Trade and Transport Facilitation in Southeast Europe Project

5

FYR Macedonia

Trade and Transport Facilitation in Southeast Europe Project

Terms of Reference

Monitoring of Change in Customs Services Procedures

[June 30, 1999]

Project: Trade and Transport Facilitation in Southeast Europe (TTFSE) Project

Project ID: 7E-PE-65041

Sector: TY – Other Transportation

Objective

1. The Custom Services Procedures Reform, the central component of the TTFSE Project, is designed to strengthen the institutional capacity of the Customs Administration and enable compatibility with the standards of the European Union (EU). The objective of the assignment of the Consultant is to conduct impartial monitoring and follow-up of the changes to the present customs clearance procedures, on the basis of existing, if available, or especially designed reviews. The changes are expected to cover such operations as: working methods, paper flows, time/work-cycle standards, and the reduction of waiting time at border crossings.

2. The consultant will also prepare the Terms of Reference for additional activities in support of the implementation of reform to customs procedures including: (i) manpower and staff development plans; (ii) administrative restructuring; (iii) revisions to staff profiles; (iv) remuneration and severance schemes; and (v) design of new customs clearance procedures.

3. The ownership of the client organizations and other stakeholders is essential to the success of reform. The consultant will incorporate in his work style appropriate participatory methodology for the introduction and management of change. This methodology will build upon the initial launch workshop and the provisional action plan provided as an output of that workshop.

Background

3. Gaining peaceful independence after the breakup of the Yugoslav Federation in 1991, the FYR Macedonia lost a large and protected market that had purchased three-quarters of its industrial production. Along with successful macroeconomic stabilization, the Government has made progress in structural reforms since 1994, including trade regime liberalization and the simplification and modernization of customs procedures. The recovery of output and employment in the country, however, has been protracted, and a sustainable and growing export base is now desperately required. The trade deficit would appear to be getting out of hand: exports in 1997 stood at just US$1.2 billion (36% of GDP), while imports rose to nearly US$ 1.6 billion (about 50% of GDP), leaving a deficit of about US$400 million, an increase of about 25% compared to 1996. Facing the increasing trade deficit and contracted economy, the Government has decided to strengthen trade/transport facilitation in order to encourage private sector activities and, thus, to improve its economic foundation.

4. Existing customs procedures are inappropriate, lengthy and change often without prior notice. Input comes from too many ministries and state agencies. As a result the procedures are often incomplete, vague and full of exceptions. Above all, there are such inefficiencies in the procedures as: redundant paper flow at Border Crossing Points (BCPs); mandatory warehousing before goods are delivered to importers; and 100% cargo physical inspections both at the borders and at the warehouses without any application of selectivity criteria. All of these factors hinder the funding of private sector trade activities.

5. In addition, border crossing facilities are insufficient and are causing border delays, thus increasing trade/transport costs. With respect to equipment, the Republic of Macedonia Customs Administration (MCA) has obsolete hardware, software and telecommunication systems. The Local Area Networks (LAN) installed in the customs houses are also old and fail to meet today’s needs. Automated Data Processing (ADP), critical to modernized MIS, is short-staffed with only 15 inadequately trained employees. The MCA lacks: (i) strong management; (ii) an effective structure at headquarters; and (iii) transparent staff policies. In addition, headquarters officials receive little or no technical training and seldom visit the field, where operation are under the control of regional directors whose experience is often limited. The smuggling of drugs and aliens is prevalent in FYR Macedonia, especially to Albania and Europe. Corruption is less significant than in other Balkan countries, but it is one of the most critical reasons for Government’s revenue shortfall, since customs collections represent more than 20% of the US$ 3,300 million budgets of the country, and the amount of the shortfall is considered to be significant. At the current moment, Customs has neither the organization, legal powers, skills nor support to handle investigations in smuggling or duty evasion.

6. The Government, in close collaboration with the EU and the Bank, has started various improvement measures. An EU compatible Customs law was enacted, which places Customs Administration under the Ministry of Finance. Customs adopted the use of a Single Administrative Document (SAD). A new tariff, aligned to international standards, was introduced. The different categories of duties were consolidated, and a flat declaration handling fee introduced, consistent with World Trade Organization (WTO) practice. The Government also introduced a wide range of training programs as a part of the Transit Facilitation Project of the Bank. Most of the modernization activities are now stalled, pending the introduction of the new Customs law.

7. FYR Macedonia, with all of the other active participants within the South European Cooperative Initiative (SECI)[1], has realized the importance of coordinated actions to address the issues above[2]. A regional view of the situation has emerged according to which participant countries would apply simultaneously coordinated and compatible measures to the benefit of the members of the region as well as through traffic. The Government, having received some funding from the EU for improvement in border infrastructure and equipment installation, requested IDA funding for further infrastructure improvements at five border stations and additional equipment in early April 1998. There is no PHARE funding slated for Tabanovce (on the border with Yugoslavia), while critical improvement needs also remain at Kafasan (on the border with Albania) and Deve Bair (on the border with Bulgaria), despite multi donor funding. On the basis of economic viability, the Project selected these three major crossings for improved infrastructure and included additional equipment. Also, this assistance would complement the Transit Facilitation Project.

Trade and Transport Facilitation in Southeast Europe Project

8. The Project will address principally the issues described above. The project will seek improvements in: institutional reform; border crossing procedures; infrastructure; equipment; Management Information Systems (MIS); software; smuggling and corruption control, and trade facilitation. The actions to be implemented under the project will be designed to be compatible with EU practices. Hence, the analyses of the current situation and the definition of project components take into account the programs of all donors. These issues will be addressed by means of coordination with other countries under the Program.

Scope of Work

9. In order to facilitate the management of change, the consultant will prepare, after conducting field observations, a complete report on current customs clearance procedures in all items listed below. The consultant will be expected to then to periodically monitoring and review changes to existing customs clearance procedures and working methods. Precisely, it should implement and revise as necessary the recommendations of existing reviews, if available, otherwise a full review should be carried out.

(a) The items related to procedures and paper flows to be covered include:

(i) import-export: forms being used, entry submission, detail of goods, level of description, time response to uses, flow of documents through different offices of Customs, description of interventions by customs officers;

(ii) transit: description of the procedures and acceptance of such conventions for transit facilitation as TIR, etc.;

(iii) payment of duties: system of passes, use of tariffs;

(iv) issuance of guarantees: systems in place, other security to cover customs debts;

(v) collection of revenue: adoption of the WTO Valuation Agreement, exemptions, free zones, and origin rules;

(vi) consignment of all kinds of goods: procedures in place for manifests of goods in air, maritime, rail, postal, and passenger traffic; and

(vii) multi-modal transport: including special clearance procedures for express consignments.

(b) The study is expected to describe the necessary implementation steps for reforms addressing:

(i) controls procedures: risk selectivity and random based controls;

(ii) effectiveness: availability of data basis for risk selectivity controls;

(iii) delays: time response to users;

(iv) application of international treaties regarding transit of goods: TIR and related conventions, acceptance of information on TIR carnets; and

(v) Coordination with other agencies and customs of neighboring countries: information received and formal agreements signed.

(c) The study also is expected to examine and propose improvements to such features of customs brokers as :

(i) structure and organization: authorization, staff, training;

(ii) level of services offered to business: availability and costs to users;

(iii) competitiveness: possibility for users to have direct access to Customs; and

(iv) ability to assume a greater role in new customs procedures: receiving and recording commercial documents;

(d) On the strength of the proposals made under b and c above, the consultant will draft the Terms of Reference for specific items of work necessary to achieve the performance indicators under the project, including but not necessarily limited to:

(i) manpower and staff development plans

(ii) administrative restructuring

(iii) revision to staff profiles

(iv) remuneration and severance schemes

(v) design of new Customs clearance procedures

(e) The consultant will review the action plan provided by the launch workshop and suggest complimentary or supplementary participatory mechanisms to promote client and stakeholder ownership of the reform process.

10. The Consultant will be responsible to the Customs Project Coordinator of the National Project Implementation Unit (NPIU) for all aspects of the services. The Consultant is assumed to take up the assignment immediately after loan/credit effectiveness.

Monitoring

11. Following the initial review mission, the consultant will make quarterly missions to the field. Each mission would be for approximately two weeks. Particular attention would be given to bottlenecks and constraints on reaching project objectives. The missions are intended (i) to provide inputs as one of the sources of information for the quarterly reports prepared by the PIU and (ii) for supervision missions of the IDA. The missions should be scheduled, therefore, to fall sufficiently in advance of (i) and (ii) in order for mission reports to provide useful and timely inputs.

Data, Services and Facilities

12. The data, services and facilities to be provided respectively by the government and the Consultant are indicated below.

(a) The NPIU (Government) will provide:

(i) all the necessary data for the consultant's assignment

(ii) unlimited telephone, fax and mail services.

(b) The consultant will provide:

(i) own living accommodations

(ii) personal computer equipment

(iii) office space and furniture

(iv) office equipment (list to be prepared)

(v) clerical and translation services

(vi) own office supplies

(vii) own transport

Deliverables

13. Time Schedule. The initial period of assignment will be for 6 weeks followed by quarterly missions throughout the life of the project for a total of approximately 28 person weeks. The Consultant will complete the initial report within two months after the effectiveness of the project. Quarterly reports should be provided within two weeks after the conduct of the mission to the country by the Consultant.

Qualifications

14. The Consultant shall submit a technical proposal including the suggested methodology and time frame, a staff list, the CVs of the staff proposed and the company’s experience in particular in conducting reviews of institutional procedures.

[1] The Southeast European Cooperative Initiative (SECI), consisting of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Hungary, Moldova, Romania, Slovenia, the former Yugoslav Republic of Macedonia, and Turkey, was set up in December 1996 to promote regional economic and environmental cooperation among the countries in the region. Improvement of border crossing conditions is of high priority for free transit, for more reliable trade and investment and for more efficient fight against corruption and smuggling. Some of the participants were countries at war and gained recently their independence. External assistance was put in place by UN-ECE, the US government and the governments of Italy, Austria, Greece, and Turkey.

[2] The European Union, the European Conference of the Ministers of Transport (ECMT), the International Road Transport Union (IRU), the UN-ECE, the World Customs Organization (WCO), and the World Bank are some of the international organizations that have recognized the issue and started addressing it.