Umberto de Pretto explains to MECN why KSA’s joining up to convention is a significant milestone
The sight of trucks sitting at the Saudi border of the UAE will be familiar to many that have crossed between the two countries but that process could be about to get a lot faster for some fleets with the KSA government finally signing up to the TIR Convention. It could also lead to greater trade between the GCC and beyond.
The Convention on International Transport of Goods Under Cover of TIR Carnets (TIR Convention for short), was originally conceived as a means of speeding up trade between countries almost 60 years ago, Umberto de Pretto, Secretary General of the global transport organisation IRU, explains.
“The TIR Convention, first adopted in 1959 and upgraded in 1975, is a highly successful UN transport convention, enabling the global development of trade and commercial links,” he says. “In short, it is the only global customs transit system, allowing goods to move through international borders without additional checks.”
Trucks bearing the white on blue TIR square on their grilles are common in many parts of the world today with the system helping to streamline procedures at borders, reducing the administrative burden for customs authorities and for transport and logistics companies ever since. It cuts border waiting times significantly, saving time and money. TIR authorised operators can move goods quickly across multiple customs territories, under customs control, using a single guarantee. Harmonised systems and data exchange tools mean that operators only need to submit their declaration data once for the entire transit movement. Each TIR transport from start to end of the journey is monitored on-line, so goods can be traced and secured while in transit.
“TIR guarantees the payment of customs duties and taxes, and makes border crossings faster, more secure and more efficient, reducing transport costs, and boosting trade and development,” adds de Pretto. “TIR guarantees cover VAT as well as customs duties.”
He continues: “Up to 57% of transport time is spent at border crossings and 38% of transport costs go towards unofficial levies. TIR addresses the issue by enabling goods to transit from a country of origin to a country of destination in sealed load compartments that are controlled by customs via a multilateral, mutually recognised system.
“This system secures customs duties and taxes and provides a robust guarantee mechanism, reducing trade transaction costs and minimising time spent waiting at borders, so facilitating higher growth of intra-regional and inter-regional trade.”
Saudi’s joining to the convention has been a long time coming, especially as its neighbor the UAE signed up to the convention a decade ago.
De Pretto says that momentum for Saudi’s membership to TIR has been steadily growing, especially as trade has become more of an important focus for Saudi Arabia in recent years.
“With the World Trade Organisation’s Trade Facilitation Agreement coming into force last year (itself a system for expediting the movement, release and clearance of goods, including goods in transit between WTO members), the spotlight has been on TIR as an effective tool to implement the TFA’s objectives,” he says. “Equally, the Saudi Arabian Vision 2030 and National Transformation Program 2020, is positioning KSA as a logistics hub linking Asia, Africa and Europe. We are extremely pleased that Saudi Arabia has pledged to implement the system swiftly and we look forward to seeing the first TIR operations in the very near future.”
When asked what opportunities could this open for Saudi Arabia and companies looking to trade outside the Kingdom, de Pretto reels off stats to demonstrate the ground that Saudi needs to make up with trading with its neighbours.
“Bilateral trade between Arab countries is currently below 10%, and only 5.8% of Saudi exports go to its GCC neighbours. The GCC has collectively committed to join the TIR system, with Kuwait, Qatar and the UAE already signatories, and Bahrain and Oman set to join soon,” he remarks.
The IRU secretary general adds that by opening up a wider trade corridor, Saudi Arabia becomes a more attractive destination for investors which has been one of the priorities for the government reforms in the country.
“Foreign investors, looking at indicators such as border crossings and customs formalities, would be encouraged to invest once a country accedes to TIR,” he explains. “Adopting the global standard sends a strong signal to investors, who would have more confidence in the attractiveness of investment opportunities relating to transit and trade.”
Elaborating on his point, he adds that the trade corridor could also stretch to markets beyond Saudi Arabia’s immediate GCC surroundings.
“UN Conventions, and TIR in particular, provide harmonised legal frameworks in which companies can operate. So corridors such as the Ashgabat Corridor (linking Central Asia to the GCC countries through Oman) can benefit from a global tool which harmonises the different legal frameworks, making it easier for operators to work between the separate jurisdictions,” he says.
He adds: “TIR can unblock the challenges of waiting times and security at borders. There are further issues, which harmonised UN conventions can tackle – such as the ADR Convention on the transport of dangerous goods and the ATP Convention on the transport of perishable goods. Multilateral agreements can address other issues, such as visas for drivers in the Middle East. IRU encourages countries to use these tried and tested conventions and agreements to streamline processes.”
With most goods and products entering the region by sea, road transport has long-been the main method of ferrying them across the GCC. An established region-wide rail network is still years and possibly decades away making the adoption of TIR by Saudi Arabia could make the country a crucial link and strengthen the use of intermodal transport to and from the region.
“IRU has long advocated for ending silo approaches to border processes and unifying them under global conventions – such as TIR,” says de Pretto. “For seven decades TIR has been facilitating and securing customs procedures for road transport. Our work on applying TIR to the intermodal context showed considerable savings in time and costs, as a result of reduced border processes; reduction in emissions with shorter waiting times; and, conversely, a significant boost to trade as the number of transports could potentially rise.
“Concretely, we recorded a 5-day saving in time when using TIR along an intermodal trade corridor linking Europe to the Middle East. Another study estimated that the use of TIR along an intermodal corridor between Serbia and Azerbaijan would reduce transit and slack times by 92 hours; and increase container use by an estimated 33%, as the same container can be used to transport goods more times in a given year.”
Read a full version of the interview in the August issue of Truck & Fleet Middle East