For Kips—a business that imports construction materials and household goods, from over 30 brands across Europe—clearing goods through customs used to take several hours and sometimes days. Each consignment entering Montenegro would be directed from the border to the inland customs terminal for inspection.
The customs clearance process was also costly. Kips incurred “parking” charges for the duration the goods were cleared at the terminal. This was further complicated by the terminal’s limited operating hours from 7:00 a.m to 3:00 p.m. Any cargo truck arriving after 1:00 p.m. would be cleared on the next workday, causing further delays and increasing costs for Kips.
“As one of the longest standing private sector companies in Montenegro—even though we had a good track record with customs and were labelled a ‘compliant company’—each of our consignments was inspected. This included detailed counting of products and taking samples to check whether they match the customs declaration accompanying the goods. It resulted in slow clearance times and hefty costs for our company,” said Novak Rutovic, head of freight forwarding and calculation, Kips.
To ease the flow of goods, the Montenegro Customs Administration has rolled out new approaches following several years of support from the World Bank Group. Initially, a time release study was carried out to better understand each step in the trade process and how to unlock obstacles for traders. Recommendations focused on simplifying customs procedures that allow economic operators to import goods and perform customs formalities more easily.
IFC worked with Montenegro customs to develop a streamlined and paperless clearance framework for traders that meet or exceed trade compliance standards. New standard operating procedures were developed, and the customs software system was upgraded to enable the clearance of goods 24 hours a day, 7 days a week.
The new regime was piloted with two companies, including Kips. The companies went through an extensive accreditation process to become ‘trusted traders’ and benefit from the new regime. This involved a self-assessment process to meet the criteria, prove they were financially stable and fully compliant with customs and tax laws in the past three years, and had an effective system for managing commercial and transport records. Customs then visited and evaluated the companies to verify the information.
Once authorized by customs, trusted traders benefit from a low rate of physical inspections and examinations, rapid release times and the ability to use electronic documents (a single document submitted electronically instead of six paper documents physically submitted to customs).
A major advantage is that the customs clearance can now take place in the companies’ premises—eliminating the need to rely on the restricted hours of the inland terminal. This significantly reduces clearance costs related to usage of customs terminals, driving to the terminal and back to the company premises, costs for accommodating vehicles, customs agent fees etc.
The new simplified procedures for certified traders have reduced clearance times from 8 hours to 30 minutes. Less paperwork and fewer inspections have reduced fees and costs and led to fewer challenges and delays.
“The new system has saved us money and time. Since the regime was introduced in 2017, we have saved over 100,000 euros (almost 40,000 euros per year),” said Rutovic. “The time savings has improved our decision making, especially in purchase and delivery management. We can now make more precise plans, which is very important for the effectiveness of the entire supply chain.”
The customs administration has also benefitted from the new simplified regime. Improved business processes result in faster processing and clearance times enabling the administration to operate more efficiently. The new system has also helped customs to build trust and better understand its customers: traders.
“With the launch of the new system, we are getting to know our trading community better and understand their business practices and concerns,” said Aleksandar Damjanovic, Director General, Montenegro Customs Administration. “If customs can win the trust of companies and demonstrate that compliance has its rewards, this program will grow in size and impact.”
Customs and trade associations are now working together to promote the new simplified customs regime. Currently, four percent of all import declarations are processed through the new system. Customs has set a goal to have at least 40 percent of declarations under the simplified regime by 2022.
Simplified customs procedures for import are a key element of international trade policy. The procedures are long-standing and widely used in the European Union and in the World Trade Organization Trade Facilitation Agreement.
“We believe that a partnership approach with traders can unlock the trade environment in Montenegro,” said Damjanovic. “The new simplified customs procedures will not only save traders time and money, but help the country compete more fully in regional and global markets.”
Support for the initiative was provided by the World Bank Group with funding from the Trade Facilitation Support Program (TFSP). The TFSP is funded by nine donor partners: Australia, Canada, the European Commission, the Netherlands, Norway, Sweden, Switzerland, the United States, and the United Kingdom. This initiative—implemented by IFC and the World Bank—provides assistance to countries seeking to align their trade practices with the World Trade Organization Trade Facilitation Agreement (WTO TFA).
Published in July 2021