WORLD TRADE
ORGANIZATIONG/C/W/265
17 May 2001
(01-2527)
Council for Trade in Goods
TRADE FACILITATION EXPERIENCE PAPER BY COSTA RICA
1. Introduction
Since the early 1990s, Costa Rica has recognized the benefits to both the public and private
sectors of implementing trade facilitation measures and the fact that, thanks to the resulting increase
in the volume of international trade, this active ly contributes to general welfare.  The country is
therefore intent on continually improving its measures, laws, regulations, administrative provisions
and procedures in order to promote increasingly simple, free-flowing, transparent and predictable
international trade.
The following paper describes some of the most significant aspects of Costa Rica's recent
experience of trade facilitation, of customs affairs in particular, with a view to making a positive
contribution to and furthering the work being carried out by the World Trade Organization since the
Singapore Ministerial Conference.
2. Background
In the late 1980s, Costa Rica's customs service was organized according to the "traditional
customs" system. Customs legislation was obsolete,  customs procedures out of date and customs
officials involved in all stages of the process, often acting with excessive discretion.
This system was a real burden on companies since it pushed up the costs for traders,
producers and consumers.  Moreover, it was based on the concept of the compulsory inspection of all
goods.
The customs clearance procedure was manual and involved an excessive amount of
paperwork, which led to slow processing of information and out-of-date foreign trade statistics.
Communication and coordination between customs offices was virtually non-existent, while
procedures were not standardized and therefore resulted in unequal treatment.
Customs staff lacked professional qualifications and training, and the infrastructure and
technological tools at their disposal were inad equate and prevented them from doing their job
properly.
Faced with such shortcomings, the Government of Costa Rica, with the backing of the
Agency for International Development (AID), decided in 1989 to launch the Customs ModernizationProject.  This involved the development of a computer information system to simplify  and expedite
customs operations, training activities and studies on amending customs legislation.
The early 1990s marked the launch of a comprehensive project to overhaul the customs
system, which aspired to transform Costa Rica's National Customs System into a service capable ofmeeting new international trade requirements.G/C/W/265
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The customs reform focused on four main areas of action:  (1) organizational restructuring,
(2) inspection and automation, (3) customs procedures and (4) legislation.
3. The Customs Modernization Programme
The modernization of Costa Rica's customs system constitutes one of the main challenges as
regards encouraging foreign direct investment, business competitiveness and overall economic
development.
The Customs Modernization Programme greatly improved Costa Rica's National Customs
System and achieved many of its aims and objectives , including the overriding goal of transforming it
into a functional, dynamic and professional structure, governed by a modern and efficient regulatory
system well-prepared for the country's integratio n into the global economy, which would, in turn,
enable customs to become more flexible and reliable in the face of the ever-increasing demands of
importers and exporters.
At the same time, the Customs Service has also taken on new duties, such as establishing the
origin of goods for tariff preference purposes, protecting intellectual property rights through theimplementation of border measures, and checking that anti-dumping duties and countervailing
measures are properly applied.  Nevertheless, the traditional role of revenue collection continues to be
of paramount importance; for example, collection of customs duties from 1991 to 2000 represented an
average of 46.77 per cent of total current government revenue.
4. Customs measures which have had a bearing on trade facilitation
The simplification of customs procedures by establishing the Single Window for Warehouse
Clearing (VUDE) and the introduction of an electronic customs declaration form enabled unnecessary
stages in the customs processes to be eliminated, warehouse clearing processes to be standardized,
customs clearance time reduced and related costs substantially cut.
The official inspection system has enabled greater internal control of customs and private-
sector customs service auxiliaries since it enforces a posteriori control of exporters, importers and the
private intermediaries involved in clearing goods through customs.
Administrative restructuring also brought great progress in its wake; customs staff became
more professional and the overall number of employees fell.  By way of illustration, in 1994professional staff represented only 5 per cent of all officials (63 out of a total of 1,268);  in 1997 this
figure had increased to 21 per cent of all officials (119 out of 555);  and in 2000, professional staff
represented 28 per cent of the payroll (172 of 612 officials).  Likewise, at least 205 officials are
technicians with either higher secondary or university qualifications.
The average time for goods clearance was slashed from six days before 1994 to four hours as
from 1996. In 2000, with the application of selective and random checks (red and green customs
channels), clearance procedures not involving either physical or documentary inspection took an
average of 12 minutes and those requiring physical inspection an average of 115 minutes.
5. Adoption of risk-assessment and control techniques
Costa Rica is keen to support all trade facilitation measures in its multilateral relations.
Obviously, a modern customs service has to be able to establish controls based on risk management
and automated methods of selection.  Physical and documentary inspections need to be more
methodical and scientific.G/C/W/265
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Costa Rica has not implemented control systems based on risk analysis methods; customs
regulations and procedures governing computer selection criteria are, however, being used to
determine which goods would be subject to an on-the-spot control.  Nevertheless, current customs
legislation states that inspection procedures may be established using selective and random criteria,
thereby providing enough flexibility for a control system based on risk analysis methods to beimplemented in the short term.
6. Processing prior to arrival or advance goods clearance
One of the traditional private sector concerns was that customs required goods to be
physically present as a sine qua non  condition for authorising their clearance.  In spite of this and
given the possibility of carriers using electronic means to transmit data on shipments of goods in
transit, the possibility of allowing import and export procedures to be conducted prior to the arrival ofthe goods at the customs port was considered.
For these reasons, Costa Rican customs currently allow import and export customs
declarations to be presented even when the goods have not yet reached the customs port or when the
export procedure has not been commenced, provided that all other requirements, such as importpermits, have been complied with and any duties paid.
As far as import transactions are concerned, this procedure has helped to facilitate flows of
goods and meant that users have access to them (raw materials and final products) almost as soon as
they have been unloaded from the transport unit at the customs port or airport.
7. In-works and commercial clearance
In 1996, Costa Rica introduced a procedure into its customs legislation providing for in-works
clearance.  This option is open to companies specializing in industrial processes and allows them to
receive goods directly in their own warehouses, provid ed that these have been authorized as primary
customs zones.  The major steps in this procedure are the presentation of a provisional declaration
when the goods arrive at the customs port or airport, payment of the corresponding duties and
presentation of a final import declaration within three working days of the arrival of the goods at the
bonded premises.
A simplified system known as Commercial Clearance has also been established. This has the
same characteristics as in-works clearance, described above, the difference being that companies haveto be regular importers engaged in commercial activit ies and registered as customs service auxiliaries
with the Directorate-General of Customs.
8. Automation of customs clearance procedures
The problems experienced by the customs service in its attempts to streamline procedures and
conduct controls in line with the modernization carried out in other countries, coupled with the need
to raise the technical level of customs processes, meant that investment in computer equipment and
the development of information systems meeting the needs both of the Customs Service and of the
private sector became a necessity right at the star t of the customs reform.  A variety of different
components and modules were therefore developed and together make up the Customs InformationSystem (CIS).
The CIS is a tool conceived to help both customs officials and private-sector users to perform
and follow up customs procedures for goods entering or leaving the country.  The data captured by the
system is in turn handled correctly and intelligently, thereby allowing customs operations presentingirregularities to be more effectively monitored and facilitating the free flow of import and export
goods and the elimination of most obsolete manual controls.G/C/W/265
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9. Users' Committee
The Committee of Customs Service Auxiliaries and Customs System Users is a forum in
which the Deputy Minister of Finance, the Director -General of Customs and representatives of Costa
Rica's various business chambers meet regularly to discuss customs issues.
This forum exists for private entrepreneurs to give their views on government customs
policies.  In most cases, it forges a consensus on major changes, thereby favouring international trade
facilitation and improved State control through the customs service.
10. The National Deregulation Commission and si mplification of trade-related procedures
Government efforts to simplify trade-related procedures and formalities included the creation
of the National Deregulation Commission in 1998.  Th is body is made up of representatives of both
the public and private sectors and its main role is to review draft legislation in order to avoid
duplicating or adding new red-tape.  It also endeavours to simplify current procedures with a view to
making it easier to attract and retain investment, preventing corruption and possible administrative
abuse and improving the services offered to users by public bodies.
Some of the work of this Commission has proved extremely successful, in particular the
simplification of procedures for joining the Inward Processing and Free Zone Regime, the suppression
of the monopolistic practice of "first to register, only one to import and market" in the case of
agricultural inputs, the establishment of the rapid registration procedure for low-risk veterinarymedicines and a single procedure for the use, retailing and storage of agrochemicals.  The automatic
registration of generic agrochemicals was also authorized and the technical regulation on the general
labelling of non-food products was eliminated along with other obsolete technical regulations.
This Commission's work represents an economic benefit to both importers and consumers
since it avoids duplication, encourages competition and affords foreign trade operators and consumers
greater legal safety.
11. Export trade facilitation through the Single Window for Foreign Trade (VUCE)
Another mechanism which has simplified export transactions both qualitatively and
quantitatively is the Single Window for Foreign Trade (VUCE) system.  It provides users with a
unified process including all the steps involved in goods export procedures.  This window has alsocentralized procedures for obtaining permits and prior authorization for importing goods which are
subject to phytosanitary and zoosanitary requirements.
The head offices are located in the Costa Rican capital of San José, in the buildings of the
Foreign Trade Promotion Agency (PROCOMER), and th ere are branches in all of the customs offices
countrywide. It has an Executive Board made up of private and public sector officials who work
together to suggest constant improvements to the system.
The facilities offered by this mechanism include centralization of the officials of a range of
institutions in charge of issuing prior import and export licences, such as the Ministry of Health,
Ministry of Agriculture and Livestock and Council for Textile Quotas.  Response time per formality is
30 minutes or less.
As part of the ongoing improvements to this facilitation tool, an innovation known as the
Integrated Single Window System for Foreign Trad e (SIVUCE) was introduced to the system several
months ago in a bid to render it more adaptable, beneficial and appropriate to business exportG/C/W/265
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logistics.  Its main aim is to allow the export sector to carry out customs procedures 24 hours a day
and 365 days a year by means of "pre-stamped" customs declarations.  The system is very simple
since the Foreign Trade Promotion Agency furnishes exporters with both pre-stamped declarations
and the software for completing and sending them.  This is an added bonus for exporters since they
are no longer restricted to the Window's business hours and their officials do not have to leave theoffice to obtain approval for a procedure, which results in a considerable saving in terms of both time
and money.
A total of 45 per cent of all goods export procedures are carried out using this system and, on
the basis of its favourable reception by the export sector, it has been forecast that this figure will climb
to 75 per cent by December 2001.
12. Trade facilitation through transparency and predictability
Costa Rica uses a range of publication methods, fr om the most traditional, such as the Official
Journal "La Gaceta", to new technological tools, such as the Internet.
The Ministry of Finance Web page (www.hacienda.go.cr) contains a site dealing exclusively
with customs matters (www.hacienda.go.cr/aduanas) and offering up-to-date information for users on
a variety of issues, such as the legal framework, basic regulations applicable, tariffs applicable in line
with the Import Tariff, draft legislation, a description of current customs procedures, statistics, some
management indicators, consultation of customs import declarations, the organizational structure, as
well as officials' names, e-mail address, telephone numbers, etc.  With the exception of certainconfidential information, all customs import declaration data are published.
Another page (www.hacienda.go.cr/budha/) on the Web site  on customs matters features a
consultation system known as the Ministry of Finance Document Search Engine or "BUDHA".  This
enables searches to be run on a range of customs regulations, such as the circulars, resolutions andrulings of the National Customs Service, Directorate-General for Taxation and National Customs
Tribunal.  The advantage of this mechanism is the ease with which information can be called up using
a single related keyword.
Costa Rica also features on the list of countries which currently publish information on
customs procedures in the "Hemispheric Guide on Customs Procedures" , as displayed on the Free-
Trade Area of the Americas (FTAA) Web page, and is one of only two countries with hyperlinks fromthis site to their own national customs Web pages.
The transparency characterizing the work of Costa Rica's National Customs System in favour
of foreign trade operations is supported by mechanisms such as the advance publication by customs
authorities of requirements, for example as regards tariff classification and rules of origin, which alsogives system users the guarantee of predictability.
To this same end, customs legislation also affords users the possibility of addressing technical
enquiries to the customs authorities on issues related to the application of technical regulations, rates
in force, tariff criteria and customs valuation.
13. Investors' manual
One of the most common problems facing investors in the different countries in which they
wish to set up companies is the lack of clear rules on the myriad of procedures and formalities which
have to be carried out with numerous government bodies.  This is not normally a straightforward taskand businessmen have to go to great personal lengths to compile and sort the necessary information
which is usually dispersed and vague.  This is a waste of both time and money and, at times, even acts
as a disincentive to foreign investment.G/C/W/265
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In the light of this problem, Costa Rica has been striving to simplify procedures both by
executive decree and through administrative measures.  It recently took the initiative of providing
investors with a tool which compiles and systematizes all of the information on the common and basic
procedures for setting up companies, irrespective of the sector, as well as incorporating specifictourism and export sector procedures.  This manual was created to meet the domestic need for clear
and transparent rules on the development and installation of production activities.  Both a hard copy
and a digital version (on CD-ROM and the Web page www.tramites.go.cr/manual) of the document
are available.  Investors may update their information on a monthly basis using this page.  The
document contains a description of the procedure, requirements, deadline and legal basis.  Forms
available in the digital version can be filled in electronically and all applicable legislation accessed.
An English version of the document is currently being prepared.
Costa Rica believes that the "Investors' manual"  project helps to establish clear and
transparent rules which strengthen the principles of predictability and security to the advantage of
traders.  Projects such as this are, moreover, intended to help to safeguard public and private
resources, raise legal safety levels, create a better climate for investment and act as both an incentiveto compliance and a disincentive to corruption.
14. The introduction of specific trade-facilitati on provisions in the Canada-Costa Rica Free
Trade Agreement
Costa Rica recognizes the importance to a small economy open to international trade of all
aspects of trade facilitation and the decisive role they play in a country's economy, and therefore
considered it appropriate to regulate the matter with in the framework of its bilateral trade relations.
Proof of this is the recent inclusion of a specific chapter entitled "Trade Facilitation and Additional
Provisions" in its Free Trade Agreement with Canada.
This chapter includes, for the first time ever in a trade agreement signed by Costa Rica, a
series of principles and specific obligations with regard to trade facilitation, the underlying objective
being to step up trade flows and ensure the cont inual improvement of trade between both nations.
This new regulation establishes the specific obligations to be respected by both countries,
including the need to dispatch goods promptly;  simplify clearance procedures for low-risk and low-
value goods; coordinate with other bodies requiring compliance with import or export requirements;apply World Customs Organization principles on express consignments; successfully implement
common processes;  establish consultative mechanisms with the trading and business community;
publish advance rulings on a range of customs matters; ensure that administrative and other action can
at least be reviewed by a judicial authority;  publish regulations and documents related to goods
import and export processes and ensure confidential business information is dealt with as such.
There is also a commitment to developing a technical cooperation programme in customs-
related areas, for example, training, risk assessment and prevention and detection of smuggling, to
mention but a few.  Last but not least, it sets out a Future Work Programme, providing for a regular
review of the facilitation measures currently being implemented and, in the near future, a study of the
possibility of implementing further measures.
15. Conclusion
Costa Rica hopes that this report will prove a positive contribution to WTO discussions on
trade facilitation.  All of the practices developed and set forth in this document reveal the growingimportance of this issue in the context of Costa Rica's trade and customs policy.  Furthermore, it
highlights the need for both developed and developing countries to pay immediate attention to getting
trade facilitation processes under way, in some cases, and pursuing them in others, with domesticG/C/W/265
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efforts being stepped up to develop customs reform processes and introduce new trade facilitation
measures in customs matters or other trade-related spheres.
The efforts of developing countries must continue to receive backing in the form of financial
support and technical assistance.  The support of donor countries and organizations should, inpractice, entail concrete commitments and coordinated action guaranteeing satisfactory results, as an
urgently needed complement to the trade liberalization processes currently under way within the
framework of both the multilateral system and bilateral and subregional relations.
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