Trade facilitation to overcome GCC border delays
Since Gulf Corporation Council (GCC) countries are primarily oil and gas-based economies, they depend heavily on the continuous operations and reliability of both the procurement of raw materials and supply of finished products to customers. The delay in receipt of raw materials to any chemical or petrochemical plant can potentially disrupt operations for all the players involved in the entire value chain, leading up to the end customer.
Border crossings, specifically land border crossings in the region for petrochemicals and chemicals, have been a challenge due to long waiting times and queues of trucks, mostly for customs checks and documentation at many regional borders and stations. This is primarily due to the lack of harmonized procedures across the GCC member states.
These delays cost the industry millions of dollars each year. The time spent at the border can cause significant delays to the supply chain and increase the risk of damage to goods, people, and the environment, which could potentially have disastrous consequences since certain chemicals are highly sensitive to variations in storage conditions. To enhance border crossing procedures, GCC countries must streamline these procedures, in particular, by enhancing cooperation among border agencies.
This article will highlight the causes of land border crossing delays in the region, their implications on businesses, and the recommended best practices that can help overcome these delays
Causes of border delays in land transportation
Gulf countries as a group are some of the world’s most business-friendly emerging markets. However, most of them continue to perform poorly when it comes to trading across their borders. This poor performance in cross-border trade could be linked to the land-border crossing landscape in the GCC region, and this could also be why nations in the Arabian Gulf continue to trail behind the leading developed countries.
Intra-regional trade in the Arab region represents only 14% of total trade [1]. One of the factors contributing to this low figure is the fact that international road transport in the region is still facing challenges. These challenges are primarily related to the complex customs procedures and extended document processing time.
Customs procedures in the GCC
Based on the preliminary research GPCA conducted with relevant stakeholders, it was concluded that improvement in the customs procedures in the GCC is vital for improved border crossing in the region.
Key challenges include, but are not limited to:
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- Lack of harmonized customs procedures: Misalignment on policies, procedures, and lack of coordination between standards, infrastructure, and charges in the GCC region (especially for specialty chemicals) are the predominant reasons behind border delays as they lead to numerous documentation requirements and ultimately lead to long customs clearance process/ time. Such misalignments cause trucks to be turned back, even for minor discrepancies in documents.
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- Change in regulations and required approvals not announced well in advance: New regulations, restrictions, and requirements are imposed by the customs authorities without pre-notification to the impacted stakeholders. This is further impacted by the lack of grace period for necessary preparation, arrangements, and corrective actions. Organizations require sufficient time to understand and adapt to new regulations, standards, certificates, etc. Furthermore, businesses should also be engaged by the authorities for consultation before any regulations are changed or adopted.
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- Awareness of chemical products: The limited knowledge of customs staff on petrochemicals and (specialty) chemicals and their handling leads to unsafe and time-consuming inspections. This is complemented with the lack of advanced scanning or checking of chemicals and petrochemicals at borders. This could potentially be dangerous due to the volatile properties of certain chemicals and might lead to fatal incidents or injuries.
Best practices
Cross-border road transport in the GCC could be improved through the implementation of the following best practices:
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- Collaboration between the GCC chemical industry and the GCC customs authorities: Industry leaders in the region should work with the concerned customs personnel in their respective countries to enhance the knowledge of chemicals and petrochemicals and conduct safe handling and inspection training. The industry could also support the customs authorities by sponsoring advanced technologies and equipment that are linked to the single window system for smooth transactions. The customs authorities in turn could conduct workshops, seminars, or awareness sessions for the new regulations and requirements ahead of time from the implementation date and involve all related stakeholders in the consultation and pilot runs.
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- Enforcing the laws set by the GCC Customs Union: The GCC Customs Union was established (in 2003) with the objective of abolishing customs duties “taxes” as well as regulations and procedures restricting trade among the GCC member states and implementing unified customs duties “taxes” and trade and customs regulations for trade with the non-member states. However, effective implementation of the laws stated by the Customs Union is yet to come to fruition. Establishment of committees and task forces at the GCC Secretariat (comprising customs representatives from all the GCC countries), focusing on border crossing legislations and common laws is vital to improve the intra-GCC trade. It is also important that these committees and task forces are engaging with businesses to ensure alignment before launching any new regulations.
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- Adopting the principles of the WTO’s Trade Facilitation Agreement (TFA): Traders from both developing and developed countries have long pointed to the vast amount of “red tape” that still exists in moving goods across borders, and which poses a particular burden on small and medium-sized enterprises. The TFA entered into force on 22 February 2017, and contains provisions for expediting the movement, release, and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues [2]. However, like the principles set by the GCC Customs Union, effective implementation of the provisions stated under the TFA is yet to be seen and adopting these principles will help improve transparency, increase possibilities to participate in global value chains, and also reduce the scope for corruption.
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- Transformation to digitalization: Paperless or digital processes and documentation along with Blockchain solutions, with an integrated/ connected system among GCC customs would be an important tool to improve the document processing time, and reduce border delays
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- Leveraging railways: For centuries, railways have been at the heart of economic development of countries. The development of a 2,177 kilometers long railway [3] in the six GCC states, is therefore a massive and unique opportunity to catalyze the required changes. As the GCC countries are investing heavily, it is expected to come with the necessary regulations to facilitate trade and spur economic development. As it will be impractical to stop an entire train load at the border, a risk-based approach, such as what is prescribed through the TFA can be applied. Due to the various security and pre-notification mechanisms, pre-screened operators within the terminals and railways operations, multiple CCTV cameras, etc., railways have the potential to reduce EHS&S risks and can, therefore, create a lower risk trade corridor, thereby improving the flow of goods.
Conclusion
The GCC countries are some of the world’s most business-friendly emerging markets. An improved land transportation border crossing system in the region will not just result in improved flow of goods in the region but also attract new businesses, including SMEs, to establish and expand in the GCC, which would enhance the Arabian Gulf economy. Road transportation has several benefits when compared to sea transportation for intra-GCC trade. Free flowing of resources and goods would improve the overall synergy of the region, helping it to establish itself as one of the global leaders like the EU and North America.