Honduras Honduras is a lower middle-income country with a population of 7.75 million and a GDP of $17.43 billion (2011).71 The Honduran economy continues to rebound, despite the devastation caused in the late 1990’s by Hurricane Mitch, which resulted in the death of more than 5,000 people and billions of dollars in damage.72 Recently, the economy has displayed annual growth rates of 5 percent. The government has actively pursued the help of international financial institutions to alleviate poverty levels.73 For instance, through its partnership with the World Bank, Honduras has made significant progress in restoring macroeconomic stability, implementing a business friendly system, improving the financial sector’s performance capacity, and initiating better management of public sector finances.74 Nevertheless, much of Honduras’ progress continues to be undermined by its large income gap problem, an integrated drug trafficking culture and a high prevalence of crime. With the presence of these problematic factors, poverty and unemployment have grown. Approximately 59 percent of Hondurans live below the poverty line and 36.2 percent are living below the extreme poverty line.75 Honduras’ economy is largely diversified and based on a mixture of agricultural and manufacturing exports. The World Bank finds that Honduras has one of the most open economies in Central America, because imports and exports consisted of 129 percent of the country’s GDP in 2008.76 Nevertheless, the Index of Economic Freedom only lists the country as the 96th freest country with score of 58.4.77 As far as regulatory efficiency is concerned, the proliferation of free trade agreements, including CAFTA-DR, has helped Honduras liberalize its trade and investment priorities. However, at the same time, business regulations remain burdensome and government services are poor.78 In relation to open markets, the Honduran government has recently begun to implement “charter cities,” or free trade zones, to help grow the economy. While commendable, the charter city policy does not represent the deep level of institutional reforms that Honduras needs to spark dynamic economic growth across the country. Finally, systemic corruption runs rampant within Honduras, further wearing away at the rule of law and making the political system vulnerable to external influence.79 Like other CAFTA-DR signatories, the Honduras economy is highly susceptible to external shocks. For instance, the agriculture sector’s purchasing power parity has declined in the last two decades as a result of the decline in the price of food prices. In addition, Honduras lacks the capacity to mitigate the effects of natural disasters on its households. Moreover, despite its progress in the last two decades, Honduras is not on track to meet its four Millennium Development Goals: extreme poverty by half, reducing under five malnutrition by half, and reducing under five and infant mortality by two-thirds. In fact, the World Bank continues to denote the need for Honduras to improve its educational system. Given that a majority of Hondurans depend on agriculture as a primary source of income, the World Bank continues to stress the need for the government to promote diversification and increased productivity in rural, agricultural communities.80 For the 2012 LPI, Honduras ranked the lowest of all the CAFTA-DR nations examined, with a rank of 105. It received a score of 2.53 out of 5 for the trade facilitation areas examined in the survey.

28

Highlights from Private Sector Trade Facilitation Survey:

Customs Administration: Survey respondents were asked to describe to what extent the customs administration complies with a number of mandates.

By and large, respondents found that information on customs laws, regulations, and procedures are easily available. They also found time given to comply with new laws or regulations as sufficient, with about 50 percent responding that this was sometimes the case and 25 percent responding that this was often the case.

Respondents were also content with the extent of training and information sessions made available for the purpose of educating the sector on new laws and regulations. In fact, 50 percent responded that this was always the case while 25 percent responded that this was sometimes the case.

At the same time, respondents were displeased with the administration’s lack of

consultation with the private sector on new measures, responding that about 50 percent of the time there was no consultation at all and 25 percent of the time there was some consultation. Meanwhile, about 50 percent answered that there is barely any point of consultation that can be achieved through the internet.

An overwhelming 75 percent answered that the administration never opens regulations to a comment period prior to their adoption.

Risk Management: Respondents found that the customs administration employs and

intelligence-based risk management system. However, they also said that AEO programs were not used and neither were electronic signatures.

When asked if the customs administration coordinates with other authorities to develop common data elements and processes, 100 percent of respondents said that this barely ever happens.

When asked if information technology is used to expedite the release of goods, 67 percent said that it is used a good amount, while 33 percent said it is somewhat used.

Logistics and Infrastructure: Generally, respondents found the country’s transportation

infrastructure to be positive, but with room for improvement. They also noted that the customs administration’s interaction with government agencies was also good in Honduras.

Honduran airport infrastructure received positive rankings of 100 percent.

With regard to the harmonization of border controls, Honduras received a rating of fair by 100 percent of respondents.

29

Integrated Border Management: Respondents found that Honduras performed well in terms of the harmonization of border controls, procedures and documents. However, the customs administration should continue to work to create a single window environment to facilitate the flow of goods through Honduras.

Survey respondents pointed out that while the customs administration sometimes overcharges, there is often a process in place to appeal customs decisions.

Procedural Requirements: Survey respondents noted that Honduras does a good job

processing goods between 2 and 7 days. However, respondents noted that the administration does not do the best job in allowing goods to get through within 48 hours whenever possible.

With regard to the use of single-entries for multiple shipments, respondents were divided, 33 percent said that this is allowed rarely, while 33 percent said that this is allowed half of the time, and another 33 percent said that this is not allowed at all.

Strategic Planning: According to survey respondents, the government does not

announce public strategies and only rarely consults with the private sector.

Respondents ranked Honduras positively in terms of transparency, predictability, and on performance evaluation.

30

F. Nicaragua Nicaragua is a lower-middle income country with a GDP of $9.32 billion and a population of 5.870 million (2011).81 Despite its history of political instability and susceptibility to natural disasters, Nicaragua’s economy has recently started to exhibit signs of stability and growth. This development is due in large part to sound macroeconomic policies that the government began to implement starting in 2001.82 In fact, Nicaragua’s quick rebound from the global economic crisis of 2008 can largely be attributed to macroeconomic discipline, the consistent growth of exports, and an increase in inward FDI.83 For example, in 2011, Nicaragua’s economy grew by 5.1 percent, the highest rate in over a decade. At the same time, the government was able to bring inflation down to 8 percent the same year—a vast improvement from the high of 25 percent experienced in 2008.84 Additionally, joining CAFTA-DR helped the country diversify its economy beyond agriculture to include mineral and apparel production. The economy’s stabilization has afforded the Nicaraguan government the opportunity to redirect its focus towards addressing long-term issues such the heavy prevalence of rural poverty. In addition to governmental action to address rural poverty, debt relief by the International Development Association (IDA) has helped Nicaragua reduce the level of poverty across the country.85 On a negative front, Sandinista President Daniel Ortega’s election resulted in an alignment with Venezuela’s late President Hugo Chavez. As a result of election fraud and restrictions on civil society, the United States reneged on a portion of its Millennium Challenge Corporation grant to Nicaragua.86 Nicaragua’s economy is currently ranked as the world’s 110th freest according to the 2013 Index of Economic Freedom. The Index notes that Nicaragua’s relatively low score on the index is due to its inefficient and inconsistent regulatory environment. Commercial regulations in Nicaragua are increasingly burdensome. The cost of starting a business is nearly equal to the average annual income in the country. Moreover, acquiring the necessary permits to start a business takes over 200 days and can cost almost three times the average income of a Nicaraguan citizen. Finally, because of the unproductive and rigid labor market, high unemployment rates endure while “monetary stability continues to erode.”87 The Index also points out that Nicaragua’s complex regulations increase the cost of trade exponentially above the actual trade-weighted average tariff rate of 2.3 percent. At the same time, investment practices lack transparency and efficiency. The high cost of long-term financing obstructs private sector growth. On a more positive note, Nicaragua continues to attract FDI despite the cumbersome nature of its regulatory environment and the anti-market comments of some of its policy makers.88

Nicaragua was not included in the 2012 LPI survey. However, Nicaragua was included in the 2010 LPI rankings and received a ranking of 107 and a score of 2.54 out of 5. Nicaragua should work to improve its customs administration to remain competitive with the rest of the CAFTA-DR countries. Highlights from Private Sector Trade Facilitation Survey:

31

Customs Administration: Survey respondents found Nicaragua’s customs administration did not provide many opportunities for training or points of inquiry to understand new laws. Furthermore, respondents found that there customs staff were inadequately trained.

When asked about corruption, respondents generally found that the administration rarely

follows up on reports—61 percent said that the customs administration rarely or never follows up on reports. Approximately 60 percent of respondents said that there was rarely or never protection from retaliation based on corruption

Furthermore, 69 percent of survey respondents said that there were rarely or never

mechanisms available to report instances of corruption to the customs administration. Risk Management: Respondents generally found that Nicaragua’s customs authority has

made progress in terms of using information technology to expedite the customs process for goods. However, respondents noted that Nicaraguan customs has not made effective or uniform use of compliance and risk analysis information.

When asked if Nicaragua allows for an AEO program, 33 percent responded that it is

completely allowed. However, a combined 50 percent said that AEO or trusted trader programs are not allowed at all.

Approximately 67 percent of respondents said that Nicaragua somewhat makes electronic

systems available to the trading community. Another 25 percent responded, that electronic systems are made available a good amount of the time.

Logistics and Infrastructure: Respondents said that Nicaragua needed for better

harmonization of border controls and interagency coordination.

When asked about Nicaragua’s customs administration’s coordination with the health, consumer protection, agriculture, immigration, and environmental control agencies, respondents marked fair between 67 percent and 75 percent of the time for each agency respectively.

Integrated Border Management: Generally, respondents noted that Nicaragua does a fair

job at managing border controls. However, Nicaragua still has work to do in complying with advance ruling mandates.

For example, when asked how well the customs administration complies with mandates for

the application of duty drawback, deferral, or relief from customs duties, nearly 67 percent of respondents said that Nicaragua does a poor or very poor job.

When asked about overcharging for customs processing, 42 percent of respondents said that

this usually happens. Another 25 percent responded that overcharging happens about half of the time, while 25 percent responded that this happens occasionally. Only 8 percent said that overcharging always happens.

32

Procedural Requirements: Respondents noted that Nicaragua is not the most efficient in terms of procedural requirements. Often it takes longer than one day for the customs administration to process goods.

For example, 55 percent of the private sector respondents surveyed noted that it takes

between 8 and 14 days for the offloading of goods by carrier from a truck, rail car, vessel, or aircraft.

Overall, 73 percent said that it takes between 2 and 7 days to clear customs, while 27 percent

said that it takes between 8 and 14 days for full customs clearance in Nicaragua.

Strategic Planning: Respondents noted that Nicaragua could improve its duties payments system, as well as its implementation of penalties for inadvertent errors. Furthermore, survey respondents noted that Nicaragua could improve its oversight of examination of goods. However, the majority of respondents noted that Nicaragua has implemented a strategic plan.

Almost 55 percent of respondents said that Nicaragua’s customs administration has

developed a strategic plan to describe its overall strategy for key priorities.

33

SECTION III – Public-Private Sector Partnership Recommendations

Section III offers a proposal for the Corporate Trade Facilitation Council (CTFC), which will serve as the platform for the implementation of Public-Private Sector Projects to address the concerns identified in the private sector trade facilitation survey. This section of the report first defines and suggests a structure for the CTFC and the PPPs that the CTFC will seek to implement. Thereafter, this report offer ideas and background for potential PPPs based upon the recommendations of the Competitive Advantage report. A. Proposal for the Corporate Trade Facilitation Council (CTFC) This project’s recommendations for PPPs are intended for implementation, direction, and consultation through the CTFC at the Chamber of Commerce. This report’s first objective, to define the CTFC, follows the first suggestion of the Competitive Advantage report. Below we elaborate on the role of the CTFC and some details on its potential structure, objectives, and activities. In addition, we provide the Competitive Advantage report’s related recommendations based upon the private sector trade facilitation survey. The report’s first recommended measure was for CAFTA-DR nations to implement greater follow-up on prior trade facilitation commitments. Specifically, the Competitive Advantage report noted that this would entail:

“The creation or designation of a permanent mechanism for allowing private sector participation in the drafting of national and regional legislation and regulation, reinforcing communication with the business sector and avoiding the adoption of measures without first assessing their impact on the production sector.”89

Ideally, this “permanent mechanism” would be the CTFC with a region-wide focus on the CAFTA-DR. Moreover, the CTFC would serve as a platform for private sector exporting and importing firms to coordinate, discuss ideas, and implement potential partnership projects with the public sector. Makeup and Details of CTFC: The CTFC will take on a regional focus and will be housed at the Chamber of Commerce. Naturally, the CTFC will be comprised of firms from different industries that export and import between the CAFTA-DR region and the United States. A good starting point for gauging interest in participating in the council will be to examine the 311 firms who completed the Chamber’s 2012 private sector trade facilitation survey. These firms may have a particular interest in participating in the CTFC given their prior involvement with the survey. It will be important to staff the CTFC with individuals that hold unique skills in understanding both the impact of trade facilitation measures on the private sector industries that are represented on the council and experience in dealing with the public sector in the CAFTA-DR nations. Individuals with a combination of a legal or governmental background and experience working for exporting and importing firms would prove most suitable for serving as permanent staffers of

34

the CTFC. The CTFC could also benefit from working with academic consultants holding a special expertise in trade facilitation or supply chain management. To focus on particular project areas for trade facilitation, the CTFC could include subcommittees within the Council to more closely monitor the implementation of the PPPs. This would also allow for interested firms and country governments to participate voluntarily in a given subcommittee under the CTFCs mandate. One potential structure for subcommittees could be to develop six committees based on the priority areas of the trade facilitation survey. For example, the CTFC could host subcommittees on customs administration, risk management, logistics and infrastructure, integrated border management, procedural requirements, and strategic planning. Objectives of CTFC: The main objective of the CTFC should be to promote mutual gains through trade facilitation improvements for private sector firms and governments of the CAFTA-DR region. The CTFC can accomplish this goal by serving as a platform for the identification of potential trade facilitation projects for implementation in coordination with the CAFTA-DR countries’ customs administrations. Ideally, expert staff at the CTFC would liaise with customs administrations and provide updates to CTFC members at the Council’s meetings in the run up to annual meetings of the CAFTA-DR Commission. As the Competitive Advantage report recommended:

“Prior to each meeting of the CAFTA-DR Free Trade Commission, the establishment of a regional public-private sector dialogue in order to exchange information on the status of trade facilitation issues in the CAFTA-DR region. At the national level, two months prior to each meeting of the CAFTA-DR Free Trade Commission, the public and private sectors should convene in order to conduct an evaluation of the status of trade facilitation issues.”90

Activities of the CTFC: The CTFC will be the platform where a dialogue between the private sector and the CAFTA-DR public sector can take place for the implementation of PPPs to enhance trade facilitation. These projects would be monitored and evaluated by a subcommittee within the CTFC. Before the yearly CAFTA-DR Commission meeting, it will be valuable for the CTFC to produce an annual report outlining progress on the implementation of trade facilitation projects and analyzing their value to the member firms and CAFTA-DR economies. The annual report will also provide a section detailing the year’s updates on trade facilitation activities within the CAFTA-DR region. One related recommendation from the Competitive Advantage report suggested that the mechanism for trade facilitation provide a similar type of analytical document. The Competitive Advantage report recommended:

“In order to feed into these dialogues, call upon a third, independent party (an international organization, a group of consultants, a university, etc.) to evaluate progress in this area. Another analytical tool, such as the organization of national self-assessments that will converge in regional reports for discussion.”91

35

Additional CTFC activities include educational and networking conferences in selected locations throughout the CAFTA-DR region and in the U.S. to educate firms on a given nation’s customs administrations regulatory framework. These conferences can showcase CAFTA-DR nations’ progress on projects and activities related to trade facilitation. In addition, the CTFC can host conferences or advocacy days in each national capital to educate the country’s lawmakers on the private sector’s priorities for trade facilitation. B. Defining the Public-Private Partnership (PPP)

The term public-private partnership (PPP) refers to an agreement between public and private sector entities that aims to mutually share their skills and assets to more efficiently provide public services and infrastructure.92 In order to maximize benefits for both parties, PPPs are oriented so as to capitalize on the respective strengths of each party, while minimizing each party’s respective weaknesses.93 PPP arrangements may adopt varied modalities, including diverse degrees of corporate involvement, finance, and risk exposure.94 This concept is expressed in figure 3A. Figure 3A: PPP Spectrum

C

orpo

rate

Inv

olve

men

t

High Low

Buy asset/Own/Operate Finance/Design/Build/Own/Operate Finance/Design/Build/Transfer/Operate Finance/Design/Build/Lease/Operate/Transfer Finance/Build/Operate/Transfer Lease/Develop/Operate Build/Lease/Operate/Transfer Design/Build/Operate Design/Build/Major Maintenance Design/Build Operations and maintenance service Advise on operations and maintenance for a fee

Source: Loxley, “An Analysis of a Public-Private Sector-Partnership: The Confederation Bridge.”

Often governments face financial constraints and lack the technical capacity to maintain their previously implemented projects. Therefore, when implementing a new automated system or other technical- and capital-intensive projects, PPPs can serve as an ideal method to foster stakeholder buy-in, and ensure its sustainability and eventual success. A conscious attempt should be made to bring in as many credible stakeholders as possible. PPPs have become increasingly popular in trade facilitation initiatives in recent years, in large part because PPPs have the potential to maximize gains from trade facilitators in all parties.95

In addition, measuring the impact of trade facilitation imposes significant obstacles to governments looking to determine whether their policies are providing real solutions on the ground. As such, in this specific area, the private sector can share useful firsthand experience

36

and measure the impact of a particular action. Moreover, companies are also able to provide best practices given their experience trading with different countries and employing initiatives specific to each country in turn.

In addition, the private sector can serve as a valuable partner by sharing its expertise and providing practical assistance on matters that specifically relate to everyday firm-level activities. For example, companies may share information and experiences on using technology, logistics processes and data management, as well as by participating in training programs. In addition to technical assistance, businesses may provide financial assistance. However, the presence of funding is not the only essential factor for a successful PPP. Namely, the business community support may consist of technical expertise provided free of charge to governments.96

The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) addresses the purpose, creation methods, and operating structures of PPPs under its suggestions for customs administrations dealing with trade facilitation issues. With the UN/CEFACT’s, Recommendation No. 4, National Trade Facilitation Bodies, the UN emphasizes the importance of PPPs in trade facilitation in order to:

Identify issues affecting the cost and efficiency of a country’s international trade. Develop measures to reduce the cost and improve the efficiency of international trade. Assist in the implementation of those measures. Monitor the impact of measures using detailed indicators. Provide a national focal point for the collection and dissemination of information on best

practices in international trade facilitation. Participate in international efforts to improve trade facilitation.97

This recommendation also details the requirements for an effective partnership:

Recognition of the need to facilitate trade. Identification of, and commitment to achieving, shared objectives for private sector and

government entities to streamline trade and transportation processes. Development of political will for trade facilitation. Availability of champions promoting the agenda either in the public or private sector (or

both). Identification of priority actions that can be acted upon rapidly and lead to tangible

results. Definition of a plan of mid-term measures. Pooling of resources that can support the partnership. Willingness to harmonize trade procedures across borders and in accordance with

international standards.98

37

Evidence exists proving success of PPPs in trade facilitation. Some examples of successful trade facilitation PPPs included:

ATA Carnet is an international customs document accepted by 80 countries and territories which allows for the temporary entry of goods, duty-free and tax-free, whether shipped or hand-carried. The ATA Carnet system was established by international ATA convention and is governed by World Customs Organization and International Chamber of Commerce and its World Chambers Federation to encourage world trade and reduce trade barriers created by different national customs regulations.99

Business Anti-Smuggling Coalition (BASC) is a business-customs partnership created to promote safe international trade in cooperation with governments and international organizations.100

Southeast Europe Cooperative Initiative (SECIPRO) and EUROPRO Committees advise

administrations and companies on relevant trade facilitation measures, on best business practices and on nontariff barriers.101

Central Asia Regional Customs Cooperation Committee (CARCCC) provides a cooperation platform for the customs bodies of central Asian countries for the purpose of fostering closer trade and economic ties within the region.102

Walvis Bay Corridor Group promotes the utilization of the Walvis Bay Corridors, which

is a network of transport corridors in Southern Africa. The partnership enables the pooling of resources and authorities of both transport regulators and transport operators, thus effectively serving as a facilitation center.103

Trade Support Network is a group of trade representatives who provide input into the

design and development of modernization projects.104 According to previous work on trade facilitation PPPs by the World Bank, the stakeholders in successful PPPs based upon trade facilitation projects include:

Private stakeholders: representatives from financial institutions, transportation providers and intermediaries, drivers and operators, brokers and forwarders, and freight terminals.

Public sector representatives: border security officials, customs and health authorities,

revenue collectors, enforcement agencies, and any government agency with a stake in a product being transported.

Other relevant parties: regional bodies, international government and nongovernment

organizations, and national associations.105 In brief, through the active participation of the business community, with existing competencies in trade and a vested interest in the success of trade facilitating reforms, PPPs can develop the most efficient and mutually beneficial policies. PPPs may also contribute to improvements in

38

transparency, information flows, and the viability of sustainable solutions to trade facilitation policy problems. Notably, a constant dialogue between the private and public sectors is essential to achieve these goals. For this project, the CTFC would most appropriately serve as the platform for these dialogues, and PPP planning stages, to take place. Effective mutual goal-setting, cooperation, and coordination among stakeholders from a diverse array of industries and sectors are the keys to the success of PPPs in trade facilitation.106

C. Harmonization of Border Controls Border clearance processes, usually outdated and bureaucratic, are among the most problematic areas in trade facilitation. They lead to administrative corruption, lengthy delays and high transaction costs, which impose much greater barriers to trade than tariffs.107 Border controls involve not only custom offices, but also other agencies such as health, agriculture, quarantine, police, immigration and standards. In fact, evidence suggests that customs are responsible for only a third of regulatory delays.108 Border control systems represent different national needs and concerns as they try to equilibrate security with trade.109 As a result, cross-border coordination of government activities, both within a country and among nations, is essential for the purpose of facilitating trade.110 International harmonization and updating of legislation, as well as dealing with the different levels of capacity and organizational cultures of the involved agencies at home and abroad, is a main challenge for governments.111 Chapter five of the CAFTA-DR is dedicated to Customs Administration and Trade Facilitation. It refers to the transparent, efficient, and expeditious clearance of goods procedures in order to keep traders informed about new provisions and regulations, among other items.112 There are several cooperation agreements to support the implementation of such premises. For example, the USAID CAFTA-DR Regional Trade Program (CRT) developed customs manuals to provide customs administrations with guidelines related to legal and regulatory framework for trade facilitation and customs management. As part of the program, USAID organized workshops with SIECA and Chemonics to offer training on rules of origin. USAID developed the Project for Compliance with Rules of Origin and Customs Procedures jointly with SIECA to support the implementation of rules of origin and the development of improved customs management in CAFTA-DR.113 The program helped with the harmonization of guidelines, dissemination of information, and guidance and compliance to customs administration.114 Countries in the CAFTA-DR region are also part of the Mesoamerican Integration and Development Project, which aims to strengthen and foster integration and development in the region.115 One of the project’s components refers to the Mesoamerican Procedure for the International Transit of Goods (TIM), which focuses on modernizing customs and cross-border points in Mesoamerican countries. TIM is based on the use of computer systems and standardized customs procedures in order to optimize immigration, customs, and quarantine formalities at border points. It consolidates into the Single Transit Document (DUT) all requirements established by these authorities.116 The Chamber and IDB Competitive Advantage report suggests that there is ample room for CAFTA-DR nations to improve in the area of harmonizing border controls. One main problem is the absence of coordination among customs administrations in crossing points and lack of

39

consultation with trader and intermediaries. Generally, survey respondents stated that they are rarely consulted about new legislative proposals prior to their adoption and that there are no training sessions on new regulations. Another obstacle respondents identified was overcharging in tariff payments by customs administrations. Subsequently, operators appeal for reimbursements on the overcharged amounts, but rarely receive their claims. Moreover, respondents mentioned that the appeals process is a highly inefficient dispute settlement mechanism. Other problems identified by respondents include the lack of trained personnel and widespread corruption in customs offices.117 Consequently, this recommendation aims to coordinate efforts in the application of the international standards and good practices contained in the Revised Kyoto Convention (RKC).118 Currently, only two members of the CAFTA-DR have fully acceded to the RKC: the U.S. and Dominican Republic.119 The RKC’s objective is to facilitate trade by harmonizing and simplifying customs procedures and practices. The convention provides standards and recommended practices for modern customs procedures and techniques, such as transparency and predictability, standardization and simplification of necessary documents, simplified procedures for authorized persons. The RKC also calls for the maximum use of information technology, minimum necessary customs controls to ensure compliance with regulations, use of risk management and audit-based controls, coordinated interventions with other border agencies, and partnership between customs and trade—including formal consultative arrangements.120 As the Comparative Advantage report establishes, the process of harmonization of borders control involves several stages. First, members of CAFTA-DR should review their customs legislation, regulations, and procedures at the national and regional level in order to determine the degree of implementation of the commitments in the RKC. Secondly, countries should address whether modernization of national legislation is needed and create ad-hoc working groups through the CTFC’s subcommittees to coordinate and harmonize standards, processes, and documents at border crossings based on the RKC guidelines. Finally, mechanisms toward the uniform interpretation and application of customs rules and regulations within CAFTA-DR countries should be implemented.121 The public and private sector should work together towards a strategic plan to implement these steps through the CTFC. Stakeholders: Overview of Public and Private Sector Interests The border delays affect the business community directly. Therefore, the private sector has a strong interest in improving procedures at border crossings. Traders experience first-hand the inconsistencies among requirements and duplication of regulatory formalities to import in the region and may offer valuable advice. As the Competitive Advantage report reflects, the private sector is eager to participate in the process of harmonization of border controls in the region. Respondents not only call for a regional unification of criteria regarding customs legislations but also desire to be consulted as national and regional legislation on issues such as requirements, permits, fees, and others are being drafted.122 Furthermore, the private sector is not limited to exporters and importers but also includes intermediaries who provide transport, commercial, financial, and other related services, such as facilities and infrastructure. In other words, all private sector stakeholders who participate in the exchange of trade information and procedures related to border control should be considered in development of the PPP. Similarly, industry

40

and business associations have a key role to play in this process by accommodating diverse stakeholder interests, and should do so through the CTFC.123 All government agencies with policies that involve border control functions and interventions, such as preventing an illegal movement of people and goods, protecting national and international public health, safety, and security, and facilitating tourism should participate in the PPP.124 Public stakeholders in the PPP should not only include customs , but also police, immigration, veterinary and phytosanitary inspection, agriculture, biosecurity, economy, energy, environment, treasury, foreign affairs, health, interior, investment and infrastructure, justice, port authorities, statistics, and transport.125 The process of reviewing the customs legislation, regulations and procedures at both national and regional level is intense and the business community can provide reformers with specific needs and initiatives based on its experience, and identification of difficulties. The private sector may also provide reformers with a pool of experts to consult during the process of drafting the new laws. Similarly, government agencies may take advantage of private sector services to complement or augment their resources and capabilities. The public sector may benefit from the partnership with the business community even once the reform is completed. For example, they could cooperate to encourage compliance with trade controls and procedures. To this end, they may implement training and workshops for governmental representative, traders and trade-related services providers. Finally, businesses can provide valuable feedback about the performance of the new regulations and degree of advance toward the full implementation of the plan.126 Best Practices and Lessons Learned One of USAID’s recommendations for the future of CAFTA-DR is the integration of the government with the private sector, improving their communication and coordination, as well as integrating the business community to the development of strategic plans in modernization efforts in the region.127 The U.S. Department of Commerce launched the Central American Border Management Reform program to establish and strengthen PPPs and increase the technical expertise in Honduras, Costa Rica, and El Salvador’s customs administrations. The program highlights the importance of public and private sector cooperation in developing lasting solutions for customs and border management reform. The project includes a mechanism to encourage ongoing dialogue through the formation of mixed consultative groups. The groups make recommendations and follow up with the governments to enact the proposals developed during the project. In addition to workshops, a key feature of this program is the inclusion of a practical activity, Visitor Educational Exchanges, which consists of visits to U.S. ports, to enable participants to learn about U.S. best practices and public-private cooperation at the border. Another lesson of the project is to include SMEs in the dialogue as they have more limited opportunities to voice their opinions. Finally, the inclusion of a mechanism that ensures commitment to and continuance of the public-private discussions is essential .128

41

One popular instrument to exchange views on and discuss changes to customs procedures and regulation, and other border controls issues would be the establishment of a Joint Customs and Border Control Consultative Committee. The committee’s aim should be to provide a forum for the business community and public agencies involved in border controls to present its concerns on the status quo and promote the simplification and harmonization of procedures and other matters of mutual interest. The committee also could offer the opportunity customs administrations to receive feedback on their operations. Some examples of these committees include: Irish Customs Consultative Committee,129 U.K. Joint Customs Consultative Committee (JCCC),130 U.S. Advisory Committee on Commercial Operations of Customs and Border Protection (COAC),131 Australian Customs and Border Protection National Consultative Committee (CBPNCC).132 These committees meet regularly, for example Irish Committee meets four times a year while the U.K JCCC meets three times a year. Importantly, that there is no any firm or stakeholder that is over-represented. The membership should be as democratic as possible and not aimed at representing specific interests of a single firm. Moreover, the committees may be split up into smaller sub-committees in order to discuss in-depth technical issues. The sub-groups may be permanent or transitory to meet specific needs. Regionally, in Central America, successful examples of public and private cooperation exist. The Mesoamerican project also includes a component related to strengthen the cooperation between the private and public sectors. The Comisión de Facilitación de Comercio Exterior Centroamericana (COFACECA) comprises trade facilitation commissions of Guatemala (CONAFACIL), El Salvador (CIMA), Honduras (CEIMSA), Costa Rica (VUCE), and Nicaragua (CIFCO). Except VUCE, all have public and private participation on a large scale.133 The mission of the COFACECA is to support the process of implementation of the Central American custom union and support the implementation the chapter five of CAFTA-DR, among others. The CRT strongly promoted PPP in the framework of trade facilitation in the region. To this end, the project included public and private sector representatives as cosponsors of some events, such as the launching of the Electronic Document Generator (GEDOEL), seminars on verification of origin, and the workshop on rules of origin for judges and prosecutors. Another example is the participation of the Honduran Private Enterprise Council (COHEP) in the development and dissemination of draft legislation on electronic documents and signatures for Honduras. It cooperated with the process of gathering input, drafting the bill, and promoting review of the legal text in order to adapt the language as necessary to ensure its consistency with Honduran law.134 Similarly, the Private Enterprise High Council of Nicaragua (COSEP) participates in developing policies and drafting laws. Out of 44 laws approved by the Nicaraguan Congress in 2010, 25 were approved with COSEP‘s participation and it absorbed CAFTA-DR‘s demand for legislative reform in the country.135 CTFC’s Role in Implementation The CTFC subcommittees on integrated border management and customs administration should jointly work to sponsor the formation of a customs harmonization consultative committee, comprising the different sectors of the public and private sectors mentioned above. It is important to keep a multi-sector representation to gain involvement and credibility. It should clearly define the roles, responsibilities and expectations of all parties from each sector and

42

country.136 This document should also describe its overall and specific objectives, strategy and key priorities in a consensual manner. It would be also useful to review this document at least annually in order to updates needs according to the improvements. Ensuring sustainability is essential in all PPP agreements since they usually have great support during the first phase but interest starts to wane thereafter. Thus, publishing regular reviews and reporting progress is not a minor responsibility of the CTFC.137 Particularly in the area of developing performance measures or metrics, the CTFC may offer unique inputs because they constitute the users of the new regulations. The survey and focus group experiences established by the Chamber and IDB are a good example of what could be accomplished by the subcommittee. Such monitoring mechanisms should not only facilitate supervision, but also underscore confidence in the dialogue on trade facilitation and harmonization. The CTFC should provide concrete recommendations and the way of implanting them to foster the willingness of participation of the public sector. The World Bank, through its handbook of Border Management Modernization, recommends several strategies to ensure the engagement of the business institutions, which can also be applied for the public sector:

A clear, concise summary of key issues and decisions required. A clear account of the problems to be solved, with a clear long term vision. A clear link between the issues and problems identified and any activities to be agreed on

and financed under a project, including possible alternatives and the reasons for their rejection.

A strong justification for the likely expense, weighing costs against benefits. Clear evidence of the proposer’s technical capacity to achieve objectives. A careful, realistic identification of threats to the success of a project. Accurate estimates of required resources. Objective performance measures to allow accurate progress monitoring.

The World Bank’s handbook also points out the relevance of making realistic assessments of successful reforms and potential to achieve meaningful changes in the short- and long-term. Implementation risks exist and they should be properly identified and acknowledged. For this reason, the establishment of realistic and achievable objectives is critical. The CTFC would establish a channel between the business community and the diverse agencies from the members of CAFTA-DR. As a result, to accommodate all positions, it should consider the outstanding rivalries, competition, and conflicts of interest among agencies within each country and among the six CAFTA-DR members. Similarly, each nation presents different competences, physical, technical, and financial resources that may limit the implementation of the reforms.138 Political willingness is a main determinant of the legal and regulatory reforms needed to harmonize customs controls. In this context, another key player—each country’s national congress—should be considered to develop feasible alternatives given each country’s unique political situation. Moving forward, the CTFC could also promote the role of the private sector, not only as stakeholder, but also as partner and service provider looking to PPP opportunities in terms of, for example, joint border crossing models. With joint border crossing models, “two neighboring

43

customs administrations entering into an agreement to operate Customs control jointly, i.e. to coordinate export and import controls, opening hours and competences.”139 PPP’s hold immense potential in this area, where regional businesses’ involvement would go beyond dialogue to become an active partner. Benefits of Harmonized Border Controls There are significant transactional costs towards border control reforms, both politically and economically. Vested interests may be against reforms. Further, the availability of funds may prove an obstacle—especially for governments facing deficits. However, the benefits of harmonizing border controls far outweigh the costs.140 Even with difficulties, the benefits of harmonizing border controls are clear and straightforward. According to the UN:

“The more countries base their individual customs working methods, processes and procedures on relevant international standards in the RKC and the Convention on the Harmonization of Frontier Controls of Goods, the more cross-border cooperation and coordination can be facilitated.”141

Benefits for the government:

Increased government efficiency through more effective and efficient resource deployment.

Increased national revenues from higher and more accurate duty collection. Increased trader compliance and enforcement. Improved integrity and transparency. A better border control management attracts more trade, FDI and foster overall economic

competitiveness. Lowering the costs of production and importation leads to reduced prices for local

consumers. 142

Benefits for the private sector:

Faster clearance and release. Reduced overall costs from delays and informal payments. The World Bank reports that

reducing clearance times may reduce traders’ costs between 0.5 and 0.8 percent of cargo value. Similarly, reducing administrative costs leads to between 0.1 and 0.5 percent lower cargo value. Reducing the variability of clearance time and, thereby, the inventory levels for traders, costs are lowered for traders.143

Transparent, consistent, predictable application and explanation of rules. More effective and efficient resource deployment. Reduced numbers of steps in processing. Elimination of contradictions and redundancies between different policies. Greater facilitation for compliant traders. Enhanced competitiveness. Clear guidance on rights and obligations.144

44

D. Electronic Entry Documentation System Rules of origin (ROO) can function as effective trade policy instruments when properly aligned with the needs of importers, exporters and producers. From a user or firm-level perspective; however, the key to benefitting from ROOs is through the creation of a system in which the rules are easily accessible. In this case, accessibility entails going beyond a simple theoretical knowledge of ROOs and origin procedures, to the real and hands-on understanding that permits the correct categorization of the final good and provides access to the correct preferential tariff for that good. Origin certification can be a lengthy and complex process, given the globalization of the supply chain. Often raw materials and parts used to make a finished good are drawn from all over the world. In addition to the complications that arise from the ever-expanding value-added chain, the proliferation of preferential agreements, as the preferred mode of bilateral trade, continue to complicate the ability of customs officials to apply the correct preferential tariffs. Complications from what has become known as the “Noodle Bowl Effect” can result in different tariff reduction and elimination schedules; different product and technical standards and conformance requirements; and different product and services exclusions.145 Consequently, inefficient compliance with ROOs can result in additional administrative and production costs for traders and producers, and low FTA utilization rates by customs administrations. Using information technologies for the purpose of streamlining the entry documentation process has become something of a cause célèbre among trade policymakers. Among developing countries, using an electronic entry documentation system represents a gateway for streamlining the customs process, increasing inward FDI, and allowing SMEs to compete internationally as exporters.146 Specifically, an electronic entry system can assist in facilitating trade through the following means:

Permits electronic submission of the certificate of origin and supporting documents to Customs for endorsement.

Allows for the declaration form and attached documents to be submitted online, enabling Customs to facilitate trade, increase transparency and follow international best practices.

Authorizes importers to send their duty and fee payments electronically.147 While CAFTA-DR countries have reaped a number of benefits associated with electronic entry systems, ineffective implementation of the system, insufficient technological capacity and inadequate human capacity continue to hinder the potential for greater success in ROO enforcement. Further exacerbating the presence of non-tariff barriers is the lack of regional harmonization, especially when it comes to the use of a standard of electronic documentation system.148 Generally, firms surveyed by the private sector trade facilitation survey felt that CAFTA-DR’s ineffective or, wholly lacking, electronic documentation systems impeded ROO activities. According to the survey, while all CAFTA-DR countries use IT to some respect, when it comes to the electronic submission of documents prior to arrival, only about 13 percent of respondents found that the country they trade with “completely” provides this service.149 Another 31 percent

45

of respondents found that this was true “to a great extent,” 30 percent “to some extent,” 13 percent only “somewhat” and 13 percent “not at all.”150 When asked if the customs administration “uses information technology to expedite the release of goods,” only 6 percent of respondents found that this statement to be “completely” to 4 found that this was true “to some extent,” 33 percent only “to some extent, 18 percent “somewhat” and 3 percent “not at all.”151 In general, a majority of the survey respondents noted that CAFTA-DR governments have made an effort to invest in the modernization of IT equipment and to increase customs capacity for the purpose of building a better electronic documentation system.152 As a consequence of government efforts to increase capacity, the respondents also noted that the electronic system has resulted in marginally shorter wait times and marginally more streamlined paperwork submissions process. Nevertheless, the respondents maintained that the technology used by CAFTA-DR customs is mired with operational bottlenecks that lead to “system saturation problems that routinely paralyze export and import procedures.”153 In addition, a majority of respondents found that the technology that is currently being used has the capacity to be more beneficial to trade “if other procedures related to imports and exports of goods were also carried out electronically.”154 In particular, participants in the survey stressed the benefits of electronic system harmonization with the ministries of agriculture, livestock and public health.155 Finally, respondents with SME interests emphasized that while the government is committed to e-trade, these resources are difficult to access by small agricultural producers.156 Stakeholders: Overview of Public and Private Sector Interests Customs administration and personnel in the region generally support the development of an electronic entry documentation system through the active consultation and the technical expertise of the private sector. For example, Guatemalan customs authorities have shown a propensity for “consultations with major traders and carriers to develop shippers and businesses’ electronic information systems.”157 The same can be said for El Salvador’s authorities, as private sector respondents also espoused the interest of El Salvadorian authorities in collaboration with an overwhelming rate of 95 percent.158 Concurrently, government agencies such as the Ministry of Foreign Trade and the Ministry of Industry and Commerce have both shown ownership in the creation of more relevant electronic system priorities. Private stakeholders interested in the implementation of an efficient electronic entry documentation system in the CAFTA-DR region include:

Associations focused on promoting the interests of the apparel and manufacturing sectors such as the Central America-Dominican Republic Apparel and Textile Council (CECATEC-RD), which is composed by the business associations and chambers of the textile and apparel industry within the region, the Honduran Private Enterprise Council (COHEP), the Guatemalan Exporters Association (AGEXPORT) and the Center for the Promotion of Micro and Small Enterprises in Central America (CENPROMYPE).159

Inter-regional consultative groups such as the CCIE (Consejo Consultivo de la Integracion Economica), a group whose members come from different Central American nations and varying economic sectors. CCIE also functions as the consultative arm of COMIECO (Council of the Ministry of Economy and Trade).160

46

Other trade facilitating associations include CONAFACIL, CIMA, CIMCO, CEIMSA and VUCE. At the regional level, these groups form COFACECA (Comisiones de Facilitacion del Comercio Exterior de Centro America – Commission of Trade Facilitation of Central America).161

Shippers and freight forwarders, customs brokers and transportation and logistics firms such as DHL, FedEx and UPS are also stakeholders in the implementation of a more efficient electronic system.

In addition to the interests of CAFTA-DR governments, international and regional development assistance agencies such as USAID and IDB, government agencies such as the Department of Commerce and the Office of the U.S. Trade Representative, and organizations such as the Chamber of Commerce also have a stake in the successful implementation of a fully electronic entry documentation system. Best Practices and Lessons Learned There are a number of important lessons and best practices that the Council should consider before moving to implement its own projects and activities. Specifically, a number of foreign donors have provided technical assistance to CAFTA-DR customs administrations for the purpose of creating a more efficient electronic system, of which the Chemonics-led, USAID-funded, Regional Trade Program for CAFTA-DR (CRT) is the most prominent case. GEDOEL, the electronic software developed by Chemonics that is currently in use, guides users through an online process to establish the origin of a product and to compile the necessary certification of origin documents for use by customs. Free, readily available online and accepted by CAFTA-DR countries as a legitimate tool, GEDOEL functions as an important resource for importers, exporters and producers looking to determine whether their product is being traded under the correct preferential tariff terms.162 A final evaluation of the project conducted in August 2010 concluded that GEDOEL facilitated better understanding of ROOs and helped in the issuance of electronic COOs during the 2009-2010 pilot phase. During the pilot phase, evaluators found that the website received more than 13,000 visits and, of those visits, 300 resulted in registered users who were successfully issued Certificates of Origin.163 Under the conservative assumption of a $1,000 specialist fee for determining the good’s origin, the 300 certifications that were achieved through GEDOEL’s free service saved traders approximately $1.3 million.164 Currently, the administration, hosting, and maintenance of the GEDOEL system is under SIECA’s jurisdiction. Before transferring responsibility to SIECA, Chemonics trained the organization’s employees in the effective administration and maintenance of GEDOEL. Despite the training, the long time lapse between the administration of the training and the transfer has resulted in a system that has not been updated to include “the necessary changes to the decision trees associated with ROO changes derived from the newest version of the Customs Harmonized Coding System.”165 Moreover, at some point under SIECA’s administration of the system, the software ceased to operate and SIECA’s experts were unable to pinpoint the cause, or even the date, of the

47

software’s malfunction. However, the experts did find that the system held outdated information and held issues with the software’s logic and configuration of the equipment.166 In addition, because the website was not updated, the private sector, in constant need of information on customs, ROOs, etc., did not receive the information it needed to efficiently import and export its products. At the same time, SIECA’s own website is continuously not updated on a regular basis. Remarkably, at the time of the report’s publication, SIECA’s website on Customs Procedures only contained five documents – CAUCA, RECAUCA, Guidelines on Customs Procedures, Transporters’ Guidelines, Alphabetical Index of Products and Chemicals.167 CTFC’s Role in Implementation The Chamber’s Competitive Advantage report provided the following over-arching recommendations on the implementation of a fully electronic entry documentation system168:

Bilaterally launch and implement a program, between CAFTA-DR countries in a condition to do so, aiming to expand it to the whole region.

Efficiently coordinate the work and internal mechanisms of the trade ministries and customs administrations in order to implement these first steps.

Build IT capacity sot that private operators can have the tools to issue these certificates. If only paper copies are available, allow the use of copies (as opposed to signed originals)

that can be in either or English or Spanish. Capacity building in the form of more modernized technology and better infrastructure is necessary if activities based on these recommendations are to be successfully implemented. In the case of the electronic entry documentation system, this entails the complete overhaul of the current IT system. CAFTA-DR countries need to invest in the necessary data storage facilities and in the “interconnection capacities” of all government ministries involved in trade.169 Because the CTFC is not expected to serve as a donor agency, providing IT assistance ultimately remains outside of its mission scope, but it can nevertheless leverage the multilateral and private sectors, as well as with other donors to support procurement efforts. Given the complications that arose during the implementation of the Chemonics project, it is possible for the CTFC to use the lessons learned to foster a more sustainable electronic system through private sector participation. Some of the activities that the CTFC can implement to support the reports recommendations include:

Given the CFTCs wide scope, the Council can uses its resources to disseminate information about the system and build the system’s capacity to expand across borders and to the entire CAFTA-DR.

Facilitate further training to customs administrators to increase their capacity in making changes to the software, specifically the decision trees used to determine ROO.

Empower members of the public sector and private sector to exchange experiences on IT issues and to analyze concrete examples on how other countries and firms have successfully addressed those issues. Bringing a specialist from Europe or other South American countries to exchange best practices and lessons learned is also necessary.

48

Hire the services of a marketing company to develop and execute a comprehensive regional marketing campaign for dissemination to the entire region on the benefits of an electronic entry documentation system.

Enhance engagement with government agencies and private-sector associations to promote the use of the electronic system by holding additional dissemination events, building on other events in the region that discuss foreign trade and promote/enhance the participation of private sector representatives in these events.

Promote sharing of information with business associations so that they can publish information on their websites.

Implementing an effective electronic system necessitates the involvement of private sector stakeholders in the consultation and implementation process given that a system implemented by the public sector is unlikely to endure without buy-in and feedback from the private sector. As a tool for trade facilitation, public-private partnerships empower firms and business associations to play a greater role in advocacy, consultation and implementation efforts. In the creation of the electronic entry documentation system, PPPs can deliver technical support and service projects in a more efficient and sustainable manner than the public sector can via its own efforts. Ultimately, the CTFC’s overarching goals should be to nurture a working relationship between its members and the public sector in the creation of a fully electronic entry documentation system. Through its support of the electronic system, the CFTC can also become a leader in the promotion of transparency and governance. Efforts to implement the software can also include long-term capacity building mechanisms, such as the development of inter-sectoral to combat corruption without fear of retaliation. Benefits of an Electronic Documentation System The implementation of an efficient electronic entry documentation system facilitates trade in a number of ways. An electronic entry documentation system:

Promotes the correct application of the CAFTA-DR agreement to customs operations, thereby reducing the risk of incurring legal violations.

Enhances the understanding of customs regulations by importers, traders, and exporters. Reduces the costs of trade by eliminating the need to hire the specialized services of

consultants in determining the origin of goods. Reduces the prevalence of errors in origin certifications, delays in the clearance of goods

for import and the inapplicability and/or refusal of access to preferential tariff treatment. Increases incentive to stimulate investment in local markets and the development of

SMEs. As was apparent from the Chemonics project, electronic systems provide customs administrators and the countries they serve an immensely cheap tool for attaining a certificate of origin and providing a more simplified system for documentation.170 Finally, the electronic system can be scaled up and implemented CAFTA-DR-wide, resulting in a more streamlined trading process.

49

Ultimately, an electronic entry documentation system represents a useful resource for facilitating trade for CAFTA-DR countries. This tool can be easily replicated and, with minor modifications, extended for use in all CAFTA-DR countries. An electronic system can help facilitate the complex task of applying ROOs for the origin determination of goods, which is central to gaining access to preferential tariffs under a free trade agreement. A broad dissemination of such tools represents a gateway to future success for traders, producers, and the national economies of the individual countries. The system can assist in promoting greater governance and transparency among stakeholders. E. Sanitary and Phytosanitary Standards

Sanitary and phytosanitary standards (SPS) ensure consumers are supplied with food and related goods that are safe to consume. Further, SPS ensures the health of animals and plants. In addition to establishing measures for maintaining safety and health, SPS standards for trade facilitation also ensure that a country’s authorities do not use health and safety regulations as a tool for protecting their domestic producers from competition by imports in the domestic market. By and large, governments have come to depend on the UN Food and Agricultural Organization (FAO)/World Health Organization (WHO) Codex Alimentarius Commission, the World Organization for Animal Health (OIE) and the International Plant Protection Convention (IPPC) to establish their SPS standards. Governments also rely on the scientific assessment of risk and the use of the precautionary principle when it comes to setting a standard for a product that is not referenced in the three main international agreements mentioned above.171 Sanitary and phytosanitary standards facilitate trade by clearly defining the characteristics of a good or product and by improving both compatibility and usability on a global scale. During the Uruguay Round of the WTO, member nations established the “Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures” and the “Agreement on Technical Barriers to Trade” (TBT) to address the emerging debate over the use of standards in international trade. The SPS and TBT agreements can be interpreted as an attempt to balance the global harmonization of product standards and to prevent these standards from becoming tools for protectionism. Nevertheless, although SPS standards are determined without protectionism in mind, inefficient implementation of standards can create non-tariff barriers to trade that mirror the effects of protectionist policies. For CAFTA-DR, seven regional priorities in SPS were identified by public and private stakeholders in the lead up to the final agreement:

Integrated SPS regulatory information systems Upgrade laboratory infrastructure and analytical methods capability Strengthen national WTO/SPS enquiry points Develop animal health, inspection and sanitary standards for animal products Harmonization of risk assessment methodologies and development of risk mitigation

methods Traceability Coordination and participation in international standard-setting organizations.172

50

While CAFTA-DR countries have shown a commitment to addressing these priorities, the continued lack of harmonization and mutual recognition of SPS standards has resulted in the manifestation of non-tariff barriers in the trade of foodstuffs and animal or plant life.173 In the Chamber’s survey, a number of the survey participants voiced concern over the inadequate number of qualified personnel in sanitary and phytosanitary regulations, whose lacking qualifications can lead to delays in the withdrawal of goods from the point of entry.174 Other areas identified by the private sector as bottlenecks include the lack of urgency exhibited by personnel in the granting of permits, the over-centralization of activities, the inadequate service to exporters from inspectors and laboratories and, finally, the haphazard application of an online data entry system.175 Per the USAID-funded initiative “For Improved And Harmonized Agricultural Statistics And Sanitary-Phytosanitary Regulatory Infrastructure In Central America,” other areas of concern include:

Absence, or lack of priority in funding support to systemic issues such as disease eradication or laboratory reforms. This can include fee-structuring systems, purchasing of necessary equipment and supplies, and implementation of data management systems.

Government officials are subject to replacement along with changes in political administrations, leaving holes in institutional knowledge.

Import requirements are complex and often reflect moving targets. National administration priorities are not necessarily in-tune with one another, in turn

further complicating the harmonization of standards process.176 When it comes to trading with the United States, duplicability and added costs in the importing and exporting of agricultural products continue to hamper exchange flows. One common example involves double inspections, wherein a product that has been examined and certified within the United States must undergo another extensive inspection upon reaching its final destination in CAFTA-DR. Per the regulations of Organismo Internacional Regional de Sanidad Agropecuria (OIRSA), importers must re-sanitize their goods before they can be imported. The sanitation process generally consists of fumigation that is conducted while the product is still on board of the vessel or at port. The cost associated with re-sanitation is large and can include the “purchase of the fumigant ($11.25 per metric ton), delays in the unloading process and in the time that the vessel must remain in port, and unpredictability in the timing of shipments, which may result in higher storage costs for mills.”177 Duplication and inefficiency regulating of agricultural products is not reserved for trade with the United States, as many of the same problems also plague inter-country trade flows in the CAFTA-DR. One example involves the shipment of tomatoes from Costa Rica, which undergo an initial inspection before being exported from Costa Rica and, a second, more stringent inspection when being imported by Nicaragua. Typically, Nicaragua’s Ministry of Agriculture and Forestry (MAGFOR) will send a sample of the tomatoes to the city of Rivas to have a lab inspect the product. Apart from the wait time associated with the laboratory inspection, the lack of adequate physical infrastructure is problematic because when a customs official determines the need for an inspection, “the cargo must be unloaded in open areas that expose perishable products to warm temperatures and outside conditions.”178 In addition, the import of perishable goods can face further delays because of “inconsistencies in the working hours of customs agents

51

and customs offices.”179 In this case, “inconsistencies” can refer to customs officials who “shut down operations after 5 p.m. and on weekends.”180 This means that procedural paperwork for shipments arriving at the border on the weekend are delayed until Monday, which not only slows down the shipments route to market, but also causes significant delays for other importers whose products arrived on the Monday—clogging up the ports.181 Ultimately, delays resulting from final approval inefficiencies can amount to nearly 10% of the final product cost along with reduced shelf life for the product. While burdensome to all businesses, the costs that are especially high for small enterprise farmers.182 The following addresses the potential value and role of PPPs in enhancing the mutual recognition of SPS and SPS-related registrations and other technical standards by CAFTA-DR signatories. The section will also provide practical recommendations for the purpose of enhancing efficiency and profitability for both the private and public sector. Stakeholders: Overview of Public and Private Sector Interests One way in which CAFTA-DR signatories have shown their commitment to SPS standard harmonization is through the creation of the Central American Customs Union (CACU), an organization that identifies and addresses SPS harmonization issues and recommends appropriate regional regulations to address the issue. For example, CACU was at the forefront of the creation of the Harmonized Regulation on Microbiological Residue Standards for Food—a CAFTA-DR-wide piece of legislation—which was confirmed and implemented in 2009. The law standardized the maximum residue levels for over 95% of microbiological pathogens and provided CAFTA-DR with a solid regulatory framework from which to export foods that meet international standards.183 The primary objective of the law was to not only harmonize standards and decrease the prevalence of arbitrary decisions by customs administrators, but also to accord Central American countries the opportunity to show the rest of the world their potential in creating an integrated market system, potentially like that of the European Union. The institutionalization of harmonization has also positively affected external trade activity because countries exporting to CAFTA-DR need only meet one specific regulation rather than different regulations per country.184 A number of CAFTA-DR governments have also spearheaded individual legislative actions to bring their respective regulatory systems closer to meeting the standards set by the WTO SPS Agreement. The WTO SPS agreement states that an “exporting country’s food safety system must be considered equivalent to that of the importing country.”185 In the case of Guatemala, government stakeholders have passed several laws regulating pesticides, which have positively impacted small agricultural farmers in Guatemala. Specifically, prior to the new law, Guatemala’s registration system did not provide adequate protection for the use of dangerous substances and resulted in snow pea producers being put on the U.S. automatic detention list. With the livelihoods of rural farmers at stake, the new law banned the substance and Guatemala was removed from the automatic detention list. As of April 2011, Guatemalan snow pea farmers could easily access U.S. markets and no longer have to go through the rigorous process of proving that their pesticide levels are not beyond U.S. standards.186

52

The ministries of public health, foreign affairs, commerce and industry within each CAFTA-DR country have also responded with urgency when it comes to the implementation of more efficient regulations and greater inter-regional harmonization in standards. Each of these government agencies have coordinated, or are currently working, with USAID, the Department of Commerce, the USTR and other U.S. government counterparts to create an environment more conducive to trade. For example, the government of Nicaragua has come together with USAID to provide assistance to dairy producers on through trainings and best practices to better prepare their products for export to the U.S.187 Similar to the Nicaragua case, the U.S. government also leveraged the expertise of CAFTA-DR institutions such as OIRSA and export organizations such as the Central American, Panama and Caribbean Federation of Chambers and Exporters’ Associations (FECAEXCA), the El Salvador Export Corporation (COEXPORT) and the Costa Rica Export Chamber (CADEXCO) to provide technical and capacity building assistance to the regions SMEs in SPS issues.188 Like their public counterparts, a number of private sector bodies are also working to harmonize the regions standards via their own efforts. For example, the poultry industry has piloted projects on traceability by engaging all “types of stakeholders involved in the supply chain from feed mills to parent stock farms, hatcheries, broiler farms, slaughter houses and processing plants. By the end of 2011, over 100 companies exporting chicken, shrimp or FFV, as well as thousands of farmers, are partners.”189 National and regional buyers like Wal-Mart, Hortifruti, Sigma and Tropix Foods, Agrolempa in El Salvador and Desarollo Agricola S.A. (DAISA) in Nicaragua, have also become involved in trade capacity building. In fact, Wal-Mart has been an outspoken critic of CAFTA-DR trade, going so far as to say that there was “no respect for sanitary and phytosanitary certification and/or permits” within the region and that discretionary barriers in food products are blocking commerce.190 Best Practices and Lessons Learned The private sector is interested in creating a simplified, standardized and harmonized SPS regulatory system that will facilitate the easy movement of goods from sellers to buyers.191 In the case of SPS, which requires a heavy dependence on laboratory and customs technology to determine safety, private companies are better able to afford and offset the fixed, up-front investments needed for the purchase and installment of specialist IT systems and dedicated staff. Moreover, the identification, evaluation, and implementation of SPS activities require a wide range of experience and skills that are seldom found within a customs administration. In the case of Thailand, the government provides financial assistance to SMEs so that they may participate in the SPS electronic traceability system. In Chile, the poultry and pork industry continue to provide technical support to the public sector for the implementation of an electronic export certificate tailored to the private sector’s needs and particularities, as well as national sanitary requirements.192 There are a number of PPPs currently working to address SPS standards within CAFTA-DR. For example, both the Dominican Republic and Honduras have created National SPS Committees (CNMSF) to provide advice on the creation and implementation of SPS-related programs and regulations. The CNMSFs also promote public-private interaction and

53

coordination. In both cases, the ministries of health, foreign affairs, commerce, and industry, along with a plethora of industry associations and stakeholders, are involved in the distribution of information on regulations and providing trainings to promote the role that SPS standards play in trade.193 Guatemala has a similar PPP in place involving the Guatemalan Ministry of Economy, the Ministry of Health, and CONAFACIL, an international organization working to further facilitate trade in the region.194 Finally, in Costa Rica, the National Phytosanitary Committee (CONAFI) promotes a dialogue between the public sector, agricultural producers, exporters and academia in the design and implementation process of SPS policies. Activities include monthly round tables to address broad SPS issues while key players include the Ministry of Agriculture, State Sanitary Service, organizations of producers/exporters, academics, the FAO, IICA and OIRSA.195 Some other successful PPPs in SPS and Trade Facilitation include:

Chile: Electronic Zoosanitary Export Certificates (ZCE) for Livestock Products Objectives: Decreasing the time and cost of issuance of zoo certificates to export and minimizing the risk of errors in the capture and transmission of information on zoo sanitary inspection/certification. Main Activities: Designing and implementing SPS inspection/certification software and the design of on-line database of SPS certificates. Key Achievements: Designing and implementing ZCE software and the online database in pork and poultry products and the adaptation of the software to other industries (bovine meat products).196

Chile: Electronic System for the Veterinary Drug Residues Control Program

Objectives: Fulfilling SPS requirements of international markets; decrease the time of issuance of drug residue certificates. Activities: The design of on-line database of laboratory analysis/sampling.197

Thailand: Harnessing smart IT solutions for food traceability

Objectives: Food safety along particular supply chains, facilitate compliance with trading partners’ requirements and increase the competitiveness of high-value agri-food exports. Activities: Development and implementation of an electronic traceability system; training to enable private sector operators to use traceability system. Key Achievements: By the end of 2011, over 100 companies were using the system; improved access to data about agri-food exports among supply chain partners and import authorities; enhanced competiveness.198

CTFC’s Role in Implementation of Regionally Standardized SPS System The Chamber report makes the following recommendations on SPS199:

Develop a mutual recognition initiative for sanitary registration among all seven CAFTA-DR countries. Launch the process with one or two priority products in such areas as cosmetics, food, medicines or pharmaceuticals, which may serve as a pilot project for such an initiative.

54

Use one of the Central American Technical Regulations in force as a basis to conduct a comparative study on U.S. and Dominican legislation in order to understand and then propose mechanisms for allowing the mutual recognition of sanitary registrations of said products, aiming to cut time and costs.

Expand the products pilot phase in an attempt to create a permanent mechanism for all seven countries to work on different mutual recognition proposals.

Allow the use of sticker labels to facilitate reconditioning and shipment of goods across regional borders where harmonization of labeling requirements is pending.

Some activities that the CTFC can initiate to address these CAFTA-DR wide recommendations include:

Working with CAFTA-DR governments to advocate that they further prioritize legislative action to harmonize SPS standards with those of the U.S. This would ensure the easier flow of goods between the partners, as companies would understand how to comply with the laws of the importing country.

CTFC can initiate or provide training and infrastructure development to SMEs by using its leverage with MNCs.

Provide technical and capacity building assistance to the various ministries for the purpose of modernization and the integration of consistent procedures across ministries.

Hold regular workshops to update stakeholders on changes/updates in regulations. This can be achieved in cooperation with FDA, APHIS, FSIS, and U.S. Customs along with CAFTA-DR representatives.

Establish a working group within CTFC that can provide technical assistance on FDA microbiological standards to CAFTA-DR signatories.

Promote the establishment of a body that oversees and certifies the freshness of produce being exported to U.S.

Call for the hiring of additional staff and provide regular training.200 The CTFC can leverage the collaborative activity that is currently percolating in the region to identify innovative solutions to the challenges facing CAFTA-DR with respect to SPS standards. Moreover, the promotion of a more consultative ensures the participation of industry and private stakeholders in regulatory decision-making. Such collaboration can reduce the perception that trade decisions are made without the concerns of the wider trading community at large. For example, in Australia, the state government and the private sector worked together to co-finance activities to manage plant health. The initiative resulted in standards that addressed consumer and market needs while building up capacity and coordination between government and industry. The U.S. government has also fostered consultation in other FTAs. For example, at APEC’s Food Safety Cooperation Forum (FSCF), U.S. leadership helped to set up the Partnership Training Institute Network (PTIN) for building food safety capacity in the Asia Pacific region. Early on, private stakeholders provided important assessments of existing food safety capacity issues, which were then used to establish priorities for capacity building activities by PTIN.201 As part of the process, the CTFC can also introduce private and public stakeholders to the experiences of some institutions in Europe, “that have robust animal health systems in which

55

governments take on clearly defined but limited roles, and industry complements or replaces previous government services.”202 Benefits of a Regionally Standardized SPS System Ultimately, the CTFC can help the public and the private sectors understand the roles that they respectively play in supporting compliance, creating a culture of shared responsibility, and promoting collaboration in SPS standardization. If done effectively, these actions can result in enhanced consumer confidence in products, faster and more efficient passing transportation for the good to market, and overall increased competitiveness for CAFTA-DR products worldwide. F. Authorized Economic Operator Programs According to the World Customs Organization (WCO), an authorized economic operator (AEO), “…is a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national customs administration as complying with WCO or equivalent supply chain security standards.”203 The establishment of these programs is a central pillar of the WCO SAFE Framework of Standards to Secure and Facilitate Global Trade.204 In exchange for making security guarantees and working cooperatively with national customs administrations to ensure international supply chain safety, firms participating in AEO programs receive benefits designed to ease the customs process and reduce the associated costs. The WCO SAFE Framework realizes that businesses operating as part of international supply chains have a vested interest in securing their operations, and through private sector involvement in AEO programs, customs agencies can provide for security further away from the border and make more effective use of their limited resources. These PPPs offer direct benefits to both the public and private sectors. The WCO establishes the international best practices for creating an AEO program, including criteria companies must meet to become a participant and security partner and the benefits that countries should offer in return. The criteria listed in the SAFE Framework for becoming an accredited AEO include:

Record of compliance with Customs and other enforcement agencies Observance of relevant laws and regulations Proper establishment according to national laws Permanency of business premises Pre-existing security procedures Lack of criminal convictions among senior management Adequate company controls over staff, premises, equipment, inventory, and other

assets205 In addition to the criteria above, the WCO contends that customs administrations should consider trade volumes, strategic geographic concerns, security anomalies, and risk assessments of the physical goods themselves when extending AEO status to a firm.206

56

The SAFE Framework also lists several benefits that firms can expect to gain from participating in AEO programs, and underscores the need for customs agencies to clearly delineate and define any benefits to the private sector. Suggested benefits include:

Quicker movement of low risk goods through Customs Improved security Reduced costs due to security and Customs efficiencies Greater understanding and knowledge of Customs procedures Improved communication between Customs officials and AEO participants207

In the Competitive Advantage report, respondents identified problems with AEO programs as an area within risk management with significant room for improvement. Overall, respondents noted the lack of AEO programs among all CAFTA-DR members as a large problem. In countries with established AEO programs they noted a lack of benefits from participation in said programs, a lack of coordination among different customs agencies regarding AEO programs, and the lack of equitable and reliable application of these programs as problems which the CAFTA-DR countries need to address. In the Dominican Republic, 38 percent of respondents disagreed with the statement that the customs administration provides benefits based on compliance and risk analysis, and 35 percent disagreed with the statement that the customs administration makes an effective and fair use of risk analysis information.208 In El Salvador, 53 percent of survey respondents replied ‘barely’ or ‘not at all’ when asked if the customs administration had an AEO program.209 In addition, the “Compendium of AEO Programs,” published by the WCO, shows that existing AEO programs among the CAFTA-DR nations are small in scope when compared to their international counterparts. These programs, listed in table 3B, are generally limited within the supply chain, and have very few qualified participants. Costa Rica’s PROFAC program, for example, is limited to sea, land, and air carriers of exports. PROFAC only consists of one qualified participant, rendering it rather useless. Guatemala’s AEO-GT program allows for significantly more types of participants (importers, exporters, customs brokers, carriers, port authorities, and logistics operators), but has yet to extend AEO status to any firms.210 Problems such as these have severely limited the effectiveness of AEO programs launched by the CAFTA-DR nations and need to be remedied in order for these countries to obtain the full benefits of establishing these programs.

57

Table 3B: Existing AEO Programs

Country Program name Date started Types of participants Number of participants

Costa Rica

Customs Facilitation 

Program for Reliable 

Trade (PROFAC)

3/18/2011sea, air, and land 

carriers (exports only)1

Dominican 

Republic

Authorized Economic 

Operator (AEO‐DR)3/21/2012

importers, exporters, 

brokers, port 

operators, warehouse 

operators, shipping 

companies, freight 

forwarders, truckers, 

and express couriers

2

El Salvador

Customs Program on 

Business Compliance 

(PACE)*

12/1/2008 importers 37

Guatemala

Authorized Economic 

Operator of 

Guatemala (AEO‐GT)

4/1/2010

importers, exporters, 

customs brokers, 

carriers, port 

authorities, logistics 

operators

0

Honduras n/a n/a n/a n/a

Nicaragua n/a n/a n/a n/a

CanadaPartners in Protection 

(PIP)1995 (revised in 2008)

importers, exporters, 

cargo carriers (air, 

highway, rail, and sea), 

customs brokers, 

couriers, warehouse 

operators, freight 

forwarders, shipping 

agents

1,480

Kenya AEO 11/1/2010

importers, exporters, 

shippers, clearing 

agents

64

South Korea AEO 4/15/2009

exporters, importers, 

customs brokers, 

freight forwarders, 

transporters, sea/air 

carriers, ground 

handlers, warehouse 

operators

292

United 

States

Customs‐Trade 

Partnership against 

Terrorism (C‐TPAT)

11/1/2001 whole supply chain 10,325

Source: "Compendium of AEO Programs," World Customs Organization

*Not technically an AEO program, but provides many similar benefits

58

In order to maximize the benefits obtained from AEO programs in the region, there are several steps that the CAFTA-DR nations can take. These include:

Establishing AEO programs in countries where they currently do not exist Expanding AEO programs in the countries that already have them Establishing regional pilot programs to test new types of AEO programs Seeking mutual recognition with other AEO programs Engaging in capacity building programs with both the public and private sectors

El Salvador, Honduras, and Nicaragua currently lack AEO programs and will benefit most immediately from taking steps to establish them. Honduras and Nicaragua should begin crafting legislation, while El Salvador needs to create legislation that will transform their current customs compliance programs into a full-fledged AEO program. As part of this process, these countries should endeavor to create programs that with the same format or structure, in order to make them mutually intelligible and to help reduce costs for private sector participants. Consultations with the private sector will enable the government to gauge these firms’ priorities concerning potential benefits and to most effectively design programs that will entice participation from the private sector. As the arbiters of international best practices regarding AEO programs, WCO should be included in this process as well. The abovementioned countries should also look to the WCO in assisting them in implementing timetables to feasibly include importers, exporters, and other stakeholders in their respective AEO programs. Costa Rica, the Dominican Republic, and Guatemala have already established AEO programs and will benefit the most from expanding the scope of these programs. These three countries in particular need to solicit greater participation from the private sector categories that currently qualify for their programs, while also creating concrete timetables to expand their programs into the remaining categories of supply chain actors. While each program’s security criteria should ultimately determine which companies are eligible to participate, only one firm in Costa Rica, two in the Dominican Republic, and no firms in Guatemala have attained AEO status. Therefore, these three countries also need to consult with the private sector in order to guarantee that they offer sufficient benefits to entice private sector participation, should conduct cost-benefit analyses of their programs to make sure that the benefits received justify the costs of application and participation, and reform their programs if necessary. Moreover, these countries should also work together to establish a pilot program for a new, regional trucking initiative, which would allow accredited trucking operators to move goods smoothly across Central American borders on long-haul routes. By allowing trucking operators, who comply with traffic laws and meet the security requirements, to become AEO partners, operators will be able to move goods among all five of the Central American economies without needing five different sets of documents. Most importantly, these countries can help integrate their economies and infrastructure to provide for the more efficient transport and output of goods. Once these AEO programs are well established, the CAFTA-DR nations should begin seeking mutual recognition agreements of AEO programs. First, they should pursue mutual recognition agreements with other countries that have AEO programs meeting an acceptable level of security

59

protections. Thereafter, CAFTA-DR countries can increase the appeal and effectiveness of their AEO programs through integration, information sharing, and regional partnerships. Finally, the six CAFTA-DR nations need to engage in AEO program capacity building initiatives with both the public and private sectors through the CTFC’s subcommittee on risk management. Customs officials need to be trained in the operational aspects of the AEO program in order to maximize the full benefits of the program, and private sector participants need to be trained regarding their rights and responsibilities under the program. Stakeholders: Public and Private Sector Interests The ministries of foreign affairs, public health, commerce, and industry within each CAFTA-DR country have responded positively to the implementation of more efficient regulations and greater inter-regional harmonization in AEO programs. The majority of these government agencies have current working relationships with the Department of State, USAID, the Department of Commerce, the USTR, and other USG counterparts to create an environment more conducive to trade. For example, in the case of El Salvador, USAID contributed to the government’s efforts to create their Business Customs Compliance Program (PACE), which has proven to be a capable platform for the implementation of several AEO provisions. In addition, USAID has been working with SIECA and El Salvador’s Department of Origin at the Customs Authority (DGA) to implement further AEO training.211 The U.S. government has also leveraged the expertise of export organizations such as the Central American, Panama, and Caribbean Federation of Chambers and Exporters’ Associations (FECAEXCA), the El Salvador Export Corporation (COEXPORT) and the Costa Rica Export Chamber (CADEXCO) to provide technical and capacity building assistance in the implementation of AEO programs.212 Multinational corporations such as Wal-Mart, Dole, Chiquita, Super 99, Hanesbrands Inc., InBev, General Motors, and Whirlpool are all interested in the implementation of effective AEO programs. International shippers, such as Crowley Maritime, CMA CGM, Maersk Line, and Seaboard Marine, along with freight consolidators, import brokers, freight forwarders, warehouse operators, terminal and port operators like DP World Caucedo and Puerto Quetzal, and logistics firms such as FedEx, UPS, and DHL also have a large stake in AEO program implementation. CTFC’s Role in Implementation of AEO Programs Good relations and sustained communication between the public and private sectors will be essential to accomplish these goals, and the CTFC will play a crucial role in facilitating these discussions. The CTFC can aid this process by lobbying these governments for the creation of new AEO programs, promoting the expansion of the existing programs, and by voicing the opinions of the private sector in the drafting of relevant legislation. With regard to the regional trucking pilot program, the CTFC should not only advocate for the creation of this program, but should also encourage all regional governments to participate in these discussions. The CTFC will also be instrumental in setting up workshops and information sessions to train government officials and private sector employees about the rights, responsibilities, requirements, and best practices surrounding these programs.

60

G. Single Window Environments

When implemented, single window systems bring an immense improvement to the international trade environment. These important electronic terminals, “aim to simplify border formalities for traders and other economic operators by arranging for a single electronic submission of information to fulfill all cross-border regulatory requirements.”213 The submission of documents with electronic signatures eliminates the need to provide duplicate documents to each agency, as well as the requirement to submit tangible, original documents as well. Uploading all relevant documents to these systems at once also allows individual government agencies to view them as needed, saving the private sector, as well as government agencies and consumers, valuable time and brings products to market more rapidly. The governments of the CAFTA-DR nations have agreed to create these systems, most recently through the Inter-American Network of International Trade Windows (RedVUCE), but all remain at different phases of the development process; none have yet to deploy a functional single window system for both imports and exports. Table 3C: Single Window Systems in CAFTA-DR

Source: "Business Climate for Competitiveness in the Americas: Simplification of Procedures to Promote Competitiveness" by Margarita H. Libby Costa Rica currently possesses the most developed single window, but there are several issues with this system. Customs still requires one original copy of the import documents, rendering the electronic submission of these documents through the single window less beneficial. The system also only operates during normal business hours, meaning that firms cannot submit documents at any time.214 Also problematic is the fact that firms cannot clear shipments through customs in advance; the products must be physically in the country before they can submit documents for approval.215 Once it becomes operational, the Dominican Republic will have the most advanced single window environment among the CAFTA-DR nations. This system will be the only one among the CAFTA-DR nations that accepts digital signatures, removing the requirement for original documents.216 The current single window systems for El Salvador, Guatemala, and Honduras only cover exports, and therefore do nothing to facilitate the importation of goods into those countries.217

Country Start Date ScopeExpansion to 

Include Imports

100% 

Virtual

Country Accepts 

Digital 

Signatures

VUCE Uses 

Digital 

Signatures

Costa Rica 1996imports and 

exportsn/a No Yes No

Dominican 

Republic2009

imports and 

exports2013 No Yes Yes

El Salvador 2000 exports ready No Yes No

Guatemala 1986 exports ready No Yes No

Honduras 1987 exports ready No No No

Nicaragua 1994 exports no data No Yes No

61

Each nation has a plan to expand their systems to cover imports as well, but implementing these plans requires political willingness within and among their respective governments. No concrete dates for the expansion are publically available. While El Salvador and Guatemala have laws permitting the use of digital signatures, their single windows fail to accept them. Honduras does not have legislation allowing the use of digital signatures, which prohibits their single window from using them.218 Nicaragua similarly covers only exports under their single window environment, and there is no publically available information regarding any plans to expand this system to include imports as well.219 CFTC’s Role in the Implementation of Single Window Environments In order for CAFTA-DR nations to obtain the full spectrum of benefits offered by single window environments, the CTFC should play an active role in the development and deployment of these systems. It should endeavor to:

Monitor the progress and ensure the sustainability of RedVUCE; push governments to

reach the implementation stage and roll out a final product Encourage CAFTA-DR nations to make their single window systems mutually

intelligible, with the ultimate goal of convergence into one, shared system Conduct private sector evaluations of individual single window systems and offer

recommendations on possible improvements The CAFTA-DR nations deserve to be recognized for their commitments to creating these systems. They made significant contributions to the creation of RedVUCE, which aims to make participating countries more competitive by creating single windows and streamlining the private sector’s interactions with government agencies.220 While the CAFTA-DR nations have made admirable strides towards the implementation of single window environments, it is important to make sure that these efforts do not stall. The CTFC can play an important role in maintaining the momentum behind this initiative and ensuring that the final single window programs implemented by governments in the CAFTA-DR region are relevant to the private sector. Should CAFTA-DR governments begin to lose sight of this objective, the CFTC should work to remind of the value of successfully implementing these single window systems for consumers and private sector firms by stressing the economic and efficiency gains they stand to reap upon the successful launch of their single window systems. In addition, the CTFC should encourage the CAFTA-DR nations to create their single windows with a spirit of cooperation by sharing information and attempting to make these systems as similar and harmonized as possible. By making their single windows mutually intelligible, these countries can further reduce the transaction costs associated with international trade and increase the competitiveness of their markets. Over time, the region should labor to combine their individual systems into a unitary system shared by all CAFTA-DR partners. This would provide the private sector with the most efficient and easily accessible system for facilitating the flow of goods. It would also ease the flow of trade within the CAFTA-DR region.

62

Following the launch of these single window systems, the CTFC, working through the relevant council subcommittee, should create a log of private sector complaints, suggestions, and points of confusion, and should work to transparently present these issues with the appropriate government’s customs administration. In addition, the CTFC staff should administer periodic single window system evaluations in order to guarantee that they continue to meet the trade facilitation priorities of the private sector, and propose potential improvements to the national governments.   Stakeholders: Government and Private Sector Interests in Single Window Environments All government agencies that require documentation to allow goods into the country have an interest in the single window system. This varies from country to country, but can include customs, environmental agencies, agricultural agencies, food and drug agencies, and consumer safety agencies. By gaining access to an online database of all relevant forms, these agencies save time and resources that would otherwise be devoted to more complicated border interactions with the private sector. Most all of the private sector firms mentioned above would benefit from a single window system. Time and efficiency gains are established, but also, consumers are able to receive their products with a faster turn-around—enabling the firm to increase its output and accrue mutual economic benefits for all parties involved in the process. Benefits from the Implementation of Single Window Environments Importers, shipping lines, and freight forwarders are the primary private sector beneficiaries of single window systems. Moving products through the customs process more quickly allows imports to reach market sooner, but also improves the turnaround time of vessels in port by reducing administrative delays.

63

SECTION IV: Quantitative Analysis

A. Gravity Model Specification

Our project used augmented gravity equation model to examine the impact of trade facilitation efforts in the six Central American and Caribbean countries of the CAFTA-DR on U.S. exports to these countries. The gravity model was first used in international trade in 1962 by Jan Tinbergen, when he compared Newton’s universal law of gravitation to describe the bilateral trade flows between two countries as proportional to their economic sizes and inversely proportional to the transaction costs. Economic size is generally represented by GDP, population, or land area, while the geographic distance between the two countries and cultural dissimilarities reflect transaction costs. The gravity model was initially criticized for its lack of theoretical support but found legitimacy when Paul Krugman proposed incorporating monopolistic competence into the model, further solidifying the gravity model’s findings.1 In addition to basic variables such as GDP, population, and land area, an augmented gravity equation also includes other relevant variables that affect bilateral trade flows such as geographic indicators, trade facilitation or economic conditions. Starting with a basic gravity equation in multiplicative form, the natural logarithms of both sides were taken in order to obtain a log-linear equation.2 Following previous studies on trade facilitation in the framework of a gravity model, the initial specification is as follows:3

ln ln ln ln ln ln

ln ln ∗ ln As listed in the initial specification, i denotes the exporter, j denotes the importer, and t denotes trading years. In this case, importers include the six CAFTA-DR members: Costa Rica, Dominican Republic, El Salvador, Honduras, Guatemala, and Nicaragua. The other variables in the model are represented as follows:

M: Value of manufacturing imports from country i to each member of the CAFTA-DR excluding the U.S.

                                                             

1 United Nations Conference on Trade and Development (UNCTAD) and World Trade Organization (WTO), “Chapter 3: Analyzing Bilateral Trade using the Gravity Equation,” in A Practical Guide to Trade Policy Analysis (UNCTAD-WTO, 2012), accessed March 17, http://www.wto.org/english/res_e/publications_e/wto_unctad12_e.pdf; Chaney, Thomas, “The Gravity Equation in International Trade: An Explanation,” Unpublished, University of Chicago (2011). 2 This specification is also convenient because the parameters of an equation estimated in logarithms are elasticities. 3 Wilson, John S., Catherine L. Mann, and Tsunehiro Otsuki, “Assessing the Benefits of Trade Facilitation: a Global Perspective,” The World Economy 28, nº6 (2005): 841-871; Felipe, Jesus, and Utsav Kumar, “The Role of Trade Facilitation in Central Asia: A Gravity Model,” Levy Economics Institute of Bard College Working Paper 628 (2010).

64

GDP: Real gross domestic product of importer and exporter.4 GDPpc: Real per capita GDP of importer and exporter. Frankel argues that per capita GDP captures factors related to the level of economic development, the productive capacity of the exporter and the purchasing power of the importer.5 DIST: Geographical distance between the exporter and importer. BORDER: Dummy variable denoting whether the exporter and importer have a common border. LANG: Dummy variable denoting whether the exporter and importer have a common language. COL: Dummy variable denoting whether one country was a colony of the other at some point in time. TF: Trade facilitation indicator of the exporter and importer. CAFTADR * TF: CAFTADR is a dummy variable denoting whether both the exporter and importer are members of the CAFTA-DR. This is an interaction term denoting the effect of both trade facilitation and being part of the CAFTA-DR and represents the variable of interest given that it captures the joint effect of trade facilitation improvements as well as being a member of the agreement. While the importer´s TF variable captures the impact on imports from all countries, this interaction term reflects the impact on intra-bloc imports, including imports from the U.S.

Some studies also include a variable representing the relative cost of trading or multilateral resistance term of the countries with the rest of the world. Anderson and van Wincoop point out that bilateral trade is not only determined by distance between two countries but also by their relative trading costs or relative distance to other trade partners.6 This effect is commonly captured by a variable known as remoteness, which is defined as the GDP-weighted average distance to all other countries. In a short sample period, like in the model represented here, this variable does not vary considerably and it is possible to include fixed effect dummy variables instead.7

                                                             

4 Some studies also include population as measure of country size. We run the regressions including this variable too and we do not find significant differences in the results. Thus, we present the output based on this specification only. 5 Jeffrey Frankel, Regional Trading Blocs in the World Economic System, (Washington, D.C.: Institute for International Economics, 1997). 6 Anderson, J. E., and E. van Wincoop, “Gravity with Gravitas: A Solution to the Border Puzzle,” The American Economic Review 93, nº1 (2003): 170-192. 7 UNCTAD and WTO, “Chapter 3: Analyzing Bilateral Trade using the Gravity Equation.”

65

Moreover, several fixed effect variables may be incorporated into the model in order to control for the unobserved components in the regression. As a result, the second specification is: ln ln ln ln

ln ln ln ln ∗ ln

: time invariant exporter dummy

: time invariant importer dummy

: time fixed effect dummy. This variable is common for all countries but takes a different value for each year accounting for business cycle effects and time specific shocks.

: country-pair fixed effect dummy. As Wilson et al. argue, tariffs may be incorporated to control for the pairwise unobserved relationship.8 Since tariffs data availability for the Central American and Caribbean countries of CAFTA-DR is limit for the covered period, we exclude this variable.9

Some aspects impact bilateral trade that vary across time and may justify including exporter-yearly, importer-yearly and country-pair-yearly dummies in the regressions. These effects, however, are not included as they absorb all country specific factors and make it impossible to estimate the effect of trade facilitation. Furthermore, although trade agreements are often included in gravity models, a CAFTA-DR dummy is not included in the model due to collinearity issues with the already included trade facilitation variable and the interaction term.

B. Estimation methods

Since the gravity model is estimated by employing the log-linear version, the presence of zero trade flows is challenging because the logarithm of zero is not defined, given that zero trade flows may represent missing data or an actual lack of trade. If the zero trade data are randomly distributed, it is possible to drop the observations and estimate the regression with the truncated sample.10 If the distribution of zeros is not random, however, dropping zero trade values will create large biases because the absent of trade may reflect the high barriers to trade.11 Since the sample used in this report has a relevant percentage of non-trade flows, we estimate the model by

                                                             

8 Wilson et al., “Assessing the Benefits of Trade Facilitation: a Global Perspective.” 9 We run the regression with tariffs which reduce significantly the number of observations leading to unimportant results which are not shown here. For each described dummy variables we exclude one exporter, importer, year and country-pair respectively to avoid perfect collinearity. 10 It is possible, for example, that the exporter does not export certain good simply because it does not produce it. This is particularly the case when dealing with disaggregate data which is not our case. 11 UNCTAD and WTO, “Chapter 3: Analyzing Bilateral Trade using the Gravity Equation.”

66

using two different samples: one truncated sample without zeros and another with zeros in trade flows. It is important to note that all econometric methods have pros and cons and it is impossible to assert that one absolutely outperforms the others.12 Thus, several estimation methods were used for the sample. Regarding the truncated sample, three sets of regressions were estimated. First, we performed a simple ordinary least squares (OLS) pooled analysis. Second, we ran a panel data regression with fixed and random effects. Under the fixed effects (FE) model, the unobserved heterogeneous component is constant over time and affects each pair of countries of the panel in a different manner. The use of fixed effects presents some problems because the time-invariant explanatory variables of each pair of countries are perfectly collinear with the fixed effects and are dropped from the model. Consequently, it is not possible to estimate the effect of some gravity country-pair variables such common language, borders and distance. By contrast, under the random effects (RE) model the unobserved heterogeneous component is exogenous and no correlation between the country-pair effects and the regressors exists. Finally, we performed the Hausman and Breusch-Pagan test to examine the adequacy of each model and control for heteroskedasticity. Additionally, we used the Poisson Maximum Likelihood (ML) estimator to estimate the sample with zero trade flows. This method is beneficial because it can be applied to trade levels instead of logarithms, meaning zero flows observations do not need to be dropped. Finally, the model was controlled for fixed and random effects.13 In each case, the model was estimated with and without specific effects. C. Data

Table 4A details the definition and source of each variable. Table 4A: Variable Definition and Sources

Variable Definition Source

Imports (M)

Value of manufactures imports from country i to the CAFTA-DR members except the U.S. in current dollars. Manufactured goods are defined as the sum of commodities in SITC Rev 2 categories 5 to 8 except 68 (non- ferrous metals)

Commodity and Trade Database (COMTRADE) of the United Nations Statistics Division

GDP Gross domestic product in World Bank Development                                                              

12 Herrera, Estrella Gomez, “Comparing Alternative Methods to Estimate Gravity Models of Bilateral Trade,” nº10/05. Department of Economic Theory and Economic History of the University of Granada, 2010. 13 The coefficients of this model are also interpreted as elasticities.

67

constant 2000 US$ of exporters and importers

Indicators

Per Capita GDP Gross domestic product in constant 2000 US$ of exporters and importers

World Bank Development Indicators

Distance

Geodesic distances are calculated following the great circle formula, which uses latitudes and longitudes of the most important cities/agglomerations (in terms of population)

Center d´Études Prospectives et d´Informations Internationales (CEPII)

Common Border Dummy variable indicating whether the two countries are contiguous

CEPII

Common Language (Lang)

Dummy variable indicating whether the two countries share a common language (official or national languages and languages spoken by at least 20 percent of the population of the country)

CEPII

Colonial Ties (Col) Dummy variables indicating whether the two countries have ever had a colonial link

CEPII

Trade Facilitation (TF)

Logistic Performance Index (LPI) is a multidimensional indicator, rated on a scale from one (worst) to five (best).

World Bank Development Indicators

Unfortunately, data availability of the trade facilitation indicator for CAFTA-DR countries is very limited, especially for a significant period of time. Following several studies on bilateral trade performance and trade facilitation, the Overall Logistic Performance Index (LPI), noted above in this report, was developed by the World Bank was used as a proxy of trade facilitation.14 To further expand, the LPI is a multidimensional assessment of logistics performance rated on a scale from one (worst) to five (best) with six components:

Efficiency of the customs clearance process Quality of trade and transport-related infrastructure Ease of arranging competitively priced shipments

                                                             

14 For example: Felipe and Kumar, “The Role of Trade Facilitation in Central Asia: A Gravity Model,” Hoekman, Bernard, and Alessandro Nicita, “Trade Policy, Trade Costs, and Developing Country Trade,” World Development 39, nº12 (2011): 2069-2079; and Portugal-Perez, Alberto, and John S. Wilson, “Why Trade Facilitation matters to Africa,” World Trade Review 8, nº3 (2009): 379-416.

68

Competence and quality of logistics services Ability to track and trace consignments Frequency with which shipments reach the consignee within the scheduled or expected

timeframe. LPI reports for 2007, 2010 and 2012 account for surveys performed in 2006, 2009 and 2011.15 Chart 4B shows the overall LPI rankings for the seven CAFTA-DR countries. The indicator for the U.S. is significantly higher than the index for the other six countries. According to the U.S. indicator, trade facilitation in the region improved from 2006 to 2009; however, the indicator suffered a slight decrease in 2011 for some countries (Dominican Republic, Costa Rica and Honduras).

Chart 4B: LPI in CAFTA-DR and the U.S.

Source: Our elaboration based on World Bank Development Indicators

The sample covers three years 2006, 2009 and 2011. Tables 4C and 4D show the list of trading partners in the truncated and complete datasets. D. Results16

Tables 4E and 4F show the results for the five approaches for the whole bloc with and without fixed effects. The gravity model analysis shows that the interaction term between the LPI of the

                                                             

15 Nicaragua was excluded from the LPI 2012 due to insufficient number of responses or other data reliability concerns. Other trade facilitation indicators are trading across borders, included in Doing Business indicators, which is also available since 2006 and in spite of providing annual data it is not expected that trade facilitation indicators vary significantly in such a short period. We also estimate the model using the disaggregate LPI indicators but since the sub-indicators are highly correlated is not possible to estimate their effect individually. 16 We also estimate the model for each country individually but since the coefficients of our variable of interest are not significant we do not report them.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2006 2009 2011

Nicaragua

Dominican Republic

Honduras

Guatemala

Costa Rica

El Salvador

US

69

six CAFTA-DR countries and the CAFTA-DR dummy has a statistically significant positive impact on imports for the members of the bloc in all regressions.

Therefore, it can be concluded that the sign of the estimated coefficients are reasonably robust. The size of the coefficients, however, varies across specifications. According to the diverse estimations, a 1 percent increase in the trade facilitation indicator of CAFTA-DR countries (excluding the U.S.) when both the exporter and import are members of the CAFTA-DR (including the U.S.) leads to an increase in imports to CAFTA-DR (excluding the U.S.) between 2.7 percent and 7.1 percent. Indeed, in 8 out of 10 regressions the coefficient is almost 6 percent or above. It is worthy to note that the importer’s LPI is not significant or slightly negative, which is contrary to what is expected, when considering without the interaction term. In other words, improving trade facilitation in the framework of the CAFTA-DR boosts import flows to the six countries.

Generally speaking, the goodness of fit (R2) is low.17 Including fixed effects to account for the unobserved heterogeneity helps to increase the percentage of import´s variance that our model explains. In these cases, the panel regressions with random effects and the pooled OLS models present the highest goodness of fit, 60 percent and 75percent respectively. Nevertheless, in all estimations the coefficients are almost alike.

                                                             

17 In all regressions, the F-statistic for overall significance indicates that taken jointly all coefficients in the model are statistically different than zero. Without fixed effects, the Breusch-Pagan Test indicates that random effect (GLS) model is preferred to OLS but with fixed effects, GLS is not significantly preferred to OLS. It is not possible to perform the Hausman test in the model without fixed effects because the model fitted on these data fails to meet the asymptotic assumptions of the test. In the model with fixed effects, the Hausman test indicates that the random effects model is more appropriate than the fixed effect one.

70

Table 4E: Results for CAFTA-DR, without fixed effects

Dependent variable: lnM Dependent variable: M Pooled OLS Panel FE Panel RE Poisson FE Poisson RE Ln GDP Exporter 0.24*** -.04 0.12*** -0.02*** -0.02***

(8.22) (-1.49) (4.63) (-7754.95) (-7754.95) Ln GDP Importer 0.06 -.003 0.03 -0.06*** -0.06***

(1.51) (-0.09) (0.81) (-19000) (-19000) Ln GDP pc Exporter

-0.06 .002 -0.01 0.05*** 0.05*** (-1.12) (0.03) (-0.14) (9038.5) (9038.5)

Ln GDP pc Importer

0.13* 0.20*** 0.17*** 0.17*** 0.17*** (1.7) (3.12) (2.58) (32332.8) (32332.8)

Distance 0.002 0.46 0.01 -0.41*** (0.05) (1.44) (0.21) (-6.27)

Shared Border 1.17*** 0.91** -0.62 (3.55) (2.18) (-0.7)

Common Language

1.6*** 1.38*** 0.83** (6.55) (4.51) (2.5)

Colonial ties -0.58 -0.38 0.73 (-1.13) (-0.47) (0.64)

Ln LPI Exporter 4.32*** -0.19 4.01*** 2.17*** 2.17*** (6.36) (-0.16) (5.59) (15227) (15227)

Ln LPI Importer 1.32 -1.91* -0.64 -0.25*** -0.25*** (1.03) (-1.75) (-0.6) (-1801.14) (-1801.14)

Ln LPI Importer X CAFTA-DR

2.69*** 6.54*** 2.82*** 7.12*** 7.12*** (9.03) (6.16) (7.15) (34365.05) (34365.05)

Constant 0.07 11.91*** 5.01*** (0.04) (4.37) (3.15)

Observations 1,005 1,005 1,005 2,091 2,429 R2 Overall 0.25 0.08 0.23 0.08 0.06 R2 Within 0.04 0.01 R2 Between 0.10 0.34 Log Likelihood -1.685e10 -1.685e10 Note: robust t- and z- statistics in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%. In the case of Poisson estimations R2 is computed as the square of the correlation between imports and fitted values to be compared. Source: our calculations using Stata.

71

Table 4F: Results for CAFTA-DR, with fixed effects

Dependent variable: lnM Dependent variable: M Pooled OLS Panel FE Panel RE Poisson FE Poisson RE Ln GDP Exporter -0.04 -0.04 -0.04 -0.05*** -0.05***

(-1.48) (-1.49) (-1.41) (-1500) (-15,184.41) Ln GDP Importer -0.004 -0.004 0.002 -0.02*** -0.02***

(-0.12) (-0.13) (0.08) (-6695.33) (-6,695.33) Ln GDP pc Exporter -0.01 -0.01 0.004 0.04*** 0.04***

(-0.18) (-0.18) (0.08) (5982.72) (5,982.72) Ln GDP pc Importer 0.15** 0.16** 0.15** 0.04*** 0.04***

(2.16) (2.19) (2.08) (6133) (6,133.00) Distance 0.46 0.45 0.03 -0.40***

(1.44) (1.42) (0.49) (-6.04) Shared Border 6.11 1.26*** -0.56

(1.17) (3.92) (-0.62) Common Language 1.08 1.08 1.84 0.76**

(1.6) (1.55) (1.46) (2.26) Colonial ties -0.61 -0.81 0.74

(-0.32) (-0.63) (0.65) Ln LPI Exporter -0.15 -0.15 0.54 1.82*** 1.82***

(-0.13) (-0.13) (0.52) (12370) (12,370.34) Ln LPI Importer 0.09 0.09 0.09 -1.02*** -1.02***

(0.05) (0.05) (0.05) (-5171) (-5,171.38) Ln LPI Importer X CAFTA-DR

6.58*** 6.58*** 5.98*** 6.72*** 6.72*** (6.62) (6.43) (5.83) (31993) (31,993.75)

Constant 10.75* 10.5*** 8.31*** 19.18*** (1.8) (3.44) (3.46) (34.46)

Exporter Fixed Effects Yes No Yes No No Importer Fixed Effects Yes No Yes No No Country Pair Fixed Effects

Yes Yes No Yes No

Time Fixed Effects Yes Yes Yes Yes Yes Observations 1005 1005 1005 2091 2429 R2 Overall 0.74 0.08 0.59 0.07 0.06 R2 Within 0.05 0.05 R2 Between 0.11 0.79 Log Likelihood -1.616e+10 -1.616e+10 Note: robust t- and z- statistics in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%. In the case of Poisson estimations R2 is computed as the square of the correlation between imports and fitted values to be compared. Source: our calculations using Stata.

72

SECTION V – Appendix and References Charts and Tables: Chart 1A. Evolution of U.S. Merchandise Exports to CAFTA-DR Countries

(in billions dollars)

Source: own elaboration based on U.S. International Trade Commission (USITC), Interactive Tariff and Trade DataWeb, available at http://dataweb.usitc.gov/scripts/user_set.asp.

Chart 1B. U.S. Exports to CAFTA-DR by Destination in 2012

Source: USITC, Interactive Tariff and Trade DataWeb.

0

5

10

15

20

25

30

35

Nicaragua

Honduras

Guatemala

El Salvador

Dominican Rep

Costa Rica

Costa Rica 24%

Dominican Rep 23%

El Salvador 10%

Guatemala 20%

Honduras 19%

Nicaragua 4%

73

Chart 1C. Direction of U.S-CAFTA-DR Trade 2000 & 2011

Source: CRS CAFTADR: Developments in Trade and Investment, R42468, http://www.fas.org/sgp/crs/row/R42468.pdf

Table 4C: List of countries Included in the sample without Zeros

Albania France Pakistan Argentina Germany Panama Australia Greece Paraguay Austria Guatemala Peru Belgium Honduras Philippines Bolivia Hong Kong SAR, China Poland Brazil Hungary Portugal Bulgaria India Romania Canada Indonesia Russian Federation Chile Ireland Singapore China Italy Slovak Republic Colombia Japan South Africa Costa Rica Jordan Spain Czech Republic Korea, Rep. Sweden

74

Denmark Malaysia Switzerland Dominican Republic Mexico Thailand Ecuador Netherlands Turkey Egypt, Arab Rep. New Zealand Ukraine El Salvador Nicaragua United Kingdom Finland Norway United States

Venezuela, RB Table 4D: List of countries included in the sample with zeros

Albania Greece Norway Algeria Guatemala Oman Angola Guinea Pakistan Argentina Guinea-Bissau Panama Armenia Guyana Papua New Guinea Australia Haiti Paraguay Austria Honduras Peru Azerbaijan Hong Kong SAR, China Philippines Bahrain Hungary Poland Bangladesh India Portugal Belarus Indonesia Qatar Belgium Iran, Islamic Rep. Romania Benin Ireland Russian Federation Bhutan Israel Rwanda Bolivia Italy Saudi Arabia Bosnia and Herzegovina Japan Senegal Brazil Jordan Serbia Bulgaria Kazakhstan Sierra Leone Burkina Faso Kenya Singapore Burundi Korea, Rep. Slovak Republic Cambodia Kuwait Slovenia Cameroon Kyrgyz Republic Solomon Islands Canada Lao PDR South Africa Chad Latvia Spain Chile Lebanon Sri Lanka China Lesotho Sudan Colombia Liberia Sweden Comoros Lithuania Switzerland Costa Rica Luxembourg Syrian Arab Republic Cote d'Ivoire Macedonia, FYR Tajikistan Croatia Madagascar Tanzania Cyprus Malawi Thailand Czech Republic Malaysia Togo

75

Denmark Mali Tunisia Djibouti Mauritania Turkey Dominican Republic Mauritius Uganda Ecuador Mexico Ukraine Egypt, Arab Rep. Moldova United Arab Emirates El Salvador Mongolia United Kingdom Eritrea Morocco United States Estonia Mozambique Uruguay Ethiopia Namibia Uzbekistan Finland Nepal Venezuela, RB France Netherlands Vietnam Gabon New Zealand Yemen, Rep. Gambia, The Nicaragua Zambia Germany Niger Zimbabwe Ghana Nigeria

76

Appendix AA:

Map of CAFTA-DR region – Congressional Research Service

Private Sector Trade Facilitation Survey – Chamber, AACCLA, and IDB

Competitive Advantage: Moving Ahead of the Global Competition, Private Sector Priorities for Trade Facilitation in the CAFTA-DR Region – Chamber, AACCLA, and IDB report

2013 Index of Economic Freedom country rankings – Heritage Foundation and Wall

Street Journal

2012 Logistics Performance Index country rankings – World Bank

77

CAFTA-DR Countries

 

Source: Congressional Research Service

78

The following is a survey by the Association of American Chambers of Commerce in Latin America(MCCLA) and the Inter-American Development Bank. lt is designed to identify the principalobstacles to trade facilitation that companies experience.

In countries at every level of development, importers and exporters face intemational trade baniers ofan administrative and technical nature when moving goods across borders. This survey, prepared

the assistance of Sandler Travis & Rosenberg, P.A. and Sandler & Travis Trade Advisory Services,Inc., is intended to provide region-wide momentum toward the implementation of country-specificcustoms modemization and trade facilitation priorities in the hemisphere.

The questions below solicit your feedback regarding the performance of your specific country basedon mandates in CAFTA-DR or U.S.-Chile Free Trade Agreement, and the World CustomsOrganization's Revised Kyoto Convention in the following areas:1 ) Customs Administration;2) Risk Management;3) Logistics & Infrastructure;4) Border Management;5) Procedural Requirements; and6) Strategic Planning.

Our goal in asking these questions is to facilitate public-private partnerships in the region, in order toenhance communication and promote the mutual benefits to government and industry of customsmodernization and trade facilitation efforts.

Your organization's responses to the survey will help us identify and advocate for specific customsadministration enhancements in each country. Accordingly, you will be asked to identiff the specificcountry to which your responses refer. The survey is best completed by an individual within yourorganization with responsibility for customs and logistics or imporVexport compliance.

All responses will be aggregated, and no individual responses will be attributed or shared without theexpress consent of the submitter.

Thank you for participating.

l. Please indicate to whlch country yout respon3e. throughout the survey wlll refur.

Country

2. Please enter your contact lnionnation. All suwoy r€spon3es wlll b. aggregated. No inionnation specific loyour organization wlll be shar€d without your erpllcit aPproyal.

Fii8t, Last l{ame:

Organlzation:

Country:

Email Addre*E:

Pick One:

L_____

P.rcle'l

79

3. Ple..e .||ter your co|np.ntf! profrla All t||rvet rr.pon.6 wlll be .ggr€g.t€d. o Infofln ffon rpeclfic toyour orgrnlaffon wlll be sha|td wlthout yoor erellclt rpprurrl.flumber ot EmplotEoa In Gotnprny:

Volunre of E .port /lnpod. fro|t to Counf$

Page 2

80

1. To wtat extent does l{re Gustomr Adminl3tration comply with tho followlng mandates?

Never Rarely Sometimes

Information is easily available to the public on all customs O C OOften Always

olaws, regulations, and procedures, including on the

intemet

Consultations with the private sector b€fore introduction of Oa new measure (s.9. new technology, examination

process, policy changes)

Points of inquiry exist to address cusloms matters which

are available on the intemet

Customs regulations are published in advance with a

comment period prior to adoption of a rule

Suffdent lime is given to comply with a new law orr€gulation

Customs offers training/ information sessions about the

new laws or regulations

\J

U

ooo

oo(J

o

o

o

2. The Grctom3 Adnanistration enploys a hlghly protes3lonal workforce, which is recruited competltively,well ttalned, adeqrately paid, screened ior anto|lcement ri3k3, and with a high level ot undeEtandlng otapplicable law! and regulations.

Q Skongly Disagree

Q oisagr""

Q unoecioeo

O onr*

Q Strongty agree

3. Therc b an adequate number ot pellonnel at air, land, and soa ports of entry, with the proper technicalequipment and Infonnation to address a&eues related to applicatlon of cu3toms lawa and procedures.

Q Strongly oisagree

Q ois"sr""

Q unoecioeo

Q nsr*

Q Strongly ngree

Fr:r,re lJ

81

l. Tlero alc proceseo and operallons In placo tl|.t ar deaigned to n nlmtse Orc ltrcideoca of com"don

Q Strongly Disagree

Q oisagre"

Q unoe<io"o

O onr""

Q $rongry Agree

2. |en an Incld.nt of corruptio|t occur|!

Med€dsm(s) ars evailabl€ b the public to report th6

incider

The Administration follows up on the report

There is pmtedion from r€taliation

Nsver

o\Jo

Rarely

or\o

Sometimes Often

o

Always

no

Page 4

82

t. Each country should ondeayor to adopt or malntain dik managemant 3ystemS to focus cu3totn3 re3orrce3on high{|3k goo& and allow lor exp.dited clearance of low.rbk goodr. To what extett h.3 tte Gustoms

Admlnl3tratlon lmplementod r|3k management sy!tem3?

Q ruot "t "tr

Q Somewtrat

Q ro some extent

Q To a great extent

Q Completety

2. Please rat€ the iollowing statemen$ ba3€d on lmplementatlon of rkk-basod management by the Guttomt[oden zatlon3

NeithsrCompletely

disagree

The Customs Adminisbation employs an intelligence- Obased compliance and risk management systom

There are account-based, post-entry procadures for Oimporters wilh proven compliance histories and mnsislent

import pafterns

The Customs Administration provides b€nefits based on O

Disagree agree nor Agree

disagreeooo\,/ \-/ \_,/

Completely

agree

o

ocompliance and risk analysss [i.e. compliance

p€rformance is rewarded by expsdited proc€ssing,

Authorized Economic Operator (AEO)I

The Customs Administration makss effective, fair, and

uniform use of comoliance and risk analvsis information

3. Io what extent are r|3k managcnEnt ry3tem5 autoln ted or employed electonically?

Q ruot at "tr

Q Somewtrat

Q To some edent

Q To a great extent

C Gompletely

Page 5

83

L To what e{ont does tl|o Gustoms Ad|nini3tratlon comply witlt the tollowlng mandatos?

Notatall Barely Somewhat

Uses informalion technology to expedite the relsase of

gooos

Makes electronic systems availabla to the trading

community

Provides for electronic submission of processing of

information and data bsfore affival

Coordinates wilh other customs authorities to ensure

compatibility to facilitate exchange of trade data

Coordinates with other customs authorities to develoo

@mmon data elements and Drocesses

Allows for a trusted trader/Authorized Economic Ooerator

program

Confdential information submitted by parties is maintained

as confidential

2. Plea3e score these element3 based on effectiyeness of inplementation;

Information technology and automated systems to support

commercial and tade operations

Option to use elecironic means for filing

paperworutransactions (i.e. use of Electronic Certificates

of Origin)

Very poor Poor

\_/ \_,i

n\,/ \_/

Completely

r)

IJn

r)

Excellent/1

A good

amount

n

r)

trf

\J

Goodn

(J

oTJ

Fair

o

ooTJ

oo

U

oo\J

o

one single elsctronic interface to complete imporUexport Crelated paperwo*

Tariff and related infomation/dala available from an Oautomated system, and provides automated systems for

the payment of duties, taxes, and other fees by electronic

fund transfer

Acceptance of electronic signatures

84

t. Pl.a3e rat how {|e G||r!om! AdnlnLtretlon porionn3 In e.ch caLgory:Poor

oa)o

The overall multi-rnodal transDort infraslructure and

s€rvioes

Maritime infraslructure and oquipmsnt

Airport infrastrucnure and equipment

Cross border facilities and pocedures

Simplification of customs proc€durcls

Harmonization of border controls

Vsry poornootl

Fair

(,

oo(_/

Good

(J

or)

Very good

tl

\J()

2. Ple.3e tate how rell OGAr (Ott.' Gov.mmeot Agenal..) Interact with t{re Gu.lo|n. Admlnbtra0on:Very Poor Poor Fair Good Excellent

Health/sanitationOOOOOconsumerProtec'tionOOOOOAsricunureOOOOOEnvironmentat controt OOOOOrmmisraiionOOOOOothers(i.e.policeand O O O O Oother aulhorities)

Page 7

85

l. Ple..e iilo, to your fnowLdgc rd .. .p0ldle, how mll thc Cu.tom. Admlnltffio|r atd Gu.tomr

Dartormc p€dorm In each r.cton:

Harmonizetion and standadization of CusbmsAdminigfath/€ proceduFs and documenb

lntemational coordination betfleen countries Customs

Administrations

Coordinebd pr@siqg at bod€r crossing points and joint

op€€tons

Consufblions with maior tradsrsy'caniers to dewlop

shippers/busing6s €loc{ronic informalion syst€ms

Singlo Windolv Environri€nt br exporuimporUbansit

procodut€8

Intsmalional cooperalion based on good prac'tic€s

Envitonm€ntal conlrd

Very poor

ooo

o

Poor

o

ooooo

Fair

ooooooo

Good

ooooooo

Very good

ooooooo

Page 8

86

1. The Gustoln! Admlnbtration should iosue a written rdvance rullng at the request ot an lmporter, erpoderor producer. In g€n€ral to whal extent doG$ lhe Gu3tom3 Adminbtratlon comply with th|3 mandate?

U) Always

Q Usualty

O About half the time

Q narety

Q H"""t

2. Please rate how well the Gustoma Admini$Oation conplies with the following mandates tor advancerullngs!

Ruling wilhin 150 days afler a request

Tariff classification

Customs valuation criteria

Application of duty drawback, deferral or relief from

customs duties

Country of origin marking

Application of quotas

Very poor

/-\rfn

n

Poor Fair

r-\

on

Good

TJr)

n

a)

Very good

r)

nna)

3, How ofton, in your oplnlon, do the iollowlng eyent3 concernlng duty paymentg occur?

Never occasionaly About half the usualry Always

Overcharging of duties

Prompt repayment of duties by Customs

Necessary to file an appeal due to the

overcharging of dutieso

(J (,or)

r)U

TJ

o11

Paoe 9

87

'1. Doco tlte oppor&dtt ei.t to appeC ! Gu.lo.ns d.d.lon to hlgher ard morr ..nlor l.T€b of tltc GustoileAdndnldradonl rnrn.goment ior tavlau atd p6,CUo changF?

Q v""

O"o2, b the'€ publlcly .velbble intonn8tlon on adminbtr.On rullng3 and oth.t compllance nattef.?

Q v""

O"o3. 13 there an €lleatlve Independont and/or ludlcial autfiorlg lor appeals?

Q ves

O"o4. ls tl|ere an efircttv. problem !€rolutlon offce or contact lor lrnpotted.xporteE?

Q v""

O"o

Page 1 0

88

1. Gountd€a ihould adoF{ or maldain simplified custom3 procedures ior the rclaere of goo&. To wftatextdrt doos the Customg AdnlnlltEtion comdy wlth thb mandate?

Q ruot at att

Q somewtrat

Q To some extent

Q To a great extent

Q Completely

2. Th. Wodd Eank's Dolng Bu3lne.3 2010 rGpo tound S|.t tl|e average la0n American counby rcqulrer luatovef aaFn docurnenb to Import a good. Basod on lroor arpcrience, how do€3 your cou||tryA

Q Less ttran 3 documents

Q &7 documens

Q 7 documents

Q 8-to documents

Q Uore tran 10 documents

3. Doea tho conntry allow ior tha u3e of canetr?

Q v""

O*o4. Can a camet serve slrnultaneoutly as a Customg €nlry document?

Q v""

O"o

Page 11

89

l. lo wh.t .xffi do.. t|e Go.too. ldninirffion .llow io? illnt of 3lngl. d rL. cffidl lmportdoo. In

. glno D.rlod (..9. mon0 y frllng va .haFtert{y{hlpm.ntl?

o

o

Not at all

Rarely

Half of the Tims

To a great extent

Completely

2. To whlt qtent do.. tlte Cu.tom. Admlnl!ffion .llou ior lmrn d'rate or rrpld nle..e ry fiffng entrt d.t||| advdp ot arrlYal?

\Jr\

o

Not at all

Rarely

Half of the Time

To a grcat extent

Completely

3. Pleaae rate, to your lo|owledgE, how lfte custom3 Admlnbffion Frfonn! In tlFNever Sometimes

tollrylngOfren

o

o

catcgpri6:Always

\J

Goods are released prompty, wiftin 48 hours of anivat Owhen possible

Goods are released at point of anival without lemporary Otransfor

Ths Customs Adminisfra$on allons goods to b€ withdrawn Ow hot|i prejudice befor€ dobrmination of duties, la)(es orbes

n

o

Page 12

90

1. In rclatlon to tte actlvitie3 listed beloq how do.3 the Curto:ns Administration usually p€rfonn?

Total time needed to clear customs

Customs clearance and technical control for release to

canier

Offoading of goods by cani€r from fuck, rail car, vessel or

aircrafl

Receipt of documents and data necessary to request

releass of goods

Preparation of documenls by imporler/exporter, canier,

brok6r

Availability of goods to canier for pick up and delivery from

port authority or terminal operator

2. Ar far rs you know, are exporieEllmpodorr requlred to uro biokel!?

Q v""

O"o3. Broke|t arg generally u3eful and well-lnfomod of lawr and regulations?

Q nt*ays

Q on"n

Q Sometimes

Q neue,

Q Does not apply

4. To what eltont docr the Guston:s Adninbtr.tion comply wlth the iollowlng mandates?

Allows submission of a single manifest covering all goods contained in

a shipment transported by an express shipment service through

electronic means

Povides for clearance of certain goods with a minimum of

documentation

Adopts or mainlains sxpedited customs procedures for express

shioments

Provides for clearance of oxpress shipments within six hours afler

submission of customs documents (provided anival of the shipment)

14+ days &14 days 2-7 days 1 day or lessoooooooor\rl

tooo

n(,

oU

o

Never Sometimesooooo

Often

o

r)

o

ooo

to

Always

rl

Paqe 13

91

'1. To wftlt.!rta. is t||. C||3to|ns Admlnbffion ddr.loP.d rd mde publlc a sffigl,c pl.n th.tdescrlt.. ltr ov.6ll .hrt gy Jdror key pdodff..?

Q Hotaratr

Q somevvtra

Q To some extant

Q To a grea extent

Q comptetty

2. How docr thc Gu3tom. Adtninistratio|! rate In th. tollowlng arcar:Very poor Poor Farrn

o

Good

o

Exc6ll€nt

o

T.anspar€ncy and pr€dictiability of thc

Customs Administration

Us€ of indicatoB or performance

measuromenb

Consultation wilh the business community

dudng the p1oca33 of brmulaling lhe annual

plan

n

o

Page 14

92

L How do exbting itatute. and regulafions govemlng the Gu3toms Administration ref,ect the followlngp.inclpl€.?

Completely

effective

oooooon

Extremely

important

\J(J

onr^\

veryeffective

ooooa)no

veryimportant

()

Moderately

efiective

oooono

Mode€tely

important

r^\

ooo

Slightly

effective

rl

n(J

buclnesa:

Slightly

important

r)

(-/

/-\

ot_/\Ja)

oU

rf

USimplification and Harmonization of Customs

Proc€dures (WCO Revised Kyoto Protocol)

3. lo what edont do you agree wlth ihe tollowlng statementr conceming the Customs Administration:

Completely Disaoree

Neither agree Aore€ Completely

disagree - nor disagree - agree

/.\11r\r\\_-/ \J \_-/ \_-/

Not at all

effective

Declarant rights

'Fast Track Clearance" for eligible 'Export-Oriented Units"

Responsible oversoht of examination of goods

Penalty assessments for inadvertent enors

Prompt releas€ of goods post decision to inspec{

Exemption from Payment of Duties (or Repayment)

Trusi€d Trader/Authodzed Economic Operator (under

WCO SAFE Framework)

2. Rank thcso components b.sed on lmportanc. to yoot

Not at all

imDortant

lmplementation of the Valuation Agreement

lmplementation of the Rules of Origin

Agreement

lmolementation of the Harmonized Tariff

System

lmplementation of the Trade-Related Aspects

of lntellectual Property Rights (TRIPS)

lmplementalion of lhe Agaeement on

In the next four years, the strength of

Customs laws and proc€dures will improve

lf tulty implemented, the Revised Kyoto O O O O OProtocol will substantively improve the

Customs laws and operations of the Customs

administration

Paqe 1 5

93

I.l

you have completed the MCCLA and IADB Trade Facilitation Survey. We greatly appreciate your

feedback and look forward to sharing the results of the survey with you.

94

Competitive Advantage: Moving Ahead of the Global Competition

Private Sector Priorities for Trade Facilitation in the CAFTA-DR Region

95

96

97

Cataloging-in-Publication data provided by the

Inter-American Development Bank

Felipe Herrera Library

Integration and Trade Sector, Inter-American Development Bank.

Competitive advantage: moving ahead of the global competition / Integration and

Trade Sector, Inter-American Development Bank, Association of American Chambers

of Commerce in Latin America, Chamber of Commerce of the United States of America.

p. cm. (IDB monograph series ; 147)

1. Free trade—Dominican Republic. 2. Free trade—Central America. 3. Foreign

trade promotion—Dominican Republic. 4. Foreign trade promotion— Central America.

I. Inter-American Development Bank. Integration and Trade Sector. II. Association of

American Chambers of Commerce in Latin America. III. Chamber of Commerce of the

United States of America. IV. Title. V. Series.

IDB-MG-147

JEL Classification: F15, F13, F53

Keywords: Trade Facilitation, Policy Dialogue, CAFTA-DR, Integration, Free Trade

Agreement, Public-Private Sector Cooperation

The opinions expressed in this publication are those of the authors and do not necessarily

reflect the views of the Inter-American Development Bank, its Board of Directors, or

the countries they represent.

The unauthorized commercial use of Bank documents is prohibited and may be

punishable under the Bank’s policies and/or applicable laws.

Copyright © 2013 Inter-American Development Bank. All rights reserved; may be freely

reproduced for any non-commercial purpose.

98

iii

Foreword/ v

Acknowledgements/ vii

Acronyms and Abbreviations/ ix

Part 1

Executive Summary/ 1

Part 2

Background and Objective of the IDB-USCC/AACCLA

Work on Trade Facilitation/ 3

Part 3

Work Methodology/ 5

Part 4

Main Challenges Identified by the Private Sector/ 7Challenges Identified in the Survey/ 7

Challenges Identified in the Focus Groups/ 13

Part 5

Proposed Private Sector Solutions to Address Ongoing Challenges/ 21Horizontal Issues/ 21

Specific Issues/ 22

Part 6

Recommended Measures/ 27

Annex

Individual Country Reports from the IDB-USCC/AACCLA

Trade Facilitation Survey/ 33

99

100

v

With the liberalization of tariffs, a series of more complex trade reform

measures are necessary if nations are to maximize the economic

gains and benefits of freer trade. Global competition and lower tar-

iffs have exposed the cost of, inter alia, inefficient and sometimes conflicting

customs procedures, redundant paperwork, and a lack of adequate infra-

structure and technological capabilities.

Research and empirical evidence highlight the importance of im-

plementing these more complex reforms, known collectively as “trade

facilitation” and running the gamut from customs procedures and port

efficiency to institutional and regulatory reforms. In fact, a recent World

Economic Forum (WEF) study shows that addressing administration and

infrastructure barriers could boost global GDP up to six times more than

removing all remaining tariffs, while trade flows could increase by around

15 percent.

Lowering these barriers thus becomes especially relevant for both

governments and the private sector as a tool for boosting trade flows and

economic growth and development.

Trade facilitation efforts have been gaining strength across the

globe—from regional settings such as the Asia-Pacific Economic Coopera-

tion (APEC) forum to the World Trade Organization (WTO), where recent

months have witnessed a renewed push to conclude a multilateral trade fa-

cilitation package.

The Inter-American Development Bank (IDB), the U.S. Chamber of

Commerce (USCC), and the Association of American Chambers of Com-

merce in Latin America (AACCLA) place the highest priority on trade

facilitation measures for realizing the vision of a more competitive, econom-

ically integrated and prosperous Latin America and the Caribbean (LAC)

region. Working in the context of the IDB-USCC Memorandum of Under-

standing, our institutions remain committed to promoting an ambitious

trade facilitation agenda through a strong private sector participation and a

vigorous public-private sector dialogue.

101

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITIONvi

This report marks the beginning of a strong institutional collabora-

tion to support the efforts of LAC authorities and business community to

identify and address barriers that may be impeding the optimal utilization

of market access opportunities.

Antoni Estevadeordal Patrick KilbrideManager Senior Director

Integration and Trade Sector Americas

Vice Presidency for Sectors and Knowledge U.S. Chamber of Commerce

102

vii

Competitive Advantage: Moving Ahead of the Global Competition

– Private Sector Priorities for Trade Facilitation in the CAFTA-DR Re-

gion was prepared jointly by the Integration and Trade Sector (INT)

at the Inter-American Development Bank (IDB) and the Secretariat of

the Association of American Chambers of Commerce in Latin America

(AACCLA) at the U.S. Chamber of Commerce (USCC). It is the product of

an independent, collaborative initiative—in the context of the IDB-USCC

Memorandum of Understanding—that seeks to contribute to CAFTA-DR

authorities’ efforts to identify challenges and best practices in order to fa-

cilitate trade throughout the region. The report was coordinated by Carolyn

Robert (IDB/INT) and José Raúl Perales (AACCLA), with pivotal support

from Erick Feijóo (IDB/INT) and Reuben Smith-Vaughan (AACCLA), and

under the general supervision of INT Manager Antoni Estevadeordal and

USCC Senior Director for the Americas Patrick Kilbride. The IDB and the

USCC would like to acknowledge and thank Johanna Hill (Central America

Trade Consulting) and Nicole Bivens-Collinson and Ned Steiner (Sandler,

Travis & Rosenberg) for their technical support and input to the report.

Sandra León-Reinecke and Ingrid Carolina Barreto (IDB/INT) were

responsible for the layout and publication of the document.

103

104

ix

AACCLA Association of American Chambers of Commerce in

Latin America

AEO Authorized Economic Operator

CAFTA-DR The Dominican Republic-Central America Free Trade

Agreement

CAUCA Central American Uniform Customs Code

CBP Customs and Border Protection Agency

CEE U.S. Centers of Excellence and Expertise

CENPROMYPE Center for the Promotion of the Micro and Small

Enterprise in Central America

EU European Union

FAUCA Central American Single Customs Form

FDA Food and Drug Administration

IDB Inter-American Development Bank

IECA Central American Economic Integration

INT Integration and Trade Sector of the Inter-American

Development Bank

OGAs Other Government Agencies

RECAUCA Regulations of the Central American Uniform Customs

Code

RTCA Central American Technical Regulations

SMEs Small- and Medium-Sized Enterprises

TIM International Transit of Goods (IDB program)

TRIPS Agreement on Trade-Related Aspects of Intellectual

Property Rights

USTR Office of the United States Trade Representative

USCC U.S. Chamber of Commerce

105

106

1

In an effort to help identify barriers to efficient trade flows in the Do-

minican Republic-Central America-United States Free Trade Agreement

(CAFTA-DR) region, at the first meeting of the CAFTA-DR Free Trade

Commission (San Salvador, El Salvador, February 22–23, 2011) Ministers

launched the Trade Facilitation Initiative. Ministers instructed their high-

level functionaries to carry out a consultation and self-evaluation process

with stakeholders in order to identify pending challenges and to share best

practices on how to address these challenges, including policies and pro-

grams that countries could adopt to facilitate trade.

Independently and in the context of their Memorandum of Un-

derstanding, the Inter-American Development Bank (IDB), through its

Integration and Trade Sector (INT), and the Association of American

Chambers of Commerce in Latin America’s (AACCLA) secretariat at the

U.S. Chamber of Commerce (USCC) contributed to this process with a

survey and focus groups on trade facilitation priorities in the CAFTA-DR

region, aiming to refine and consolidate private sector recommendations to

governments. The survey garnered 325 responses from a total of 311 com-

panies of different sizes and characteristics with operations in Central

America and the Dominican Republic. The focus groups were held between

March and November 2012 in the different countries of the agreement, with

a special focus on engaging SMEs and companies with a significant export

and import presence in several CAFTA-DR countries.

The response of the private sector to this joint exercise was over-

whelmingly positive and cooperative. The feedback and input garnered

through the survey and focus groups highlighted salient issues that stymie

greater investments opportunities and a greater flow of goods and services

throughout the region, thereby impeding the full and optimal utilization

of the agreement. Additionally, company representatives identified specific

measures that would streamline trade and investment opportunities in the

CAFTA-DR region.

Based on the measures identified by the private sector through these

joint efforts, this report recommends that the following measures be ad-

opted in the CAFTA-DR region:

107

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION2

1. Greater follow-up on trade facilitation commitments, including

permanent channels for public-private sector consultations, and

independent evaluation of progress in trade facilitation issues

2. Implementation of a fully electronic entry documentation system

3. Harmonization of border controls

4. Implementation of a harmonized tariff system in the region

5. Mutual recognition of sanitary and phytosanitary (SPS) and SPS-

related registrations

6. Adoption of authorized economic operator (AEO) programs and

risk systems

7. Transparency and capacity building, including permanent capacity-

building mechanisms taking into consideration all the different

public sector agencies involved in international trade issues

The report is structured as follows:

Section II provides background information on the CAFTA-DR

Trade Facilitation Initiative.

Section III explains the work methodology used in the survey and

focus groups.

Section IV gives an overview of the CAFTA-DR region’s main

trade facilitation challenges identified by the private sector, both

in the survey and in the focus groups.

Section V examines the proposed private sector solutions to

address the region’s trade facilitation challenges—both for hori-

zontal, cross-cutting issues, as well as for specific issues.

Finally, Section VI details the seven measures recommended by

IDB and USCC/AACCLA officials after a careful review of key pri-

vate sector priorities.

108

3

Since the beginning of the CAFTA-DR implementation process in 2006,

the nature, intensity, and direction of foreign trade among the region’s

countries has drastically changed. Intra-regional Central American

trade has grown at a greater speed in the five years following the entry into

force of the treaty than it did in the last twenty years of regional integra-

tion. In fact, since 2006 intra-regional Central American trade has grown 55

percent, increasing from $9 billion to $14.2 billion in 2011. Furthermore,

Central America now trades actively with China, serves as a productive plat-

form for globally integrated companies, and plays a key role in a variety of

both low- and high-value supply chains.

The growth in trade and investment and the increase in global compe-

tition have highlighted Central America’s deficiencies in commercial logistics

and infrastructure issues. Industry and government leaders alike have brought

attention to this subject as a key issue on the trade and development agenda for

the region. A better trade and logistics infrastructure would transform Central

America into a more attractive region for investing and doing business. At the

same time, it would allow small- and medium-sized firms, which form the back-

bone of the region’s economies, to have greater opportunities to trade. From

a country-by-country perspective, studies have shown that delays in customs

clearance result in an increase in transport costs by between 4 and 12 per-

cent, whereas the increase in physical distance raises transport costs by

between 8.5 and 18.7 percent. In addition, from a regional perspective, if Cen-

tral America’s key infrastructure integration and efficiency indicators were to

improve to the level of EU15, intra-regional exports would double.

Hence, within the framework of the first meeting of the CAFTA-DR

Free Trade Commission on February 22–23, 2011, the Trade Facilitation Ini-

tiative was launched in order to help identify barriers to efficient trade flows

in the CAFTA-DR region. The consultation and self-evaluation process with

stakeholders was divided into three thematic areas:

a. Customs and trade facilitation

b. Logistics and supply chain

c. Technical standards, including sanitary and phytosanitary mea-

sures

109

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION4

As a contribution to this process, the IDB and USCC/AACCLA con-

ducted a survey on trade facilitation issues, as a result of which 325 responses

were submitted from a total of 311 companies of different sizes and charac-

teristics with operations in Central America and the Dominican Republic.

Additionally, the IDB and USCC/AACCLA coordinated the organiza-

tion of focus groups in the different CAFTA-DR countries between March

and November 2012. As mentioned above, the goal of this joint effort was

to investigate trade facilitation issues more deeply, to go beyond anecdotes,

and to develop concrete metrics with which to measure future progress, with

a special focus on SMEs and companies with exports to several CAFTA-DR

countries.

110

5

In order to identify the challenges that hamper an efficient trade flow, two

different work tools were used. The first one was the drafting of a survey

by AACCLA and the IDB. The survey covered the following issues:

a. Customs administration

b. Risk management

c. Logistics and infrastructure

d. Integrated border management

e. Procedural requirements

f. Strategic planning

The second tool was the organization of focus groups, also by AACCLA

and the IDB, with the support of CENPROMYPE. The IDB worked with

AACCLA and expert trade facilitation consultants on the preparation of a

questionnaire for focus group participants for the purpose of gaining a better

understanding of the challenges and issues faced at the national and regional

level. This questionnaire served as a basis for the roundtable discussions.

The focus groups took place in person and via videoconference at the

following locations on the following dates:

Country Date

1. Costa Rica Focus Group San José, April 12, 2012

2. El Salvador Focus Group San Salvador, April 11, 2012

3. Guatemala Focus Group Guatemala, March 29, 2012

4. Honduras Focus Group Tegucigalpa, April 27, 2012

5. Nicaragua Focus Group Managua, April 13, 2012

6. Dominican Republic Focus Group Santo Domingo, April 13, 2012

7. United States Focus Group Washington, D.C., November 15, 2012

111

112

7

Below is an overview of the survey results on the status of trade facilitation

issues in the CAFTA-DR countries concerning each of the surveyed areas.

The results not only highlight the conditions in which traders and private

sector operations regard trade facilitation in the region, but also underline

what activities these actors deem a priority.

Respondents asserted that although information on customs laws and regu-

lations is sometimes available to the public, training sessions on new laws

rarely take place. In addition, the private sector is seldom consulted about

new legislative proposals prior to their adoption. Respondents also pointed

out that there is not enough customs staff in the CAFTA-DR region, and that

the staff currently available is not adequately trained.

Moreover, corruption is still found to be a problem. Regional trends on

corruption and customs processes indicate a reality where available mecha-

nisms or tools for reporting corruption cases are insufficient. In those cases

where reporting does take place, there is little to no protection against retali-

ation.

Information is easily available to the public on all customs laws, regulations,

and procedures, including on the Internet

Consultations are held with the privatesector before introduction of a new

measure (e.g. new technology,examination process, policy changes)

Customs offers training/information sessions about the new laws or

regulations

3%

22%

21%

18%

35%

33%

34%

39%

29%

36%

1%

10%

9%

2%

7%

NeverRarelySometimesOftenAlways

To what extent does the customs administration comply with the following mandates?

113

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION8

Respondents said that, to a certain extent, customs administrations in Cen-

tral America and the Dominican Republic use risk management systems

to make processes more effective and efficient. They pointed out that all

countries tend to use information technologies, allow for the electronic

transmission of documents prior to the arrival of goods, and keep this in-

formation confidential. Nevertheless, they asserted that customs agencies

When an incident of corruption occurs…

To what extent does the customs administration

comply with the following mandates?

NeverRarelySometimesOftenAlways

Mechanisms are available to the public to report the incident

The administration follows up on the report

There is protection from retaliation

17% 18%

48%

33%39%

29%26%

30%

16%16%10% 6%9%3% 1%

Provides for electronic

submission/ processing of

information and data before

arrival

Maintains as confidential

the information

submitted by parties

Uses compliance

and risk analysis

information in a confidential,

fair and uniform way

Allows for a trusted trader/

authorized economic operator program

Coordinates with other customs

authorities to develop

common data elements and

processes

Uses information

technology to expedite the release of

goods

3% 13% 8% 12% 17% 13%18% 13%

13%

34% 26% 30%33% 30% 37%

38% 35% 38%40% 31%

38%

15% 18% 17%

6% 13% 5% 1% 4% 3%

Completely To a great extent To some extent Somewhat Not at all

114

9MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

do not have AEO programs, do not coordinate with other customs admin-

istrations, and do not apply their risk management systems in a uniform

and equitable fashion.

In global terms, respondents rated the region’s airport facilities as good, the

region’s transportation services and infrastructure as adequate, and the har-

monization of border controls and their ease of use as poor.

Respondents also pointed out that customs administrations do a

“fair” or “good” job in interacting with OGAs, with the exception of the co-

ordination with consumer protection organizations and safety authorities,

including the national police.

Customs administrations do a good job in the implementation of a single

window environment for exports and imports. Nonetheless, they poorly

coordinate crossing points with other customs administrations and do not

consult with the main cargo carriers, generally speaking.

Respondents asserted that customs administrations do a good job in

the application of tariff classifications and in dealing with advance rulings

for goods. Nevertheless, in terms of tariff payments, customs administrations

The overall multimodal transport

infrastructure and services

Maritime infrastructure

and equipment

Airport infrastructure

and equipment

Cross-border facilities and procedures

Simplification of customs procedures

Harmonization of border controls

Very poorPoorFairGoodVery good

4%

37%

39%

13%

7%

1%11%

51%

24%

13%

2%

27%

48%

16%

7%

1%

24%

54%

16%

6%

1%

18%

38%

29%

13%

1%14%

41%

28%

16%

Please rate how the customs administration performs in each category.

115

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION10

sometimes overcharge, which forces op-

erators to make appeals. In these cases,

reimbursements almost never take place.

Additionally, although there is

an appeals process for all jurisdictions,

there is a regional consensus that no

country has an efficient dispute settle-

ment office.

Most respondents pointed out that

customs administrations in the CAFTA-

DR region keep the required number of

documents at the World Bank average

for Latin America, which is between

three and seven documents.

Respondents noted that on a re-

gional average goods take between two

and seven days to clear the customs

process. Nonetheless, customs adminis-

trations do not allow goods to be released

quickly, even when the documents have

been filed in advance; only rarely are

goods released within 48 hours.

Even though a single manifest can

be filed to cover all goods, the possibility

of filing a single entry to cover all im-

portations in a given period does not

exist. Respondents also said that there

is still work to be done in the field of

express shipments, since goods get an

expedited treatment only occasionally.

Respondents noted that customs ad-

ministrations make their strategic

plans available to the public. How-

ever, respondents believe that customs

24.6%

75.4%

Yes No

55.8% 44.2%

Yes No

63.6%36.4%

Yes No

55% 78%

22%5%

Often AlwaysNever Sometimes

Does the opportunity exist to appeal a

customs decision to higher and more senior

levels of the customs administration’s

management for review and possible change?

Is there an effective independent and/or

judicial authority for appeals?

Is there an effective problem resolution

office or contact for importers/exporters?

Goods are released promptly, within

48 hours of arrival when possible.

116

11MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

administrations do not consult with the business community enough when

drafting their annual plan.

The survey results also indicated that customs administrations are

moderately effective at fast track clearance and oversight of goods exami-

nation. Yet, they also think that customs administrations are only slightly

effective at implementing trusted trader programs and exemptions from

payments or repayments.

NeverSometimesOftenAlways

10%

34%16%

31%22%

41%

40%

37%33%

22%

32%24%34%

3%

11%8%

Allows electronic submission of a single manifest covering all goods contained in a shipment transported

by an express shipment service

Provides for clearance of certain goods with

minimum documentation

Adopts or maintains expedited customs

procedures for express shipments

Provides for clearance of express shipments

within six hours of submission of customs documents (provided

the shipment has arrived)

Very Bad Bad Fair Good Very Good

Transparency and predictability of the customs administration

Use of indicators or performance measurements

Consultation with the business community during the process of formulating the annual plan

23%

39%

22%

1%

15%

34% 35%

15%

24%

37%

30%

8%

To what extent does the customs administration comply with the following mandates?

How does the customs administration rate in the following areas?

117

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION12

Finally, survey respondents suggested that the most crucial customs

policy pending in the CAFTA-DR region is the implementation of the

How do existing statutes and

regulations governing the customs

administration reflect the following

principles?

Rank these components based on importance to

your business.

Declarant rights

8% 10% 9%20%

12%26% 26%

38% 28% 30%

39%

33%

41% 34%

43%42% 43%

30%39%

24% 28%

10% 20% 18% 11% 16% 9% 10%

1% 1% 1%

“Fast track clearance” for eligible “export-oriented units”

Responsible oversight of examination

of goods

Penalty assessments

for inadvertent

errors

Prompt release of goods post decision to

inspect

Exemption from

payment of duties (or

repayment)

Trusted trader/

authorized economic operator

(under WCO SAFE

Framework)

Completely effective Very effective Moderately effectiveSlightly effective Not at all effective

Implementation of the Valuation Agreement

Implementation of the Rules of Origin Agreement

Implementation of the Harmonized Tariff System

3%

2%

2%

5%

3%

7%

6%

2%

13%

5%

22%

17%

16%

18%

20%

46%

46%

43%

44%

37%

23%

28%

37%

20%

34%

Implementation of the Convention on Simplification and Harmonization of

Customs Procedures (WCO Revised Kyoto Protocol)

Implementation of the TRIPS Agreement

Not at all important Slightly important Moderately importantVery important Extremely important

118

13MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

Harmonized Tariff System, followed by the adoption of the World Cus-

toms Organization’s Revised Kyoto Protocol and World Trade Organizaton’s

Agreement on Rules of Origin.

As a product of the different consultations carried out, three different

types of challenges were identified: a) technology challenges; b) national-

level challenges; and c) regional-level challenges within the framework of

CAFTA-DR. Some of these challenges are attributable to the application of

laws related to foreign trade and trade facilitation, while others are linked

more to a need to build greater capacity in information technology areas,

training in general, and others.

Generally speaking, most companies noted that over the last few years

they have witnessed important government investments in IT equip-

ment and capacity building in order to electronically transmit customs

documents.

The above has led to shorter times and more efficient processes for

carrying out import and export procedures in many countries. Nonetheless,

many firms pointed out that technological infrastructure at customs admin-

istrations is insufficient. Operational problems have been detected as well,

which cause repeated delays and an average response time that still has not

reached optimal levels. In addition, in almost all countries there are system

saturation problems that routinely paralyze export and import procedures.

Likewise, the majority of firms think that technological tools would

be better used if other procedures related to imports and exports of goods

were also carried out electronically. In particular, participants stressed the

importance of the electronic transmission of documents to the ministries

of agriculture, livestock, and public health. It was also repeatedly mentioned

that it should be required that the ministries of public safety adopt some

type of trade facilitation criteria, since it is becoming increasingly difficult to

obtain permits from such authorities.

SME representatives asserted that, although great strides have been

made in facilitating e-trade through the adoption of information tech-

nologies, there is a certain degree of difficulty for taking advantage of these

resources, especially in the case of small agricultural producers.

119

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION14

Many challenges identified by firms are at the national level and shared by

many, if not all, countries. Among the most common are the following:

Customs and Trade Facilitation

Withdrawal of goods before final duty determination and use of guarantees

Customs administrations do not allow for the release of goods prior to liq-

uidation and without prejudice to the final determination of customs duties,

taxes, and applicable rights.

Participants stated that in several countries there are procedures al-

lowing for the withdrawal of goods whenever there is a dispute between the

importer and the authority over payment of duties. Nonetheless, in order

to withdraw goods, one must first pay the amount that customs deems

adequate, and in many cases the payment process is cumbersome. Only af-

terwards can the importer contest this action and attempt to recover the

amounts that were allegedly overpaid.

Likewise, companies indicated that it is not possible to comply with

the customs tax liability through a guarantee, such as a bond, insurance

policy, etc.

Release of goods within 48 hours, management of samples, and

express shipments

Respondents in various countries mentioned that there are significant prob-

lems for releasing goods entering by air within 48 hours following their

arrival.

In addition, company representatives noted that there is a recurring

problem with sample imports. In some countries the process can take up to

three days, even when said imports require no special permits.

Finally, firms indicated that there are additional requirements for and

many delays with the release of express shipments, which contravenes inter-

national commitments in this area. Participants noted that the CAFTA-DR

agreement itself contains commitments regarding expedited treatment of

low-risk goods. Specifically, Article 5.4 encourages the parties to “adopt or

maintain risk management systems . . . that simplify the clearance and move-

ment or low-risk goods.”

Participants also pointed to penalties for customs errors that are dis-

proportionate and tend to harm innocent parties. For example, detaining or

120

15MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

seizing goods for importers’ errors on customs entry documents penalizes

the consignee, who is blameless.

Destruction of goods of no commercial value

CAUCA and RECAUCA allow for the destruction of goods with no com-

mercial value without paying import duties. However, some countries have

demonstrated problems complying with these provisions by setting out ad-

ditional requirements for securing exemption from payment.

Single window

There are single window initiatives in a number of the countries; however,

two types of challenges are apparent:

1. Ensuring the participation of a range of institutions linked to for-

eign trade operations can only occur with effective leadership in

the coordinating institution.

2. Including both export and import procedures in the process.

Advance rulings

Broadly speaking, attendees to the focus groups indicated the following:

1. The use of advance rulings should be promoted; and

2. Times to receive customs rulings should be reduced.

Transparency and participation in the customs legislation

drafting processes

Company representatives expressed that there are no permanent mecha-

nisms for ensuring consultations with the private sector regarding new

legislative proposals, requirements, permits, charges, and other requisites

impacting foreign trade prior to their adoption.

Management of original official documents and their copies

Several importers and exporters indicated that they had experienced prob-

lems with different national entities that required original documents for

the issuance of permits, even though said documents must be submitted

more than once in these processes. This particularly causes problems for the

express industry and SMEs. They also noted that customs agents sometimes

121

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION16

ask for the documents to be translated, even though the law allows for docu-

ments to be written in either English or Spanish.

Logistics and Supply Chain

Costs of inland freight

Many participants pointed out that one of the largest costs for exporting

and importing goods is the cost of inland freight. In some instances, these

services can be more expensive than international freight.

Marine and air cargo capacity

In general, companies noted that there is only limited marine and air cargo

capacity going into the United States. There are also problems with the per-

formance of delivery times, which leads to additional inventories.

Port procedures

Attendees indicated that procedures applied in some of the region’s ports are

cumbersome, and therefore unnecessarily increase the time that goods must

stay at ports.

Legislation modernization

According to several participants, there is a need to update the regulations

governing logistics, port management, maritime transport, customs, sani-

tary, and safety legislation.

Capacity building

Many participants indicated their concern that there are insufficient per-

sonnel to carry out very important steps in the release and withdrawal of

goods processes, resulting in significant operational delays. For example,

they mentioned inspectors at ports, sanitary and customs inspectors, and

free trade zone inspectors, among others.

Sanitary Measures and Technical Regulations

Adoption of trade facilitation measures

Private sector representatives indicated that authorities responsible for

health and agricultural issues related to import and export permits should

incorporate trade facilitation measures in their decision process, as there are

persistent problems such as:

122

17MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

1. Slow pace in the granting of permits

2. Centralization of activities

3. Lack of services to the exporters (inspectors, laboratories, etc.)

4. Lack of online processes

Training and technical assistance

Although government support is acknowledged, company representa-

tives believe that it is necessary to provide further support in terms of

dissemination of information and technical assistance in order to ensure

compliance with sanitary and phytosanitary measures as well as with tech-

nical regulations.

SMEs mentioned that, in their case, it is also necessary to simplify the

transfer of information related to these issues.

In terms of trade among all seven CAFTA-DR countries, the main challenges

identified were the following:

Customs and Trade Facilitation

AEO programs and risk analysis systems

Even though the safety criteria applied by authorities may not be in the

public domain, AEO programs and risk analysis systems could elevate

product safety levels in order to facilitate their access to the different CAFTA-

DR countries. Furthermore, attendees expressed their concern regarding the

lack of harmonization across the region’s risk management systems.

Website with information on rules and requisites applicable to trade in goods

Exporting and importing companies need information on the rules appli-

cable to their products of interest in a specific market (e.g. tariffs, duties,

excise taxes, sanitary measures, technical regulations, mandatory documents,

permits, registration costs, etc.). Such information, at a CAFTA-DR level and

points of contact for consultations, is not available on a single website, which

would facilitate users’ searches.

There is also no updated list available electronically of duties or taxes

related to exports and imports. Company representatives agreed that such

a list should be created and include all measures related to international

trade in a single interface. This should also work as a location to place

123

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION18

newly adopted measures for importing products in the different CAFTA-

DR countries.

Capacity building, training, and information dissemination

Many attendees mentioned that, six years after CAFTA-DR entered into force,

there is still some lack of knowledge regarding many requirements in the

agreement, especially with regard to customs, origin, tariff preferences, etc.

Along the same vein, companies called for special capacity building on

CAUCA and RECAUCA.

They also indicated that the lack of knowledge is not only apparent in

the private sector, but also in certain government initiatives. Therefore, they

requested a strengthening of state capacities for providing technical advice

and assistance to firms, since such capacities are still limited given the lack of

human, financial, and technological resources.

Multilateralism of CAFTA-DR

There are problems with the multilateral application of CAFTA-DR in terms

of harmonized interpretation of the commitments in the member countries.

Common customs criteria

At the regional CAFTA-DR level, company representatives indicated that

there is a need to provide more guidance to customs authorities at the border

and other areas regarding the necessity to apply customs legislation in a uni-

form fashion, so as to minimize officials’ differences in opinion. Likewise,

they noted a lack of guidance for staff with high turnover rates and a lack of

harmonization of customs criteria and procedures in every country.

Respondents expressed that when there are any doubts regarding tariff

classification, customs administrations request too much information in

order to verify the correct classification. This process is onerous for firms

and especially for SMEs.

Finally, participants mentioned on several occasions that although

trade accords and CAUCA/RECAUCA prevail over national legislation, au-

thorities are not respecting this hierarchy.

Electronic transmission of documents

On interconnection issues between customs and other institutions (using ei-

ther the TIM or FAUCAs), participants indicated that greater inter-country

124

19MAIN CHALLENGES IDENTIFIED BY THE PRIVATE SECTOR

coordination is necessary for improving the transmission of transit declara-

tions and customs forms.

Projects should be expanded upon in order to allow for full intercon-

nection between all customs regimes (import and export).

The technological equipment at customs tends to be overburdened

and as a result it is oftentimes slow, causing the system to collapse.

Simplification of import procedures

Firms opined that the region is witnessing an ever growing introduction of

new import requirements that are not based on legal requirements, hence

becoming additional and unnecessary procedures.

Logistics and Supply Chain

Ground transport

A frequent topic of discussion at the focus groups was the lack of coordina-

tion among Central American authorities in charge of cargo transportation

requiring permits within the Central American region. Examples were pro-

vided in areas such as the movement of dangerous cargo, heavy cargo, and

machinery.

Cross-border transit of goods

Representatives indicated that there are barriers to the cross-border transit

of goods. Common issues include the imposition of discretionary fees that

increase transportation costs.

Disproportionate or inappropriate penalties—such as seizure of goods

for incorrect entry information that penalizes the consignee for errors made

by the importer of record—create a disincentive for seized goods to be

claimed. There is a problem throughout the region of warehouses filled with

abandoned goods.

Sanitary Measures and Technical Regulations

Permanent capacity-building and technical assistance programs

Several participants noted that goods are rejected at the border be-

cause of labeling problems (e.g. failure to identify a colorant, bilingual

labeling, acidity degree for canned products, etc.) and called for greater

capacity building in this area, especially when there are changes to existing

legislation.

125

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION20

Non-tariff barriers

It was underlined that there is a lack of quick dispute settlement mechanisms

for non-tariff barriers in which affected firms could participate directly.

Lack of legislation harmonization and common criteria for its application

All countries expressed problems with import processes and product regis-

tration (food, pharmaceuticals, medical devices, etc.). Some of these issues

are:

1. Rejection at the border

2. Delays in receiving sales permits (e.g. certification of free sale)

3. Different labeling requirements

Mutual recognition of registrations

Within the framework of the multilateral application of the CAFTA-DR

agreement, company representatives stressed that it was pivotal that coun-

tries prioritize the mutual recognition of the necessary registrations for the

sale of, among other things, medical, cosmetic, and food products.

Reducing times and costs on this front would greatly benefit firms with

a regional presence.

Even though this is one of the work areas for the Central American Eco-

nomic Integration project, given the multilateral aspect of CAFTA-DR, this

goal should receive the highest priority within the trade facilitation framework.

Compatibility of Central American and CAFTA-DR technical regulations

Many participants thought that the drafting of the RTCAs did not take into

consideration ways to facilitate trade within the CAFTA-DR region and, as

a result, these standards do not always guarantee access to the U.S. market.

Delays in the release of goods or sales authorization

A considerable number of company representatives stressed that there are

too many delays in the release of perishable goods that require a permit for

exiting customs in the end market or for the sale of the product itself. For

example, there are delays linked to laboratory tests and lack of staff at border

crossings to inspect cargo in a quick and timely fashion.

Likewise, there are no points of contact at agencies such as the FDA for

following up on these cases. Producers, exporters, and importers simply lack

a contact person with whom they could discuss any inspection or seizure.

126

21

As part of the focus groups, there was an effort to ensure that agents or

economic operations involved in day-to-day trade operations would

focus not only on challenges, but also on possible solutions. These pro-

posals are divided into two areas: a) horizontal, and b) specific to one of the

work areas.

Harmonization, regionalization, and standardization: Company rep-

resentatives mentioned that harmonization is needed for requirements

across all industry types, including data to be presented and the format

to be followed. In particular, it is needed for those related to the basic

information required at the border for the introduction of merchandise.

Single website with information on applicable trade rules and require-

ments: A CAFTA-DR organization, such as the Committee for Trade

Capacity Building, supported by a regional organization, could work on the

development of this portal.

Permanent training programs: There is a clear need for additional dis-

semination of information and training tools, including information about

destination markets in order to avoid additional costs, returns, etc. At the

public and private level, new training modalities should be implemented,

such as illustrative documents and online information, including customer-

friendly information.

Awareness programs: There is a need for a permanent training and aware-

ness plan for public officials who traditionally are not involved in trade

facilitation initiatives, but who nonetheless play a pivotal role, such as health,

defense, and environment officials, among others.

Counseling: It is necessary to increase the state’s capacity to advise com-

panies, especially SMEs, on how to overcome trade barriers, possibly by

creating a special counseling office.

127

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION22

Consultation on draft legislation: It is pivotal to promote mechanisms that

will allow the participation of economic actors in the drafting of national

and regional legislation, so that these actors can acquaint themselves with

and opine on new initiatives for laws, requirements, permits, fees, and others

with an impact on exports and imports. Likewise, it is recommended that

such laws contain grace periods and the possibility of capacity building in

order to comply with the changes.

Follow-up on commitments: Within the CAFTA-DR framework, it is impor-

tant to promote the use of different types of tools in order to follow up on

each country’s commitments, such as:

A matrix for registering trade obstacles and border problems, sim-

ilar to the matrix used in Central America in the framework of the

Central American Economic Integration project

Peer review mechanisms

Creation of a public-private commission for establishing a perma-

nent dialogue on trade facilitation

Greater presence: More government personnel is required in order to pro-

vide inspection services in export and import processes at borders, ministries

of health, agriculture and livestock, free trade zones, etc.

Advance rulings: Participants were of the opinion that the Free Trade Com-

mission should request country authorities to disseminate widely among

country agencies information relevant to the issuance of advance rulings

and applicable requirements, pursuant to the commitments agreed upon in

Article 5.10 of CAFTA-DR. The aforementioned is indispensable in order

to ensure legal certainty for economic operators as well as to provide clarity

and coherence to applicable criteria.

AEO programs: Company representatives emphasized that it is necessary

and important to make progress in this issue in a way that facilitates trade

between all seven CAFTA-DR countries. This will ensure that all processes

128

23PROPOSED PRIVATE SECTOR SOLUTIONS TO ADDRESS ONGOING CHALLENGES

adopted by each country be as harmonized as possible or at least allow for

the mutual recognition of authorities across the countries.

Single window: Participants deemed it important to promote the imple-

mentation of single window projects that fully integrate both import and

export processes, as they are conducive to the integration of all the actors

involved. Participants also highlighted the importance of an all-agency

single window, which would include the OGAs, i.e. agencies other than

customs.

Unification of criteria: At the CAFTA-DR level, customs authorities at bor-

ders and other officials on the ground should be provided with guidance on

the need to consistently and uniformly apply customs legislation so as to

minimize both differences in opinion and lack of staff orientation in light

of high turnover rates. Likewise, it would be important to work on the har-

monization of customs criteria and processes at the regional level in order to

strengthen existing mechanisms or to adopt new ones.

Capacity building: More equipment and infrastructure such as technolog-

ical support to border points for customs administrations in the region are

needed. In particular, additional IT investment is necessary to build data

storage facilities and interconnection capacities among government agencies

involved in the import and export of goods. Furthermore, countries should

work on including other national agencies in order to facilitate the electronic

transmission of documents.

Process review: Participants deemed it necessary to review the implementa-

tion degree of trade facilitation measures and the respect for rights in areas

related to import and export processes such as:

Commercial samples: Speed up and facilitate entry and exit of

samples with a sales value.

Destruction of goods: Ensure that goods under customs control

without any industrial or commercial use can be destroyed with

the corresponding termination of the customs tax liability, hence

eliminating the payment of duties and taxes on imports.

Express shipments: Comply with international commitments in

order to ensure that the release of goods under this mechanism

129

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION24

take place within the necessary timeframes for complying with

market requirements.

Use of bonds/guarantees: Create a bonds/guarantees system for

allowing importers to comply with their customs tax liability

through a guarantee, which will “ensure” the payment of any cus-

toms tariff that may be owed following the release of goods. While

countries work on an internal system along these lines, guarantees

issued by non-local providers could be used. For example, a ship-

ment from the United States to country A in Central America can

trust that a bond company in the United States is covering the

shipment, as long as the government of country A amends its leg-

islation for allowing this arrangement.

Preparation of manuals: Manuals should be developed for the preparation

of certificates of origin, trade remedy procedures, dispute settlement pro-

cesses, and other relevant customs documents. These manuals should also be

made available online and could serve as a guide for the public and private

sectors to acquaint themselves with the processes that the appropriate au-

thorities will use in each one of these issues.

Process review of marine trade operations: There should be greater knowl-

edge of responsibilities in operations for the different actors involved

(producers, exporters, carriers, etc.) and of the use of different shipment doc-

uments for facilitating trade. Likewise, it is necessary to review documents

related to the international transit of goods and multimodal operations.

Mutual recognition of registrations: This should be ensured with the backing

of bilateral and multilateral technical assistance to support achieving various

elements of this goal.

Setting of standards: Participating representatives requested that the

drafting of mandatory national or regional legislation should incorporate

the standards from the main target export markets, since this would allow

all companies to comply with national laws and enable their goods to enter

their destination market.

130

25PROPOSED PRIVATE SECTOR SOLUTIONS TO ADDRESS ONGOING CHALLENGES

Decentralization of services: It would be beneficial to learn best practices

from other countries regarding the decentralization of services in the areas

of sanitary and phytosanitary standards, the granting of permits, electronic

issuance of resolutions, etc. Likewise, it is worth looking into the creation of

an electronic bureau for receiving sanitary certificates.

Following up on commitments in RTCAs: Countries should have a regional

procedure in order to oversee the application of technical regulations and

national registration processes. A study could be conducted on how to sup-

port the region in this area.

Manuals: Electronic and hardcopy manuals should be produced on how to

export to the United States; they should cover procedures and requirements

for registering products and how to process permits and authorizations

prior to exporting and importing, especially for SME products.

Institutional modernization: It is recommended that the ministries of

agriculture and health adopt modernization projects, incorporating uni-

form procedural rules, process automation, and trade facilitation measures,

without losing their area of control.

131

132

27

The creation or designation of a permanent mechanism for allowing

private sector participation in the drafting of national and regional

legislation and regulation, reinforcing communication with the

business sector and avoiding the adoption of measures without first

assessing their impact on the production sector.

Prior to each meeting of the CAFTA-DR Free Trade Commission, the

establishment of a regional public-private sector dialogue in order to

exchange information on the status of trade facilitation issues in the

CAFTA-DR region. At the national level, two months prior to each

meeting of the CAFTA-DR Free Trade Commission, the public and

private sectors should convene in order to conduct an evaluation of

the status of trade facilitation issues in the region so as to use this

material at the regional dialogue.

In order to feed into these dialogues, calling upon a third, indepen-

dent party (an international organization, a group of consultants, a

university, etc.) to evaluate progress in this area.

Another analytical tool such as the organization of national self-as-

sessments that will converge in regional reports for discussion.

Based on the Article 5.4 commitment cited in section IV, the creation

of a statutory de minimis threshold for low-risk/low-value goods al-

lowing them to enter informally with minimal documentation.

Bilaterally launch and implement a program, between CAFTA-DR

countries in a condition to do so, aiming to expand it to the whole

region.

Efficiently coordinate the work and internal mechanisms of the

trade ministries and customs administrations in order to implement

these first steps.

133

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION28

Build IT capacity so that private operators can have the tools to

issue these certificates.

If only paper copies are available, allow the use of copies (as op-

posed to signed originals) that can be in either English or Spanish.

An effort to modernize national and regional legislation looking

to the International Convention on the Simplification and Har-

monization of Customs Procedures, as amended (Revised Kyoto

Convention) and its annexes should be made.

This process could be started with a review of the customs legisla-

tion, regulations, and procedures at the national and regional level

in CAFTA-DR countries vis-à-vis the main commitments in the

Kyoto Convention in order to determine the degree to which these

commitments have been incorporated into national and regional

legislation.

Afterwards, each country could take the results from this review and

analyze whether modernized national legislation is necessary. It is

also recommended to consult the private sector about the results of

such review.

Once this process has been conducted, a working group should be

created for customs to coordinate and harmonize standards, pro-

cesses, and documents at border crossings based on international

best practices.

Uniform interpretation and application of customs rules and regu-

lations within participant countries and across the region must be

ensured.

A set of case-appropriate penalties should be developed, including

administrative rulings, fines, etc. For reasons of facilitation and

transparency, customs violations should be resolved administra-

tively as much as possible as opposed to resorting to the much more

costly, time-consuming, and opaque judicial system.

A regional model similar to the CEE should be created, where best

industry-specific practices can be shared and implemented, towards

the ultimate goal of regional standardization.

134

29RECOMMENDED MEASURES

Adapt tariff reduction schedules and rules of origin based on the

new versions of the Harmonized Tariff System.

Establish mechanisms at the national level for quick imple-

mentation of the adaptations demanded by the updating of the

Harmonized Tariff System.

Implement a uniform interpretation, at least at the Central Amer-

ican and Dominican Republic level, of the tariff schedule.

Additionally, create an expedited mechanism in which the private

sector can participate so that it can provide input along the pro-

cess.

Promote the use of advance rulings and analyze the viability of

reducing the time for issuing an advance ruling to 30 days.

Develop a mutual recognition initiative for sanitary registration

among all seven CAFTA-DR countries. Launch the process with one

or two priority products in areas such as cosmetics, food, medicines,

or pharmaceuticals, which may serve as a pilot project for such an

initiative.

Use one of the Central American Technical Regulations in force as

a basis to conduct a comparative study on U.S. and Dominican leg-

islation in order to understand and then propose mechanisms for

allowing the mutual recognition of sanitary registrations of said

products, aiming to cut time and costs.

Expand the products pilot phase in an attempt to create a permanent

mechanism for all seven countries to work on different mutual rec-

ognition proposals.

Allow the use of sticker labels to facilitate reconditioning and ship-

ment of goods across regional borders where harmonization of

labeling requirements is pending.

135

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION30

Support the design and/or strengthening of AEO programs within

a CAFTA-DR framework of cooperation, identification of best prac-

tices, and mutual support. Areas of intervention would include:

policy development, training, equipment, and adaptation and

strengthening of customs systems (e.g. risk management systems).

Consider the possibility of strengthening the regional legal frame-

work in order to make operational the AEO provisions in the

CAUCA.

Incorporate the intergovernmental dimension by involving other

entities in the certification process (agriculture, health, environment,

police, etc.), always under the lead of the customs administration.

Strengthen the CAFTA-DR dimension by promoting dialogue and

negotiations for achieving mutual recognition agreements.

Promote the active participation of the private sector from the early

design stages, in cooperation with customs, and implement support

mechanisms aimed at facilitating compliance with certification stan-

dards and, therefore, access to the program’s benefits.

Calibrate costs of program with benefits (i.e. make sure the returns

of the program in benefits equal the costs required by participation).

Consider creating different programs for different modes of trans-

port (i.e. sea, land, air). Also, consider the size of the AEOs and the

special challenges faced by SMEs in participating in “trusted trader”

programs.

Consider creating an AEO program for low-risk goods. (See com-

ment above regarding facilitation of low-risk/low-value goods.)

The CAFTA-DR Free Trade Commission could support the creation of a

capacity-building program in each CAFTA-DR country, with the goal of

ensuring that the different public and private sector actors will understand

the content of the main laws and regulations related to international trade;

know, through workshops and training events, the content of new laws with

enough time so as to take any necessary measures that will allow them to stay

in the market.

136

31RECOMMENDED MEASURES

The following can be mentioned regarding such a program:

The program could include permanent capacity-building mecha-

nisms taking into consideration all the different public sector

agencies involved in international trade issues, so as to ensure that

they incorporate a trade facilitation dimension into their activities.

Such a program should promote the customs administrations’ con-

tinued work with international organizations on the development of

modern tools to ensure the fight against corruption. Among others,

these tools should promote that economic agents be able to report

corruption instances without fear of retaliation.

The capacity-building program should also seek to strengthen cus-

toms appeals systems so as to ensure the existence of independent,

efficient systems at the administrative and judicial levels.

A set of case-appropriate penalties should be developed including

administrative rulings, fines, etc. For reasons of facilitation and

transparency, customs violations should be resolved administra-

tively as much as possible as opposed to resorting to the much more

costly, time-consuming, and opaque judicial system.

The program could allow the use of alternative non-governmental

funding for trade facilitation projects should be considered, such as

private financing, user fees, private technical assistance, and/or in-

kind contributions.

137

138

139

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION34

Costa Rica’s participation in the global economy has been growing steadily

in the last ten years—the economy has more than doubled its size during

this time span, with a cumulative growth rate of 125 percent. In spite of this

progress, obstacles remain to producing and exporting in the country, spe-

cifically in terms of the trade facilitation issues that companies face each and

every day. Below is a summary of the responses from companies engaged in

exporting to and importing from Costa Rica with regard to their experiences

with the country’s customs and logistics matrix.

Survey respondents noted that the

Costa Rican customs administration

has aptly fought corruption in all forms,

including the creation of reporting and

follow-up mechanisms.

Nevertheless, respondents also

stated that the customs administration

rarely consults with the private sector

when altering customs procedures and

only rarely offers training or informa-

tional sessions to users.

Respondents were extremely impressed by the Costa Rican government’s

ability to effectively manage the risks that exist at customs entry points. This

is especially true with regard to the use of information technologies in risk

management. Moreover, respondents had a favorable opinion of the imple-

mentation of a number of items aimed at facilitating customs procedures

while maintaining a high level of security.

42%

35%

12%

11%

UndecidedStrongly agree

AgreeStrongly disagree Disagree

There are processes and operations in place

that are designed to minimize the incidence

of corruption.

140

35ANNEX

While having a solid physical infrastructure is vital to increase the flow of

goods across borders, it is equally crucial to have appropriate coordination

among the agencies working at the border to ensure the traffic can efficiently

utilize existing infrastructure. Although respondents noted that, in general,

NeverRarelySometimesOftenAlways

Points of inquiry exist to address customs matters, which are available

on the Internet

Customs offers training/information sessions about the new laws

or regulations

3.6%17.9%

32.1%

32.1%

14.3%

11.1%

29.6%

40.7%

14.8%

3.7%

Information technology and

automated systems to support

commercial and trade operations

Option to use electronic means

for filing paperwork/

transactions (i.e. use of electronic

certificates of origin)

A single electronic interface to complete

import/export-related paperwork

Tariff and related information/data available from an

automated system, and automated systems for the

payment of duties, taxes, and other

fees by electronic fund transfers

Acceptance of electronic signatures

Very poorPoorFairGoodExcellent

4% 9% 13% 4%17%9%

26% 13%

9%

13%30%

26%30%

26%

22%

52%30%

26%

35%

35%

4%9% 17%

25%13%

To what extent does the customs administration comply with the following mandates?

Please score these elements based on effectiveness of implementation.

141

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION36

the infrastructure at all levels and in all parts of the matrix is of poor to fair

quality, they rated cross-border facilities and the harmonization of border

controls as very poor. Nevertheless, respondents believe that the customs

administration generally maintains a good rapport with the OGAs operating

at the border.

Please rate how well OGAs interact with the customs

administration.

Please rate how the customs administration

performs in each category.

Health/sanitation

Consumer protection

Agriculture Environmental control

Immigration Others (i.e. police and other

authorities) Very poorPoorFairGoodExcellent

5%

24%

33%

38%

5%10%

40%

45%

10%

14%

43%

33%

15%

55%

30%

5%

10%

45%

5%

35%

14%

14%

57%

14%

Very poorPoorFairGoodVery good

Cross-border facilities and procedures

Harmonization of border controls

27%

24%

32%

29%

27%

24%

9%

24%

5%

The customs administration should

issue a written advance ruling at the request of

an importer, exporter or producer. In general, to what extent does the customs administration

comply with this mandate?

Survey respondents noted that Costa

Rica’s management of an integrated

border was fair. Their assessment in-

cluded key highlights and lowlights,

including a good rating of the national

single window, but a poor rating of the

harmonization and standardization of

customs administrative procedures and

20%

20%

45%

15%

RarelyUsuallyAlways

Never

About half the time

142

37ANNEX

documents. Respondents also stated that the customs administration is very

effective when dealing with advance rulings as well as when there is an ap-

peal and a review of one of its own decisions.

The relative importance of border

procedures, stemming from the rapid

growth of international trade in recent

years, has added to the transaction costs

involved in the movement of goods

across borders. Survey respondents

noted that the Costa Rican customs ad-

ministration efficiently minimizes the

Harmonization and standardization of customs administrative procedures

and documents

Coordinated processing at border crossing points

and joint operations

International cooperation based on good

practices

Very poorPoorFairGoodVery good

10%20%29%

24%

25%

33%

38%

35%

38%29%

20%

Please rate how well, to your knowledge and as applicable, the customs administration and customs personnel perform in each section.

80%

8–10 documents3–7 documentsLess than

3 documentsMore than 10 documents

7 documents

5%5% 5% 5%

The World Bank’s “Doing Business 2010” report found that the average Latin American country requires just over seven documents to import a good. Based on your experience, how many documents does your country require?

In relation to the activities listed below, how does the customs administration usually perform?Total time needed to clear customs

Customs clearance and technicalcontrol for release to carrier

0% 20% 40% 60% 80% 100%

14+ days 8–14 days 2–7 days 1 day or less

5% 60% 35%

5% 70%5% 20%

143

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION38

procedural requirements for exporters and importers—averaging three to

seven documents to import a good (World Bank’s average indicator) and an

average of two to seven days for goods to clear customs. While the respon-

dents noted that they are often allowed to submit a single manifest covering

all goods in an express shipment, the customs administration only some-

times enables the clearance of express shipments within six hours after the

submission of customs documents.

Even though the survey portrayed the

overall trade facilitation matrix as fair,

the business community does not feel

as if companies are allowed to par-

ticipate in further development of the

matrix. In fact, respondents poorly

rated Costa Rica’s consultations with

the business community and the ad-

ministration’s use of indicators, while

they only gave lukewarm approval to

the transparency and predictability is-

sues. Nevertheless, survey respondents

noted that the customs administration

is moderately effective at protecting de-

clarants’ rights as well as at fast track

clearance for eligible “export-oriented

units.” Ultimately, the respondents’

highest priority regarding the customs

administration is to implement a har-

monized tariff system and the WCO

Revised Kyoto Protocol.

30%

10%

20%

40%

To a great extentSomewhatNot at all

Completely

To some extent

To what extent has the customs administration

developed and made public a strategic

plan that describes its overall strategy and/

or key priorities?

32%

11% 11%

37%

11%

AgreeDisagreeCompletely disagree

Completely agree

Neither agree nor disagree

In the next four years, the strength of Customs

laws and procedures will improve.

144

39ANNEX

Implementation ofthe Valuation Agreement

Implementation of the Rulesof Origin Agreement

Implementation ofthe Harmonized Tariff System

Implementation of the TRIPS Agreement

Implementation of the Convention on Simplificationand Harmonization of Customs Procedures

(WCO Revised Kyoto Protocol)

Not at all important Slightly important Moderately importantVery important Extremely important

5%5%

5%5%

5%

16%

16%

21%

26%

20%

21%

21%

47%

47%

20%

47%

26%

11%

21%

55%

11%

47%

Rank these components based on importance to your business.

145

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION40

As a Caribbean island nation in close proximity to the United States, its

largest trading partner, the Dominican Republic relies heavily on its ability

to quickly and efficiently get goods through its airports and seaports. Yet,

obstacles remain to moving goods into and out of the Dominican Republic.

Below is a summary of the responses from companies in the Dominican Re-

public regarding their experiences with the country’s customs and logistics

matrix.

Survey respondents noted that the Dominican customs administration

has done a fair job at implementing general CAFTA-DR mandates, such

as making customs laws easily available to the public, consulting with the

private sector, providing sufficient comment periods for new regulations,

and organizing training sessions for customs users. Yet, survey respondents

expressed that, while generally there are a sufficient number of customs

administration officials, they are not sufficiently or adequately trained for

their duties. Furthermore, although there are processes in place to minimize

corruption in customs management and procedures, there is rarely any pro-

tection for those who report an incident when and if it occurs.

When an incident of corruption occurs…

NeverRarelySometimesOftenAlways

Mechanisms are available to the public to report the incident

The administration follows up on the report

There is protection from retaliation

5%

26%33% 27%

35%17%41%

17%25%

23% 17%17%

5% 4%

146

41ANNEX

Respondents were extremely impressed with the amount of automation and

information technology used by the Dominican customs administration at

customs entry points. This is also true in regard to the electronic systems

available for use by traders, a single electronic interface, tariff-related in-

formation online, and electronic submissions prior to the arrival of goods.

Nonetheless, they noted that there are some issues with the trusted trader/

AEO program that should be addressed, as well as issues with uniformity

and case treatment.

Respondents pointed out that while the overall transport infrastructure is

fair, the harmonization of cross-border controls, facilities and procedures is

poor. They also noted that the interaction with OGAs is good, except with

security and police officers.

The customs administration makes effective, fair, and uniform use of

compliance and risk analysis information

The customs administration provides benefits based on compliance and risk

analysis [i.e. compliance performance is rewarded with expedited processing,

authorized economic operator (AEO status)]

There are account-based, post-entry procedures for importers with proven

compliance histories and consistent import patterns

The customs administration employs an intelligence-based compliance and risk

management system

AgreeDisagreeCompletely disagreeCompletely agree

Neither agree nor disagree

4%

22%

17%

38%

35%

30%

17%

25%

39%

48%

57%

33%

26%

4%

4%

Please rate the following statements on the basis of implementation of risk-based management by the customs administration.

147

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION42

Survey respondents rated the per-

sonnel implementation of the single

window poorly. On the other hand, they

approved of the implementation of har-

monized standards and of cooperation

with other international agencies. It was

also noted that appeals are generally

Please rate how the customs administration

performs in each category.

Please rate how well, to your knowledge

and as applicable, the customs administration and customs personnel

perform in each section.

The overall multimodal transport

infrastructure and services

Maritime infrastructure

and equipment

Airport infrastructure

and equipment

Cross-border facilities and procedures

Simplification of customs procedures

Harmonization of border controls

Very poorPoorFairGoodVery good

14%5% 5% 10%

9%9%

19%

19% 19%

41%

32%36%

57%

24%

67%

36%

50%50%

14%

48%

14%5% 9% 10%

Harmonization and standardization of customs

administrative procedures and documents

Single window environmentfor export/import/transit

procedures

International cooperation based on good practices

Very poorPoorFairGoodVery good

11%17%

33%

11%

11%

22%

53%

61%

28% 37%

11% 6%

23.5%

17.6%

41.2%

17.6%

RarelyUsuallyAlways

Never

About half the time

The customs administration should

issue a written advance ruling at the request of

an importer, exporter or producer. In general, to what extent does the customs administration

comply with this mandate?

148

43ANNEX

dealt with well, with an independent judicial system available if needed in

the appeal process.

Generally speaking, respondents pointed out that Dominican customs au-

thorities manage time efficiently when getting goods through the clearance

Goods are released promptly, within 48 hours of arrival

when possible

Goods are released at point of arrival without

temporary transfer

The customs administration allows goods to be

withdrawn without prejudice before determination

of duties, taxes or fees

NeverSometimesOftenAlways

10%28%

61%35%

39%

33%

45%

33%

6%10%

Total time needed to clear customs

Customs clearance and technicalcontrol for release to carrier

Offloading of goods by carrierfrom truck, rail car, vessel or aircraft

Receipt of documents and datanecessary to request release of goods

Preparation of documents byimporter/exporter, carrier, broker

Availability of goods to carrier forpick up and delivery from portauthority or terminal operator

14+ days 8–14 days 2–7 days 1 day or less

6%6% 50% 39%

6%6% 44% 44%

5%5% 37% 53%

5% 37% 58%

6% 50% 44%

5% 74% 21%

Please rate how, to your knowledge, the customs administration performs in the following categories.

In relation to the activities listed below, how does the customs administration usually perform?

149

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION44

process. Furthermore, they only require three to seven documents, which is

below the region’s average. Finally, customs often allows for a single manifest

file to cover express shipments.

Yet, the customs administration does not allow for the filing of a single

entry to cover all imports and only sometimes does it allow for express ship-

ments to be released within six hours. Also, while customs allows the use of

carnets, these are not allowed to be used simultaneously as an entry document.

Respondents found fault with the way Dominican customs consults with

the private sector for creating an annual plan, but praised transparency and

predictability aspects. Likewise, they noted that the trusted trader/AEO pro-

gram is only slightly effective and needs to be improved. Finally, they rated

the implementation of the Harmonized Tariff System as very important.

How does the customs administration rate in the following areas?

Transparency and predictability of the customs administration

Use of indicators or performance measurements

Consultation with the business community during the process of formulating the annual plan

Very poor Poor Fair Good Excellent

6%

22%

39%

28%

6%

6%

33%

6%

50%

6%

11%

22%

44%

17%

6%

150

45ANNEX

Implementation ofthe Valuation Agreement

Implementation of the Rulesof Origin Agreement

Implementation ofthe Harmonized Tariff System

Implementation of the TRIPS Agreement

Implementation of the Convention on Simplificationand Harmonization of Customs Procedures

(WCO Revised Kyoto Protocol)

Not at all important Slightly important Moderately importantVery important Extremely important

5% 11%5% 47% 32%

5% 16%5% 47% 26%

5% 5% 42% 47%

5% 16%5% 26% 47%

5% 26% 26% 42%

Rank these components based on importance to your business.

151

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION46

Salvadorian exports have enjoyed healthy growth rates since the country

implemented the CAFTA-DR agreement in 2006, especially in terms of intra-

regional trade in Central America. Yet, in a broad sense, this growth has been

sluggish, especially in terms of exports to the United States. Companies in El

Salvador face technical and practical trade facilitation difficulties as well as

others associated with regulatory coordination and human resources. Below

is a summary of the trade facilitation survey responses from exporters and

importers operating in El Salvador with regard to their experiences with the

country’s customs and logistics matrix.

While the information regarding customs laws and regulations is available

sometimes, survey respondents indicate that there are rarely any consulta-

tions with the private sector concerning new rules or changes to existing

To what extent does the customs administration

comply with the following mandates?

21% 25% 21%

42% 33% 38%

29% 33% 29%

8%

8% 8% 4%

Information is easily available to the public on all customs laws,

regulations, and procedures, including

on the Internet

Consultations are held with the private sector before

introduction of a new measure (e.g. new

technology, examination process, policy changes)

Customs regulations are published in advance with

a comment period prior to adoption of a rule

NeverRarelySometimesOftenAlways

152

47ANNEX

rules. New rules are rarely published

providing a comment period. In addi-

tion, well over half of the respondents

believe that the current customs work-

force in El Salvador is insufficient and

not sufficiently trained.

Although there is clearly room for im-

provement, respondents were impressed

by the government of El Salvador’s use

of information technology throughout

the customs matrix, including the use of automated systems, electronic

filing, a single interface, and electronic signatures. Nevertheless, respondents

raised issues relating to other customs authorities as well as to the country’s

ability to allow for trusted trader/AEO programs.

The customs administration employs a highly professional workforce, which is recruited competitively, well trained, adequately paid, screened for enforcement risks, and with a high level of understanding of applicable laws and regulations.

20.8%

12.5%

62.5%

4.2%

UndecidedStrongly Agree

AgreeStrongly Disagree Disagree

Tariff and related information/data available from an automated system, and automated

systems for the payment of duties, taxes, and other fees by electronic fund tranfers

A single electronic interface to complete import/export-related paperwork

Acceptance of electronic signatures

15%

11%

10%

5%

15%

6%

5%

5%

10%

50%

40%

44%

30%

35%

35%

25%

33%

60%

40%

5%

5%

6%

5%

5%

Information technology and automated systems to support commercial and trade

operations

Option to use electronic means for filing paperwork/transactions (i.e. use of

electronic certificates of origin)

Very poor Poor Fair Good Excellent

Please score these elements based on effectiveness of implementation.

153

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION48

Overall, survey respondents did not think that El Salvador has a good in-

frastructure and logistics system, but they did not consider these are bad

either. The best ratings were given to airport infrastructure, while the worst

To what extent does the customs administration

comply with the following mandates?

Please rate how the customs administration

performs in each category.

16% 16% 21%

21% 26%32%

26%

42% 26%

37%

16%16%

5%

Completely A good amount Somewhat Barely Not at all

Coordinates with other customs authorities to ensure compatibility to

facilitate exchange of trade data

Coordinates with other customs authorities to develop common data elements and

processes

Allows for a trusted trader/authorized

economic operator program

Very poorPoorFairGoodVery good

Airport infrastructure and equipment

Simplification of customs procedures 15%

15%

15%

25%

55%

50%

15%

10%

went to the simplification of logistics operations. The same opinion holds

true for the customs administration’s interaction with OGAs. In spite of

154

49ANNEX

the overall middle-of-the-road results, survey respondents frowned upon

the customs authority’s interaction with the agricultural agencies and the

police.

Survey respondents were critical of El

Salvador’s border management capa-

bilities, including harmonization and

customs standardization as well as con-

sultations with major traders in order to

create an electronic information system.

Despite these shortcomings, respon-

dents were positive about the customs

authority’s fairly quick management

of advance rulings. Additionally, while

there is an effective way to appeal cus-

toms decisions and an independent

judicial authority to review cases, re-

spondents found fault with the public availability of appeals information.

Health/Sanitation

Consumer protection

Agriculture Environmental control

Immigration Others (i.e. police and other

authorities)

Very poorPoorFairGoodExcellent

2% 2% 2% 2% 1%

3%5%

2%5%

8% 7%9%

7%

12%

6%

2%

3%

9%

5%4% 6% 6%

1%

5%

Please rate how well OGAs interact with the customs administration.

The customs administration should issue a written advance ruling at the request of an importer, exporter or producer. In general, to what extent does the customs administration comply with this mandate?

38.9%

5.6%

33.3%

22.2%

RarelyUsuallyAlways

Never

About half the time

155

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION50

The Salvadorian customs authority was reported to excel in terms of the

speed with which goods move through the customs process. The authority

Please rate how well, to your knowledge

and as applicable, the customs administration and customs personnel

perform in each section.

Please rate how, to your knowledge, the

customs administration performs in the

following categories.

Harmonization and standardization of customs administrative procedures

and documents

International coordination among countries’ customs

administrations

Consultations with major traders/carriers to develop

shippers’/businesses’ electronic information

systems

Very good Good Fair Poor Very poor

5%

30%

50%

15%

5%

25%

60%

10%

6%

22%

44%

28%

6% 6%

83%

44%

65%

17%

50%24%

6%

Always Often Sometimes Never

Goods are released promptly, within 48 hours of arrival when possible

Goods are released at point of arrival without

temporary transfer

The customs administration allows

goods to be withdrawn without prejudice before determination of duties,

taxes or fees

156

51ANNEX

also ranks well in allowing the release of goods by filing entry data in ad-

vance of arrival.

Yet, the Salvadorian customs authority does not allow filing a single

entry bond and fails to implement a number of mandates under certain

situations, including goods being withdrawn without prejudice before de-

termination of duties, taxes or fees, or goods being released at the point of

arrival without temporary transfer.

The customs authority was rated as fairly poor in terms of transparency and

predictability as well as in its use of indicators or performance measure-

ments. The Salvadorian customs authority was also rated poorly with regard

to its consultations with the private sector.

In addition, while moderately effective at oversight of goods, the

customs authority is only slightly effective at fast track clearance, penalty

assessments, and trusted trader programs. Survey respondents found it

equally important for El Salvador to implement a harmonized tariff system

and TRIPS disciplines.

1 day or less 2–7 days 8–14 days 14+ days

Total time needed to clear

customs

Customs clearance and

technical control for release to

carrier

Offloading of goods by carrier from

truck, rail car, vessel or aircraft

Receipt of documents

and data necessary to

request release of goods

Preparation of documents by importer/

exporter, carrier, broker

Availability of goods to

carrier for pick up and delivery

from port authority or

terminal operator

24%

71%

31%

69%

38%

63%

47%

53%

44%

56%

25%

75%

6%

In relation to the activities listed below, how does the customs administration usually perform?

157

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION52

How does the customs administration rate in the following areas?

Rank these components based on importance to

your business.

6% 6%

28%35% 41%

39%

35%35%

28%24% 18%

6%

Excellent Good Fair Poor Very poor

Transparency and predictability of the customs administration

Use of indicators or performance measurements

Consultation with the business

community during the process of formulating the

annual plan

Implementation of the Harmonized Tariff System

Implementation of TRIPS

Not at all important

Slightly important

Moderately important

Very important

Extremely important

0%6%

18%

47%

29%

6%

18%24%

47%

6%

158

53ANNEX

Declarant rights

Responsible oversight of examination of goods

Penalty assessments for inadvertent errors

Prompt release of goods post decisionto inspect

Exemption from payment of duties(or repayment)

“Fast track clearance” for eligible “export-oriented units”

Trusted trader/authorized economic operator (under WCO SAFE Framework)

Not at all effectiveSlightly effectiveModerately effectiveVery effectiveCompletely effective

35%6% 47% 12%

18%12% 53% 18%

12% 65% 24%

47%12% 29% 12%

24%6% 65% 6%

29%29% 29% 12%

21%14% 50% 14%

How do existing statutes and regulations governing the customs administration reflect the following principles?

159

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION54

Guatemalan exports have grown since the country implemented the CAFTA-

DR accord in 2006, especially in terms of intra-regional trade in Central

America. Yet, in a broad sense, this growth has been sluggish. Obstacles re-

main to exporting in Guatemala, specifically in terms of trade facilitation

issues that companies face on a daily basis. Below is a summary of the trade

facilitation survey responses from companies exporting and importing in

Guatemala regarding their experiences with the country’s customs and lo-

gistics matrix.

While information regarding customs laws and regulations is sometimes

available, survey respondents claimed that there are scarcely any consulta-

tions with the private sector, new rules are seldom published with a comment

period, and training or informational sessions are rare. Additionally, well

over half of the survey respondents believe that the current Guatemalan cus-

toms workforce is insufficient and not well trained.

To what extent does the customs administration

comply with the following mandates?

Information is easily available to the public on

all customs laws, regulations, and

procedures, including on the Internet

Consultations are heldwith the private

sector before introduction of a new

measure (e.g. new technology, examination process, policy changes)

Points of inquiry exist to address customs

matters, which are available on the Internet

Customs regulations are published in

advance with a comment period prior to adoption

of a rule

NeverRarelySometimesOftenAlways

2%

28% 28% 30%20%

31% 33% 31%30%

33%21% 27%

35%

5%15% 6%12%

2% 3%6%

160

55ANNEX

Corruption emerges as a key issue,

but the largest problem that respondents

highlighted is the fear of retaliation

when a company does report a customs

incident.

Guatemala’s customs authority is fairly

good at using information technology

and automated systems to support com-

mercial and trade operations, including

the acceptance of electronic signatures. Yet, there are concerns about coordi-

nation with other customs administrations in the CAFTA-DR region as well

as about allowing for trusted traders/AEOs. Finally, half of the survey re-

spondents noted that the customs authority has only partially implemented

a risk management system.

When an incident of corruption occurs there is protection from retaliation.23%

10%

65%

2%

RarelyOftenAlways

Never

Sometimes

Uses information technologyto expedite the release of goods

Makes electronic systems availableto the trading community

Provides for electronic submission and processing of information and data before arrival

Coordinates with other customs authoritiesto ensure compatibility to facilitate

exchange of trade data

Coordinates with other customs authoritiesto develop common data elements and processes

Allows for a trusted trader/authorizedeconomic operator program

Maintains as confidential the informationsubmitted by parties

Not at all Barely SomewhatA good amount Completely

27%

27%

19%

40%

36%

28%

17%

35%

33%

32%

28%

32%

31%

38%

35%

31%

23%

14%

15%

14%

29%

1%

4%

11%

3%

3%

6%

5%

To what extent does the customs administration comply with the following mandates?

161

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION56

In general, respondents noted that Guatemala’s transport infrastructure

was fair; yet, they found fault with the logistics side of the multimodal

transport system. As for the customs administration’s interaction with

OGAs, survey respondents rated it between poor and fair, depending on

whether it is with the agriculture ministry or with law enforcement and

monitoring agencies.

Please rate how well OGAs interact with the customs

administration.

Please rate how the customs administration

performs in each category.

Very Poor Poor Fair Good Excellent

Agriculture Others (i.e. police and other authorities)

9%

19%19%

38%31%

52%

19%

6%1%0%

The overall multimodal transport infrastructure

and services

Cross-border facilities and procedures

Simplification of customs procedures

Harmonization of border controls

Very poorPoorFairGoodVery good

4%17% 21% 20%19%

26%34% 33%

57%

52%36% 37%

20%6% 9% 10%

162

57ANNEX

Survey respondents gave poor grades to border management in Guatemala,

especially in a number of areas that include environmental control, consul-

tations with major traders, and coordinated crossing with other customs

administrations. On the other hand, the Guatemalan customs adminis-

tration was described as fairly good at implementing the single window

environment.

The customs administration was given a poor assessment with regard

to the issuing of written advance rulings. Also, while there is a way to appeal

customs decisions, there is no independent judicial authority before which

to lodge appeals and no effective resolution office.

Harmonization and standardization of customs

administrative procedures and documents

International coordination among countries’ customs administra-

tions

Consultations with major traders/carriers to develop

shippers’/businesses’ electronic information systems

Very poorPoorFairGoodVery good

11%

30%

46%

12%

12%

30%

42%

16%

13%

33%

43%

10%1%

Please rate how well, to your knowledge and as applicable, the customs administration and customs personnel perform in each section.

Is there an effective independent and/or judicial authority for appeals?

73%

27%

Yes No

163

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION58

The customs administration was praised for the speed with which it moves

goods through the customs process. The administration also ranks well at

allowing the release of goods with a minimum number of documents.

Nevertheless, the customs administration is reported never to allow

filing a single entry bond or rapid release by filing an entry in advance. In

addition, it is said to fail to implement a number of mandates under cer-

tain situations, including goods being withdrawn without prejudice before

determination of duties, taxes or fees, or goods being released at the point

of arrival without temporary transfer. Guatemala’s customs administration

appears to struggle with express shipments.

In relation to the activities listed

below, how does the customs administration

usually perform?

Total time needed to clear customs

Customs clearance and technicalcontrol for release to carrier

Offloading of goods by carrierfrom truck, rail car, vessel or aircraft

Receipt of documents and datanecessary to request release of goods

Preparation of documents byimporter/exporter, carrier, broker

Availability of goods to carrier forpick up and delivery from portauthority or terminal operator

14+ days 8–14 days 2–7 days 1 day or less

6%

5%

3%

3%

1%

4%

20%

15%

9%

9%

8%

14%

67%

61%

48%

51%

54%

56%

7%

19%

41%

38%

38%

26%

164

59ANNEX

Survey respondents noted that the customs administration does not make

announcements of a public strategy, seldom consults and shares information

with the private sector, and fails to use indicators or performance measure-

ments.

Allows electronic submission of a single manifest covering all goods contained in

a shipment transported by an express shipment

service

Provides for clearance of certain goods with minimum documentation

Adopts or maintains expedited customs

procedures for express shipments

Provides for clearance of express shipments within six hours after

submission of customs documents (provided the

shipment has arrived)

NeverSometimesOftenAlways

13%

41%

23%

41%24%

39%

35%

31%26%

17%

29%20%37%

2% 12% 9%

Development and communication of a strategic plan that

describes the administration’s

overall strategy and/or key priorities

Transparency and predictability of the

customs administration

Use of indicators or performance

measurements

Consultation with the business community during the process

of formulating the annual plan

5%22% 18%

28%

37%

26% 41%38%5%

43%31%

30%

42%

10% 10% 4%10%

Very poorPoorFairGoodExcellent

To what extent does the customs administration comply with the following mandates?

How does the customs administration rate in the following areas?

165

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION60

Survey responses signal a pressing need to improve current statutes

and regulations governing the customs administration, including but not

limited to exemption from payment of duties and penalty assessments for

inadvertent errors. Respondents noted that the most important and pressing

trade facilitation action is the implementation of the Harmonized Tariff

System.

How do existing statutes and

regulations governing the customs

administration reflect the following

principles?

Declarant rights

“Fast track clearance” for eligible“export-oriented units”

Responsible oversightof examination of goods

Penalty assessmentsfor inadvertent errors

Prompt release of goodspost decision to inspect

Exemption from paymentof duties (or repayment)

Trusted trader/authorizedeconomic operator

(under WCO SAFE Framework)

Not at all effective Slightly effective Moderately effectiveVery effective Completely effective

9%

12%

13%

27%

18%

35%

31%

46%

32%

35%

42%

32%

48%

38%

41%

42%

43%

27%

38%

16%

25%

4%

14%

9%

4%

12%

1%

4%

3%

166

61ANNEX

Honduran exports have grown since the country implemented the CAFTA-

DR agreement in 2006, but in general this growth has been rather sluggish.

Obstacles remain to producing and exporting in Honduras, specifically in

terms of trade facilitation issues that companies face every day. Below is a

summary of the trade facilitation survey responses from companies oper-

ating in Honduras regarding their experiences with the country’s customs

and logistics matrix.

Survey respondents stated that while the customs administration offers

training sessions on new laws, it fails to consult with the private sector prior

to the introduction of new regulations and never allows a comment period

before the publication of such regulations.

Likewise, even though often there are mechanisms available to report

an incident, the customs administration only sometimes follows up on re-

ports, and there is rarely any protection from retaliation once a report is filed

by a company or operator.

Information is easily

available to the public on all

customs laws, regulations,

and procedures, including on the

Internet

Consultations are held with the

private sector before

introduction of a new

measure (e.g. new technology,

examination process, policy

changes)

Points of inquiry exist to address

customs matters, which are available on

the Internet

Customs regulations are

published in advance with a comment period prior to adoption

of a rule

Sufficient time is given to

comply with a new law or regulation

Customs offers training/

information sessions about the new laws or

regulations

NeverRarelySometimesOftenAlways

25%

50%

25%

75%

25% 25%

25%25%

25% 25%50%

25%

50%

25% 25% 25% 25%

50%

To what extent does the customs administration comply with the following mandates?

167

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION62

Survey respondents generally agreed that the customs administration makes

good use of information technologies and employs an intelligence-based

compliance and risk management system, but they thought that the ad-

ministration failed to use AEO programs and to provide benefits based on

compliance and risk analysis. The customs administration also fails to accept

electronic signatures.

Overall, respondents stated that Honduran transport infrastructure is good,

though there is room for improvement, especially with regard to the harmo-

nization of border controls. As for the customs administration’s interaction

with OGAs, respondents generally ranked it as good, while noting that inter-

actions with other agencies are better than other interactions.

To what extent does the customs administration

comply with the following mandates?

Uses information technologyto expedite the release of goods

Makes electronic systems availableto the trading community

Provides for electronic submission andprocessing of information and data before arrival

Coordinates with other customs authoritiesto ensure compatibility to facilitate

exchange of trade data

Coordinates with other customs authoritiesto develop common data elements and processes

Not at all Barely SomewhatA good amount Completely

100%

33% 67%

33% 67%

33% 67%

33% 67%

168

63ANNEX

The Honduran customs administration and its personnel have performed

well in the harmonization of border procedures and documents as well as

in ensuring that there is proper environmental control and oversight. But

respondents said the administration has made little progress in creating a

single window environment for the flow of goods.

Very Poor Poor Fair Good Excellent

Harmonization of border controlsAirport infrastructure and equipment

The overall multimodal transport infrastructure and services

0% 0% 0% 0% 0%

100% 100%

67%

33%

Please rate how the customs administration performs in each category.

Health/sanitation

Consumer protection

Agriculture Environmental control

Immigration Others (i.e. police and other

authorities)

Very poorPoorFairGoodExcellent

33%

67%

33%

67%

33%

33% 100% 100% 100%

33%

Please rate how well OGAs interact with the customs administration.

169

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION64

The customs administration is

said to have only rarely issued advance

rulings when requested; yet, according

to survey respondents, it fares well in

terms of the general mandates that need

to be implemented regarding advance

rulings.

Survey respondents noted that

the customs administration occasion-

ally overcharges duties on goods, but

a process is in place to appeal customs

decisions. Furthermore, an effective in-

dependent and/or judicial authority for

appeals exists, though there is no effective problem resolution office or con-

tact for importers and exporters.

Honduras’ customs administration does a good job in terms of allowing the

use of carnets and an even better one in allowing the carnet to serve simul-

taneously as a customs entry document. Nevertheless, customs is reported

to allow only rarely the filing of cover-all single entries for imports in any

given period.

Harmonization and standardization of customs administrative procedures

and documents

Single window environment for export/import/transit

procedures

Environmental control

Very poorPoorFairGoodVery good

67%

33%

67%

33%

33%

67%

Please rate how well, to your knowledge

and as applicable, the customs administration and customs personnel

perform in each section.

The customs administration should

issue a written advance ruling at the request of

an importer, exporter or producer. In general, to what extent does the customs administration

comply with this mandate? Rarely

UsuallyAlways

Never

About half the time

33.3%

66.7%

170

65ANNEX

While overall the customs admin-

istration does a decent job at getting

the goods out in the two-to-seven day

range, survey respondents noted that,

in general, the entity does not allow

the goods to be released promptly and

within 48 hours of arrival when pos-

sible.

The customs administration re-

quires the use of brokers, and survey

respondents noted that brokers are

often well informed about laws and

regulations.

Survey respondents noted that the customs administration only sporadically

announces a public strategy and only rarely consults with the private sector.

On the other hand, respondents viewed positively the issues of transparency

and predictability, as well as the use of indicators to judge performance.

There is great variance in the current statutes governing Honduran

customs administration—from very effective regulations regarding the

prompt release of goods post decision to inspect to only slightly effective

regulations concerning trusted trader programs.

To a great extentRarelyNot at all

Completely

Half of the time

33.3%

33.3%33.3%

NeverOftenAlways

Does not apply

Sometimes

100%

To what extent does the customs administration allow for the filing of cover-all, single entries for imports in a given period (e.g. monthly vs. shipment-by-shipment filing)?

Brokers are generally useful and well informed about laws and regulations.

171

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION66

Declarant rights

Responsible oversight of examination of goods

Penalty assessments for inadvertent errors

Prompt release of goods post decisionto inspect

Exemption from payment of duties(or repayment)

“fast track clearance” for eligible “export-oriented units”

Trusted trader/authorized economic operator (under WCO SAFE Framework)

Not at all effectiveSlightly effectiveModerately effectiveVery effectiveCompletely effective

50% 50%

50% 50%

50% 50%

50%

100%

100%

50%

50% 50%

How do existing statutes and regulations

governing the customs administration

reflect the following principles?

172

67ANNEX

Nicaraguan exports to the United States have almost tripled since the

CAFTA-DR trade agreement came into force, reaching nearly $3 billion

in 2011. In fact, Nicaraguan exports growth since implementation of the

accord is second only to Costa Rica among the group of signatory coun-

tries. Yet, this growth is hampered by important logistic and infrastructural

limitations. Nicaragua ranked lowest among the CAFTA-DR countries in

the 2010 World Bank’s logistics performance index (LPI), one of several

key indicators of the logistics challenges that exporters and trade agents in

the country must face. Below is a summary of the trade facilitation survey

responses from companies regarding the country’s customs and logistics

matrix.

Survey respondents stated that while information regarding customs laws is

generally available to the public, rarely are there points of inquiry to address

customs issues or training sessions about new laws. They also noted that

there are insufficient and inadequately trained personnel working for the

customs administration. The country seems to lack sufficient mechanisms

for reporting incidences of corruption, and there is an overall lack of protec-

tion from retaliation.

Always Often Sometimes Rarely Never

Mechanisms are available to the public

to report the incident

The administration follows up on the report

There is protection from retaliation

17%

52%

26%

13%

48%

35%

35%

26%

30%

9%4% 4%

When an incident of corruption occurs…

173

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION68

While survey respondents noted that the customs authority has made prog-

ress in improving the use of information technology to expedite the release

of goods, they rated poorly the customs authority’s implementation of AEO

programs. Likewise, respondents stated that customs has failed to make ef-

fective, fair, and uniform use of compliance and risk analysis information.

In general, survey respondents noted that Nicaragua’s transport infrastruc-

ture was fair, with airport facilities and performance described as good, while

the simplicity and harmonization of border controls was described as poor.

Respondents also mentioned that the Nicaraguan customs authority does a

fair to good job at interacting with other national government agencies.

Not at allBarelySomewhatA good amountCompletely

Uses information technologyto expedite the release of goods

Provides for electronic submissionand processing of information

and data before arrival

Coordinates with other customs authoritiesto ensure compatibility to facilitate

exchange of trade data

Coordinates with other customs authoritiesto develop common data elements

and processes

Allows for a trusted trader/authorizedeconomic operator program

Makes electronic systems availableto the trading community

Maintains as confidential the information submitted by parties 67% 33%

33%17% 17% 33%

33%8% 42% 17%

17%8% 58% 17%

8%8% 50% 33%

67%8% 25%

67%8% 25%

To what extent does the customs administration

comply with the following mandates?

174

69ANNEX

The customs authority personnel at the various border crossings generally

do a fair job at implementing the different statutes and regulations, including

environmental controls, consulting with major carriers, and coordinating

with other customs authority divisions and personnel. Yet, implementation

of the various mandates concerning advance rulings remains an issue.

Consumer protection

Agriculture Environ-mental control

Immigration Others (i.e. police and other

authorities)

Health/sanitation

ExcellentGoodFairPoorVery Poor

8%17%

67%8%0%

0%17%

75%8%0%

0%25%

75%0%0%

8%17%

67%8%0%

0%25%

75%0%0%

0%25%

58%8%8%

Ruling within 150 days after a

request

Customs valuation criteria

Application of duty

drawback, deferral, or relief

from customs duties

Country of origin marking

Application of quotas

Tariff classification

Very poorPoorFairGoodVery good

33%

50%

17%

25%

42%

25%

8%

17%

50%

25%

8%

8%

50%

25%

17%

8%

75%

8%8%

8%

75%

8%8%

Please rate how well OGAs interact with the customs administration.

Please rate how well the customs administration complies with the following mandates for advance rulings.

175

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION70

Respondents noted that there is

an opportunity to appeal customs au-

thority decisions. But given the high

incidence of overcharging (about half

the time) and the absence of an effec-

tive independent or judicial authority

for appeals, there is work to be done,

including the creation of an effective

problem resolution office or point of

contact.

Most survey respondents stated that Nicaragua keeps the required number

of documents at the World Bank’s average for Latin America. Yet, the cus-

toms authority has problems getting the goods through customs in one day,

with the total average ranging from two to seven days. Some claim even

longer periods.

How often does overcharging occur?

OccasionallyUsuallyAlways

Never

About half the time

25%

42%

25%

8%

In relation to the activities listed

below, how does the customs administration

usually perform?

Total time needed to clear customs

Customs clearance and technicalcontrol for release to carrier

Offloading of goods by carrierfrom truck, rail car, vessel or aircraft

Receipt of documents and datanecessary to request release of goods

Preparation of documents byimporter/exporter, carrier, broker

Availability of goods to carrier forpick up and delivery from portauthority or terminal operator

14+ days 8–14 days 2–7 days 1 day or less

0 2 4 6 8 10 12

27% 64% 9%

9% 64% 27%

27% 55% 18%

55% 45%

27% 73%

27% 64% 9%

176

71ANNEX

Half of the respondents noted that

only rarely does customs allow for the

rapid release of goods from customs

when filing entry data in advance. They

also claimed that these goods are seldom

released within 48 hours of arrival.

Survey respondents also stated

that more work is needed in the field

of express shipments, where goods are

only expedited sometimes, though often

a single manifest covering all goods is

allowed.

Although respondents gave a fair stamp

of approval to the customs authority

on transparency and the use of indica-

tors to measure performance, they rated

poorly customs’ consultations with the

business community, and also stressed a

moderate achievement in terms of de-

veloping a strategic plan and making it

known to the public.

Respondents noted that regula-

tions governing the customs authority

were slightly effective in most cases, the

best being the regulations governing the responsible oversight of examina-

tion of goods. The worst regulations, on the other hand, are said to be those

regarding trusted trader programs.

Survey respondents suggested that the two key customs policies

pending implementation are the Harmonized Tariff System and the World

Customs Organization’s Revised Kyoto Protocol.

Often AlwaysNever Sometimes

18%

73%

9%

Goods are released promptly, within 48 hours of arrival when possible.

To what extent has the customs administration developed and made public a strategic plan that describes its overall strategy and/or key priorities?

To a great extentSomewhatNot at all

Completely

To some extent

54.5%

18.2%

9.1%

18.2%

177

COMPETITIVE ADVANTAGE: MOVING AHEAD OF THE GLOBAL COMPETITION72

Very Poor Poor Fair Good Excellent

Transparency and predictability of the customs administration

Consultation with the business community during the process of formulatingthe annual plan

Use of indicators or performance measurements

0%9%

18%

27%

36%

64%

45%

73%

9%

0%

How does the customs administration rate in the following areas?

Declarant rights

Responsible oversight of examination of goods

Penalty assessments for inadvertent errors

Prompt release of goods post decisionto inspect

Exemption from payment of duties(or Repayment)

“fast track clearance” for eligible “export-oriented units”

Trusted trader/authorized economic operator (under WCO SAFE Framework)

Not at all effectiveSlightly effectiveModerately effectiveVery effectiveCompletely effective

18% 45% 27% 9%

9% 55% 27% 9%

9% 45% 27% 18%

55% 18% 27%

36% 55%

45% 55%

9%

45% 45% 9%

How do existing statutes and regulations

governing the customs administration

reflect the following principles?

178

179

1 Hong Kong 89.32 Singapore 88.03 Australia 82.64 New Zealand 81.45 Switzerland 81.06 Canada 79.47 Chile 79.08 Mauritius 76.99 Denmark 76.110 United States 76.011 Ireland 75.712 Bahrain 75.513 Estonia 75.314 United Kingdom 74.815 Luxembourg 74.216 Finland 74.017 Netherlands 73.518 Sweden 72.919 Germany 72.820 Taiwan 72.721 Georgia 72.222 Lithuania 72.123 Iceland 72.124 Japan 71.825 Austria 71.826 Macau 71.727 Qatar 71.328 United Arab Emirates 71.129 Czech Republic 70.930 Botswana 70.631 Norway 70.532 Saint Lucia 70.433 Jordan 70.434 South Korea 70.335 The Bahamas 70.136 Uruguay 69.737 Colombia 69.638 Armenia 69.439 Barbados 69.340 Belgium 69.241 Cyprus 69.042 Slovakia 68.743 Macedonia 68.244 Peru 68.245 Oman 68.146 Spain 68.047 Malta 67.548 Hungary 67.349 Costa Rica 67.050 Mexico 67.051 Israel 66.952 Jamaica 66.853 El Salvador 66.754 Saint Vincent

and The Grenadines66.7

55 Latvia 66.556 Malaysia 66.157 Poland 66.058 Albania 65.259 Romania 65.160 Bulgaria 65.061 Thailand 64.162 France 64.163 Rwanda 64.164 Dominica 63.9

65 Cape Verde 63.766 Kuwait 63.167 Portugal 63.168 Kazakhstan 63.069 Turkey 62.970 Montenegro 62.671 Panama 62.572 Trinidad and Tobago 62.373 Madagascar 62.074 South Africa 61.875 Mongolia 61.776 Slovenia 61.777 Ghana 61.378 Croatia 61.379 Uganda 61.180 Paraguay 61.181 Sri Lanka 60.782 Saudi Arabia 60.683 Italy 60.684 Namibia 60.385 Guatemala 60.086 Burkina Faso 59.987 Dominican Republic 59.788 Azerbaijan 59.789 Kyrgyz Republic 59.690 Morocco 59.691 Lebanon 59.592 The Gambia 58.893 Zambia 58.794 Serbia 58.695 Cambodia 58.596 Honduras 58.497 Philippines 58.298 Tanzania 57.999 Gabon 57.8100 Brazil 57.7101 Benin 57.6102 Belize 57.3103 Bosnia and Herzegovina 57.3104 Swaziland 57.2105 Fiji 57.2106 Samoa 57.1107 Tunisia 57.0108 Indonesia 56.9109 Vanuatu 56.6110 Nicaragua 56.6111 Mali 56.4112 Tonga 56.0113 Yemen 55.9114 Kenya 55.9115 Moldova 55.5116 Senegal 55.5117 Greece 55.4118 Malawi 55.3119 India 55.2120 Nigeria 55.1121 Pakistan 55.1122 Bhutan 55.0123 Mozambique 55.0124 Seychelles 54.9125 Egypt 54.8126 Côte d’Ivoire 54.1127 Djibouti 53.9128 Niger 53.9129 Guyana 53.8

130 Papua New Guinea 53.6131 Tajikistan 53.4132 Bangladesh 52.6133 Cameroon 52.3134 Mauritania 52.3135 Suriname 52.0136 China 51.9137 Guinea 51.2138 Guinea-Bissau 51.1139 Russia 51.1140 Vietnam 51.0141 Nepal 50.4142 Central African Republic 50.4143 Micronesia 50.1144 Laos 50.1145 Algeria 49.6146 Ethiopia 49.4147 Liberia 49.3148 Burundi 49.0149 Maldives 49.0150 Togo 48.8151 Sierra Leone 48.3152 Haiti 48.1153 São Tomé and Príncipe 48.0154 Belarus 48.0155 Lesotho 47.9156 Bolivia 47.9157 Comoros 47.5158 Angola 47.3159 Ecuador 46.9160 Argentina 46.7161 Ukraine 46.3162 Uzbekistan 46.0163 Kiribati 45.9164 Chad 45.2165 Solomon Islands 45.0166 Timor-Leste 43.7167 Congo, Rep. of 43.5168 Iran 43.2169 Turkmenistan 42.6170 Equatorial Guinea 42.3171 Congo, Dem. Rep. of 39.6172 Burma 39.2173 Eritrea 36.3174 Venezuela 36.1175 Zimbabwe 28.6176 Cuba 28.5177 North Korea 1.5N/A Afghanistan N/AN/A Iraq N/AN/A Kosovo N/AN/A Libya N/AN/A Liechtenstein N/AN/A Somalia N/AN/A Sudan N/AN/A Syria N/A

Rank Country Overall Score Rank Country Overall Score Rank Country Overall Score

0–49.9 REPRESSED

ECONOMIC FREEDOM SCORE

50–59.9 MOSTLY UNFREE60–69.9 MODERATELY FREE70–79.9 MOSTLY FREE80–100 FREE

2013 INDEx Of ECONOMIC fREEDOM COuNtRy RaNkINgS

180

viii ConnECTinG To CompETE 2012 TrADE LOgIST IcS In ThE gLOBAL EcOnOMy

Economy

2012 LPI

Rank Score

% of highest

performer

Singapore 1 4.13 100.0

Hong Kong SAR, China 2 4.12 99.9

Finland 3 4.05 97.6

Germany 4 4.03 97.0

Netherlands 5 4.02 96.7

Denmark 6 4.02 96.6

Belgium 7 3.98 95.3

Japan 8 3.93 93.8

United States 9 3.93 93.7

United Kingdom 10 3.90 92.7

Austria 11 3.89 92.5

France 12 3.85 91.2

Sweden 13 3.85 91.2

Canada 14 3.85 91.1

Luxembourg 15 3.82 90.3

Switzerland 16 3.80 89.7

United Arab Emirates 17 3.78 88.9

Australia 18 3.73 87.2

Taiwan, China 19 3.71 86.6

Spain 20 3.70 86.4

Korea, Rep. 21 3.70 86.2

Norway 22 3.68 85.9

South Africa 23 3.67 85.5

Italy 24 3.67 85.4

Ireland 25 3.52 80.6

China 26 3.52 80.5

Turkey 27 3.51 80.3

Portugal 28 3.50 80.1

Malaysia 29 3.49 79.8

Poland 30 3.43 77.8

New Zealand 31 3.42 77.4

Iceland 32 3.39 76.6

Qatar 33 3.32 74.3

Slovenia 34 3.29 73.1

Cyprus 35 3.24 71.8

Bulgaria 36 3.21 70.7

Saudi Arabia 37 3.18 69.7

Thailand 38 3.18 69.6

Chile 39 3.17 69.5

Hungary 40 3.17 69.5

Tunisia 41 3.17 69.4

Croatia 42 3.16 69.2

Malta 43 3.16 69.0

Czech Republic 44 3.14 68.5

Brazil 45 3.13 68.2

India 46 3.08 66.4

Mexico 47 3.06 66.0

Bahrain 48 3.05 65.7

Argentina 49 3.05 65.5

Morocco 50 3.03 65.0

Slovak Republic 51 3.03 64.9

Philippines 52 3.02 64.8

Economy

2012 LPI

Rank Score

% of highest

performer

Vietnam 53 3.00 64.1

Romania 54 3.00 63.8

Bosnia and Herzegovina 55 2.99 63.5

Uruguay 56 2.98 63.5

Egypt, Arab Rep. 57 2.98 63.3

Lithuania 58 2.95 62.3

Indonesia 59 2.94 62.2

Peru 60 2.94 61.9

Panama 61 2.93 61.6

Oman 62 2.89 60.4

Yemen, Rep. 63 2.89 60.3

Colombia 64 2.87 59.8

Estonia 65 2.86 59.5

Ukraine 66 2.85 59.3

Benin 67 2.85 59.3

Botswana 68 2.84 58.9

Greece 69 2.83 58.6

Kuwait 70 2.83 58.5

Pakistan 71 2.83 58.4

Mauritius 72 2.82 58.2

Malawi 73 2.81 57.8

Guatemala 74 2.80 57.7

Serbia 75 2.80 57.6

Latvia 76 2.78 56.9

Georgia 77 2.77 56.8

Albania 78 2.77 56.7

Ecuador 79 2.76 56.2

Bahamas, The 80 2.75 56.1

Sri Lanka 81 2.75 56.0

Costa Rica 82 2.75 55.9

Côte d’Ivoire 83 2.73 55.4

Madagascar 84 2.72 55.1

Dominican Republic 85 2.70 54.4

Kazakhstan 86 2.69 54.2

Niger 87 2.69 54.1

Tanzania 88 2.65 52.9

Namibia 89 2.65 52.9

Bolivia 90 2.61 51.6

Belarus 91 2.61 51.6

Syrian Arab Republic 92 2.60 51.3

El Salvador 93 2.60 51.2

Guinea-Bissau 94 2.60 51.1

Russian Federation 95 2.58 50.7

Lebanon 96 2.58 50.6

Togo 97 2.58 50.5

Central African Republic 98 2.57 50.3

Macedonia, FYR 99 2.56 50.1

Armenia 100 2.56 50.0

Cambodia 101 2.56 50.0

Jordan 102 2.56 49.8

Zimbabwe 103 2.55 49.6

Maldives 104 2.55 49.4

Economy

2012 LPI

Rank Score

% of highest

performer

Honduras 105 2.53 49.1

Cameroon 106 2.53 48.9

Bhutan 107 2.52 48.6

Ghana 108 2.51 48.2

Lao PDR 109 2.50 48.0

Senegal 110 2.49 47.7

Venezuela, RB 111 2.49 47.7

Iran, Islamic Rep. 112 2.49 47.6

Paraguay 113 2.48 47.4

São Tomé and Príncipe 114 2.48 47.4

Guinea 115 2.48 47.4

Azerbaijan 116 2.48 47.4

Uzbekistan 117 2.46 46.9

Gambia, The 118 2.46 46.8

Liberia 119 2.45 46.3

Montenegro 120 2.45 46.3

Nigeria 121 2.45 46.3

Kenya 122 2.43 45.9

Fiji 123 2.42 45.4

Jamaica 124 2.42 45.3

Algeria 125 2.41 45.3

Solomon Islands 126 2.41 45.2

Mauritania 127 2.40 44.7

Papua New Guinea 128 2.38 44.0

Myanmar 129 2.37 43.8

Kyrgyz Republic 130 2.35 43.3

Gabon 131 2.34 43.0

Moldova 132 2.33 42.6

Guyana 133 2.33 42.5

Burkina Faso 134 2.32 42.3

Afghanistan 135 2.30 41.5

Tajikistan 136 2.28 41.1

Libya 137 2.28 41.0

Angola 138 2.28 40.8

Rwanda 139 2.27 40.5

Mongolia 140 2.25 40.0

Ethiopia 141 2.24 39.6

Lesotho 142 2.24 39.5

Congo, Dem. Rep. 143 2.21 38.6

Cuba 144 2.20 38.3

Iraq 145 2.16 37.1

Comoros 146 2.14 36.5

Eritrea 147 2.11 35.5

Sudan 148 2.10 35.3

Congo, Rep. 149 2.08 34.7

Sierra Leone 150 2.08 34.5

Nepal 151 2.04 33.1

Chad 152 2.03 32.9

Haiti 153 2.03 32.8

Djibouti 154 1.80 25.5

Burundi 155 1.61 19.5

LPI ranking and scores, 2012

181

References                                                              

1 Hornbeck, J.F. “CAFTA-DR: Developments in Trade and Investment.” Congressional Research Service, April 9, 2012: 1. 2 “Joint Statement from the meeting of the CAFTA-DR Free Trade Commission.” Office of U.S. Trade Representative, February 2011. 3 “Competitive Advantage: Moving Ahead of The Global Competition.” US Chamber of Commerce and Inter-American Development Bank, Washington, DC: February 2013: 1. 4 “Joint Statement from the meeting of the CAFTA-DR Free Trade Commission.” Office of U.S. Trade Representative, February 2011. 5 Ferrantino, Michael. Using Supply Chain Analysis to Examine the Costs of Non-Tariff Measures (NTMs) and the Benefits of Trade Facilitation. USITC. Working Paper, No. 2012-01A, 2012: 28. 6 Milner, Chris et al, “Trade Facilitation in Developing Countries.” Centre for Research in Economic Development and International Trade. Research Paper No. 08/05, 2008: 3. 7 Portugal-Perez, Alberto and John S. Wilson. “Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure.” The World Bank, Development Research Group, Policy Research Working Paper No. 5261, 2010: 2. 8 Ferrantino, 28. 9 Gonzales, Jose et al. “Latin America: Addressing High Logistics Costs and Poor Infrastructure for Merchandise Transportation and Trade Facilitation.” World Bank Research Paper, August 2007: 2. 10 Hellqyist, Marcus. “Trade Facilitation – Impact and Potential Gains.” National Board of Trade, SWERPO, August 2002:19. 11 Hummels, David. “Time is a Trade Barrier.” Purdue University, July 2001: 1. 12 Ibid, 23, 21. 13 Hellqvist, 5. 14 Engman, Michael Engman. “The Economic Impact of Trade Facilitation.” OECD Trade Policy Working Papers. No. 21, OECD Publishing: 6. 15 Ibid, 8. 16 Ibid, 9. 17 “Competitive Advantage: Moving Ahead of The Global Competition,” US Chamber of Commerce and Inter-American Development Bank, Washington, DC: February 2013: 3. 18 Ibid. 19 Ibid. 20 Ibid. 21 Ibid. 22 Hornbeck, 1. 23 Arvis, Jean-François et al. “Connecting to Compete: Trade Logistics in the Global Economy.” Connecting to Compete 2007: the Logistics Performance Index and Its Indicators. Chapter 1.4, Washington, DC: 2007, 60, 61. 24 “Logistics Performance Index 2010.” The World Bank. <http://www1.worldbank.org/PREM/LPI/tradesurvey/mode1c-result.asp?countryID=19&countryID=26&backurl=mode1c.asp&grpindicator=2>. Accessed March 23, 2013. 25 “Data for Costa Rica.” The World Bank. <http://data.worldbank.org/country/costa-rica>. Accessed March 23, 2013. 26. “Costa Rica Country Overview.” The World Bank <http://www.worldbank.org/en/country/costarica/overview>. Accessed March 23, 2013. 27 “Costa Rica, 2013 Index of Economic Freedom.” The Heritage Foundation. <http://www.heritage.org/index/country/costarica>. Accessed March 23, 2013. 28 The World Bank, Costa Rica Country Overview. 29 Ibid. 30 Ibid. 31 Ibid. 32 “Costa Rica, 2013 Index of Economic Freedom.” 33 Ibid.

182

                                                                                                                                                                                                 

34 “Country Data for Dominican Republic.” The World Bank. <http://data.worldbank.org/country/dominican-republic>. Accessed March 23, 2013. 35 Seelke, Clare Ribando. “Dominican Republic: Background and U.S. Relations.” Congressional Research Service, November 2012: 7. 36 Ibid, 7. 37 Ibid. 38 Ibid. 39 Ibid. 40 Ibid. 41 Ibid, 9. 42 Ibid, 7. 43 “Dominican Republic, 2013 Index of Economic Freedom.” The Heritage Foundation. <http://www.heritage.org/index/country/dominicanrepublic>. Accessed January 26, 2013. 44 Ibid. 45 Competitive Advantage Report, 39. 46 “El Salvador. World Development Indicators.” World Bank. <http://data.worldbank.org/country/el-salvador>. Accessed February 2, 2013. 47 Ibid. 48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid. 52 Ibid. 53 Ibid. 54 Ibid. 55 Seelke, Clare Ribando.“El Salvador: Political and Economic Conditions and U.S. Relations.” Congressional Research Service, November 2012, 9. 56 “El Salvador. The World Bank Country Overview.” World Bank. 57 Ibid. 58 “El Salvador, 2013 Index of Economic Freedom.” Heritage Foundation. 59 Ibid. 60 Ibid. 61 “Guatemala, The World Bank Country Data.” World Bank. <http://data.worldbank.org/country/guatemala>. Accessed March 23, 2013. 62 Taft-Morales, Maureen. “Guatemala: Political, Security and Socio-Economic Conditions and U.S. Relations.” Congressional Research Service. June 2012: 1. 63 “Guatemala, The World Bank Country Data.” 64 Ibid. 65 Ibid. 66 Taft-Morales, 6. 67 “Guatemala, The World Bank Country Data.” 68 Taft-Morales, 6. 69 “Guatemala, 2013 Index of Economic Freedom.” The Heritage Foundation. <http://www.heritage.org/index/country/guatemala>. Accessed March 2013. 70 Ibid. 71 “Honduras, The World Bank Country Data.” The World Bank. <http://data.worldbank.org/country/honduras>. Accessed March 23, 2013. 72 Ibid. 73 Meyer, Peter J. “Honduran-U.S. Relations.” Congressional Research Service. July 2012: 16. 74 “Honduras, The World Bank Country Overview.” The World Bank. <http://www.worldbank.org/en/country/honduras/overview>. Accessed March 23, 2013. 75 Ibid.

183

                                                                                                                                                                                                 

76 Ibid. 77 “Honduras, 2013 Index of Economic Freedom.” The Heritage Foundation. <http://www.heritage.org/index/country/honduras>. Accessed March 23, 2013. 78 Ibid. 79 Ibid. 80 “Honduras, The World Bank Country Overview.” 81 “Nicaragua, The World Bank Country Data.” The World Bank <http://data.worldbank.org/country/nicaragua>. Accessed March 23, 2013. 82 Ibid. 83 Ibid. 84 Ibid. 85 Ibid. 86 “Nicaragua, 2013 Index of Economic Freedom.” The Heritage Foundation. <http://www.heritage.org/index/country/nicaragua>. Accessed March 23, 2013. 87 Ibid. 88 Ibid. 89 Competitive Advantage Report, 27. 90 Ibid. 91 Ibid. 92“Partnership for Progress. How PPPs Work.” <http://ncppp.org/howpart/index.shtml#define>. Accessed March 21, 2013. Loxley, Salim J. “An Analysis of a Public-Private Sector-Partnership: The Confederation Bridge.” A Report Prepared for the Canadian Union of Public Employees. 1999. 93 Loxley, “An Analysis of a Public-Private Sector-Partnership: The Confederation Bridge.” 94 World Bank and Public-Private Infrastructure Advisory Facility (PPIAFF). “How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets.” <http://www.ppiaf.org/sites/ppiaf.org/files/publication/How-to-engage-with-private-sector-Clemencia-Farquharso-Yecome-Encinas.pdf>. Accessed March 21, 2013. Loxley. “An Analysis of a Public-Private Sector-Partnership: The Confederation Bridge.” 95 Global Facilitation Partnership (GFP) Explanatory Notes. “Public-Private Partnerships in Trade and Transport Facilitation.” World Bank. June 2005. <http://www.gfptt.org/sites/default/files/refread/4957ad2b-9a3a-42c7-82a2-c8d83c96b669.pdf>. Accessed March 21, 2013. 96 Cosgrove-Sacks, Carol, and Mario Apostolov, eds. “Trade Facilitation: The Challenges for Growth and Development.” United Nations Publications. Vol. 299. New York and Geneva: 2003. <http://www.unece.org/fileadmin/DAM/cefact/publica/ece_trade_299.pdf>. Accessed March 21, 2013. 97 United Nations Economic Commission for Europe. “National Trade Facilitation Bodies.” ECE/TRADE/242. Geneva, October 2001. <http://www.unece.org/fileadmin/DAM/cefact/recommendations/rec04/rec04_ecetrd242e.pdf>. Accessed March 21, 2013. 98 “National Trade Facilitation Bodies.” United Nations Economic Commission for Europe. 99 “ATA Carnet.” <http://www.atacarnet.com/faq/what-are-origins-ata-carnet-system>. Accessed March 23, 2013. 100 “Business Alliance for Secure Commerce.” <http://www.wbasco.org/english/what_is_basc.htm>. Accessed March 23, 2013. 101 Apostolov, Mario. “UN/ECE’s Contribution to Public and Private Partnership in Facilitating International Trade.” United Nations. <http://unpan1.un.org/intradoc/groups/public/documents/untc/unpan001815.pdf>. Accessed March 23, 2013. 102 “Central Asia Regional Customs Cooperation Committee Founded in NW China.” <http://english.peopledaily.com.cn/200208/21/eng20020821_101846.shtml>. Accessed March 23, 2013. 103 “Walvis Bay Corridor Group.” <http://www.wbcg.com.na/>. Accessed March 23, 2013. 104 “U.S. Customs and Border Protection.” <http://www.cbp.gov/xp/cgov/trade/automated/modernization/trade_support_network/>. Accessed March 23, 2013. 105 World Bank GFP Explanatory Notes. “Public-Private Partnerships in Trade and Transport Facilitation.”

184

                                                                                                                                                                                                 

106 “Trade Facilitation: The Challenges for Growth and Development.” United Nations.; Proksch, Marc and Noordin Azhari. “Aid for Trade and Public-Private Partnerships.” Asia-Pacific Trade and Investment Review 3, no. 2 (2007): 89-107; and World Bank GFP Explanatory Notes. “Public-Private Partnerships in Trade and Transport Facilitation.” 107 McLinden, Gerard. “Collaborative Border Management: A New Approach to an Old Problem.” World Bank Economic Premise 78 (April 2012); and World Bank, “Border Management Modernization.” (Washington, DC: The World Bank, 2011). 108 McLinden and World Bank. 109 Aniszewski, Stefan. “Coordinated Border Management: A Concept Paper.” World Customs Organization. Research Paper No. 2, June 2009. 110 “Cross-border Management and Customs.” UNECE. <http://tfig.unece.org/contents/cross-border-management-customs.htm>. Accessed March 27, 2013. 111 “Coordinated Border Management: A Concept Paper.” World Customs Organization. 112 “USAID Regional Trade Program for CAFTA-DR, Final Report,” USAID. August 2010, accessed March 27, 2013, <http://www.caftadr.net/rtp-final_files/USAIDRegionalTradeProgram_FinalReport.pdf>. 113 Ibid. Note: The project was launched in July 2006 and was completed in December of 2010. 114 “Cooperative Agreement USAID-SIECA Regarding Rules of Origin And Customs Management.” USAID and SIECA. Accessed March 27, 2013. <http://www.caftadr.net/sieca-final_files/SIECA_cap1-5%20Final_English.pdf>. 115 “Portal Oficial del Proyecto MesoAmérica.” Accessed March 28, 2013. <http://www.proyectomesoamerica.org/joomla/index.php?option=com_content&view=article&id=229&Itemid=57>. Note: The Mesoamerican Project was launched in 2008 and is composed by the following countries: Mexico, Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Dominican Republic (added in 2009). 116 “2009-2010 Executive Report: Mesoamerica Project Executive Commission, XII Summit of Heads of State and Government of the Tuxtla Mechanism for Dialogue and Coordination.” Cartagena de Indias, Colombia, October 25 and 26. Accessed March 28, 2013. <http://www.proyectomesoamerica.org/joomla/images/XII_Cumbre_Tuxtla/libro2009_2010_ingles%20LR.pdf>. 117 Competitive Advantage Report. 118 Yasui, Tadashi. “Benefits of the Review Kyoto Convention,” World Customs Organization. Research Paper nº6, February 2010. Accessed March 25, 2013. Note: The main international agreement that deals with customs procedures to facilitate trade is the WCO’s International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention) which entered into force in 1974. It was updated in 1999 and RKC entered in force into 2006. There are 82 contracting parties. 119 “Revised Kyoto Convention.” UNECE. Trade Facilitation Implementation Guide. <http://tfig.unece.org/contents/revised-kyoto-convention.htm>. 120 Ibid. 121 Competitive Advantage Report. 122 Ibid. 123 “Border Management Modernization.” World Bank. Gerard McLinden, Enrique Fanta David Widdowson, Tom Doyle (Editors), (Washington, D.C.; World Bank, 2011); and “Coordinated Border Management: A Concept Paper.” World Customs Organization. 124 UNNEXT, ESCAP and UNECE. “Business Process Analysis Guide to Simplify Trade Procedures.” Updated September 2012. <www.unescap.org>. 125 “Coordinated Border Management: A Concept Paper.” World Customs Organization. 126 “Border Management Modernization.” World Bank. 127 USAID Regional Trade Program for CAFTA-DR, Final Report. USAID. 128 “U.S. Experience: Central American Border Management Reform.” RIAC. 129 “Customs Consultative Committee,” Irish Tax and Customs. <http://www.revenue.ie/en/customs/customs-consultative-committee/>. 130 “Joint Customs Consultative Committee (JCCC).” HM Revenues and Customs. <http://www.hmrc.gov.uk/jccc/>. 131 “Advisory Committee on Commercial Operations of Customs and Border Protection (COAC),” U.S. Department of Homeland Security. <http://www.cbp.gov/xp/cgov/trade/trade_outreach/coac/>.

185

                                                                                                                                                                                                 

132 “Customs and Border Protection National Consultative Committee.” Australian Customs and Border Protection Services. <http://www.cargosupport.gov.au/site/national-consultative.asp>. 133 “Programa Regional USAID de Comercio Para CAFTA-DR” USAID. June 2009. <http://pdf.usaid.gov/pdf_docs/PNADU370.pdf>. 134 Ibid. 135 “Evaluation of the Regional and Bilateral Programs to Support Trade Compliance under CAFTA-DR.” USAID. Accessed March 28, 2013. <http://pdf.usaid.gov/pdf_docs/PDACS790.pdf>. 136 “Handbook of Best Practices at Border Crossings – A Trade and Transport Facilitation Perspective 2012.” OSCE and UN. Accessed March 28, 2013. <http://www.osce.org/eea/88200?download=true>. 137 “ICC Customs Guidelines.” ICC Committee on Customs and Trade Regulations. Document No. 103-6/12. June 2012. 138 “Border Management Modernization.” World Bank. 139 “Joint Border Controls.” UNECE. Trade Facilitation Implementation Guide. <http://tfig.unece.org/contents/joint-border-controls.htm>. Accessed March 28, 2013. 140 “Coordinated Border Management: A Concept Paper.” World Customs Organization. 141 “Cross-Border Management.” UNECE. Trade Facilitation Implementation Guide. <http://tfig.unece.org/contents/cross-border-management.htm>. Accessed March 28, 2013. 142 “Coordinated Border Management: A Concept Paper.” World Customs Organization.; “Benefits of the Review Kyoto Convention.” World Customs Organization.; “Handbook of Best Practices at Border Crossings – A Trade and Transport Facilitation Perspective.” World Bank.; “Border Management Modernization.” OSCE and UN. 143 “Border Management Modernization.” World Bank. 144 “Border Management Modernization.” World Bank. “Handbook of Best Practices at Border Crossings – A Trade and Transport Facilitation Perspective.” OSCE and UN. 145 Slow, Yue Chia. “Trade and Investment Policies and Regional Economic Integration in East Asia.” ADBI Working Paper Series. Number 10, April 2010. 146 “Study on Prospects for Harmonizing Cyberlegislation in Central America and the Caribbean.” United Nations Conference on Trade and Development, 2011, v. 147 “Cutting-Edge Customs Systems to Improve Trade.” USAID Trade Hub – South Africa. <http://www.satradehub.org/trade-facilitation/sath-content/activities/regional-integration/trade-facilitation/cutting-edge-customs-systems-to-improve-trade>. Accessed March 24, 2013. 148 Competitive Advantage Report, 8. 149 Ibid. 150 Ibid. 151 USAID Regional Trade Program for CAFTA-DR, Final Report, 8. 152 Competitive Advantage report, 13. 153 Ibid. 154 Ibid. 155 Ibid. 156 Ibid. 157 Ibid, 57. 158 Ibid. 159 “Central America-Dominican Republic Apparel and Textile Council.” <http://www.apparelcentralamericadr.com/cecatec-dr/>. Accessed April 6, 2013. 160 “CAFTA-DR Regional Trade Program, Work Plan for Calendar Year 2007.” February, 16, 2007: 13. 161 Ibid. 162 Barragan, Fernando, and Ana Escalante. “GEDOEL: A Powerful Regional Trade Facilitation Tool.” Smart Lessons, International Finance Corporation, May 2010: 2. 163 USAID Regional Trade Program for CAFTA-DR, Final Report, 2. 164 Barragan and Escalante, 3. 165 Ibid, 4. 166 “Evaluation of the Regional and Bilateral Programs to Support Trade-Compliance under CAFTA-DR.” Segura Partners LLC. August 2011: 80.

186

                                                                                                                                                                                                 

167 Ibid, 81. 168 Competitive Advantage Report, 28. 169 Competitive Advantage Report, 23. 170 “Recent Developments in Trade Facilitation in Latin America and the Caribbean,” XXXVI Regular Meeting of the Latin American Council, Caracas, Venezuela, 27-29 October 2010: 9. <http://www.sela.org/attach/258/EDOCS/SRed/2011/03/T023600004720-0-Recent_Developments_in_Trade_Facilitation_in_LAC.pdf>. Accessed April 4, 2013. 171 “Current Issues in SPS.” World Trade Organization. <http://www.wto.org/english/tratop_e/sps_e/sps_issues_e.htm>. Accessed March 29, 2013. 172 “CAFTA-DR Sanitary and Phytosanitary Trade Capacity Building Program.” World Trade Organization. Aid for Trade Case Story, March 2011. <http://www.oecd.org/aidfortrade/47435024.pdf>. Accessed April 4, 2013. 173 Humberto, Lopez, J. and Rashmi Shankar, eds. “Getting the Most Out of Free Trade Agreements in Central America.” World Bank Publications. 2011: 152. 174 Competitive Advantage Report, 16. 175 Ibid, 17. 176 “Initiative for Improved and Harmonized Agricultural Statistics and Sanitary-Phytosanitary Regulatory Infrastructure in Central America, Final Progress Report.” PAPA. 2005-2011: 19. 177 Humberto and Shankar, 159. 178 Ibid, 158. 179 Ibid. 180 Ibid. 181 Ibid. 182 The World Bank. “Logistics and Transport: A Long Road to Travel in Central America.” February 8, 2013. 183 Update on SPS Capacity Building for Central American-Dominican Republic Free Trade Agreement, El Salvador, May 2011. 3. 184 PAPA, 7. 185 Ibid, 8. 186 Ibid, 8. 187 “Exports of Dairy Products to the United States From Nicaragua Under CAFTA-DR.” Impact Brief. <http://www.caftadr.net/impactbrief-1.html>. Accessed March 24, 2013. 188 PAPA, 18. 189 Hopper, Marlynne, Juliana Salles Almeida and Marian Garcia. “Public-Private Partnerships to enhance SPS capacity: What can we learn from this approach?” Joint document of the Standards and Trade Development Facility and the Inter-American Development Bank. April 2012: 33. 190 Segura Partners LLC, 70. 191 USAID Work Plan for Calendar Year 2008, 60. 192 Ibid. 193 Hopper, Almeida and Garcia, 55. 194 Work Plan for Calendar Year 2008, 20. 195 Hopper, Almeida and Garcia, 54. 196 Ibid, 66. 197 Ibid. 198 Ibid. 199 Cooperative Advantage Report, 29. 200 PAPA, 20. 201 “Other Trade Activities.” Office of the U.S. Trade Representative. Page 164. <http://www.ustr.gov/sites/default/files/Chapter%20IV.%20Other%20Trade%20Activities.pdf>. Accessed April 4, 2013. 202 USAID Work Plan for Calendar Year 2008, 34. 203 “WCO SAFE Framework of Standards to Secure and Facilitate Global Trade.” World Customs Organization. June 2012: 37. 204 Ibid, 6.

187

                                                                                                                                                                                                 

205 Ibid, 24. 206 Ibid. 207 Ibid. 208 Competitive Advantage Report, 28. 209 Ibid. 210 “Compendium of Authorized Economic Operator Programmes,” World Customs Organization. June 2012: 19-23. 211 PAPA, 19. 212 Ibid. 213 Choi, Young Jae. “A Survey of Single Window Implementation.” World Customs Organization. August 2011: 1. 214 Libby, Margarita. “Business Climate for Competitiveness in the Americas: Simplification of Procedures to Promote Competitiveness.” Compete Caribbean. October 5, 2011: 15-17 215 Ibid. 216 Ibid. 217 Ibid. 218 Ibid. 219 Ibid. 220 “Declaration of the Inter-American Network of Foreign Trade Single Windows.” San José, Costa Rica. September 28, 2012.

188