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SITPROSimplifying International Trade

The Cost of Paperin the Supply Chain:

Project Hermes

Perishable Foods SectorResearch Report

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3/60SITPRO: The Cost of Paper in the Supply Chain 1

The Cost of Paper in the Supply Chain:

Project Hermes Perishable Foods Sector Research Report

1. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.1 Study aims and objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.2 Study approach and methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.3 Specific research commodity range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3. The Perishable Food Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.2 The core product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.3 Supply chain participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.4 Size of industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.5 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.6 Perishable food supply chain structure in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3.7 The market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.8 Costs and charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.9 Documentation overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.10 Paper wastage and the environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4. Industry Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.1 UK Perishable Food Imports 2005 - Total 25,960 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.2 UK Perishable Food Exports 2005 - Total 10,761 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.3 UK Imports - Agriculture and Food (Source: World Trade Organisation Trade Statistics 2005) . . . . . . . . . 164.4 UK Exports - Agriculture and Food (Source: World Trade Organisation Trade Statistics 2005). . . . . . . . . . 16

5. Myth vs Reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

5.1 General administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5.2 Export . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5.3 Import . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

6. UK Government Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

7. The Cost of Doing Business in the UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

7.1 Costs - Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

8. Quoted statistics and examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

9. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

10. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

10a. Import Procedures and Documentation - an outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

10b. Export Procedures and Documentation - an outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

10c. Transit Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

10d. Duty Relief Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

10e. Statistic Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

10f. World Bank: Doing Business 2007 Extract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

11. Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

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4/60SITPRO: The Cost of Paper in the Supply Chain2

1. Executive Summary

The objective of this report is to assemble a set of data to describe and value some of the main issues which arise

out of using the current documentation processes and the impact on upon both the industry and the government

departments concerned with regulating the import and export of perishable goods. This is a substantial sector of

the economy, with the core perishable market GDP for imports/exports worth over 36 billion, and creating

considerable employment and revenue generation in the retail and catering sectors.

In the initial approach to the study it was determined that an attempt should be made to explore the collection of

primary data where that would add to the existing body of knowledge on the perishable food supply chain. In

particular, in order to be able to make an estimate of the cost to the industry and to then quantify the significance of

the introduction of standards-driven e-documentation and single source electronic data management, it would be

necessary to review and collect documentary and financial information on sectors of the industry for which little

published information was available.

Our research revealed, perhaps for the first time, the underlying cost of paper documentation to the UK perishable

food supply chain.

The most significant factors we managed to establish in our chosen commodity sectors were:

The volume of paper in the perishable food supply chain from start to finish:

it is estimated that the UK import perishable food supply chain generates 1 billion pieces of paper annually;

The amount of duplication: duplicate consignment data is keyed in at least 189 million times every year;

Over 90% of the paper documentation used in the perishable food supply chain is destroyed;

The cost of document-related administration in the sector of the perishable food supply chain we investigated is

estimated to be around 11% of the supply chain value per annum;

No one party in the supply chain sees or manages the whole movement. Some activities, transactions and

costs are invisible or hidden to participants;

The cost of delayed, incorrect or missing paperwork costs a little over 1 billion per annum for the sectors

studied;

The total cost of generating paper documentation for the perishable sectors studied (4.5 million document sets)

is estimated at 126 million per annum;

The cost issues associated with paper documentation results in the consumer paying considerably more for the

products than is necessary at the point of purchase.

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The bulk of the costs were initially invisible, wrapped up in the day-to-day processes that are part of the export and,

in particular, the import processes and procedures. The cost of generation, printing, administration, collection and

delivery, entering data from the documentation and obtaining certificates, copy documents, telephone calls, e-mails

and general verification exact a heavy burden on business and competent authorities.

Few operatives appreciate the true cost of deferment, for example, in interest, cashflow and eventually unclaimed

monies. It costs the industry 346 million a year.

We examined the cost of couriers, which are frequently used to collect and deliver paperwork, and found that these

dedicated couriers were supplemented by an equal number of staff who also ran around collecting paperwork. Our

estimate is that it costs the studied industry sectors 112 million annually, although the true figure may be higher.

Man hours expended within businesses on entering data and resolving issues was another extraordinary example

of expenditure. Nearly 13 million man hours in 2005 were estimated to have been expended by personnel entering

data, chasing late or missing documents or preparing claims for deferment monies deposited with HMRC. Thatequates to over 354 million a year.

We looked at the impact of a short delay inobtaining documentation or clearance due to inability to present

documentation in suitable time at the critical point of importation. In some respects the damage was greater. After

waiting time, extra transportation, the cost of holding shifts at the packhouse or importers warehouse, the cost was

found to be between 200% and 400% of the original consignment cost. We found that because of the delay in

billing this was not always passed on or recognised. This was one of a number of supplemental costs we

experienced.

In conclusion our examination of the perishable food supply chain led us to believe that paper documentation costs

the UK perishable food supply chain studied 1 billion per annum. With the documented experience of other

countries and our own analysis we estimate that with the introduction of e-documentation and shared data the

industry could save at least 700 million - or around 70% of the costs.

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2. Introduction

2.1 Study aims and objectives

This document represents the first part of an exercise to pilot the introduction of UNeDocs (United Nations

electronic trade documents) standards-driven electronic documentation and data distribution using single window

principles through the perishable foods supply chain. The report examines the issues and economic significance

associated with current documentation used within the global supply chains for consignments entering or leaving

the UK via air, sea and road.

The overall objective of this report is to assemble a set of data to describe and, as far as is possible, value some of

the main issues which arise out of using the current documentation processes and the impact upon both the

industry and the government departments concerned with regulating the import and export of perishable goods.

Trends and developments in the industry itself and in the industries and regulatory framework that influence theperformance of the sector were to be identified to help form a view on the future potential for implementation of

document standards and the financial benefit arising for the UK perishables industry and its influence on

commercial advantage within the global supply chain market.

This report is designed to summarise the cost and opportunity to the industry through the presentation of data and

information; as such it represents an initial review. It brings together descriptions and views of the supply chain

industry from different perspectives. It does not follow through any argument for changes in supply chain

processes, government policy or the regulatory framework but it is suggested that these aspects could be the

subject of a further study or review.

2.2 Study approach and methodology

In the initial approach to the study it was determined that an attempt should be made to explore the collection of

primary data where that would add to the existing body of knowledge on the supply chain industry. In particular, in

order to be able to make an estimate of the cost to the industry and to then quantify the significance of the

introduction of standards-driven e-documentation and single source electronic portal, it would be necessary to

review and collect document and financial information on sectors of the industry for which little published

information was available.

Information was sought from a variety of sources:

an interview programme collected information and views from industry representatives, shippers, airlines, airline

handlers, freight forwarders, road hauliers, express service operators including transit shed operators, general

sales agents and regulatory authorities. This included interviewing overseas sources in five countries across

three continents;

collection and analysis of statistics from a wide variety of sources, including HMRC Trade Statistics, UK trade

statistics, Overseas government trade statistics and data from individual operators within the perishable food

supply chain - from grower/producer to main importer;

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survey of main grocery retailers views.

Accordingly, the report structure reflects the broad aims of the project in:

identifying and describing the perishable food supply chain's principal document-related challenges;

quantifying where possible the types of document issues, why they happen and the frequency in particular

sectors;

factors that affect resolving of the issues;

estimating the cost to the industry of the current system.

Due to time, geography, the focus on the UK, availability and access to information, and the natural dissemination

of the costs and issues, the main research time was spent investigating the import environment. We gathereduseful data from the export environment which has been integrated into this document where appropriate, but, we

were unable to get access to the detailed data we required to make a full assessment across the spectrum of

activity within the export environment.

It should be noted that due to the above limitations and the period in which the project had to be undertaken - the

lead up to Christmas is a peak for the industry - the investigation was naturally restricted to a smaller sampling

than one would normally prefer for such an exercise as this. Therefore, the extrapolated figures contained within

this document can only be a guide to the true cost and may be subject to a positive or negative variation. A more

definite picture could only be obtained by continuing the research over a longer timescale and with a largersampling.

2.3 Specific research commodity range

The range of products covered by the importers and exporters interviewed was broad, influenced by location,

contacts, customers and/or facilities. The range of commodity codes utilised by these operatives included:

02: Meat and Edible Meat Offal;

03: Fish and Crustaceans, Molluscs and other Aquatic Invertebrates;

04: Dairy Produce; Birds Eggs; Natural Honey; Edible Products of Animal Origin;

06: Live Trees and other Plants; Bulbs, Roots and the like; Cut Flowers and Ornamental Foliage;

07: Edible Vegetables and certain Root Tubers;

08: Edible Fruit and Nuts; Peel of Citrus Fruits or Melons;

09: Coffee, Tea, Mate and Spices;

16: Preparations of Meat, Fish or Crustaceans, Molluscs or other Aquatic Invertebrates;

20: Preparations of Vegetables, Fruit, Nuts or other parts of Plants.

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For the purposes of our research the transactions we analysed were covered by the following commodities codes:

07: Edible Vegetables and certain Root Tubers;

08: Edible Fruit and Nuts; Peel of Citrus Fruits or Melons;

20: Preparations of Vegetables, Fruit, Nuts or other parts of Plants.

This particular sector is worth around 9.4 billion a year out of an import total of 25.9 billion in 2005 or 36.3%. On

exports this sector is worth 1.9 billion a year out an annual total of about 10.8 billion in 2005 or 17.6%.

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3. The Perishable Food Supply Chain

3.1 Introduction

The perishable food supply chain can broadly be defined as encompassing all those activities related to movement

of temperature or time sensitive food or food related goods by road, sea and air. There are various activities which

are inter-related but which are also industries in themselves. The principal activities are:

port control and management;

airlines;

shipping;

freight handlers, forwarders and wholesalers;

import/ export agents;

express operators and integrators, couriers;

road logistics operators; storage and warehousing

transit shed operators;

importers/ exporters;

wholesalers, retailers and food processors.

In addition to the above there are numerous related activities supporting these primary providers -ground support

services, IT support companies, charter brokers, packing companies, security organisations, dangerous goods

specialists, government departments, and control agencies such as HMRC.

All of these activities largely rely on paper documents supported by IT systems to enable consignments to move

from one stage to the next through the supply chain.

It should also be recognised that the supply chain is not strictly just perishable products. As part of the

rationalisation of the global supply chain it is now often necessary for importers and shippers to take responsibility

for the export of equipment and packaging to the third country to ensure the speed, safety and controlled

movement of the perishable goods to minimise cost, time and spoilage.

This can involve the export, to a third country of preference, of substantial amounts of plastic, cardboard, insulated

packaging and cooling products, ie gel packs, cooling blankets, insulated containers etc.

3.2 The core product

When the industry refers to perishables this can be quite a broad term and can cover a wide variety of products.

For example, some pharmaceuticals are covered by the term perishables, as they require controlled temperature

environments and therefore constitute a component part of the airline perishable mix.

But what are perishable foods? Perishable foods and products might be a more exact term, but it is generally

accepted that the term covers products which can degrade over time and are sensitive to temperature.

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The general understanding of this category is that it comprises fresh goods such as meat and meat products, fish

and fish products, fruit, vegetables and prepared foods such as salads. But it may also include dairy products,

bread, cakes, biscuits and cereals, sauces, pickles and ready meals.

3.3 Supply chain partic ipants

The global perishable food supply chain consists of a number of different commercial and regulatory organisations

who provide customers with through freight services. These organisations, mainly within the private sector, operate

in a highly competitive environment.

Ports - Air and Sea. Generally the ports act as landlords and infrastructure providers charging landing/docking

fees to the carriers and charging rent to service companies for reception terminals, offices, cargo transit sheds,

transport maintenance workshops etc....

Regulatory Authorities. The role of these organisations is to manage and regulate the import and export of goodsaccording to the laws and directives of their respective countries. They provide a valuable risk management and

revenue or duty collection service acting, effectively, as policemen to the global supply chain.

Shippers / Carriers / Road Haulage, the suppliers of cargo capacity into and out of the UK, are either scheduled

operators, charter operators, freighter operators or integrated carriers.

Freight Forwarders provide a service to shippers, airlines, importers and exporters which originally involved

receiving a consignment of freight from a shipper, arranging its routing, transportation handling and documentation

to either the final receiver or to a foreign airport.

The role of the forwarders has developed over the years with the largest forwarders describing themselves as

logistics providers.

General Sales Agents are appointed by some airlines and shippers to sell cargo capacity on their behalf, thereby

allowing the airlines/shippers to avoid the potentially high fixed costs of sales and marketing.

Integrators provide a door-to-door service, usually using their own road transport, handling, transit warehousing

facilities and aircraft or ships. Normally integrators contract directly with the airline or shipper. They started

principally as express operators, but are now competing more directly with freight forwarders and the airlines and

shippers.

Storage, Warehousing, Regional Distribution Centres (RDCs) provide a whole range of services, from simple

storage through to complex cryogenic environments, packing, processing and ripening facilities on behalf of, or as

part of, other participants in the supply chain.

Transit Shed Operators provide a transit handling service for airlines, shippers and sometimes forwarders. Their

function is to receive cargo, break it (de-consolidate or depalletise) and deliver to truck or vice versa via a transit

shed where customs clearance is required.

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Specialist Air / Sea Trucking Companies provide road transport between the UK regions and the airports / ports,

or continental airports / ports, as well as intra-European services, where trucks substitute for aircraft or ships,

usually to a schedule. Most companies work on behalf of the carriers in servicing the forwarders requirements.

Express Operators provide services for the movement of packages, where the timescales for transit are

measured in hours, by contrast to forwarders whose service transit times are generally managed in days or weeks.

Freight Wholesalers buy capacity from airlines and shipping companies and sell this on to small and medium-

sized forwarders. This enables the latter to buy freight space more economically than they might otherwise by

contracting directly with the airline or shipper.

Importers / Exporters are often the customers at either end of the supply chain, who interface with the grower or

producer at one end and the retailer at the other. Importers and exporters will most often handle the selling and

procurement on behalf of the grower and retailer, as well as being ultimately responsible for the transactions.

Growers / Producers / Wholesalers are the providers of the produce or products to be shipped. These may be

individual farmers, co-operatives or wholesale companies acting as third-party providers or intermediaries.

3.4 Size of industry

The value of the UK perishable food supply chain is estimated at 37 billion for 2005 - imports at 26 billion and

exports at 11 billion, based on WTO trade figures.

3.5 Employment

The perishable food supply chain generates substantial employment for the UK, but with many perishable products

coming from the less advantaged areas of the world, the sector is also creating major employment and income

generation in developing nations too.

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3.6 Perishable food supply chain structure in br ief

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3.7 The market

The UK is a major importer of perishable food products, 21 billion each year based on 2003 figures, which

translated into 74 billion of sales to UK consumers across retail and catering. By 2005 imports had risen to around

26 billion.

The grocery mulitples, with a collective turnover of 120 billion in 2005, now account for 80% of sales of fresh fruit

and vegetables.

By volume the vast majority of perishables are carried by sea with generally only the more time sensitive products

being shipped by air or trucked if the locations are within reasonable distance of the UK.

Even with all the technology and effort available to control handling of perishable food post-harvest mortality can be

acute for some lines. The industry sets spoilage at between 5% & 30% which has been confirmed by our research,

although our research also indicated some products such as soft fruits can exceed those figures and run to 50%.

By the very nature of the perishable food supply chain it is susceptible to demand variations resulting from climatic

conditions. For example, a 5c increase in summer temperatures can result in 150% increase in salad sales. This

has led to the just in time philosophy that drives the supply chain industry.

3.8 Costs and charges

Costs and charges in the perishable food supply chain can vary greatly depending on where the charges are levied

and for what service.

Freighting, handling fees, import and export charges, inspections, VAT, administrative costs etc. all add to the

product unit sale price and eventually the purchase price for the consumer. Ironically the supply chain cost actually

gets lower as a proportion of the overall value of the product as the product value increases. For example:

3.8.1 Cost of supply chain as percentage of wholesale product price (Source: HPL)

64%

80%

70%

93%

High ValueBerries from Chile

Low ValueApples

Tomatoes / Bell Peppers

Potatoes

Supply chain administration - 7%

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Some of the cost of import and export can now be offset by using the simplified procedures made available by the

government agencies. The usage of these procedures can deliver measurable efficiency and financial benefit.

However, although savings up to 3.5% may be obtained this is not realistically available to all importers.

3.8.2 Shipping cost illustration - North Atlantic (Source HPL 2003):

How are the costs distributed in the supply chain? We have used the table below to illustrate the basic costs levied

in the movement of a perishable goods container by sea and the average duration of time expended.

Sequence Time (Hours) Cost US$

Moving container from loading ramp to storage 1 80.00

Container waiting for pickup after loading 48 12.00

Loading container on road trailer 1 62.00

Road transport to port terminal 33 360.00

Transfer from road trailer to stack - 80.00Waiting in stack 50 40.00

Unstacking and transfer to terminal trailer - 88.00

Transfer / loading onto ship - 240.00

Containership travel time (NY to Rotterdam) 154 1840.00

Transfer / unloading off ship 1 192.00

Transfer to stack - 60.00

Waiting in stack / transfer to road trailer 106 90.00

Clearance and inspection 2 10.00

Road transport, port terminal to inland depot 14 220.00

Storage in inland depots 30 -

Moving container to consignee 2 40.00

Total hours / days 442 hrs / 19 days 3,414.00

The equivalent airfreight movement would be approximately seven times more expensive but could be 17 or more

days quicker.

It is estimated that airfreight accounts for the movement of around 30% of all perishable goods and is primarily

used for topping up and very time-sensitive produce.

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3.9 Documentation overview

The perishable food supply chain is generally accepted to be the most complex and hazardous, in terms of

spoilage, goods movement within the global logistics industry. A consignment can also amass a vast volume of

paper documentation as part of its movement from one point to another on a global scale.

In fact, a single complete consignment transaction, from grower to retailer, can comprise up to 150 documents (or

up to 225 pieces of paper) which results in duplicate elements of information being entered up to 42 times during

the lifecycle. If the number of operatives in a consignment transaction increase, which is perfectly feasible in some

product movements where goods are being repacked or processed or where multiple carriers are being used, then

these numbers may be exceeded.

Therefore if one extrapolates these figures for the UK perishable food supply chain, per annum, imports alone

could amount to 1.1 billion pieces of paper and duplicate information being entered over 189 million times for 4.5

million consignments in 2005 based upon HMRC statistics.

This is soon to increase by around twenty documents per ship for shipping supply chains with the introduction of

ship and crew inspections by Port Health. This will increase the cost of documentation further, the burden mainly

being borne by the competent authority and the shipping industry.

Documents can be broken down into two kinds: priority and non-priority documents. Priority documents constitute

those that are required for export or import goods to comply with the regulations of the exporting and importing

countries. Non-priority documents are those that support the movement on a local level i.e. for each commercial

entity involved in the movement of the goods.

The remaining key facet of documentation is the movement of the paper, its captured data and the electronic

messaging that moves up and down the chain in parallel. Rarely is the electronic data shared. This lack of data

sharing, in part due to potential commercial sensitivity and in part due to currently differing use of communication

technology, means the true costs to the supply chain industry are unappreciated. This results in substantial

additional cost to the consumer at the point of purchase.

This research project aims to demonstrate this to business and government.

3.10 Paper wastage and the envi ronment

The wastage of paper is significant, we found that over nine tenths is eventually destroyed.

Document papers

destroyed

14

(6.22%)211 (93.78%)

Document papers

retained

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It is also environmentally damaging. Whilst most of the paper may come from renewable resources a considerable

volume of the paper is NCR (non-carbon reproducing), which involves paper coated or impregnated with chemicals.

This paper is not recycleable and is potentially toxic to the environment. The dyes, bleaches and glues used in the

production of the paper, to enable differentiation of the various parts of a particular document, add to the toxicity

threat.

And, if that is not sufficient, it is then compounded by the printing and distribution costs of all this paper - some of

this paper is even flown or shipped around the world before beginning its journey back again.

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4. Industry Statistics

Based on data estimates available from UK Trade Stats and the WTO for 2005.

4.1 UK Perishable Food Imports 2005 - Total 25,960 mill ion

(Source UK Trade Stats & WTO 2005)

4.2 UK Perishable Food Exports 2005 - Total 10,761 mill ion

(Source UK Trade Stats & WTO 2005)

Meat & Meat Products 14.4%(3,737.7m)

Fish & Fish Products 6.6%(1,700.2m)

Dairy 6.3%(1,641m)

Flowers 3.4%(876m)

Vegetables & Vegetable Products 9.8%(2,535.1m)

Fruit & Fruit Products 11.9%(3,097.3m)

Coffee & Tea 1.6%(413m)

Other 46%(11,960m)

Meat & Meat Products 6.8%(727.8m)

Fish & Fish Products 8.8%(942.4m)

Dairy 6.3%(676.3m)

Flowers 0.5% (48.6m)

Vegetables & Vegetable Products 2.9%(313.6m)

Fruit & Fruit Products 8.3%(892.8m)

Coffee & Tea 1.6%(170.8m)

Other 64.8%(6,988.8m)

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4.3 UK Imports - Agr iculture and Food (Source: World Trade Organisation Trade Statistics 2005)

4.4 UK Exports - Agricul ture and Food (Source: World Trade Organisation Trade Statistics 2005)

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5. Myth vs Reality

Document issues - we dont really have any. We dont see it as a problem!

This was the most common response we received from interviewees participating in the research for this

document.

This response was, by and large, true if one was only focusing on occasions when documentation goes missing

completely. This is rare and, on average, our research has shown it happens two or three time a month at most in

many businesses.

However, ask how often documentation or more specifically priority documents such as required certificates,

invoices or way bills fail to arrive at the same time or in advance of the consignment and the reality starts to

become apparent.

Our investigation has shown clear evidence of document issues which can lead to substantial direct and indirect

costs.

During our research it soon became obvious that there are very few participants who understand the supply chain

from its start to completion. It is by virtue of the fact that each stage understands exactly what is required of them,

that the supply chain works at all. However, the failure of the key drivers of the supply chain to comprehend the

entire system masks the true cost.

Businesses fail to recognise the cost of doing business and have generally become blind to charges arising fromdealing with paper in the process, primarily because of time and habit. This is a problem that particularly afflicts

importers and larger forwarders, in particular, where our research showed that they were generally unaware of the

extra costs which could erode away their margin and the staff considered the time expended chasing a late

certificate or invoice all just part of the job and were pre-occupied reacting to and resolving this type of situation.

We also found the industry had compounded the problem, especially on imports, by tending to consolidate costs

and charges on invoices, thereby rendering them all but invisible to the recipient.

But the future could look brighter. The experience and resulting data collected by both government agencies and

commercial organisations, in the Far East in particular, highlights the benefits that are attainable both economically

and in process efficiency.

What is more, it is possible to find a good example of the impact of implementing simplified procedures, electronic

documentation, managed data distribution and cost reduction a lot closer to home. The European Union is a direct

indicator of what can be achieved given the political will and the tools and framework are provided with which to

work. There are those who will remember the cost of regulatory compliance when trading with our European

neighbours - it now effectively costs substantially less than historically to transport goods around the EU and trade

with the 27 members and some approved fringe countries.

So, what is the cost of documentation in the supply chain?

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5.1 General administration

This section covers the cost of the administrative elements of processing the data from the paper - the entry of

critical data into the array of information systems in the supply chain.

Research time has not permitted us to evaluate, at this point, what the UK government agencies may be able to

fully achieve. However, there is evidence to indicate that there could be very substantial savings, although further

research and analysis is required.

From the interviews and research so far undertaken we have been able gain a detailed insight into the process of

receiving and entering consignment documents at two critical points: the freight forwarder and the importer.

Freight Forwarder

At the freight forwarder it took 3-5 minutes to enter the necessary data from the paperwork per consignment and

generally tended to be committed in batches from a limited number of documents, the airwaybill in this instance.

This could be costing the freight forwarding industry over 7 million to enter data a year:

4.5 million import consignments x 4 minutes x 23.80* pmh = 7,140,000.00 p.a.

*This is a commonly used man hourly rate of 34.00 converted to sterling.

Importer

At the importer it took much longer as there was more information to be input and from more sources. Here the

process could take 3-4 hours for one person to process the paperwork for 8-10 consignments - 24 minutes perconsignment.

This could be costing importers nearly 43 million to enter data a year:

4.5 million import consignments x 24 minutes x 23.80* pmh = 42,840,000.00 p.a.

*This is a commonly used man hourly rate of 34.00 converted to sterling.

e-Documents and pre-populated data from a single window system could reduce this process to an estimated 9

minutes per consignment, a saving of more than 50% or the potential for twice the productivity.

5.2 Export

Analysis of the export process in third countries confirmed it can take 7-10 days to assemble the paperwork

required to export goods from a third country into the UK. The example investigated was fruit from Africa where

assembling the required certificates, declaration and transport documentation took ten days and involved four

government agencies and five logistics providers. The time taken directly impacts on the shelf life of the product,

effectively removing up to 10 days from the selling period - revenue that cannot be replaced lowering the potential

margin to be realised from sale.

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each day in tr ansit for vegetables and fruit is equivalent to lowering their prices by 0.9 percent

Source: US Agency International Development, Calculating Tariff Equivalents for Time in Trade, March 2007

Authors of the World Bank Policy Research Working Paper, Moving Forward Faster: Trade Facilitation Reform and

Mexican Competitiveness, found that each additional day that a product is delayed prior to being shipped reduces

trade by at least 1 percent. Each day is equivalent to a country distancing itself from its trade partners by 85 km on

average. Delays have an even greater impact on developing country exports and exports of time-sensitive goods,

such as perishable agricultural products.

If these claims are to be believed since David Hummels 2001 study Time as a trade barrier, which concluded that

the average cost per day of shipping time is approximately 0.5 percent ad-valorem, and the conclusion of the US

AID report of 2007 was that the cost of one days delay has risen by 0.4%. For a company importing 10,000 of

goods, an average delay of just one additional day, which cost 50.00 in 2001, would now cost 90.00.

Our research also flagged up late application by exporters or their agents, particularly in South America. One daysdelay in application for bank underwriting frequently extends to three days delay in making the documentation

available or able to be dispatched. This often results in the paperwork for a consignment following on after the

goods have departed or perhaps more critically delaying departure completely with a subsequent delay in arrival at

the importing destination. In the case of sea freight this situation may be recoverable more easily but in the airline

industry the delayed paperwork is forwarded by post which can take 10-14 days to arrive and therefore be the

same number of days behind the consignment movement.

When the goods movement includes shipping and road transport the delays in documentation at the exporting

destination can result in a major obstacle. This was illustrated by a consignment moving from Egypt to the UK viaGreece. Initially the freight was carried by sea from Egypt to Greece where the consignment was off-loaded for

trucking to the UK. Unfortunately the consignment departed Egypt without its associated paperwork. Upon arrival in

Greece the T1 declaration was delayed as was the consignment. Three days were lost while the required

paperwork, as faxed copies, was assembled and the required full duties payable guaranteed. Once these

formalities were complete the goods were released. The original documentation has to date not been forthcoming

and it is unlikely the higher duty paid will be able to be reclaimed. This amounts to a little less than 10% of the

consignment at a value of 800.

A useful reference from The World Banks Doing Business 2007 report, the section on Indicators, contains useful

information on the time to export etc for 129 countries - see Appendices 10f.

5.3 Import

As already outlined it is rare for documents to be lost completely, but it is a more frequent occurrence for

documents to be missing at the time of arrival.

Our research showed that revenue is more easily eroded at this point than almost anywhere else in the supply

chain short of total destruction of the consignment. This is mainly due to the nature of the costs. They are much

more opaque and enshrined in the process itself.

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Document release

The first issue to become apparent was the actual document exchange process upon arrival. This involves the

release of the documents by the shipper or airline to the freight forwarder via the cargo handler. The documents

normally collected by a courier or representative of the company are then taken back to the freight forwarder

offices for processing of the declarations. Once the declarations have been initiated the physical documents are

then delivered to the regulatory authorities and the necessary clearances are then obtained.

This process averages 3 hours and carries a not insignificant cost. Firstly, there is the collection of the documents

from the handler. This process averaged a little short of 10 man hours to complete by either a member of staff or a

special courier service, as employed at airports. The average cost for this collection process was 278.00 per day

taking into account courier fees, man hours for staff and transport costs. The average number of trips per day to

collect documents totalled 7.6 or a cost of 36.58 per trip. If this is extrapolated across just freight forwarders it

could be costing nearly 112 million a year. Staggering though this figure is further detailed examination across a

wider sample of companies could reveal an even higher cost to the industry.

Calculation:

278.00 per day x 365 days x 1100 freight forwarders = 111, 617,000.00 p.a.

We did encounter one example where three couriers a day were being sent down from Lincolnshire to Sheerness

and Heathrow to collect paperwork at a cost of 250 per courier. This was deemed to be isolated and did not

warrant inclusion in our data calculations.

DefermentIt was the next phase of the process which proved even more enlightening. As previously stated most interviewees

did not apparently experience issues with documentation, in relation to delays with consignments. This seemed

improbable when weighed against the amount of circumstantial evidence but it also seemed unlikely that traders

would ignore the losses if it were true.

Further investigation was required and piece by piece the reality became apparent. The problem lay in the

declaration. The industry view was right, generally the documentation didnt delay the movement of the goods, and

even if it did - it was not for too long. This was because under the present procedures if the original documents are

not present the goods can still clear and move on copies, as outlined in Appendix 10a.

The real cost was in the time expended to obtain the copies and implement the temporary clearance, the additional

duty payable because the duty preferences are removed and the requirement to guarantee the duties via a

deferment account. There are often costs incurred in the reorganisation required to bring the consignment back on

track. This can incur substantial costs which we found to be commonly between 200-400% of the value of the

product. This was illustrated by an example of a consignment of vegetables with a value of 2,200.00 which was

delayed due to documentation by 7 hours. The cost of overtime, reorganisation of logistics, and waiting time

amounted to over 8,000.00. This was just one of a number of supplemental costs which we were able to identify

that requires more research and analysis.

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Detailed analysis of the documentation and relevant company data of two importers and two freight forwarders

revealed the frequency of this situation and the cost. Our initial frequency expectation from the interviews was less

than 1%. This was very quickly revised to 10% and when closer examination of the availability of priority

documents was made this went as high as 60% depending on the country of origin.

From our research we would anticipate, on average, each importer could expect to encounter 36 document issues

every month.

Our results showed that across 562 consignments by sea and air the following applied:

Country of origin Transport Type One or more priority documents

were missing by % of consignments

Chile Air / Sea 6%

Peru Air / Sea 8.5%

Brazil Sea 62%

South Africa Air / Sea 24.2%

United States Air 19%

Thailand Sea 2%

Egypt Sea / Truck 54%

Ghana Air 29%

Source: Consultants research

As a consequence of unavailable documentation, the importers we analysed are, on average, locking up in excess

of 82,000 of cashflow per month each in their deferment accounts. This could amount to over 265 million across

the whole industry per month.

Calculation:

Average Monthly Deferment x Registered Importers = Total per month

Therefore:

82,000 x 3200 = 265,600,000 p.m.

Provided the documents are produced by the 15th of the following month the preferential duties paid can be

reclaimed, although any costs incurred due to the depletion in cashflow ie use of overdraft facilities etc cannot be

reclaimed - we calculate from our research this amounts to an average of a little over 1000, which extrapolated

across the industry would be a total of 38.4 million a year.

Calculation:

1000 x 3200 x 12 = 38,400,000.00 p.a.

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32% (26,240) is reclaimed by the 15th of each month. The remainder falls into the second option available to

importers which is the retrospective reclaim for documents which do not turn up for up to four months after the

initial declaration. This accounts for a further 57% (46,740) for each month leaving a residue of 11% (9,020)

which is not reclaimed.

Often the duty reclaim is not being paid for up to 90 days after submission because of the volume of paperwork

HMRC have to deal with.

The preferential duty rate is normally between 6.9% - 12.3% or about 8% as an average. So, for example, a

10,000 consignment may be incurring an additional 800 of duty. The situation is further compromised by the time

span and administration required to reclaim the duty. The importers analysed were not reclaiming just over 9,000

of preferential duty per month. When this figure is extrapolated across the perishable food supply chain it is seen to

be absorbing or passing on additional costs of as much as 346 million per annum.

Calculation:

Unclaimed average deferment 9,020.00 per month x 3200 importers x 12 months

= 346,368,000.00 p.a.

If the time expended throughout the entire initial import transaction is taken into account the cost rises further. This

kind of situation will use up 4-5 man hours chasing copy documents over anything up to 3 days and occasionally

more. It may then take a further 4-5 man hours to make the reclaim. The total cost to the importers for this running-

around is just over 263 million per annum.

Calculation:

Average 8 hours x 23.80 x 3200 importers x 36 average issues x 12 months

= 263,208,960.00 p.a.

The freight forwarders will also expend 3-4 hours, at a cost of 45 million per annum.

Calculation:

Average 4 hours x 23.80 x 1100 forwarders x 36 average issues x 12 months

= 45,239,040.00 p.a.

An equal amount of time may also be expended by the competent authority to ensure the documents are not

present. Then there is the time and resources costs incurred by the export end of the supply chain providing

duplicate documents.

In shipping, the importer may also incur a demurrage charge from the shipper due to delays not only loading but

also unloading when the consignment arrives. This was costing one importer 5,000 a week on incoming

consignments from one destination due to consistent failure to provide documentation at either end.

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The government agencies also have issues surrounding the paper documentation. Port Health officers use up

many man hours validating certificates and other priority documents. Personnel are tied up having to check pre-

faxed signatures from third country regulatory organisations against those on export certificates. This can use up to

2-3 man hours when consignments arrive from some countries to check just one document as there may be

upwards of several hundred signatures to be compared. Port Health officers could be at least twice, if not more,

productive if e-documentation and audited single window systems were available to them.

Then there is the physical storage of the original document by the government agencies such as Port Health. The

requirement to keep the documents for a number of years enforces the need for substantial storage space at

significant cost as well as time, and therefore further cost, to recover documents at times of inspection.

This problem also applies to freight agents etc who keep copies of consignment documentation. Swissport are one

of the few organisations who have invested in systems to scan and store documentation in an electronic storage

and retrieval system at some cost, simply to save space. This is a good example of storage cost being high,

especially as a lot of commercial businesses reside on some of the most expensive land available by necessity ofcarrying out their day-to-day business.

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6. UK Government Developments

The UK Government competent agencies for the supply chain have been actively developing their systems to

provide better efficiency and risk management in line with the continuing EU directives and UK government

requirements. These should be positively supported and encouraged.

These developments have brought about benefits which, from our analysis, have been slow in being adopted by

the perishable food supply chain. In turn the agencies have been poor at communicating the benefits to the

industry.

These developments have yet to have any noticeable impact on the paper documentation within the supply chain,

and it is difficult to see how, at present, paper could be eradicated completely without a greater will from

government and the EU. Furthermore, it will take more investment of time and money to help develop compliant

document standards and systems with trading partners, especially in South America, Central America and Africa.

The introduction of e-document standards and single window data management would greatly reduce thedevelopment costs in these regions and secure the quality and reliability of the information required in the UK for

import/export transactions.

The UK supply chain industry remains suspicious and negative towards government/EU developments and it was

surprising to note that during our interviews, neither at the coalface government agencies or business

representatives could identify any benefits, only additional beaurocracy and cost.

We do know from available data, such as that provided by UNECE and the World Bank, that significant savings

can be achieved through e-documentation and pro-active information by the various government agencies but dueto time limitation we have been unable to fully analyse this sector at this point and further research is required.

Risk Management

Already a significant influence on trade initiatives, risk management could undoubtably be a notable beneficiary of

the introduction of document standards and a single window environment.

The ability to transfer primary document information electronically directly from one competent authority to another,

without third party intervention, would greatly enhance supply chain management and assessment. All indications

are that it could reduce the required number of inspections, provide reliable information earlier and facilitate a more

educated appraisal of the consignment.

Moves have been made towards this approach by Defra. Trials are believed to be underway permitting approved

third country competent authorities to declare phytosanitary certificates and alike.

There are also other advantages to adopting standardised e-documents moved through one portal. Pooling of data

into one independent source allows all government departments to share in that data, pulling out or putting in,

without ever compromising the departments integrity of its own systems.

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Integrity is a key word when discussing the validity of any data. It is the integrity of senders and receivers that is

paramount to the information being provided is considered to be reliable and able to be actioned upon.

Just this one advantage (knowing who sent the information or document) could save a significant amount of time

and money for, certainly, importing competent authorities in the UK, thereby allowing better use of resources to

target inspections and improving the experience of processing of consignments.

The content of this single source could in turn be used to enrich future operator profiling tools to assist in the

assessment AEO applications, for example.

There are joint benefits too. The use of standardised e-documentation would enable authorised industry operators

to automate data provision in an expedited manner and allow government to receive the required information with

less investment in systems and processes.

Compliance would become a cost-effective background technology process rather than a physical, costly one. Theexample of Swedens Gateway (see page 33) does indicate there is real potential for cost reductions all round,

improved compliance and improved risk management as a consequence.

It is difficult to see how it could be perceived as anything other that a win-win for all concerned.

In summary, the expected benefits of standardised e-documents and a single window are:

Fewer inspections of consignments;

Reduced clearance processing time due to unified formalities;

Lower costs and improved working conditions for government officials;

Reduced staffing due to possible task sharing by the competent authorities by the development of

multifunctional control officers - this may liberate skilled human resources for other activities;

Better protection and security with less resources;

Pooling of electronic data;

Easier communication due to transparent procedures, harmonised data and shared intelligence between both

competent authorities in the UK and the coordinating countries, reducing opportunities for incompetent or illegal

activities.

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7. The Cost of Doing Business in the UK

The cost of transacting perishable foods is high in the UK. This is making the UK uncompetitive in some areas:

The clearance and inspection charges are too high by comparison to our near neighbours where flat rates for

clearance are commonplace. This has led to goods being landed and cleared in countries such as Germany,

France, Holland, Greece and Spain, then trucked into the UK because it is, quite simply, cheaper. In fact, all the

importers we interviewed were considering moving more cargo into Europe to save money. Several are actively

now landing cargo either by sea or air on the fringes or just outside the EU borders. One importer is now

looking to relocate a third of their imports in this way;

Fuel duty being more expensive in the UK, it is quite a substantial financial saving to be located in Europe and

only fuel as required in the UK;

Subsidies and incentives to land cargo in places like Rotterdam and Schipol are on the increase - we wereshown clear evidence of preferential cargo rates;

Administration costs: the cost of employment is cheapest at the fringes of the new 27 EU member states.

Relocating the clearances and therefore the labour intensive activities of processing paper to a cheaper zones

looks attractive. On the evidence shown during the interviews this may cut a freight forwarders or importers

labour costs by 50%;

Property overhead: office and warehouse space is acutely expensive in the primary areas around UK ports of

entry. The cost of similar facilities closer to the future points of entry for business is vastly cheaper - fromexamples shown to us by as much as 60% - 80%.

7.1 Costs - Documents

We estimate that paper documents in the perishable food supply chain are costing the industry around 28.00

to generate based on available statistical data and our own analysis which is equal to 126 million per year for

4.5 million document sets;

From data compiled during our research we calculate there could have been as many as 1.4 million incidences

of missing or delayed documentation in the perishable food supply chain in 2005. The average number of

incidences per month, per importer, we investigated was 36.46.

If all factors related to paper documents and known issues are taken into account the total cost to the food

perishable food supply chain import sector we have investigated is at least 1 billion per annum or 10.6% of the

annual import value of 9.4 billion.

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Calculation:

Cost of generating paper 126m

Document collection 112m

Entering data - forwarder 7m

Entering data - importer 43m

Unclaimed deferment 346m

Charges 38m

Man hours 354m (importers, freight forwarders and authorities)

Total 1026m

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8. Quoted statistics and examples

According to statistics quoted at a UN/CEFACT Forum in 2005 the cost of raising export goods paperwork is 40

versus the cost of raising e-documentation at around 19.50, effectively a saving of over 50%. Further analysis of

time and motion studies performed by the UNECE indicates that the time taken to generate a paper consignment

invoice just for export is 13 minutes. The cost comparison with e-documentation for generating 1000 invoices is as

follows:

1000 paper invoices x 13 minutes x 34 (23.80) p.h. = 7,366.00 (5,156.20)

1000 e-invoices x 6 minutes x 34 (23.80) p.h. = 3,400.00 (2,380.00)

This amounts to a saving of nearly 54%.

Raising of 4.5m document sets x 40 = 180m - using e-docs could save 97.2m

Processing the same invoice at the receiving party: the total time taken to open documents, process, audit file etc.is 26 minutes and 50 seconds. The cost comparison with e-documentation for receiving the 1000 invoices is as

follows:

1000 paper invoices x 26 minutes x 34 (23.80) p.h. = 15,016.00 (10,511.20)1000 e-invoices x 9 minutes x 34 (23.80) p.h. = 5,100.00 (3,570.00)Source: UNECE/Procountor/ENA 2004

This amounts to a saving of nearly 67%.

The expansion of these figures drives home the efficiencies of using e-documentation:

100,000 invoices across 5.2 million pieces would save 1 million (700,000);

turning paper documentation into e-documents could save the EU supply chain industry 4.4 billion (3.08

million) and save 48,000 man hours;

governments would save 3.1 billion (2.17 billion) and save 3,000 man hours.

Source: UN/CEFACT Forum 2005 Speakers presentations

Recorded experiences of importers in the Far East shows a marked reduction in processing time when dealing with

e-documentation and in particular a single window environment with substantial cost savings. Furthermore, the

time reduction in preparing and processing consignment documentation is equal to a shortening of the trading

distance by as much as 9,000km

(Source: Hamid Alavi, World Bank, presentation 2005/ IDB 2000 / Hummels)

Singapore importers and exporters have gained 1% of industry GDP through the use of e-documentation. This is

equal to $1.91 million in 2005 (1.25 million). If these figures are replicated in the UK, based on 2005 trade

statistics, the saving to the industry through the use of e-documentation would be over 370 million per annum.

(Source: /Hamid Alavi, World Bank, Singapore Department of Statistics/Singapore Government Trade Statistics Web site)

It is estimated that 7% of the gross consignment cost is logistics document administration.

(Source: Hamid Alavi, World Bank, presentation 2005/UNECE)

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Supporting statistics are also available from the experience of other countries:

UN/CEFACT has stated that having e-documentation in the supply chain for priority documents could save 3%-10% of the value of gross international trade;

Korea is carrying out 9.6 million supply chain e-document transactions per year with a saving to its industry of

$50 million;(Source: UN/CEFACT Forum Presentation 2005 / Korea Trade Stats)

The introduction of e-documentation in Finland has improved the trade competiveness of the South Kareliaregion by 50 million (36 million) per year;(Source: UN/CEFACT Forum Presentation 2005)

By implementing e-documentation and a single window Mauritius has reduced average clearance times fromfour hours down to 15 minutes. Tunisia has reduced processing times from 18 hours down to 7 with theirsystems;(Source: UN/CEFACT Forum Presentation 2005 / Hamid Alavi, World Bank 2005)

e-Documents have saved business in Port Klang, Malaysia, 2.59 million in guarantee charges.(Source: UN/CEFACT Forum Presentation 2005 / Hamid Alavi, World Bank 2005)

Gateway Sweden / Swedish Customs

A good pointer to the future is Gateway Sweden and, in particular, the example of cross border import and export

procedures that exist between Sweden (an EU member) and Norway (a non-EU member).

The Swedish import and export systems handle 5 million declarations per year and transact over 100,000messages per day. The adoption of e-documentation and single window processing of data has enabled the

customs authority to execute 4,000,000 automatic clearances per year within 3 minutes. In fact, 96% of the

document declarations are electronic with a reduction in compliance cost to the supply chain industry of between

30% 75%. Conversely the hit rate for the customs risk assessment teams on examinations has risen from 5% to

44%.

A further benefit to the industry is the 24 hours, 7 days a week availability of services, of which 164 are provided

free-of-charge.

The multi-technology gateway between Sweden and Norway provides a fast-track single window service for

accredited supply chain businesses to interface with seven government agencies.

(Source: Swedish Customs UN/CEFACT Executive Forum 2005)

More information on Gateway Sweden may be obtained from:

http://www.unece.org/trade/workshop/lyon_sep05/Sweden.ppt

http://www.forfas.ie/events/tradefacilitation/pdfs/Pres3%20-%20Mats%20Wicktor_Trade%20Facilitation,

The%20Swedish%20Experience.pdf

http://www.regjeringen.no/upload/kilde/ud/bro/2006/0054/ddd/word/284517-wto2.doc

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9. Conclusions

It is very clear that no one person or party sees the whole supply chain.

Our experience of the retailers is they are unable to see beyond the release of goods into the UK and do not

experience or understand the impact that paper documentation has on them in terms of cost or loss of shelf life, or

perhaps more significantly the revenue and shelf life that might be recovered. Inevitably, it is the consumer who

effectively pays the cost in higher prices for the goods.

Most importers, wrestling with the supply chain on a day-to-day basis, have little or no time to fully investigate the

reasons and/or costs for late or missing documents and often the charges for such occurrences are consolidated

on invoices from forwarders, handlers and logistics providers and just passed on or absorbed.

Equally, the high maintenance involved in entering data from the documentation is further eroding profits and

efficiency.

As our research has shown the cost to the industry is high. More significant is the fact that nobody has really

noticed. Because of the timescales involved and the established processes of the industry, the true financial cost of

paper documentation and lack of cross-migratory data in the perishable food supply chain is suppressed, even

hidden. This is not deliberate but merely a consequence of doing business.

The industry needs a solution and needs assistance.

The developments coming through on TRACES and PEACH will greatly enhance the user experience and extendthe reach of these applications back down the supply chain. Even with all the benefits these new developments will

bring, there is still a note of caution in that the harmonisation and ability to share or exchange electronic trade data

is still some way off.

In short, paper documentation is costing UK business and government alike.

The cost to government of regulating the supply chain with the current paper-based processes is administratively

high and as a consequence has to levy charges for processing declarations and inspections to meet some of this

cost. But this, the most visible impact of paper documentation cost, is an added financial and administrative burden

to traders and makes the UK import/export environment uncompetitive.

The perishable food supply chain is looking to reduce the administrative and financial burden and is starting to

make full use of the opportunities afforded it by the EU. One only has to look at the increase in trade clearances to

Europe or the relocation of trucking companies to Holland to see one of the effects of the high cost of doing

business in the UK.

But this is tinkering at the fringes and not addressing the underlying problem.

Our interviews confirmed that UK businesses are looking to the government to lead the way by making the tools

available. The supply chain industry also remains uncertain of the real benefits of the recent initiatives and the

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general consensus is that the developments are not seen as being of real value, merely an extension of regulation

and red-tape.

The UK government needs to invest in the framework to encourage the supply chain industry to modernise and

remain competitive, especially if it wishes to maintain the revenue it attracts through import and export duties.

Based upon the experiences of other trading nations who have pursued a similar course by adopting e-

documentation, the findings from our investigations and the support of global organisations and industry body

statistics, the consultants estimate that savings to the UK perishable food supply chain could be 2.6 billion per

annum or a saving of 7% of the gross GDP for the industry based upon 2005 trade figures.

Based on the savings reported by various UN, national or trade statistic organisations the savings may reach much

more.

For the vast majority of businesses operating within the supply chain this would effectively be a doubling of theirannual gross profit margin.

This saving takes into account reductions in administration man hours, process efficiencies, preferential rate loss

caused by incomplete documentation, charges, airline rates savings (taken as a market percentage for UK airlines

of the IATA declared saving for the airline industry) and support services costs as outlined previously.

These savings could only be successfully realised by introduction of e-documentation, a single window data

source and managed data distribution service made available to the industry as a whole and driven by central

government, as in other successful case studies.

For such an implementation to succeed, a standard such as UNeDocs would have to adopted to enable the

facilitation of a translation capability to distribute electronic data to all the required systems without incurring a

major upheaval and reinvestment across the entire supply chain industry and the agencies that police it.

The introduction of standards-driven e-documentation throughout the perishable food supply chain and managed

data upon single window principles would have a significant and substantial impact and undeniably deliver

quantifiable benefits and savings as has been illustrated in this document. Moreover, e-documentation would make

the UK a better environment in which to trade and make trading easier and more economic for our own

businesses, our government agencies and our trading partners.

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10. Appendices

10a. Import Procedures and Documentation - an out line

10a.1 What are Imports?

For the purposes of this report, imports are when goods are brought into the UK from outside the European Union

(EU).

The distinction as to when the word imports should be applied is not just semantics it reflects the differences in

the law for the treatment of imports against that for trade within the EU called Intra-Community trade.

10a.2 Countries o f the EU

At the time of going to print, the countries of the EU are:

Austria, Belgium, Bulgaria, Republic of Cyprus, The Czech Republic, Denmark, Estonia, Finland, France,Germany, Greece, Hungary, The Irish Republic (Eire), Italy, Latvia, Lithuania, Luxembourg, Malta, The

Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden and The United Kingdom.

10a.3 The Single Administrative Document (SAD) C88

Import and export details are usually collected through the submission to HM Revenue & Customs (HMRC), of the

Single Administrative Document (SAD). This document, in a similar format, is used throughout the EU, each

country having it printed in their own language.

In the UK it is known as form C88.

Details may also be collected via the transmission of an electronic message by NES (See 10b.2 on page 47).

10a.4 Import Declaration

Currently 99% of import details are collected through the submission to HMRC of an electronic import declaration

(C88).

The import declaration gives information needed for a complete picture of what the goods are and what is

happening to the shipment. Two of the most important pieces of information required are the Commodity Code

(also called Tariff Heading, Tariff Code, Classification Code or Harmonised Code) and the Customs Procedure

Code (CPC). Both have significant impact on duty due and how the consignment is treated.

A freight agent is often appointed to make the import declaration. If a declaration needs explanation the declared

importer is expected to provide the information and is also responsible for the accuracy of the declaration provided

by the freight agent and liable for any customs charges.

Only where a freight agent acts as an indirect representative (i.e. they make the customs declaration on behalf of a

principal in their own name) are they the declarant. In such cases both the agent and the principal are joint and

severally liable for any customs debt.

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10a.5 Payment of Import Duty and VAT

Once an import declaration (usually a C88 Single Administrative Document (SAD)) has been submitted and

accepted by HMRC, the goods covered by the declaration will not be released until the charges payable against

that import have been paid or secured.

This is normally disbursed via an importer or freight agents Deferment Account. This allows the freight to be moved

and the duties and VAT payable deferred until the 15th of the following month.

10a.6 The Import Value

When importing goods, the value is declared on the C88. This value is the amount on which any duties and VAT

due will be calculated. The customs value should is based on the CIF price (cost, insurance, freight). This valuation

is known as the transaction value and is used in the vast majority of importations.

10a.7 Documentation

In the case of perishables, Customs do require sight of the required documents relative to the consignments at thetime of import, but they may not require sight of the original document. It is sufficient to know that the original exists

and copies may be presented on the basis that the originals will be presented later and secured by deferment.

Both GSP and EUR 1 Certificates can be issued retrospectively, but these must be considered an exception.

If a certificate is lost, destroyed or stolen a duplicate can be issued. A duplicate certificate is the top copy of a

certificate only. It must be stamped and signed by the competent authority and will be valid from the date on which

the original was issued photocopies of the original form are not acceptable.

If the goods do not have a preference certificate covering them at the time of import, the full rate of duty will be

required as security. This security covers the possibility of no certificate being issued or the claim to preference

being rejected.

A valid documentary proof of origin should be produced within four months from the date the entry is accepted. If at

the end of this period the proof of origin is not available, the duty secured will be brought to account. However, if

the certificate then arrives, entitlement to submit a belated claim to preference and a refund of duty may be

permitted.

Therefore, the following needs to be be presented:

Import C88 form;

Supplier's invoice accompanying the consignment, or if there has been no sale, a letter or document clearly

showing what the status of the goods is;

Any licenses or certificates required for the type of imported goods.

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Freight Agents can input import details direct to HMRCs CHIEF (Customs Handling of Import and Export Freight)

computer system and produce a "plain paper" print which contains all the same information as a C88.

If required documents are then presented to Customs for stamping and thereby certifying the import and

acknowledging the entry.

10a.8 Preferential Rates of Duty

The EU has trading agreements set in place with certain non-EU countries. The effect of these is to allow goods

which have met specified origin rules in the country of export to be imported at a preferential or reduced rate of

duty. Claims to preferential rates of duty must be supported by proof of preferential origin (a certificate, or in some

cases a declaration on an invoice or other commercial document, issued in the exporting country).

Autonomous or non-reciprocal - Generalised System of Preferences (GSP)

Claims to preferential rates of duty under the GSP must normally be supported by a GSP Form A. It is a certificateof preferential origin and must be stamped and signed by the competent authority within the country usually (but

not always) the Customs Authority.

The certificate covers one consignment. If however the consignment is expected to be broken down into a series of

entries over a period of 3 months or less, then an exceptional application to Customs at the port / airport where the

goods will be imported may be made, to allow one certificate to cover these entries.

The GSP Form A has a limited period of validity from the date of issue. At present this is ten months. If a certificate

is not fully completed, it can be rendered invalid, so completeness of the document prior to importation is essential.

It should also be noted that any corrections must be made by the supplier.

As an alternative, exporters in GSP Countries can use declarations on a commercial invoice up to a maximum

goods value of 4,830 (6,000 Euros).

Reciprocal - EUR Preferences

Reciprocal agreements apply to both import to the EU and export from the EU. There are two ways to support a

claim to preference on imported goods or to prove the preferential origin of goods which are being exported under

preference. The most commonly used document is a Form EUR 1.

If the consignment is under a stated value, then a declaration on the invoice or other commercial document with a

legally approved form of words can be used as an alternative. Many reciprocal agreements enable exporters to

become approved to issue invoice declarations regardless of the values involved.

Each Form EUR1 or invoice declaration covers one consignment and the documents again have a limited period of

validity of 4, 5 or 10 months depending upon the particular preferential trade agreement concerned.

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Not all goods attract a preferential rate of duty and tariff quotas may be in place for certain goods from particular

countries. This has the effect of limiting the quantity of the product that can be brought in under preference. Once

the quota limit is full, the goods can still be imported but only at the full rate of duty.

If the quota is used up the goods may be placed in a Customs Warehouse. This effectively defers liability for

payment of duty and VAT, until such time as the preference quota is available again.

Once the quota is available again then the goods can be removed from the warehouse upon presentation of the

correct certificate for the preference under the new quota. The preference certificates and invoice declarations

covering the goods do have a limited period of validity.

10a.9 Customs Freight Simplified Procedures (CFSP)

CFSP is a two stage electronic method of declaration. It offers a variety of procedures, which may be operated in

isolation or combined to best meet an importers needs. It allows authorised traders to gain accelerated removal or

release of most third country imports by making a simplified declaration containing the minimum of details at thefrontier.

The full statistical and fiscal details of the goods are later provided to HMRC electronically within a defined

timescale. However CFSP imports are still subject to anti-smuggling and admissibility controls the same as all other

goods entering the UK. Other features of CFSP include cash flow benefits and the use of simplified procedures in

conjunction with normal entry and warehouse procedures.

10a.10 Import licences

When importing perishables there are also a number of licensing requirements, including:

Common Agricultural Policy (CAP) licences;

Department for Environment, Food & Rural Affairs (DEFRA) licences;

European Commission licences.

10a.11 Common Agr icultural Policy (CAP) licenses

If you import agricultural produce, whether as raw materials or processed goods, CAP licences are usually needed.

They are issued and controlled by The Rural Payments Agency (RPA). HMRC are responsible for the policing of

the licences at the time the goods are imported.

If a required licence is is not presented at the time of importation, the goods will not be allowed to move from the

port / airport. CAP goods being imported from one country may need a licence, whereas the same goods coming

from another country may not.

CAP licences are issued to control certain aspects of imports, eg. restrict the quantity of a certain type of goods

being imported from a certain country, or to restrict the quantity of a product which gets a preferential rate of import

duty.

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10a.12 Department for the Environment, Food & Rural Affairs (DEFRA) Documents

The importation of meat, poultry, dairy products, some other foodstuffs, livestock, blood, plant or plant products,

endangered species or fur will usually require a DEFRA licence, permit, certificate of conformity or Common

Veterinary Entry Document (CVED).

Goods such as meat, poultry, and their products, dairy products (including milk and eggs), animal bones or blood,

sausage skins and fishery products are required to undergo veterinary health checks at a Border Inspection Post

(BIP) on arrival in the UK. In addition to the veterinary documents required by the BIP, a Common Veterinary Entry

Document (CVED) completed by the Importer and issued by the BIP will normally be required to obtain customs

clearance.

Certain plants, plant produce and plant products are prohibited from entering the UK from non-EU countries,

although it may be possible to import, move and keep prohibited material for trial or scientific purposes under the

authority of a license issued by DEFRA / National Assembly for Wales (NAW) / SEERAD for Scotland and DARD

for Northern Ireland.

In general, all plants and some plant produce and products that are permitted to enter England, Wales and

Northern Ireland from nonEU countries must be accompanied by a phytosanitary certificate.

In Scotland, all plants and some plant produce and products that are permitted to enter Scotland from non-EU

countries must be accompanied by a phytosanitary certificate and a quarantine release certificate (QRC). The QRC

is issued by SEERAD.

All imports of fresh fruit, vegetables and nuts subject to EU Marketing Standards require a recognised certificate ofconformity before release into free circulation within the European Union. Produce for industrial processing will

need a certificate of industrial use. RPA Horticultural Marketing Inspectorate will issue certificates for importations

entering England or Wales, SEERAD for Scotland and DARD for Northern Ireland.

Feed and Food products of non-animal origin (e.g. grain) imported into the EU must also comply with feed and

food safety requirements. Certain products identified as high-risk may need to be pre-notified to health authorities

and accompanied by the relevant documentation e.g. laboratory analysis statement confirming a product is safe /

suitable for human consumption.

Endangered species both flora and fauna and their products, (eg parrots, tortoises, birds of prey, monkeys, caviar,

ivory and coral), need specified permits or other documentation to be legally imported into or exported out of the

EU.

The furs of certain animal species may only enter the EU if accompanied by evidence of their legal origin.

10a.13 Catch Document

The import of Patagonian Toothfish or Chilean Seabass, for example, require Catch documentation.

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10b. Export Procedures and Documentation - an outline

10b.1 What are Exports?

For the purposes of this report, exports are goods sent from the UK to outside the EU. Many perishables need a

license to be exported from the UK.

10b.2 Export Declaration

Export details are collected through th

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