Progress Report 4

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Support to the Integration of Ukraine in the Trans-European Transport Network TEN-T 4th Progress Report 10. APPENDIX C: Executive Summary of the border report section Interim Report 7.1 The ToR require the Consultant to examine the needs and measures for unification of cross border technologies with EU standards, to propose measures to improve multimodal (assumed to be intermodal) operations near border areas and to identify priority infrastructure and collaboration developments. The client for this project is the Ministry of Transport, thus compliance with the ToR poses significant difficulties, given that border responsibilities are predominantly concentrated within other Ministries. This Interim Report provides an initial assessment of the overall border crossing environment, profiling the current situation and highlighting some of the key issues needing to be addressed later to facilitate trade and transport movements along an extended TEN-T network. It attempts to balance the institutional perspective, with the current day-to-day experience of border users. 10.1 Part 1 Four types of border crossing were initially evaluated – airports, seaports, road crossings and rail crossings. With regard to international airports there have been major improvements in passenger processing and the methodology and performance are broadly compatible with those in the EU. Clearance of freight remains suboptimal, despite being the premium service level. However it is clearance of freight at the country’s main seaports which represents a key problem area which is adversely affecting the national trading performance and increasing transaction costs. This is reflected in high cargo dwell times, especially in the main container terminals. Import containers stay within these facilities for 22-25 days following discharge, more than double the EU average. Clearances at the road borders tend to have the highest profile because of its public interface in terms of passengers traffic. Long delays can occur at the western borders, especially with Poland and to a lesser extent Hungary, at weekends and holiday periods due to the ‘peaking‘ effect, when processing demand significantly exceeds processing capacity, probably on both sides of the border. Slow clearance processing of freight traffic also leads to long queues of trucks on the border approach roads. Passenger rail clearances are broadly in line with EU practices, but there are delays in freight traffic although these may not be critical due to other potential operational delays. The problems at the borders tend to be a manifestation of more general issues in the border clearance environment. The first is the number of organisations present. In the EU the numbers have declined through new approaches such as single window and integrated border management techniques, whereas in Ukraine stakeholders are indicating the opposite trend. International surveys confirm this situation. This growth is perceived to be partially based on the potential ‘opportunity’ to extract revenue on imports, rather than on identified need for such services. The next major problem is the high documentation requirements, double that required in OECD countries. It takes time to collect all these various documents, with surveys confirming that the major delays in clearances is the time taken to collect and submit the documents rather than the actual physical processing. In trade facilitation there is a simple formula: more border organisations = more complex border clearance procedures = delays obtaining all signatures and stamps = additional costs + border congestion. The relevant border legislation is substantial and complex, directly resulting in inconsistencies of its application by the authorities and lower levels of compliance by stakeholders who often do not understand all the requirements. This is made more difficult by additional legislation being issued at short notice. This caveat is a potential governance concern. Corruption is relatively common at most borders, including both coercive and collusive fraud. Whilst this is mainly institutionally based, some traders can benefit from the governance problems and are also party to it through financial irregularities, such as revaluations. Customs now officially acknowledge this is a problem area that needs to be addressed. The widespread application of IT technologies is limited in many cases by connectivity and utility problems, especially at the rail and more remote road borders. This potentially restricts the introduction of more advances techniques, such as risk management, single window etc. More importantly most IT applications are transaction recording rather than processing systems, thus there is duplication between the automated and manual approaches. Each border organisation has its own 36
Support to the Integration of Ukraine in the Trans-European Transport Network TEN-T 4th Progress Report isolated system making interconnectivity difficult. Indeed, most border related data is considered ‘secret’ and the concept of sharing data is not fully supported by the respective organisations. The emphasis in border operations is principally concentrated on authoritarian control and revenue generation, rather than trade facilitation as promoted by international conventions. This approach provides limits the scope for effective consultation with stakeholders and merely reinforces current negative attitudes towards the border authorities, not all of which is fully justified. Stakeholders, being the users of borders, are not yet perceived as full ‘partners’ by the authorities in the progression towards more user-friendly and efficient border operations. The ports represent the maritime border crossings and are the country’s primary trade gateways. As a result, constraints at the ports would be expected to have the most impact on the national trading performance. In addition to the general constraints highlighted above, there are a number of additional issues contributing to border delays. The first issue is the presence of appreciable volumes of disputed or abandoned cargoes. This is cargo on which there may be a technical dispute on ownership or definition of product, shipments awaiting resolution of the customs re-assessment/dispute procedures, importers with financial problems, food products without the necessary certificates etc. The result is the goods are often abandoned. An additional factor has been the financial crisis resulting in more problems in clearance. The current Custom’s approach to the removal and sale of such shipments is ineffective and resolution of how to deal with this type of cargo will become increasingly important to avoid major congestion at the container terminals in 2010. An additional constraint at the ports is the high percentage of cargo cleared within the port boundary, whereas in the EU it is mostly outside. This is mainly due to the lack of through Bills of Lading, traffic imbalances, high demand for ‘local‘ clearances and the problems inherent in the current inland clearance regime, which almost involves a duplicate clearance. The current system of on-dock clearances is supported by the port administrations as it generates revenue to them. There are no appreciable incentives to clear off the dock whilst there are plenty of potential disincentives. The problems of the road borders are based on a combination of processing times, capacity and accessibility. Processing times is the time from entry to exit of the border control zone. Passenger processing is slower in the Ukraine than in much of the EU, mainly due to the need for the driver, and sometimes the occupants, to exit the car for processing. Freight processing is extended due to the high documentary requirements, numbers of agencies present and high examination levels. Processing capacity is determined by a combination of infrastructure and personnel. As regards infrastructure, for passenger traffic this is the number of processing lanes and for freight traffic it is the parking capacity of the freight yard. As regards personnel, this dictates the number of processing points active concurrently. The peaking characteristics of the passenger traffic can result in shortages of processing lanes, but it has been noted that even at these peak times some processing lanes are unmanned. For freight, the key manning problem areas are registration, examination and assessment, as these tend to dictate overall transit speeds as they are the most time-consuming elements of the clearance. Availability of personnel in the smaller agencies has also been sited as a problem. The third key feature is processing accessibility, which addresses the issue of the ability to physically reach the processing area. Accessibility is dictated by the combination of processing times and processing capacity which results in a given flow rate into and out of the control zone. As soon as the processing demand exceeds the processing capacity, queues will start to form along the approach roads. There are lines of freight vehicles outside all the main border crossings in Ukraine and significant car queues at peak periods. This accessibility problem is not solely determined by the processing times and capacity of the Ukrainian facilities. In the outbound direction, if the partner border post cannot process the traffic as fast as the Ukrainian authorities can, then there is a build-up of traffic in the ‘no-mans’ land between the two border posts, thus the Ukrainian border post can become congested due to problems on the other side. Indeed in Part II this is highlighted as the key problem at the TEN-T borders The peaking of passenger traffic is caused by a number of factors. The price differential on certain goods, such as fuel and alcohol, encourages ‘visitors’ at weekends. This artificially increases volumes within a relatively short time window, thus resulting in peaks when processing capacity exceeds processing demand. It also causes back-up from the EU facility due to the extra inward compliance checks. In addition there are the holiday periods where overall volumes increase significantly. The EC has been actively involved in infrastructure development at the road borders, especially at Yahodyn, Chop and Uzhgorod. However, development of the road borders is complex and multi- 37
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Progress Report 4

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