Chapter 2: Literature Review
Introduction
In this section, I will access e-customs, custom procedures and regulations, single windows, and risk management. I will also discuss how electronic customs were informed by the Actor-Network Theory (ANT) towards implementing technology at customs and achieving work efficiency.
Electronic Customs
According to Ahokas, Hintsa, and Luca (2013), the implementation of electronic customs (e-customs) platforms to ensure that regulations set are followed strictly and effectively as well as facilitating trade is one of the major strategic issues for customs in various countries globally. The adoption of e-customs ensures a more enhanced cost-efficient usage of resources and, at the same time, maintaining a smooth flow of products from one country to another country. As a result, customs have to implement information technology systems that help them improve the ability to enhance information sharing and within the business industry and with other agencies in different governments. This is, however, not a simple and straightforward process. As many experts have determined, e-Government development projects frequently do not succeed due to the lack of proper understanding of the administration requirements and barriers for execution (Ahokas, Hintsa, and Luca, 2013).
In November 2013, the SFDA (Saudi Food and Drug Authority) posted on their website that it had plans to fully implement a mandatory electronic customs clearance system (E-Clearance), which was implemented on January 1, 2014. The strategy was to be performed by the Saudi Food and Drug Authority for all food products imported into Saudi Arabia, including raw materials as well as prepackaged food products. The e-clearance will include every type of food product being imported into the Kingdom of Saudi Arabia, including packed food products and also raw materials to be used in food processing (Riyadh, 2013). As a way of making sure that all importers are included in the e-clearance, the Saudi Food and Drug Authority has requested or importers who import products as well as customs brokers to fill an online registration process.
Imported Food Control Department is expected to feel its goods and contact details on the Saudi Food and Drug Authority website. They were given a deadline to make sure that everyone participated in the exercise. After that period, the SFDA stated they were not going to accept importation of food products from custom brokers and importers who are not registered on E-clearance (Riyadh, 2013). Local importers are the ones responsible for the registration of imported products. All the importers are required to create an E-Account and set up their username and password. Once they have opened the E-Account, the importers can upload their food product details, including bar code harmonized code, item code, and listed ingredients in Arabic, English, Arabic, and a copy of the product labels. The product label should include all details needed by the Gulf Standard Regulation.
A few years ago, Saudi Arabia started to put efforts towards exploiting its unique region at the mouth of the Red Sea, and the shots are so that they can be a logistics hub that will interconnect three continents which are Africa, Asia, and Europe. This plan is to be accomplished by 2030, and the program aims at transforming the economy of Saudi Arabia, and it will significantly decrease its dependence on the exportation of crude oil. Another important measure that has been implemented by the Saudi Authorities to enhance trade is the execution of a 24-hour Customs clearance for the products being imported and the process before this new implementation used to take approximately 10 to 14 days and the delay applied to frustrate both the consignees and shippers (Nadkarni, 2018).
According to the Deputy Governor for Trade Facilitation at Saudi Customs, the two pillars of Saudi Customs have consistently been revenue and security. The custom sector was able to convince the people of Saudi Arabia to accept the idea of the e-filling of documents for customs clearance before the docking of the vessel (Nadkarni 2018). Although at first there were inconveniences since people refused to clear things, they cannot see they are happy since they are provided with the option of removing their products in such a short period.
As a way of enhancing work efficiency at customs in Saudi Arabia, the traditions introduced and executed different initiatives that implemented and adopted new and useful technologies and innovative activities focusing at improving the business environment, attract global investment in association with its partners as well as increasing the competitiveness of the Saudi market. Through the technology transformation, they experienced a positive impact by raising the Kingdom’s Global Class Identifier (GCI) position for the first time since 2012. The strategy implemented comprised of 41 initiatives that included the pillars of customs’ activities across all see, land, and airports (Middle East Logistics, 2019). The various efforts executed by Saudi Arabia’s customs in the last few years are meant to improve the competitiveness of the Saudi Arabia’s business environment as well as promote logistical processes that are an essential enabler to enhance trade facilitation and prioritizing customers. With the launch of the 24-hour Customs clearance, Saudi customs can clear over 80% of the customs within the set duration of 24-hours on average. This has been achieved through technology improvement and digitization of the majority of the customs processes (Nadkarni, 2018).
Saudi customs conducted a pilot program to link Saudi Arabia’s national customs environment with a blockchain-empowered transportation arrangement from Maersk and IBM. The project, with the support of the Saudi Customs’ IT partner, intended to test new innovations and support the Kingdom’s objectives to be a worldwide logistics hub. FASAH, the national electronic framework for export and import that was launched as a joint exertion of 25 government sectors, accomplished a positive result in the clearance method, by empowering organizations to follow and finish their clearance processes electronically, and contributed in reducing the number of records needed for load clearance. The main aim of joining FASAH with FradeLens for the chosen serves to ensure traceability, immutability, auditability, reduced reconciliation, and compliance. The pilot aim of the two is also associated with the strategy whose main objective is to influence trade and improve security measures. According to the Saudi customs, they have been able to come up with a new roadmap that executes a pioneering strategy to improve changes across its processes via the implementation of new technologies that automate and simplify customs operations and deliver global services to customers. Through the implementation of the blockchain-enabled solution, Saudi Arabia’s aim is to be the first country in the region to provide customs operations that will help the Kingdom achieve its objective of becoming an international logistics hub. The recent initiative to link FASAH to the TradeLens platform is a clear indication the Kingdom’s custom is on the right track. Tarek Zarg El Aioun, Country General Manager, IBM Saudi Arabia, indicated that “We believe blockchain is playing a vital role in creating new trust-based digital ecosystems for agencies like Saudi Customs.” Through the Saudi’ custom adaptation of blockchain-enabled TradeLens, they are helping to evolve the shipping sector in the region and enable transparent, faster, and more efficient real-time processes.” In addition, Maersk Saudi Area Director Said Mohammed Shihab said, “We believe at Maersk that blockchain technology will play an important role in digitizing global shipping. We are at the forefront of adapting and harnessing this technology to that effect.”
Due to the combination of the blockchain technology enabled by TradeLens, Saudi Arabia’s customs, together with the shipping, experts have been able to achieve a significant milestone in the implementation of this technology. Through the application of technology, it has become easy to monitor products and their location as well as reducing wastage of time at the customs while it comes to clearance of cargo. The Authorized Economic Operator Program (AEO) is very crucial, and it has helped to improve the business environment and enhance other facilitated Customs processes. The other importance of technology at customs is that it has decreased the number of documents required for export and import of products by the implementation of the pre-arrival electronic submission. Through the process, the customers are provided with the ability to clear their load even before the cargo arrives, and at the same time, customs mechanisms and procedures have been greatly improved. The local exporters are also permitted to utilize the customs bonding region for storage reasons in line with trade support procedures (Sutton 2019).
Another Customs clearance exercise guide, which allowed organizations to give Customs clearance licenses, has been put in place. The guide incorporates a few corrections that target contributing to observing Customs exports and imports clearance procedures, decreasing Customs infringement, and tending to conceivable operational questions. It must be appreciated that Saudi Arabia has the most significant port network in the Middle East, and it has plans underway to expand its port in line with the Vision 2030. The Kingdom is embracing a huge number of investments in the transportation sector, with new programs such as the East-to-West Land Bridge, the Saudi Rail-Roads Expansion, substantial investments from the private sector, for example, Jeddah Islamic Port and Dammam Port redesigns, and the new economic urban centers.
“Saudi Customs is considered to be one of the most cross-functional organizations across both the government and private sectors, placing Saudi Customs at the heart of government entities essential to achieving the goals of the Kingdom’s Vision 2030” (Logistics Middle East, 2019). According to Dr. Hisham, the adviser for modern technologies and blockchain at the Ministry of Communications and Information Technology (MCIT), the ministry’s objective is to create new technologies to ultimately improve Saudi Arabia’s position. In the Information Communication Technology (ICT) sector, the department focuses on disseminating and enabling blockchain technology among the most famous modern technologies via an execution plan to develop an integrated ecosystem. According to Mohammed Al-Otaibi, the general manager of information technology at the General Customs Authority, the implementation of blockchain technology in customs and the procedures taken by the authority to achieve digital transformation. He stated that the first shipment to be launched using blockchain technology came from the King Abdul Aziz Port in Dammam, and its destination was the port of Rotterdam on May 12, 2018. Blockchain technology influences the business development of major traders and importers by decreasing cost and time while at the same time improving the security of supply chains.
At the international level, the technology provides a digital platform where each phase of the shipping process is documented. The documentation of these phases permits the authorized parties to access the records simultaneously, without the process being interfered with by any external party, therefore enhancing international cooperation to ensure the security of trade and the reliability of worldwide supply chains. According to the regional director of Maersk, the organization’s goal is to become an international logistics organization for cargo shipping and to attain this goal, Maersk created different products and services to supports shipments together with remote container management (RCM), trade finance, and Maersk Spot, which permits the client to book the delivery directly via the Maersk website. “As a result, the company’s investment in the development of digital solutions has become a pillar for its transformation,” The online booking is efficient since the customers do not have to waste like queueing to book their shipments and on the side of employees, they do not spend a lot of time recording clients’ information, and this leads to work efficiency, through TradeLens, a platform where customers from ports, airlines, customers authorities, and customers, terminals, reliably deliver their shipment information through blockchain technology.
Actor-Network Theory (ANT)
Information technology (IT) is significantly being utilized to support the communication of information across different customs groups and teams with the objective of delivering various activities more efficiently. Actor-Network Theory (ANT) has gained its influence over the years, although at the same time, it is still a deeply contested method of understanding humans and how they interact with non-humans (Cresswell, Worth and Sheikh, 2010). The complex ICT systems used at customs benefits from being informed by ANT perspectives. Despite some disadvantages, an Actor-Network Theory-based method is conceptually useful in assisting in supporting the complexity of organizations and the active responsibility of technology in this perspective. This proves to be helpful while it comes to conceptualizing how social impacts are developed as a result of the relationship between various actors in a network (Michel, Bruno, and John, 2020).
The central importance, in this case, is that Actor-Network Theory issues a lens via which one views the role of technology in changing social processes. Attention to this modeling role can result in a more drastic recognition of the complexity of technology initiation in customs settings. It can also be proven to be practically helpful in issuing a theoretically informed method to sample and analyze. Actor-Network Theory does not try to explain in any way the reason why a network exists. Instead, it focuses its interest on the infrastructure of actor-networks, the process used to form them, and how they can fall apart (Michel, Bruno, and John, 2020). Since ANT evaluates the relationship between human and non-human, it becomes an accurate theory to study how technologies are used at customs in Saudi Arabia by employees to help improve work efficiency. The study evaluates how to work efficiency is enacted by the two different actors (Cresswell, Worth, and Sheikh, 2010).
Custom procedures and regulations
The documentary regulation needed for the exhibition of products Saudi Arabia includes the following documents certificate of origin, commercial invoice, certificate of insurance (if CIF sale), and SASO (Saudi Arabian Standards Organization) compliance certificate when necessary. The above documents are supposed to be stamped by the following institutions: “bilateral” Chamber of Commerce, Chamber of Commerce, Consulate of Saudi Arabia from the exporter country, and Industry of the country exporting products.
There various rules and regulations set by the Saudi Arabian government and customs concerning import and exportation of certain products and services due to religious reasons and security issues. Some of the things banned from being imported in Saudi Arabia include non-medical-drugs, alcohol, and also a large number of non-Islamic religious items as well as other materials that are considered to be offensive according to the Islamic religion. Importation of electronic equipment and weapons is highly regulated for security purposes. For transportation of meat, a sanitary certificate is required, it is supposed to be delivered by the veterinarian services from the exporter country, and also a slaughter certificate following the Islamic rites, which should be provided by the Competent Islamic Authority (CIA) of the exporter country. These documents are supposed to be signed either by the Ministry of Foreign Affairs or by the “bilateral” Chamber of Commerce.
Samples for display in exhibitions or shows are free from Saudi labeling and shelf life regulations, but should be inspected at ports when entering Saudi Arabia; the examples should include a commercial invoice. If a product is being imported to Saudi Arabia as a sample, it should have a commercial invoice indicating that the product should not be sold and has no retail value. The following suggests a list of documents needed for customs clearance in Saudi Arabia. The first one is a certificate of origin, and it should be authenticated by a local chamber of commerce, and it should be translated into Arabic. The second one is a customs invoice (in triplicate), needed for almost all imports into Saudi Arabia, products with no value are exempted. The third one is a commercial invoice indicating the country where the shipments originated from, the name of the brand, carrier, and quantity of products, and description of the products, including valued and weight. The fourth one is the airway bill or a clean bill of lading. The fifth one is documents of insurance in case shipments are sent CIF, original materials should be included, and they should be translated into Arabic. While the last one is the Saudi Arabian Standards Organization (SASO) Certificate of Conformity, given by an authorized certification organization from the export country.
Single Windows
In the transport, trade, and shipping sector, the concept of Single Window (SW) has evolved over time in several different forms, reflecting necessary policy, market, regulatory, and technological regimes (Koh and Mowerman, 2013). The main issue being addressed by a Single Window is the requirement for an efficient electronic transaction between a business and government entities. However, the single window service model utilized by a respective and the provided unique window system functionality slightly differ. Today there are two different single-window approaches, which are custom-centric single-window approach, and port and marine centric approach. The single Window idea has its origin in the customs sector and trade facilitation, and its main focus is efficient exportation and importation strategies and institutions where the declaration of products associated with regulatory details should be reported in cross border processes (Fjortoft et al., 2011).
The trade relevant procedures offered by single windows include obtaining licenses and permits, certificates as well as necessary approvals, port exit, and customs clearance. SW provides a single point of entry and a single submission of relevant trade information for traders and more efficient and enhanced processes in a paperless environment. The term is recommended to be used by professionals when the platform has relevant information exchange between economic operators especially traders and government entities, if it supports regulatory needs and formalities, and has been approved by the government to carry out the exchange and transport regulatory activities (Koh and Mowerman, 2013).
The implementation of Single Window in various governments has significantly increased in the past several years.
This trend has been driven by the expectation of improved work efficiency for traders and administration. Single Window has enabled custom brokers to have less paperwork via single data entry and leads to fewer points of contact (Koh and Mowerman, 2013). Additionally, it leads to less waiting time and better information on status progress.
Another benefit of Single Window is that it leads to improved predictability and certainty, fewer data, and process errors as a result of enhanced work efficiency. The main issue of Single Window is interoperability in order to provide collaborative, interconnected, and networked workflow of customs operations (Fjortoft et al., 2011).
Risk Management
Risk management is the process of identifying, evaluating, and controlling potential threats to a company’s earnings and capital (Rouse, 2020). To make sure that the regulations set are effectively implemented, technologies can be applied in Saudi Arabia customs to make sure that they have effectively identified existing or possible risks that can happen. The process of risk management begins by establishing a context, and this will help to perceive the circumstances in which the entire process will take place. Technologies can help to identify risks that can have an impact on the operations of the custom. Once the risks are identified, if there are effective technologies installed, they will determine the effect of the risk, how they can be reduced or solved permanently. The risk analysis helps to effectively determine possible risks that have a possibility of occurring, their likelihood of occurring, how they can be mitigated, and how an organization can prevent similar and other dangers from occurring (Rouse, 2020).
Critical Review
Electronic customs pose several benefits to Saudi Arabia’s economy as well as the customs, and this helps to enhance work efficiency at customs. Although this is the case, there are also several disadvantages brought by the implementation of various technologies. One of the drawbacks is that the technologies used might be sophisticated to some employees who do not have skills and knowledge of how the systems are operated. To ensure that the employees have adequate information and are always updated about the new technologies, staff training is frequently needed so that the workers learn how to operate various machines and systems. The practice requires extra effort from the employees; extra amounts of money are also needed to facilitate the training of employees. Depending on the willingness of the employees, some of them might spend a lot of time in those training, and this may result in time wastage.
Another challenge of technology implementation is that it may lead to unemployment since some of the technologies such as robots perform activities that are done by human beings. The organization might opt to fire employees since with the technologies; their services are no longer required. Some of the technologies used are fully automated, and they do not require human supervision, while others require minimal human supervision. As a result, human expertise in the operation of some of the systems is not needed, and these lead to loss of employment of some of the workers.
Another issue is that ICT systems are not 100% reliable and at some time there might be technical system fail where the methods used at customs might fail to operate, and the entire order or part of the system needs to be troubleshot to determine and solve the problem At some point, the issue might be so severe to the extent that the whole system needs to be replaced with a new one. During such a process, some of the customs operations such as e-customs, their website might not be available, and they are forced to go back to their old ways of doing things. Ensure that such a situation does not happen; the systems should be frequently troubleshot and upgraded to determine existing issues as well as ensure that there are no problems to be experienced in the near future. During such a process, the normal operations are interrupted, the organization is forced to undergo unplanned cost since the technical hitch was not expected. In such a situation, employees are forced to work for long hours.