“Single Window is defined as a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements”
UN/CEFACT RECOMMENDATION No. 33
PCIS should minimise the contacts between officials and business
On 20 September the Odessa Port Administration conference hall received the presentation of the Port Community Information System (PCIS). Konstantin Yefimenko, First Deputy Minister of Infrastructure, Yuriy Vaskov, Chairman of SE ASPU, Aleksandr Golodnitskiy, First Deputy Chairman of ASPU, Yuriy Sokolov, First Deputy Chief of the Pivdenna Customs, MINDOHODOV, Viacheslav Voronoi, Chief of Strategic Development Service, Oleg Platonov, Chairman of the Interagency Working Group for “Single Window – Local Solution”, Mikhail Sokolov, Chief of Administration of the Odessa Commercial Sea Port, and Dmitriy Yakimenkov, Chief of Information Technologies Service, ASPU, took part in the event.
THE CHIEF AIM IS TO BE COMPETITIVE
Why the presentation took place at the Odessa Port was clear to all its participants. The Port of Odessa, which has always positioned itself as the leader of the industry, five months ago, became the first of the home ports to introduce the first stage of PCIS and is operating the system in the test mode.
“As far back as in 2010 it sometimes happened,” K. Yefimenko said in his opening address, “that the containers were being processed for up to 45 hours at the Port. At that time, while our main competitors – the ports in the Baltic and West European countries, to say nothing of Turkey, - spent up to three hours for the examination of containers and issuance of documents, but practically carried everything out within an hour… At that period the home legislation was subject to changes and the documents on introduction of transhipment and free pratique in the ports were adopted. With the lapse of time we cut the time of processing the documents down to 20 and then to 10 hours. PCIS is the next step after free pratique and transhipment. Until recent time the whole document circulation at the ports of Ukraine and work planning were in the paper form. The Odessa Port for the first time introduced the system of electronic turnover. Other ports are getting ready for introduction of this system, too. Technologically we are ready to process cargoes at the ports within four hours. Certainly, there are cases when the control bodies delay cargo processing for good reasons. But actually about 50 per cent of containers are processed within four hours… We will not be able to attract transit cargoes into home ports, if we are not competitive as to the time of cargo examination. As the freight of the ship carrying 5,000 containers costs hundred thousand dollars per day…”
As is known on 3 July the Cabinet of Ministers of Ukraine supported the initiative of Mininfrastruktury and adopted the Resolution on amending Resolution # 451 dated 21 May 2012 under which the notion of the port community information system, its functioning and development are introduced. The essence of the said amendments is that the control and clearance of cargoes at the Ukrainian ports will be optimized and brought in accordance with European standards. Vladimir Kozak, Minister of Infrastructure, said that the document provides for the introduction of the Port Community Information System (PCIS), connected to which will be all ports, freight forwarders, carriers, agents, control bodies, etc.
“It was most complex process,” noted V. Kozak, “at the level of interagency agreements, which we have managed to complete successfully due to the system facilitation, in view of the expected cargo turnover and development of the Port infrastructure the daily volume of the imported and transit containers may become five times as large…”
According to K. Yefimenko’s words, the home port industry will further be improving. “As the market of port transhipment on the Black Sea is becoming competent. Russia is intensively develops its ports. Our neighbours have a development program for a period until 2030. Already today this Port can process 30,000,000 tons. The Odessa Port was the first to sense transit withdrawal, the Kazakh oil in the first place. Russian companies including state monopolies are buying up stevedore companies at the Baltic ports. Turkish ports tranship 400,000,000 tons annually. So, if we are not competent, our industry will face sensitive time,” K. Yefimenko stressed.
EVERYTHING HAS STARTED IN ODESSA…
The Odessa Port would not be recognized as the industry leader unless it was not the first to introduce innovations relating to the quality pf the provided services. It is very important to attract a client, but it is more important to retain it. And how can it be done, if the neighbours on the Black Sea inspect containers and clear motor transport within one to three hours, and we do the same during days or even weeks?
To become competent the Odessa Port Administration being supported by MININFRASTRUKTURY has initiated a number of amendments to the legislation. Thanks to that the Odessa Part was the first to introduce transhipment and free pratique. The next step was the implementation of the PCIS (Port Community Unified Information System) pilot project. Why was the Odessa Port chosen as the basic one for the innovation introduction?
According to V. Vornoi’s words such decision was made by the Interagency Working Group for Introduction the “Single Window - local Solution” System in the Operations Area of the Pivdenna Customs House and Odessa Region Ports organized in pursuance of Instruction of Nikolai Azarov, Prime Minister, in 2011 under the auspices of MININFRASTRUKTURY and by initiative of the Ukrainian Committee of the International Chamber of Commerce. For “the Odessa Port was most prepared for transferring to the electronic document circulation. During the last years specialists of the enterprise have progressed in this direction as the developed and implemented several projects. And among them the electronic pass (the Automatic Access Control System /AACS/): issuing multi-circulation cards instead of paper passes, electronic planning the transport entering the Port, integration of technical means (weighing complexes) in the Port information system, etc. The above system is implemented by establishing the port community unified information system at the Port in accordance with Recommendations # 33-35 of UNECE,” V. Voronoi said.
Implementation of PCIS allows structuring and marshalling the information flows between the transport process participants. The information in the electronic form is supplied once to Single Window. The system was being designed with the use of the leading European ports experience” Hamburg, Rotterdam, Antwerp, Marseilles and Barcelona.
“On 22 May 2012,” V. Voronoi continued, “the Odessa Port and SCSU signed Process Scheme of the PCIS first stage introduction. On 8 October 2012 the first electronic work order was issued. On 2 April 2013 the Odessa Port started the system operation accompanied with parallel issuance of both electronic and paper work order. Beginning from 2 September 2013 containers are exceptionally processed in the territory of the Odessa Port in the electronic form.”
As it was noted by Director of the Strategic Development Service, ASPU, before PCIS was introduced in the Odessa Port system a standard protection level built on pin codes had been used (all in all there exist five safety levels). The user was had been provided with a code enabling it to enter the given system. “High level is based on electronic digital signatures. It is such high level based on electronic digital signatures that is applied by the Odessa Port today. This is the highest safety level for a system containing the information of limited access that is not a state secret,” V. Voronoi stressed.
The PCIS first stage operating in the Odessa Port consists of six modules. Those are preliminary information on cargo and ship, permit for discharge (free pratique), actual discharge of the cargo from the ship to the warehouse, electronic work order for releasing a container from the Port, permit customs and line agent for the container loading and permit to leave the territory of the Port. Realised are four modules out of the above ones except for the preliminary information about cargo and ship and actual cargo discharge from the ship to the warehouse. By the end of the year, V. Voronoi supposes, the remaining modules will also be realized. Thus, the whole chain of the imported cargo passing will be covered.
More than 70,000 of imported containers have been processed with the use of PCIS. The introduction of the latter, in perspective, will make Ukraine closer to the European Union trading standards, optimise transportation processes, increase the Ukrainian ports competitive ability, minimize human factor influence on the goods and transport facilities movement, promote growth of foreign trade and transit volumes, enable an increase in the State Budget receipts, reduce the time and costs of moving goods across the border and make better the international ratings of Ukraine.
According to V. Voronoi’s information, a working group for introducing the electronic work order at the Port of Illyichevsk was organized in August this year. On 23 September the system test operation began.
CUSTOMS GIVES THE GO-AHEAD TO THE ELECTRONIC SYSTEM
The first who supported the initiatives of the Odessa Port and MININFRASTRUKTURY concerning the electronic work order introduction was SCSU. Moreover, the Customs Service is interested in its early introduction as according to the information of Yuriy Sokolov, Chief of Pivdenna Customs, presented by him at the session in March this year, there have been attempts of unauthorized goods removal from the territories of Odessa Region ports. Some firms have faked the seal of Pivdenna Customs on paper documents.
“Last year,” Yu. Sokolov said during PCIS presentation, “customs officers and the Odessa Port started an experiment on the introduction of the electronic work order. From the beginning of the experiment, i.e. from October 2012, about 47,000 electronic work orders have been issued. In parallel they were issued on paper by Pivdenna Customs. Starting with 2 September, when the paper documents were not accepted any more, over 5,000 electronic work orders have been issued.
“Electronic work order possesses definite pluses,” Yu. Sokolov commented, “First, strictly fixed documents filing time. Second, minimization of human factor and any subjective aspects. Third, ability to accept the work order at any time, which is most important. When working with the electronic work order we can follow up possible risks in good time. For instance, a day before the quantity of work orders at the endorsement stage were monitored and it turned out that the cargoes under more than sixty of them had not arrived at the Port. The ship had not yet left Constantsa, but due to the system we can work with the cargo carried by her at the weekend.”
According to Yu. Sokolov, from December 2011 the legislation concerning preliminary forms of control has been valid in Ukraine; due to such fact the customs perform the functions of other control services at the initial stage. Nevertheless, unlike motor vehicles checkpoint there is a sufficient quantity of control services at the Port.
“If the freight forwarders have to make the round of all the services,” Yu. Sokolov continued, “Then, first, it will entail definite inconveniences for them, and, second, it will result in a delay of payments to the budget. At the same time, customs officer cannot know the quarantine, veterinary or other legislations inside out. That is why the electronic work order supported by the legal base as amended (Resolution # 451) and corresponding information agreements, which will be finalized by the managerial personnel of SE ASPU, enable the control bodies to see all information. And if any control forms are required, then the forwarder or cargo owner will know about it in good time and avoid additional transport expenditures.”
Yu. Sokolov is of the opinion that the port community system base should be unified as the customs service cannot work with any local bases. “It is known that the information is supplied to checkpoints directly through the primary server located in Kyiv. And therefore the bases should be adapted. The information on the formation, location of containers and preliminary information should not be exceptional at the Odessa Port, Yuzhnyi Port or at the port operators… Our nearest goal is to introduce the two modules in the PCIS users’ practice: ‘preliminary information’ and ‘formation of the containers-in-the-ports base’,” Yu. Sokolov summed up.
UKRAINE IS NOT A GAP BETWEEN EUROPEAN UNION AND CUSTOMS UNION
Finishing the system presentation V. Voronoi quoted a sentence from the 33rd Recommendation of the UN Economic Commission for Europe: “The most important prerequisites for the successful implementation of a Single Window facility are the political will of the government and the relevant governmental authorities and the full support and participation of the business community.” In support of the above words O. Platonov said that three years ago Prime Minister N. Azarov demonstrated the political will and instructed the Government to establish the Interagency Working Group for PCIS implementation, which was composed of representatives of all ministries and authorities that can influence the procedures of the transit and export-import cargoes passing, as well as the performance of the control procedures.
“Organisation of such a group,” O. Platonov noted, “and further introduction of PCIS was caused by censures on the part of the subjects of foreign trade activity concerning non-transparency of the control procedures. In other words, submitting the documents for the cargo processing the clients could not follow the sequence of servicing and registration of this process. And only thanks to the efforts of MININFRASTRUKTURY and MINDOHODOV it was possible to end the deadlock.”
After the problem of the electronic work order introduction was resolved, according to O. Platonov, brought into the foreground was the question of altering the notion of “document” interpretation itself. “Before we treated the work order as a single sheet of paper, but the “work order” is a collection of electronic documents, which enable entering changes and tracking a specific action of each official at any stage. Since 2 September, when the electronic work order became truly electronic one, the Administration of the Odessa Port together with customs and the system provider every day to analyse all the encountered obstacles,” said Deputy Chairman of the Interagency Working Group.
In October according to O. Platonov, the issue of the railway participation in ISPS will be addressed. As to all other controlling services, except the customs, they are only the observers of the process of the electronic order issuance now. “The next in turn is the implementation of the other stages of the project, due to which all the regulatory authorities will be able to enter their requirements and ensure that there is no abuse,” O. Platonov informed.
Moreover, all subjects of foreign economic activity should clearly understand that the process of implementing all the innovations will not be simple and easy. After all, control is not abolished. Only its procedure is simplified.
The most important electronic work order introduction result for freight forwarders and agents, in O. Platonov’s opinion, is the elimination of the need to apply to 30 offices and regulatory bodies and deliver the paper documents.
“From now on, the ministries and departments,” O. Platonov said, “face the task to organize a system of information exchange and create a document in the form of an electronic record. I believe that in the near future all these questions will be given utterance at a meeting of the Security Council of Ukraine devoted to transit. I hope that after such meeting the President will give a specific task to the government ... We have to prove that Ukraine is not a gap between the European Union and the Customs Union as some believe. In the future our country will be able to create normal conditions for transit. I hope that due to the support of the Ministry of Infrastructure, Ministry of Revenue and Duties and Ministry of Economic Development very soon the strategy for trade and transport facilitation will be worked out, and that will enable us to implement the real steps toward transit attraction.”
Summarizing, K. Yefimenko said the words that became the quintessence of ISPS presentation:
“In June the Law ‘On Sea Ports of Ukraine’ came into force. The main purpose of the Law is to form a port business oriented towards business customers. The business and government control bodies have been separated. The newly created body, the Administration of Sea Ports of Ukraine, was transferred certain functions of state control and regulation. Business must do business ... What does a client need? Speedy and convenient processing of cargo. This can only be done, if the business has no contacts with officials. Otherwise it leads to unnecessary time loss and appearance of the issues related to the manifestation of corruption, etc. And this applies not only to regulatory authorities, but to ports authorities as well. The purpose of ISPS is to eliminate the contact between the business and the official. This will simplify the work of the business.”
At the end of May the Port of Odessa held a “round table” seminar on the problem of sea ports clustering “Interaction between Business, Government, Science and Education within the Framework of Maritime Cluster.” The conveners were the Institute of Postgraduate Education of Sea and River Transport Specialists (IPE SRT) and SE OCSP. The Participants included representatives of the city authorities, JSC Plaske, ONMU, Institute of Market Problems, Economic and Ecological Research of NAS of Ukraine and Yuzhnyi Port.
In the opening speech Sergei Gorb, Rector of IPE SRT noted that the implementation of Law “On Sea Ports of Ukraine” and “Strategy of Development of Sea Ports of Ukraine” requires the search and introduction of new association forms in economic activity of the industry enterprises and organizations - science, ports and local authorities, i.e. clusters. The concept of a maritime cluster represents a group of companies and firms, scientific research institutes and educational institutions (universities, specialized schools, etc.) using the support of national or local government structures, which cooperate for the purpose of technological innovations implementation in order to improve the marine industry performance. In the Netherlands, Norway and Italy marine clusters are the associations of various activities – shipbuilding and repair, ports operation, navigation, marine tourism, offshore companies, etc.
CLUSTER ON THE BASIS OF THE ODESSA PORT: DE JURE AND DE FACTO
Since 2010 the Port of Odessa has been actively involved in promoting the project of clustering the Odessa transport nodal point. The Working Group consisting of the representatives of the enterprise, Regional Council and scientific environment has developed a number of documents required for the establishment and functioning of the cluster: Transport Cluster Manifesto, “Regulations on the Transport Cluster on SE OCSP”, etc. The Regional Council approved the introduction of the cluster model for the Odessa Region transport infrastructure development by its Resolution dated 18 February 2011. It was the first cluster project in Ukraine created on the basis of one of the biggest multifunction enterprises in the industry, most prepared for the implementation of a cluster model in terms of the work organization. The cluster, besides the Port, includes several shipping lines and railroad.
But in fact, the adopted documents are purely declarative: they in no way reflected in the work of the cluster, which had functioned before their signing. Among the reasons are the uncertainty of the normative legal relations, lack of scientific and legal framework and isolation of science from business and government. The newly established structure, ASPU, should build a bridge to bring the said three components of the cluster together.
“In Europe, the clusters have worked effectively for many years,” Viacheslav Voronoi, Chief of Logistics and Commercial Work Service of the Odessa Port, noted in his speech, “They are a source of comprehensive and objective information about the markets. Cluster allows of quick identification of the existing problems and analysis of the whole layer of the Region's economy and industry. For example, the idea of creating European ports logistics centres arose after evaluation of the cargo road transport idle paths, and the draft electronic "single window" got a start in life after it was calculated that 850 documents are involved in the supply chain. Today there is no a single source of information in Ukraine, which results in a chaotic and uncontrolled development of transport and its trends in this country.”
As is known, he who owns information owns the world. Today, according to V. Voronoi, Ukraine does not have a single registry of all ports’ transhipment facilities outside their territories, unified complete and reliable information on the number of forwarding and agency firms, carriers, their economic activities , people who work in the field of handling, people engaged in transhipment, logistics and distribution, which and how many goods are delivered, etc. “For the Strategy of sea ports development” not to become another declarative and useless document it is necessary that experts should collect and process the information. It will take at least 2 years. Therefore, it is required to conduct a complete inventory of all domestic port facilities, create full-fledged port clusters, unified information system, identify the areas of cargo gravitation and traffic flows crossing, calculate cargo efficiency and traffic flows crossing ratios, mechanisms usage, etc.” V. Voronoi summed up.
SINGLE WINDOW - LOCAL SOLUTION IS A WAY TO CREATE A UNIFIED INFORMATION SYSTEM IN UKRAINE
The “Single Window - Local Solution” Project can help in creating a unified information system in Ukraine as its purpose is to create “Unified Information Port Community” (UIPC). The Project has been developed by PPL 33-35 Company and Odessa port, and it operates from October 8, 2012. According to Andrei Shevchuk, the Company’s Commercial Director, who presented the Project, due to the system they developed it became possible to simplify the procedure for goods clearance, and completely replace the paper document circulation existing in the port industry with the electronic one. “The disadvantages of paper documents are obvious to everybody: human factor, prerequisites for corruption, etc. The present development of information technologies makes it possible to move to a new level of cargo traffic servicing and improve the state’s image in the international arena. And as a result, to attract new cargo flows.”
The UIS system is not new, it exists in many European ports – Marseilles, Antwerp, Rotterdam or Klaipeda. Its point is to integrate all participants of freight transport process into single information space with the possibility of providing access to the information used within the framework of technological processes and apply the technical protection means of the state standard. UIPC will include representatives of the Port, forwarding and agency companies, stevedoring companies, customs and other regulatory authorities. UIPC enabled the optimization of the information flows process. Anyone who needs it will have access to the necessary information.
“The purpose of the system is to minimize paper documents circulation during operations at the Port, time reduction and gathering the correct legitimate information. The project started in 2012. On 22 May last year an agreement on the UIPC first phase implementation was signed between SCSU and Odessa Port. The Odessa Port was not chosen by chance: as the industry leader the enterprise have been introducing many innovative solutions for many years. The first stage involves the entire process – from the arrival of the imported container at the port to its withdrawal from the territory of the enterprise to the address of its final consignee. The only lacking thing is the analysis of customs risks, which, under the current legislation, are performed directly in the system of the State Customs Service of Ukraine,” A. Shevchuk commented.
From 2 April this year the system started to function in parallel, i.e. both the electronic and paper versions of the work order are valid. If until recently the electronic work order was operated in the endorsement mode and issuance of cargo documents, then from 20 May the stage of permits for exiting the Port has been involved. Connecting the control authorities and testing the information exchange with stevedoring companies are at their final stage; contracts with linear agents of providing preliminary information are concluded and the test data exchange with them is initiated. “In the near future the chain of the loaded containers clearance will be fully realized, beginning from receipt of the preliminary information to the arrival of containers at the port, then their discharge into the warehouse, forming the electronic work order for the given container exportation, endorsement of the work orders by the control authorities, and ending with the permit for the container export from the checkpoint to its final destination. From 8 October 2012 until 20th days of May more than 22,000 containers were cleared in the electronic form,” A. Shevchuk summed up.
SPECIALISATION OF PORTS FOR ELIMINATION OF COMPETITION?
Today the Draft Strategy of Ukraine’s Sea Ports Development for a period of next 25 years is widely debated. So, a map of the ports’ specialization was proposed, i.e. three types of the ports’ strategic development were determined: efficient cargo handling, harmonious growth and formation of clusters. According to Natalia Grebennik, Associate Professor of OSNU, four clusters are planned to be organised: grain and oil in the vicinity of Nikolayev, chemistry in the Yuzhnyi Port and containers and grain at the Odessa Port.
To develop this idea it should be added that the ports’ specialization and the clusters formed around them is one of the tools to combat the competition between ports. The Ports may compete with their foreign counterparts, but they should not compete with the domestic ones. It was that statement, which caused a lively discussion among participants of the “round table”.
“The specialization treated in the Strategy,” N. Grebennik said, “implies not the elimination of competition in general, but the elimination of redundant (?) competition between the ports. We have mass of competitors at other ports on the Black Sea. Why should domestic ports compete with each other? The sober thought of the Strategy is that we require a unified comprehensive program of the port facilities development in Ukraine. It is impossible for each port to independently decide which terminals to build. Let us avoid unnecessary competition. Naturally, the ports and clusters will compete with each other, but at the same time they have common tasks.
The question “Who will define whether the competence is excessive or not?” is quite natural. As the Chief Editor of “Ports of Ukraine” magazine Konstantin Ilnitskiy noted, Ukraine is building a market economy, but at the same time it passes over to manual methods of economic management. “An investor who wants to build some kind of terminal, which does not go into the approved specialization framework, will need to obtain additional permits. Our investors contributing to the development of port infrastructure complain about bureaucratic barriers that they have to overcome in order to obtain a building permit as it is. And we are offered another bureaucratic barrier in the guise of a progressive step,” K. Ilnitskiy considers.
Incidentally, during the discussion “Port Reform: a View of Investors and Market Players. What can we Expect?” that was held at the Mozart Hotel on 24 May, the issue of the ports specialization as a tool to combat the competition between them was also raised. In the view of some participants the elimination of competition is to the hand of large companies that own certain freight flows and do not want to share their income with anyone. Besides, the elimination of competition, about which nothing is said in the Law “On Sea Ports of Ukraine”, is a direct violation of the principle of enterprises economic freedom, as well as the Law “On Protection of Economic Competition”.
What does N. Grebennik mean by “excessive competition”? And at once he answers: “Simultaneous construction of container terminals throughout the whole Black Sea coast”. To which Vasiliy Zubkov, President of Plaske Company opposed saying that “the majority of container terminals were laid during a period of 2005-2007, when pending six years the container market in Ukraine was developing with such a high rates (30-35-per-cent growth annually) as nowhere else in the world. Who could predict the 2008 crisis?”
For more than 10 years the clusters have been functioning in Ukraine without any legal framework. However, according to N. Grebennik, normative legal regulation is not always to the benefit of the business. Moreover, it can interfere with the development of the clusters. For example, as a result of state regulation of public-private partnership it is impossible to implement many investment projects involving private business. “Speaking about the formation of the legal framework I primarily mean the regional authorities’ support of enterprises or business initiatives.”
WHAT WILL THE HEART BE CALM DOWN BY
The discussion about whether a cluster of Odessa region exists or needs to be created, whether the legislative framework and the strategy of cluster development are necessary or not, and in general the definition of the “cluster” concept proper and what the benefits of such association are, turned to be very useful. The resulting document of the round-table seminar was the recommendations for creating new and functioning of the existing clusters. Including: forming a working (initiative) group from out of the staff of SE Administration of Sea Ports of Ukraine and port community enterprises with the participation of regional authorities, scientific and educational organizations of the industry for the purpose of working out organizational methods of a maritime cluster establishment mechanism. Choosing and justifying economically the organizational and economic form of the cluster association on the basis of the maritime clusters functioning international experience in consideration of the regulatory framework of Ukraine. It was proposed to monitor the needs of the port community enterprises in order to identify the incentives for the participants interacting in the system of “business – power – science – education.” Developing admission policies, the cluster members attraction mechanism, and the procedure and conditions of their work.
It was decided to apply to the SE Administration of Sea Ports of Ukraine with an offer to take over the functions of organising and coordinating the work of the cluster with the involvement of the scientific environment representatives.
The implementation of the cluster concept will enhance inter-firm flows of ideas and information, ensure the compliance of the individual enterprises development strategies with the general development strategy of the Black Sea coastal region and the ports of Ukraine, upgrade the qualifications of the industry enterprises’ workers, foster the innovation activities in the industry, etc.
V. Voronoi’s words said after the meeting was finished may be considered to be its quintessence: “We will do everything possible to bring the creation of a cluster on the basis of our company to the end. The port of Odessa, the industry leader, will have a model cluster. I am sure in this.”
T. OVRUTSKAYA, Odessa Branch of ASPU, 2 October 2013
