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UNNExT Workshops on Trade Facilitation

Almaty, Kazakhstan

4-6 May 2015

UNNExT Workshop on Trade Facilitation and Paperless Systems for

Agrifood Products

BUSINESS PROCESS ANALYSIS OF THE EXPORT OF CEREAL PRODUCT FROM KAZAKHSTAN TO AZERBAIJAN

BUSINESS PROCESS ANALYSIS OF EXPORT

CEREAL PRODUCT FROM KAZAKHSTAN TO

AZERBAIJAN

YELENA VASSILEVSKAYA (KAZAKHSTAN)

Workshop on Trade Facilitation and Paperless Systems for Agrifood Products, Almaty, Kazakhstan, 4-6 May 2015


WHY CEREAL PRODUCT EXPORT FROM KAZAKHSTAN TO AZERBAIJAN IS IMPORTANT ?

The grain industry is a high priority in the agriculture of Kazakhstan and one of the leading places in the economy of the country. 90% of the acreage is used for growing cereals.

Among the CIS countries Kazakhstan is the third largest producer of the grain after Russia and Ukraine (12,3-15,9 mln. tons in weight after processing). In the production of flour Kazakhstan takes the leading position in the world.

In the commodity structure export cereal product export (by value) accounts is about 2%. The grain is exported to 44 countries around the world. 44.3% of the total cereal product export is export to the CIS countries. Export to Azerbaijan takes the largest volumes (13% of cereal product export of Kazakhstan )

The main importer of cereal product for Azerbaijan is Kazakhstan. the volume of cereal product import volumes from Kazakhstan increase annually

0

200000

400000

600000

2011 2012 2013

Тыс.

$ Import from

other countres

Import fromKazakhstan

37% 61% 50%


USE CASE OF EXPORT CEREAL PRODUCT


Importer's

Bank

1. Buy

3. Pay

1.1. Contract conclusion

Exporter's

Bank

Importer's

Bank

3.2. Claim payment for

goods

3.1.Establish payment

guarantee

2. Ship

Russian Fright

forwarder

Kazakhstan

Customs

Research

laboratory

Sanitary

Inspection

Certification

bodies

Owner of

cars

KazakhstanR

ail ways

Azeri Sanitary

Inspection

Azeri

Customs

Azeri Rail

ways

Importer

2.2. Obtain a phyto-sanitary certificate

2.9. Unloading cargo and Custom declaration

2.8. Border crossing of Azerbaijan

2.4. Obtain a certificate of conformity

2.1. 2.1. Obtain import permit

2.6. Loading and custom declaration

2.5. Arrange transport and transportation

Russian Rail ways

and other control

2.7. Border crossing of Russia

Inspection in the

agricultural

sector

2.3. Confirmation of obligation supply grain

to the state resource

Exporter

3 process areas of supply chain: • Sale - 1 business process • Delivery – 9 business processes • Payment - 2 business process 19 stakeholders


MAIN DELIVERY ROUTES OF CEREAL PRODUCT EXPORT FROM KAZAKHSTAN TO AZERBAIJAN



The organization supplies the most complicated process. It can be carried out from the northern regions of Kazakhstan to Azerbaijan: автотранспортом (обычно не используется из-за высокой стоимости)

By railway through Russia

By two types of transport: by railway to the port of Aktau, and then across the Caspian Sea to the port of Baku (overload at a terminal in the port)

By road transport (generally not used because of the high cost) The study examined the delivery by railway. A rather complicated process: it takes 15 days

in the coming months to apply for transportation.

Calculating the cost and time transportation of cereal product from Kazakhstan to Azerbaijan by railway

Route Distance in

km Cost in $

Transit time, days

Country Country of

origin Destination Average Actual

Kazakhstan Kustanay D. Nurpeisov 1558 906 8 6 Russia Kigash Samur 748 1780 4 2 Azerbaijan Yalama Baku-Tovarnaya 205 820 2 1 Total: 3526 14 9

Wagon cost operation 670

rent 1650 Total for carriage Operator’s wagons 4196

Rented wagons 5176


Core business process area 2.4. “OBTAINING CERTIFICATE OF CONFORMITY”

Stakeholders:

Exporter (Applicant)

Body of conformity (Certifying agency)

Testing laboratory

Consists of 12 steps

Average time required: 12 days

Cost: 68$

Output and criteria to exit the business process: Exporter holds Certificate of Conformity and copies of test protocols for his cereal products

Regulation: 6 regulatory documents

Exporter Certification bodies Research laboratory

2.4.1. Submit application for

confirmation of compliance

contract for works on

certification

2.4.5. Payment for services of

conformity

2.4.8. Pack cereals samples in

presence of applicant for

submission to laboratory

2.4.13. Obtain of Certificate of

Conformity

2.4.10. Testing arrangements

and test protocol

2.4.2. Registration of application

2.4.4. Conclusion of Contract on

certification services and

procedures

2.4.6. Identification of cereals

samples quantity and sampling

requirements

2.4.7. Cereals sampling, product

sampling acts

2.4.9. Attendance in sampling

process

2.4.11. Checking conformity with

existing requirements

2.4.12. Registration of Certificate in

data base

2.4.3.Conclusion of Contract on

certification services and

procedures

conformity

Test protocol

Payment receipt

Application

not

conformity

Sampling act

Certificate of Conformity



Core business process area 2.5. “ОРГАНИЗАЦИЯ ПЕРЕВОЗКИ”

Stakeholders: Exporter Kazakhstan Railways Owner of rail cars Russian Freight forwarder


Average time required: 15-45 дней

Cost: ≈5000$ per car (60 т)

Output and criteria to exit the business process: Exporter holds: whole set of documents associated with

the carriage sufficient funds on Kazakhstan Railway’s

bank account wagons contract with Russian freight forwarder

and pays for goods transit through Russian territory


Shipper (Exporter) or

Freight Forwarder

2.5.1. Apply for carriage

Kazakhstan Rail ways Owner of Rail cars Russian Fright forwarder

2.5.4. Search for

competitive wagon costs

2.5.2.Obtain

consigner’s

code

Consigner’s 4-

digit code

Obtaining approval

for application and

date of dispatch

2.5.3. Obtain

approval for

application

2.5.5. Conclude a wagon

service contract, payment

of service

2.5.7. Search for

competitive freight

forwarder costs

2.5.8. Conclude a freight

forwarding contract

2.5.6. Conclude a wagon

service contract

Wagon service

contract

2.5.9. Conclude a carriage

contract with Russian

Railways

Freight forwarding

contract through Russian

territory

Set of documents for signing

a carriage contract

2.5.10. Cost calculation

2.5.12. Availability of funds

to cover carriage costs 2.5.11. Transfer of funds to

Railway’s bank account

E-application

Regulation: more that 10 regulatory documents


Схема бизнес-процесса 2.6. “ЗАГРУЗКА ВАГОНА, ТАМОЖЕННОЕ ДЕКЛАРИРОВАНИЕ И ОЧИСТКА”


Average time required: 1-2 days

Cost: ≈495$ per car (60 т)

Output and criteria to exit the business process:

Exporter (consigner) dispatched goods by railway transport Exporter holds original set of stamped shipping and customs documents


Exporter

2.6.1. Confirm available

funds of shipper

KazakhstanRail ways Owner of cars Sanitary Inspection Customs

2.6.2.Notify date and

place of carriage

2.6.4. Preparation of

wagon for loading

2.6.9. Supervision of

wagon arrangements

2.6.8. Wagon feed at

scheduled date and

designated place

2.6.3. Pay for wagon

service

2.6.10. Delegate of official

to place of loading


loading

2.6.19. «Exit allowed»

stamp

2.6.5. Pay of customs

fees

2.6.6. Complete of

customs declaration

2.6.11. Complete of

OSGD consignment note

enclosed with a set of

required documents

Payment receipt

Сustoms

declaration

2.6.12. Load of cereals

2.6.16. Check weight of

goods, completion of

documents, seal of

wagon, put information to

OSGD consignment note


loading

Shipping

documents

2.6.24. Dispatch of wagon

with notification to railways

administration

2.6.22. Withdrawal of

wagon for train

composition

2.5.20. Accept of goods

by stamping shipping

documents

2.6.21. Withdrawal of funds

from bank account

2.6.23. Notification to

Russian customs

authorities

OSGD consignment

note

2.6.17. Check shipping

and loading documents

acceptableNo

acceptable

2.6.18. Check shipping

and loading documents


loading, availability of

documents

2.6.7. Assign the

inspectors to the place of

loading at scheduled date

acceptable

No

acceptable

Regulation: 9 regulatory documents

Stakeholders: Exporter Kazakhstan Railways Owner of rail cars Plant quarantine inspector Kazakhstan customs


6 2,50

1,25

4,50 3,50

10,00

7,00 1,50 1,00

13,00 1,00

2,50

0

5

10

15

20

25

30

35

40

0.5 2.5 4.5 6.5 8.5 10.5 12.5 1.1 3.1 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2 .9 3.2

Day

Procedure

- Processes Kazakhstan - Processes in Azerbaijan

1.1. Conclude sales contract and trade terms 3.1. Establish payment guarantee 2.1. Obtain a permission to import 2.2. Obtain a phyto-sanitary certificate 2.3.Confirmation of supply grain to the state resources 2.4.Obtain a certificate of conformity

2.5. Arrange transport 2.6.Loading of rail car and custom declaration and clearance 2.7. Border crossing of Russia and transportation 2.8. Border crossing of Azerbaijan 2.9. Unloading and Custom declaration 3.2. Claim payment for goods

36 DAYS

TIME-PROCEDURE CHART FOR EXPORT CEREAL PRODUCT FROM KAZAKHSTAN TO AZERBAIJAN


COST-PROCEDURE CHART FOR EXPORT CEREAL PRODUCT FROM KAZAKHSTAN TO AZERBAIJAN

13 288 16 25

0 68

4956 495 0 0

800 453

0

1000

2000

3000

4000

5000

6000

7000

8000

0.5 2.5 4.5 6.5 8.5 10.5 12.5 1.1 3.1 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2 .9 3.2

Cost, $

Procedure

- Processes Kazakhstan - Processes in Azerbaijan

1.1. Conclude sales contract and trade terms 3.1. Establish payment guarantee 2.1. Obtain a permission to import 2.2. Obtain a phyto-sanitary certificate 2.3.Confirmation of supply grain to the state resources 2.4.Obtain a certificate of conformity

2.5. Arrange transport 2.6.Loading of rail car and custom declaration and clearance 2.7. Border crossing of Russia and transportation 2.8. Border crossing of Azerbaijan 2.9. Unloading and Custom declaration 3.2. Claim payment for goods

7140 $


РЕКОМЕНДАЦИИ ПО ОПТИМИЗАЦИИ ТОРГОВЫХ ПРОЦЕССОВ

области бизнес-процесс рекомендации результат

Buy 1.1. Conclude sales contract • To sign a contract with the use of electronic signature by EDS)

• reduce the time to 2-3 days

Ship

me

nt

2.1. Obtain Import Permit • exclude

• reduce the time to 1-1,5 days

2.2. Obtain Phyto-sanitary Certificate

• Improvement of the legislation of Azerbaijan on the recognition of Kazakhstan certificates, now reissued them at the border

• reduce the time

2.4. Obtain Certificate of Conformity

• application and conclusion contract On-line with EDS • the development of a unified software and regulations for

use its for payment and receive results (certificate) through Internet.

• reduce the time to 1-1,5 days

2.5. Arrange transportation

• changing the timing of application (transportation planning) • finalize legislation to clarify the requirements • optimization of the use of cars

•reduce the time to 10-50 days •reduce cost

2.6. Loading of rail car, custom declaration

• the use of electronic transport documents and electronic declaration with EDS

•reduce the time to 0,5 day

2.7: Crossing of Russian Border • development software for exchange electronic transfer sheets between railways

• reduce the time up to 5 hours

2.8: Crossing of Azerbaijan Border

• development software for exchange electronic transfer sheets between railways

• Electronic exchange of information between customs

• reduce the time up to 5 hours

2.9: Unloading and Custom declaration formalities

• exclude VAT •reduce cost

Pay

3.1. Establish payment guarantee

• optimizing the cost of banking services •reduce cost


SUMMARY Implementation of measures on optimization of trading processes will REDUCE:

delivery time up to 20 days

to estimate the cost reductions necessary to analyze the tariff policy

OPTIMIZATION OF TRADING PROCESSES WILL REDUCE: COST

CEREAL PRODUCT AND DELIVERY TIME

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