Time-Release Methodology

One of the most widely used performance indica-tors to measure customs effectiveness is the time it takes for customs to release goods.²⁰ For many

years, customs reforms were launched without proper assessment of their impact. Various customs authorities publish their release times and the WCO has issued a methodology to measure release times so that the findings are comparable across countries.

The chain of processes that imports go through from the time of their arrival in a country to their release can be shown in 11 discrete steps

(box 1.C.1). This articulation may differ somewhat among countries, but almost all the events are pres-ent in every country. The type of goods being imported also has an effect on the process being followed.

Measurement of time release is a worthwhile exercise as it can establish a pre-reform benchmark and thus help in assessing progress made by mod-ernization initiatives. In addition, it permits com-parisons across countries, but only if the methodol-ogy adopted is identical.

Two different approaches can be taken regarding this issue: an overall trade logistics perspective and a more customs-oriented perspective.

The Trade Logistics Perspective

From the overall trade logistics perspective, it is important to take into account the whole process.

Indeed, from an importer’s point of view, it is the overall time that the goods are detained before release that affects the transaction costs. The meas-urement should consider the time duration from arrival of the goods into the border post until they are physically released. This would measure the effectiveness of all operators involved in this trans-action, including port authorities, warehouse man-agement, control agencies, brokers, customs, the banking sector, and so forth. Such an analysis was undertaken in the Philippines, Japan, and in the

context of the TTFSE (Trade and Transport Facili-tation in Southeast Europe) program.

Without distinguishing the causes of the delay in the release of goods, the TTFSE, for instance, adopted a “black box” approach, measuring the time releases from arrival to physical release. This allows data to be compared across different coun-tries in Southeast Europe, but is best used to com-pare performance over time in a given country or border station. This effectiveness measurement was complemented by other indicators that measured the efficiency of customs operations such as the revenue collected per staff and the number of dec-larations per staff.

Another approach for obtaining data on trade facilitation is through firm surveys. Such data are generally less reliable as they reflect subjective opin-ions about time release rather than objective meas-urements. As a result, a large standard deviation among respondents results. Moreover, due to the costs of conducting this type of survey, they are only available from time to time without any real possibility of comparisons over time. One example of this type of study is the World Business Environ-ment Survey.²¹

BOX 1.C.1 The Steps to Release Goods from Time of Arrival

Steps Customs Participation

1. Arrival of the goods 2. Unloading of the goods

3. Delivery to a customs area, where goods are generally temporarily stored yes

4. Lodgment of the declaration yes

5. Payment of duties and duty discrepancies (can take place after step 9) yes

6. Acceptance of the declaration yes

7. Documentary control yes

8. Physical inspection yes

9. Control of other agencies such as standards or phytosanitary

10. Goods released by customs yes

11. Actual removal from the port, airport, or land border post premises Source:Author.

21. The World Business Environment Survey is the only large source regarding firm surveys’ time-release data. A large-scale survey of more than 10,000 firms was conducted in 80 countries in 1999–2000 on many aspects of the regulatory environment (World Bank 2002).

The Customs-Oriented Approach

The time-release study could detail the time it takes for each of the steps identified in box 1.C.1 for which customs bears the sole responsibility. Such a study would suggest where bottlenecks exist and how they can be eased by actions and initiatives in which customs has primary authority.

Some estimates of time release related solely to customs are available, but they cannot be fully compared across countries because of methodolog-ical differences in their compilation. This is gener-ally due to the local nature of customs procedures and a lack of harmonization of the measurement methodologies. For instance, in Bolivia, time meas-urement starts when the declaration is lodged in the ASYCUDA system even if the broker could have arrived many hours earlier and may have tried to submit his declaration, but with errors. In the case of the Philippines, the first step measured is “the arrival to lodgment,” which includes the unloading as well as the processing and issuance of the import permit by noncustoms agencies. This step is, by far, the longest step in the Philippine procedure: 60 percent of the total release time in the case of sea-port and 72 percent in the case of airsea-ports is taken up by the time lapse between the arrival of the goods and the lodgment at customs. It is unclear whether this delay is due to port inefficiency or to other controlling agencies’ involvement.

To disentangle the responsibility of various actors within customs, one could measure the time

between the different customs-related steps. To promote standardization of these measurements, WCO issued a guide to measure the time release and the World Bank, in partnership with WCO, is developing software that will provide an objective basis for this measurement (WCO 2002). The new software is expected to be fully compatible with the various automated customs management systems currently in operation. This tool should permit the measurement of time-release data in a manner that would be fully comparable across countries.

Some Illustrative Results

Time release may differ among different types of products, depending on what control agencies are involved, port of entry (airport or seaport), coun-try of origins, and which verification channels (green, yellow, or red) the goods are assigned to after risk analysis has been performed. The whole logistical process can be assessed, and detailed cus-toms-oriented information can be compiled.

In the case of the Philippines, the study calculates release time for goods that enter using different verification channels (green, yellow, and red lanes), broad commodity classifications, commodity value, country of origin, arrival location (port or airport), mode of payment, VAT exemption, exemp-tion from payment of duties, lodgment days, mode of lodgment (electronically or not), and period of lodgment (UPECON 2003). (See box 1.C.2.) BOX 1.C.2 The Philippines Time-Release Study: An Example to Follow The Philippine customs authority has published

detailed data on time release. The study distin-guishes differences along selectivity status (color lanes), commodity class, commodity value, country of origin, arrival location (port or air-port), mode of payment, VAT-exempted or not, exemption from payment of duties, lodgment days, mode of lodgment (electronically or not), and period of lodgment within a day.

In most cases, intuitions were confirmed. For instance, time release in ports is longer than in airports, and textile products and motor vehicles are cleared faster than food items (102 and 109 hours respectively, compared to 119 hours, probably because of the intervention of control agencies).

This type of study can also raise issues for fur-ther inquiry. For instance, by country of origin, Chinese goods should take longer to release than goods imported from ASEAN countries due to the fact that most Chinese goods enter the red lane and there is preferential treatment for imports from ASEAN countries due to member-ship in the Asian Free Trade Association (AFTA).

On the contrary, it was found that the time to clear goods from ASEAN countries is longer than for goods coming from China (136 hours com-pared to 98 hours). The total customs process-ing time was shorter for Chinese goods in com-parison with ASEAN goods (23 hours instead of 35 hours).

Source:UPECON 2003.

Several other studies suggest that time release differs for different types of products. For agro-products, time release was almost 40 percent longer when controlling agencies (other than cus-toms) are involved. The port of entry also affects time release as airports are usually better organized than seaports, and can handle different categories of cargo that tend to make cargo clearance less complicated. In the case of Tema port in Ghana, it was calculated that 44 percent of the clearances occur within two days whereas at the airport 90 percent of the goods were cleared in 24 hours. Even among ports in the same country, time release can differ. In Morocco in September 2003, it was reported that the average time release was 31 min-utes at Tangier port, but 50 minmin-utes at Agadir port (Morocco government). In Bolivia, it was assessed that between the most efficient border post (Pisiga, at the Chilean border), and the least efficient (Yacuiba, at the Argentinean border), the average time release was almost 30 times lower in Pisiga than in Yacuiba (Mendora 2003). On the basis of this study, customs authorities identified some administrative measures to streamline the process in some border posts.

The Bolivia study also identifies differences in clearance time by the types of inspections to which goods are subject. After lodgment declaration, three possible actions have been defined: green for immediate release, yellow for documentary control, and red for physical inspection of goods. From a survey conducted from January to June 2003, aver-age time release for a cargo assigned to the green lane was 39 minutes, 49 minutes for the yellow lane, and 71 minutes for the red lane.

Conclusion

Time-release data represent a powerful perform-ance assessment tool that enable the measurement of the effectiveness of customs services and the monitoring of progress.

They permit the creation of a detailed diagnostic of the time it takes to process goods and an exami-nation of differences across different types of com-modities, ports, and import regimes. They may also contribute to the monitoring of the impact of any customs reform. In addition, they can help to iden-tify potential corrective actions.

Annex 1.D Physical Inspection as