This article first appeared in Digital Edge, The Edge Malaysia Weekly on April 19, 2021 - April 25, 2021

Cross-border transfers of goods are a complex process, given the different customs regulations in various countries. This is why the Association of Southeast Asian Nations (Asean) has come up with the Asean Customs Transit System (ACTS) to improve the movement of goods between member countries.

After years of pilot runs, ACTS was launched last November, enabling businesses to lodge e-transit declarations directly with customs authorities and track the movement of goods from end to end.

Traders can now carry out a single transit journey across participating countries — Cambodia, the Lao People’s Democratic Republic (Lao PDR), Malaysia, Singapore, Thailand and Vietnam — via a single truck, customs declaration and banker’s guarantee, enabling companies to benefit fully from the Asean Economic Community (AEC) and the free movement of goods across the region.

“Before ACTS was introduced, traders had to prepare multiple declarations and multiple judgments to be provided at each border for customs clearance because each country has different declaration requirements,” says Dr Ramlah Mukhtar, senior assistant director at the Royal Malaysian Customs Department. 

“For instance, a truck travelling from Malaysia to Cambodia will have various declarations at the border here and in Thailand and Cambodia. At each point, the trucks have to re-declare for different regimes, have multiple documents to submit and different costs to settle. 

“It is burdensome to undergo so much customs clearance, [not to mention] the integrity of the data usually becomes inaccurate or twisted because sometimes it is not the same as it was at the beginning of the journey. 

“Sometimes, without pre-arrival information like the one enabled by ACTS, customs authorities at the different states would not be able to effectively trace the irregularities in the destination or ownership of the goods or vessels,” says Ramlah. 

Previously, a change of vehicles at every border en route also provided opportunities for fraud as there was no way to monitor the truck’s progress in real time. 

Under the system, both customs authorities and businesses can track the movement of their goods — from loading at departure to delivery at the final destination. With ACTS, businesses can look forward to reduced transport costs, which in turn will result in more affordable goods for consumers.

“We had no way of having real-time official communication between customs authorities in one country and another on the vehicles passing through our borders. So, we didn’t have effective risk assessment capabilities. With real-time pre-arrival information, there were just too many challenges when it came to the cargo clearance process and procedures,” she says. 

The 10 Asean countries adopted ACTS as part of their bid to reduce transaction costs by 10% by 2020 and double intra-Asean trade between 2017 and 2025. 

Cambodia, Lao PDR, Malaysia, Singapore, Thailand and Vietnam are already part of the system. Work is now being done to extend ACTS to Brunei, Indonesia and the Philippines.

The ACTS pilots in the North-West Corridor — Thailand, Malaysia and Singapore — started in the first quarter of 2017, and later expanded to the East-West Corridor, which covers Vietnam, Cambodia and Lao PDR, connecting to the North-East Corridor through Thailand. 

“Pilots for both the North-South and East-West corridors were conducted in 2020 and live operations for the ACTS were formally started on Nov 2, 2020,” says Aivaras Pigaga, lead ACTS IT implementation expert at ARISE Plus.

The system is managed by a permanent ACTS Central Management Team based in the Asean Secretariat in Jakarta, Indonesia, with support from the European Union-backed ARISE Plus programme. 

“The EU (European Union) implemented the New Computerised Transit System in 2000. Since 2003, the NCTS has successfully facilitated freedom of movement of goods in transit across 27 EU states, their European Free Trade Association (EFTA) neighbours and other European countries,” Pigaga says.

Until recently, the NCTS was the only fully operational paperless transit system in the world, and its success inspired Asean to develop ACTS, he adds.

ARISE Plus has provided extensive ACTS training for stakeholders in the public and private sectors, including customs authorities, government transport agencies, freight forwarders, transporters, banks and insurance companies. 

“There are plans for the ACTS to be extended to cover the handling of dangerous goods, such as lithium batteries, as they cannot be transported via air, and adding support for some of the elements of multimodal transport, such as rail transport.

“The system will be further enhanced with the Transport Monitoring System (TMS), which will allow for the monitoring of trucks entering and exiting countries under the ACTS or other relevant regional Asean agreements,” says Pigaga.

Cross-border land transport has also become increasingly paramount to keeping supply chains connected, as trade that was heavily reliant on air cargo capacity on passenger flights was badly affected when flights were grounded at the onset of the coronavirus crisis. 

Nevertheless, a seamless adoption of ACTS is going to take a while. Unlike the EU, where there is freedom of movement of goods, services, capital and labour, the movement of labour is not free in Asean.

The NCTS was a compulsory computerised system for the movement of goods, while ACTS is not obligatory, says Pigaga. 

“When the NCTS was introduced in Europe in 2000, in the first 20 months, only about 2% of actual movements were declared in the system. Trade was resisting because it was a new system.

“Trade never wants to do anything fast. Businesses are very comfortable with existing arrangements, even if they are not necessarily good, because they know [them] and have existing contracts that cover all difficulties. As businesses gradually converted to the NCTS, the uptake rose exponentially,” he says. 

Seamless cross-border trading is an enormous challenge at the best of times but throw a pandemic into the mix and there were serious problems with the ACTS rollout.

“Due to Covid-19, we still need to change trucks at the borders at the moment to conduct sanitation and there are travel restrictions for drivers,” shares Pigaga. 

While it is still too soon to tell if there have been significant savings for businesses that lodge e-transit declarations with customs authorities directly, he says that some reported a 27% reduction of costs for cross-border movement of goods using the ACTS.

“A trader moving goods from Malaysia to Cambodia via Thailand reported a 27% overall reduction of cost while using the ACTS. Considering that this is one of the very first movements under the ACTS, and with restrictions around the Covid-19 pandemic, an overall cost reduction of 27% is very encouraging,” he says. 

In Europe, however, the removal of regulatory barriers nearly 20 years ago improved overall regional trade by up to 3% or €15 billion, found Ernst & Whinney, which looked at the potential impact of the creation of a European Internal Market in terms of the transport of goods by road.

“In the EU, pre-deregulation costs of customs procedures to businesses were in the region of €7.5 billion for administration; €415 million to €830 million for delay-related costs; and government costs were placed in the range of €500 million to €1 billion. 

“It was concluded that the removal of regulatory barriers could increase overall regional trade by up to 3% or €15 billion in Europe, and similar savings could be expected in the context of Asean,” says Pigaga. 

The extent to which cost reductions and the easing of regulatory controls stimulate new trade is also crucial, he adds.

“It is a recognised phenomenon that such measures, along with provision of improved infrastructure, will in themselves result in increased trade flows as traders take advantage of a more benign environment, and there is no reason to believe that Asean regional trade will be an exception to this rule.”

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