How to ensure customs integrity throughout ports
What is a bonded corridor?
Bonded corridors are logistics solutions developed to connect physically-distant areas which enjoy a differentiated customs regime from the rest of the country (eg. Bonded areas), while avoiding to go through a customs clearance process. Bonded corridors must ensure that the customs regime integrity of the cargo will be preserved with no exception and at any point between the two points connected.
As trade patterns and logistics become more complex, bonded corridors have been gaining relevance across all geographies, allowing traders and transport companies to undergo additional customs processes such as inspection, as well minimize the payment of customs duties and other taxes. This results in much more flexibility supply chains that reduce double handling, risk of cargo damage and lead times. There are several examples where bonded corridors are applied, for instance:
- Importing/exporting cargo between a Seaport and dry port which are not connected physically, avoiding to go through customs clearance in the port
- Transiting cargo through a country from a Seaport, with final destination a different country, without having to nationalize the cargo
- Connecting an airport cargo terminal with a Sea Port for air-sea bonded cargo
- Linking two assembly factories located in different Free Zones, avoiding taxation while being transported across mainland areas
In the Middle East, there are some experiences in place where the concept of bonded corridor is operational. For instance, the JAFZA Bridge, managed by DP World and RTA, linking Jebel Ali Port, JAFZA, and Al Maktoum Airport; and the Saudi’s LogiPoint, linking the bonded zones of Jeddah Islamic Port with the one at King Abdulaziz International Airport.
Bonded corridors are usually established and managed by the Customs Authority of the country, typically under a specific law or regulation that defines the operating requirements for their users, which includes the management of those logistics assets related to the customs ports (eg. Port Authorities, Borders control, Air freight terminals, Free Zone Authorities, etc). In those cases where the bonded corridor serves a third country, a cross-border framework between Customs Authorities is also needed.
Challenges and trends
One of the major risks associated with the movement of goods via Bonded Corridors is the leakage of commodities into the local market, avoiding customs clearance and duties payment. The traditional mitigation measure to this risk includes fencing the road between bonded areas and eliminating blind spots where vehicles could be stopped and loaded/offloaded.
In recent years, several fleet and freight management applications have emerged to enhance the control of commercial vehicles and to ensure a better monitoring and reporting of vehicles and freight. Smart information technologies for fleet routing management can be divided into two types:
- Intelligent Transport Systems (ITS) located within vehicles: this system consists of GPS Fleet Tracking and Management Tools. These tools grant a real time tracking of vehicles and fleet through a web-based platform, permitting vehicles’ owners to monitor their fleet’s whereabouts and to maintain control over locations set as off-limits. The software also features theft detection and unauthorized movement alerts, providing the ability to protect vehicles and valuable cargo. GPS tracking tools can offer additional features such as access to live videos and pictures to monitor drivers’ status and actual vehicles and traffic conditions, route optimization, and maintenance reminders to track vehicles’ servicing dates.
Example of a GPS Fleet Management Tool (GPS Trackit)
- ITS located in the infrastructure: This system includes License Plate Recognition (LPR) cameras. These cameras are installed in fixed locations to read a vehicles registration plate. LPR cameras are widely used in many of the smartest cities around the world, such as Sydney, Seattle, Melbourne, London, Singapore and the Netherlands. Another form of ITS located in the infrastructure consist of automatic container number recognition system. Optical characteristic recognition (OCR) cameras are usually installed at the gate of transport infrastructures, terminals and Free Zones, ensuring that the infrastructures are secure in terms of access. These cameras capture containers and a container number is obtained, after which customs clearance verification can be checked automatically via a database system.
The potential that bonded zones can bring to the logistics ecosystem has been largely undermined by the need of using physical means to guarantee to the movement of goods under customs regime. This has been particularly constraining in densely populated areas, where technical solutions become highly complex, or in environments where security is an additional challenge.
The introduction of advanced technologies allowing any road to preserve bonded status is opening the door to reshaping the existing trade supply chains in many fronts:
- Reduction of infrastructure investment costs
- Enhancing customs enforcement, traceability and security of cargo
- Optimizing customs operations, relocating them from points of entry
- Enabling delocalization and specialization of industrial processes
- Deferring the payment of customs duties to traders
The approach for the definition of bonded corridors requires a clear understanding on:
- The end-to-end of the supply chains and markets to be connected
- The current and future infrastructure and operation challenges for the concerned roads
- Customs and transport regulation applicable (if existing) or required
- Technology and infrastructure solutions best-fit-for-purpose
- Stakeholder needs and expectations for the solution
- A sustainable business case that ensures all parties benefit from it
About the authors
Genís García-Alzórriz holds a MSc in Civil in Engineering and is a Senior Engagement Manager at ALG. firstname.lastname@example.org
Xavier Esparrich holds a MSc in Aeronautical Engineering and is a Director at ALG. email@example.com
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