Author: Satvinder Singh*
More than three years ago, Mr. Raj, CEO of City Zone Express (CZE) Malaysia, a regional logistics company with offices in Singapore, Malaysia, Thailand, Myanmar, Vietnam and China and a fleet of over 260 vehicles, was happy with his GPS-equipped fleet with modern security gadgets and an anti-hijacking system, and aimed to change into one in all the leading logistics firms within the region. However, it still faced the challenge of reducing transit times at border customs checkpoints, which involved slow, manual customs procedures, paper documentation, quite a few and sometimes inconsistent requirements for instruction, container loading and unloading controls, and truck switching on the border. Feedback from some service users suggests that the lengthy transit process, including long waiting times at borders, has discouraged them from using land transport across the region. Instead, they preferred ocean freight, which allows containers to be transported without stopping to their destination.
Meanwhile, the EU implemented a brand new computerized transit system (NCTS), which allowed goods to flow from one point to a different between the customs territories of various contracting parties, with the suspension of customs duties and reduced border controls. The system using a single regional electronic transit declaration with simplified procedures ensured a balance between the economic interests of entrepreneurs and the interests of the customs administration. This improved connectivity has facilitated trade between neighboring countries, lowering the prices of doing business, while enabling governments to keep up the security and security of the general public through the usage of automated controls on the flow of products.
To address the bottlenecks faced by the private sector in ASEAN, with EU support through ASEAN technical assistance programs, ASEAN member states began discussions on the establishment of the ASEAN Customs Transit System (ACTS) in 2007 with a view to adapting the successful EU system within the ASEAN context. More than 10 years later, on November 2, 2020, six ASEAN member states, namely Cambodia, Laos PDR, Malaysia, Singapore, Thailand and Vietnam, began ACTS.
ACTS goals to support ASEAN’s commitment to reducing the prices of road freight transport between ASEAN member states by accelerating and simplifying official control procedures using a contemporary digital system that implements a single digital declaration, process automation and real-time information exchange.
“ACTS reduces costs over time while increasing the efficiency and reliability of road freight transport in the ASEAN region by harmonizing cross-border regulatory processes and standards imposed across member economies. With this initiative, we plan to build more customer and branch networks in all ASEAN countries to benefit from the ACTS system from 2023,” said Bruno Selmoni, Director of Road and Multimodal Freight for Southeast Asia, DHL Global Forwarding.
Business users can submit digital transit declarations on to ASEAN customs authorities via ACTS and track the movement of cargo from loading at the purpose of departure to unloading on the destination. Because operators now not have to make customs declarations at borders, ACTS generates administrative and value savings while opening recent and more competitive intra-regional trade routes.
“Using ACTS is really beneficial for logistics service providers like us. From now on, we do not have to go through national customs clearance in every country we enter, which allows us to significantly save time and costs. We estimated the cost savings to be approximately 30% to 40%. This is by far the greatest competitive advantage of using any other mode of transportation available in ASEAN,” Raj said.
However, the unexpected Covid-19 pandemic has caused unprecedented disruptions to produce chains world wide and without exception in ASEAN. To keep their residents protected, countries rushed to implement travel and transportation restrictions. This meant significant challenges for the regional transport sector, especially in the world of goods movement. As a result, only a small variety of users used the newly created ACTS in 2020 and 2021, with only two ACTS movements per yr respectively. To improve ACTS utilization, ASEAN strengthened private sector coverage in 2022, leading to thirty-two ACTS transit movements between January and July.
Recent discussions with the private sector have revealed some obstacles explaining the explanations for the underutilization of ACTS. First, bank guarantees aren’t required in some national transit systems of some participating ASEAN member states, reminiscent of Cambodia and Vietnam, but are required in ACTS transactions. Difficulties in obtaining bank guarantees appear to have forced some private sector entities to postpone the usage of ACTS of their regular transport operations. Secondly, the shortage of internal customs offices in some participating ASEAN member states appears to discourage traders and logistics operators from using the ACTS program, as they have to bring goods to the border to begin an ACTS movement, somewhat than starting movements from a customs office near their location . Private sector entities typically have their headquarters at or near major airports, seaports and a few Special Economic Zones (SEZs). Third, confusion over the interpretation and priority of application of regional and national laws and regulations also creates a barrier to personal sector participation. Last but not least, they’ve limited information regarding registration as a Principal in ACTS and the extra requirements they have to meet to have the opportunity to move goods using ACTS. Many firms have noticed a lack of awareness from local customs and transport authorities,
In an try to increase the usage of ACTS, several initiatives have been undertaken to support each the private and public sectors in navigating this difficult change. A non-public sector outreach program was launched to boost awareness of ACTS amongst relevant private sector entities and associations and to supply local support to the private sector occupied with using ACTS. Regular coordination meetings between the customs and transport authorities of participating ASEAN Member States are ongoing with the aim of resolving operational conflicts and simplifying requirements for the combining and movement of products under ACTS. Additionally, a two-country transit pilot project between Cambodia and Vietnam is underway.
While national consultations are ongoing to handle the identified issues, ASEAN member states should lead regional and national awareness programs to extend greater awareness of ACTS within the private sector to motivate more logistics operators, manufacturers and traders to make use of ACTS of their transportation operations. To unite with the private sector, customs administrations and transport authorities are advised to more actively reach out to relevant stakeholders, including traders, logistics firms, freight forwarders, carriers, banks, customs agents and others, to supply information, instruction and training on helping them join and use ACTS.
Dr Ramlah Mochtar, Senior Deputy Director of the Royal Malaysian Customs Department (RMCD) recently said that efforts have been made to extend private sector participation not only by conducting nationwide outreach activities to draw market participants to make use of ACTS, but additionally by conducting regular training for banks, stakeholders and customs officers on the borders. Malaysia is able to take part in ACTS operations upon request from the private sector. She further added that “Customs and transport authorities should be sure that traders and carriers are ready to totally understand ACTS procedures, and member states must share the identical spirit to totally implement ACTS to facilitate trade within the region.”
With its significant commitments to digitalization through ACTS, ASEAN has a novel opportunity to function a model for digital inclusion and advance the digital trade community. To this end, ACTS needs to be given top priority and a focus to change into one in all ASEAN’s leading digital trade initiatives and facilitate seamless cross-border flow of products between ASEAN member states.
Looking on the long-term plan, Dato Lim Jock Hoi, Secretary-General of the ASEAN Secretariat, said a feasibility study on the implementation of ACTS along the Borneo Corridor covering Brunei Darussalam, Indonesia (Kalimantan), Malaysia (Sabah and Sarawak) and the Philippines was conducted to strengthen connectivity in region. Moreover, with strong support from relevant stakeholders, discussions are ongoing on the potential of including other transport modes, reminiscent of rail, in ACTS, which might help ASEAN leverage emerging opportunities in other transport modes to develop a sustainable transport network within the region.
In summary, ASEAN still has opportunities to enhance trade facilitation, simplify customs and transportation procedures, and reduce trade costs through a proactive approach to serving the private sector. The region should proceed to discover and address bottlenecks and obstacles because it pursues its goal of regional economic integration by implementing the free movement of products inside the region with minimal regulatory requirements. Closer coordination amongst relevant authorities of ASEAN Member States at national and regional levels and frequent consultations with the private sector will strengthen support for the ambitious goal of doubling intra-ASEAN trade within the region by 2025.
*HE Satvinder Singh is ASEAN Deputy Secretary-General for the ASEAN Economic Community.
