Written by Cecilia Viscarra,
Article No. 61 [UNCTAD Transport and Trade Facilitation Newsletter N°87 - Third Quarter 2020]
Although international trade is often associated with private companies, it also involves non-profit organizations exporting or importing goods for implementing development projects or carrying out humanitarian actions in affected territories. Non-commercial transactions do not really mean that import-export procedures are simple. On the contrary, they can be challenging for authorities, service providers at border crossings, shippers and consignees who are sending and receiving donated goods.
This article illustrates these challenges through the cases of the national cycling federations from Nicaragua, Ecuador, Chad and Mongolia, experiencing difficulties when receiving cycling equipment donations from international cooperation programmes. It also shows how implementing trade facilitation measures can ease non-commercial transactions.
National federations and the trading process of donated goods
Almost 200 nations worldwide have a national body –federation or union– to govern, promote and develop different cycling disciplines in their territory. In emerging countries, national federations are often run as non-profit organizations with little financial support and led by passionate members on a volunteer basis.
In order to train professional athletes and help them compete in international events, support is needed from international cooperation programmes such as Olympic Solidarity or the International Cycling Union (UCI) Solidarity Programme. The latter supports national cycling federations with training and equipment donations. Through donations, the UCI has provided hundreds of bicycles to athletes from emerging cycling nations since the establishment of its solidarity programme in 2010. Professional bicycles, spare parts, safety equipment, cycling kits and sports gears are shipped from Aigle, Switzerland to different countries every year.
The overall shipping process of donations starts with bicycle assembly by UCI’s World Cycling Centre mechanics. Boxes with the equipment are prepared and then handed over to the freight forwarder, who deals with all export formalities and the transport by land, sea or air to the destination. The Bill of Lading is prepared by the freight forwarder. This document is sent to the national federation acting as consignee, together with a letter describing the content of boxes, estimated value, and attesting of its European origin and that goods are not intended for commercial purposes. The national federations undertake the import process and deal with customs formalities for clearance and release of equipment in the country of destination.
Challenges faced: the national federations’ perspective
Challenges confronted by national federations are described below as short cases drawn from testimonials.
The Cycling Federation of Nicaragua
The national federation of Nicaragua opened a BMX cycling school together with the Ministry of Sports in 2019. Bicycles, helmets and cycling gear were donated by the UCI Solidarity Programme to support the school functioning. The equipment was sent by air to the Managua Airport, and unfortunately, goods stayed for more than a month in Customs depots at the airport.
Indeed, some additional documentation was requested in order to get tax exoneration applied to non-commercial transactions. “The process for clearance of goods was not comprehensible from the beginning”, indicated the President of the federation. Details that were not initially communicated required clarifications.
For example, this was the case of the requirement to add to all documents the acronym IND (Instituto Nacional del Deporte: the governmental body that cooperates with the federation to manage the BMX school), which delayed the process. Another example was the obligation to use a Customs agent, which increased the overall costs of the import transaction. With clearance fees and storage charges, the total cost reached 25% of the value of donated goods.
The Cycling Federation of Ecuador
The national federation of Ecuador received in 2019 road and track cycling bicycles to support the development of its high-performance national team. It faced two challenges during the import and release of equipment processes. On one hand, the national federation had to engage a national certified Customs agent to conduct the process. As published in the webpage of the Customs Administration, only importers registered in the ECUAPASS system could handle imports and assist on related formalities. This entailed a cost around 2’000 USD, more than the value of the equipment sent.
On the other hand, they faced complex formalities to get the tax exoneration for the donated equipment. For instance, they were requested to present a letter signed by the highest authority of the UCI to certificate the non-commercial purpose of the transaction. In addition, the document had to be accompanied by a sworn declaration from the UCI, stamped by the Ecuadorian consulate in Switzerland and dated before the goods were shipped. This requirement was impossible to meet because goods were already in the consignee country. Finally, to get deductions from other duties, the federation had to submit additional, and sometimes duplicated, documents (e.g. statement of receipt, attestation of non-commercial transaction, certificate of non-profit organization and list of athletes benefiting of the cycling equipment).
The Cycling Federation of Chad
Chad has a very active and engaged national federation that works to promote cycling among youngsters. The Cycling Federation of Chad was granted ten professional bicycles and cycling kits for the elite national team. The federation’s president considers that the process to get the six boxes from the port of destination was “complicated, long and more expensive than planned”.
It was complicated as the federation was confronted with “knowledge gaps of customs agents, who seemed not to know how to apply tax exoneration and release of goods intended for non-commercial purposes”. In addition, the limited experience of the national federation, made the overall process long: six weeks to get the bicycles and cycling kits from warehouses, instead of one week, initially announced by Customs officials. Moreover, the federation had to request different certificates from the governmental sports authorities and some help to expedite the process. The federation had to use a Customs broker –highly recommended by the authorities– to get tax exemption and finalize the release process. The latter was more expensive than planned and the final cost of the release of goods reached around 30% of its value. In addition, during the long waiting period in the warehouse some cycling kits disappeared and could not be recovered.
This challenging experience did not undermine the enthusiasm of the Fédération Tchadienne de Cyclisme, which will request further assistance in cycling equipment dotation for young athletes in the years to come. Besides, the national sports and cultural authorities will implement a facilitated procedure to request certificates for tax exemption on donated sporting materials.
The Mongolian Cycling Federation
The Mongolian Cycling Federation promotes amateur and professional cycling throughout its territory. It was granted ten semi-professional road cycles for its regional associations, under the auspices of the UCI Solidarity Programme. This federation faced challenges on release of goods upon arrival and on tax exemption.
First, clearance procedures were unclear. Additional documents were required from the transport company, most of the time containing the same information. A contract by a transport company was also requested, which was not clearly indicated from the beginning of the procedure. Then, although the information is published on the national authority web page and there is an enquiry point, the Mongolian Cycling Federation could not get enough information on the law of tax exemption on donated goods.
Trade facilitation measures can help overcome obstacles to trade of donated goods
Delays in receiving donated equipment can have negative effects in the implementation of training programmes or the organization of cycling events, hindering the development of cycling worldwide.
Trade Facilitation principles of simplification, standardization and harmonization of export, import and transit processes could assist national authorities in implementing modern solutions to facilitate international trade. More concretely, the WTO Trade Facilitation Agreement (TFA) foresees specific measures aimed at expediting the movement, release and clearance of goods. Those measures may also ease non-commercial transactions.
The table below matches the challenges described by national cycling federations above with trade facilitation measures that could be helpful to implement to overcome obstacles to trade mentioned in this article.
Obstacles to international trade
TFA measures to overcome challenges
Regulatory and policy issues
Information on import procedures and tax exoneration on non-commercial transactions was unclear and not always easily accessible
Trade-related information shall be published and be available in a non-discriminatory and easily accessible manner in order to enable governments, traders, and other interested parties to become acquainted with them (Art. 1.1)
Information on procedures for importation, exportation and transit, and forms and documents required for these transactions shall be available and updated through the internet (Art. 1.2)
Enquiry points shall made available to answer reasonable questions from traders and other interested parties on trade-related matters, inter alia, import-export procedures, applied rates of duties and taxes (Art. 1.3)
Complex bureaucratic procedures for release of donated goods and for tax exoneration on non-commercial transactions
Requesting unnecessary and duplicated documentation from consignees (signed letter, institutional certification, a sworn declaration to confirm that goods were not intended for commercial purposes and list of beneficiaries of cycling equipment)
Vague regulations (Bill of Lading subject to interpretation by staff at the port of destination)
Fees and charges imposed on or in connection with importation and exportation shall be periodically reviewed with a view to reducing their number and diversity. Fees and charges for customs processing shall be limited in amount to the approximate cost of the services rendered (Art. 6)
With a view to minimizing the incidence and complexity of import, export and transit formalities and to decreasing and simplifying documentation requirements, such formalities shall be reviewed. Documentation requirements shall be applied in a manner that aims at reducing the time and cost of compliance for traders and operators (Art. 10.1)
Need to hire customs brokers, increasing the overall transaction cost
The use of customs brokers shall not be mandatory (Art. 10.6)
Lack of knowledge of service providers (customs agents perceived as not knowledgeable about procedures for release and clearance of donations), and national federations
There are no specific trade facilitation measures to strengthen the professionalism of staff working at border posts, ports and Customs offices. However, national administrations may provide training to officials and raise awareness to better handle clearance processes and improve the efficiency of trade procedures.
National federations may want to share best practices among them to anticipate challenges
Infrastructure and equipment issues
Deficient security system at the Customs depots (Chad)
Should national authorities be committed with easing international trade and improving the way of doing business, infrastructure improvements need to be considered. This may include strategic location, flexible working hours and improved security systems and practices of Customs depots. Those measures may be included in the trade facilitation national plan and budgeted accordingly.
Conclusions and way forward
The experience of cycling equipment donations shipped from Switzerland to Nicaragua, Ecuador, Chad and Mongolia shows, in a practical way, few obstacles to international trade. As summarized in the table above, issues are related to access of information, complex bureaucratic procedures for release of donated goods and for tax exoneration, the compulsory use of customs brokers and knowledge gaps of service providers. Many of those obstacles could be addressed by implementing trade facilitation measures, including those from the TFA, article 1 on publication and availability of trade related information, article 6 on disciplines on fees and charges and article 10 on formalities connected with importation, exportation and transit.
Preparing the process shipping the goods is also important. National federations lack of resources and expertise on import procedures and should work with the UCI, the freight forwarder and national authorities to identify all requirements to get equipment cleared and to obtain exemptions and deductions applied to non-commercial transactions. Publishing this information in the internet would greatly facilitate this task.
A dialogue between national authorities in charge of trade, sports and Customs administrations could also help find solutions, as it was the case in Chad with the implementation of a special procedure to request certificates for tax exemption on sporting donations. Finally, national federations may want to share between them best practices in dealing with import procedures of equipment donations to anticipate challenges when it comes to receive equipment donations to develop cycling in their countries.
Cecilia VISCARRA MOSER¦International Development Consultant¦ [email protected]