United Nations Public Service Awards Case Studies

Challenges to Customs in Globalized Trade Environment
1. Korea, the world’s 11th largest economy, recognizes the importance of collaborating with the international community including the UN in building a prosperous world economy and safe global village.

Viewing active support to the domestic and international drive to facilitate and secure the international trade as critical to achieving the global common goal, the Korea Customs Service (KCS) consistently pursues relevant policies.

KCS has overhauled its organization and processes, shifting the focus from duty collection and customs control to clients and services.

KCS has also endeavored to create a client-oriented customs environment where clients can directly participate in customs administration and access its database for information by utilizing Information and Communication Technology (ICT).

Introduction of CLIS ; New Tool for Logistics Innovation
2. Recently these efforts inspired the development of the internet-based “Client-oriented Logistics Information System (CLIS)”, adopting new concepts to boost operational efficiency and service quality, revamp the way services are delivered and encourage the public e-participation.

CLIS is an innovative system which records processing time of all imported cargoes from “arrival at port” through unloading, transportation, warehousing and import declaration to “release” by each stage.

CLIS also provides tracking service for every imported cargo movement and information about total time consumed.

Then the average amount of time and standard deviation for each stage are automatically calculated and posted on internet for clients’ use.

3. KCS and its clients use CLIS data to identify bottlenecks for speedy cargo flow and secure trade supply chains.

Clients utilize CLIS to find the most time-saving delivery route and set production plans that cut logistics costs and enhance productivity and efficiency.

Uniqueness of CLIS
4. Given customs of advanced nations’ use of limited sampling method to calculate only the time spent from import declaration to approval, CLIS represents an innovative logistics quality control system, driven by new tools to offer a wider control span.

Winner of Presidential Award
5. After thorough examination and field observation, the Korean government declared it the best public service innovation and presented a presidential award at the Best Practice Contest of Government Innovations this November.

Service improvements, cost savings, and other economic benefits generated by CLIS were rated highest among the 117 candidates submitted by 47 governmental agencies. And KCS is now applying for a business model patent for this remarkable system.

Transferability and Availability
6. Nowadays international organizations like UN and WTO and many nations are keenly interested in trade facilitation. However, no indicators for objective evaluation of its levels have yet been composed.

In this context, the average amount of time and its standard deviation for each stage of handling imported cargoes calculated by CLIS, which it continues to help reduce, can be considered as potential indicators of trade facilitation and customs service quality.

Conclusion
7. The innovation experience KCS has accumulated with ICT is expected to play a leading role in facilitating international trade and enhancing public service quality.

What is the initiative about? (the solution)
Significance of Logistics Competitiveness in Trade 1. With globalization and liberalization, trade community faces various challenges in competition. It requires to reduce logistics cost through speedy cargo handling by eliminating delays and irregularities in logistics flow. It also needs to boost efficiency and safety of trade supply chains. Problems of Higher Logistics Cost in Korea 2. Korea Chamber of Commerce and Industry announced logistics costs had decreased from 12.5% of sales (1997) to 9.9% (2003), but it is still 1.3 to 2 times that of major advanced nations, undermining Korea’s competitiveness. To gain competitive edge in logistics, KCS had developed EDI cargo tracking system, providing information about imported cargo location. But this service fell short of expectations: only subscribers could access information, and it was not sufficient for clients’ needs in logistics. This insufficient information caused additional logistics costs (caused by extended financing and warehousing, for instance) arising from excess inventories due to inaccurate forecasting and planning. Delivery of Solutions by Developing CLIS 3. To address those problems, KCS, co-working with its clients, launched CLIS in August 2006, an internet-based, client-oriented system embodying new concepts to provide clients with real-time logistics information to meet specific needs. CLIS revolutionized logistics. Everyday some 180,000 data on cargoes loaded by carriers and bonded warehouses are automatically entered through CLIS on a real time basis. Clients can utilize the information in delivery/production planning, and so on. Value-added Information Provided by CLIS 4. CLIS provides the following information: First, historical information about individual imported cargo: Without any documentation, clients can access historical data about their imported cargoes with just one click: average time consumed and standard deviation for each stage — port arrival, bonded transportation/warehousing, import declaration and acceptance, and release, and use such data to diagnose bottlenecks and decrease the handling time. Second, real-time cargo information that is client-focused for use in logistics quality and target management: CLIS provides a target management function whereby clients can manage logistics quality of cargoes being imported by entering their expected time and standard deviation targets. Third, forecasts about the time of cargo delivery to improve the management of supply chain: CLIS provides time forecasts for each processing stage of individual cargo. Clients can use the data for optimum routing and production planning to minimize inventories and costs and promote Just-In-Time (JIT) deliveries and production. Fourth, performance information by stakeholder, including KCS and clients: Clients improve operational efficiency by managing performance of their partners’ cargo processing, time consumption and standard deviations through CLIS. KCS promotes its transparency, accountability and responsiveness as CLIS empowers monitoring and evaluation of cargo handling by each customs house. Economic Benefits Generated by CLIS 5. CLIS has saved Korean trade companies KRW 2,370Bn (USD 2.47Bn) annually in logistics costs by cutting time consumed and reducing excessive inventories. Public Service Innovation Promoted by CLIS 6. The internet-driven CLIS promotes not only the public’s e-participation but also quality control in public services, thereby creating a new best practice in public service innovation.

Who proposed the solution, who implemented it and who were the stakeholders?
The development of the system was completed in August 2006, with the following major milestones having been passed through previous innovations: Period 1 (1997 ~ 1999) Launch of an EDI-driven cargo tracking system The system was developed to monitor cargo movements and prevent smuggling. Period 2 (2000 ~ 2002) Organizational innovation to make Cargo Processing Teams client-oriented The KCS revamped the organization to be workflow-oriented so that cargo processing would be finished in one customs division. Period 3 (2003 ~ 2005) Shift to the internet-based system and full-fledged support for Logistics Promotion Policies EDI-based cargo tracking system was replaced with an internet-driven system in October 2005. Work processes were further reformed to accelerate cargo flow. Period 4 (2006 ~ Now) Launch and Use of CLIS (Completion Stage) To support self-regulated logistics management, logistics information is provided to clients as follows : - Information on total time consumed as well as time and standard deviation for each stage since May 2006. - Logistics consulting and logistics target management tailored to clients’ business capabilities since August 2006. - Routing information to locate optimal passage through the customs office, bonded warehouse and transportation in the shortest possible time since August 2006.

Describe how and when the initiative was implemented by answering these questions
a. What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
Ever-increasing Trade Volume in Korea A1. Korea is an open economy the ratio of whose trade to GDP was 69.3% in 2005 when GDP stood at USD 787.5Bn while total annual international trade recorded USD 545.6Bn. Recognizing the importance of international norms promoted by the UN and WTO such as trade facilitation and safety, Korea has continuously striven to upgrade related institutions and infrastructure to global standards. A2. KCS processed more than 9.5Mn export/import declarations, 600Mn tons of cargoes, and 15Mn TEUs of containers in 2005, with annual throughput rising about 10% yearly. Directly involved in these activities are over 120,000 clients including trade companies, freight forwarders, customs brokers and bonded warehouses. Challenges facing KCS A3. In this environment, KCS, as Korea’s international trade gate, pursues efficiency, transparency and client-friendliness, utilizing ICT to deliver high-quality export/import customs services. A4. KCS had previously employed EDI-driven cargo tracking system since 1998 to provide information about imported cargo status and location. But the system failed to realize one-stop paperless services and smooth two-way communication or respond to clients’ changing needs. A new system was called for to tackle increasing cargo handling time and growing logistics costs resulting from irregularity and to address concerns about realizing JIT production and providing quality logistics information efficiently.

b. What were the key development and implementation steps and the chronology? No more than 500 words
Major Focuses of New Initiative B1. To resolve the challenges facing the trade community and improve the organization’s operational efficiency and service quality, KCS developed the internet-based Client-oriented Logistics Information System (CLIS) in tandem with its efforts to revamp its organization, policies and business processes. B2. This drive was undertaken with four major aims: Restructuring of Organization & Business Process First, reengineering organization and business processes with a shift of focus from customs control centering around duty collection and anti-smuggling activities to the provision of more efficient customer services in order to strengthen the Korean trade community’s competitiveness. Given increasingly heavy customs workloads and limited human and physical resources, the KCS could not meet ever-changing customer needs with its old customs-control-focused organization and business processes. It therefore overhauled its organization and business processes, eliminating red tape and equipping itself for the performance of client-oriented operation to improve the Korean trade community’s productivity and efficiency. Information Sharing utilizing ICT Second, actively adopting ICT to facilitate two-way communication between customs and clients whenever requested in order to offer tailored services, enhance client satisfaction, and provide clients with opportunities to create new added value. KCS exploited the internet to enable clients to identify the cargo status in real-time and make a prompt response without having to visit customs or submit documents. Furthermore, along with internet-empowered two-way work processes, KCS provides a variety of tailored logistics information, empowering clients’ improved management of their logistics activities and elimination of wastes in ways suitable for their particular circumstances. Establishment of Good Governance through Partnership Third, introducing concepts of good governance, speedy management and quality control and expanding partnership-based services that bring results. Stakeholders’ active participation in administrative decision-making is bearing more and more importance and speedy management has become a precondition for survival of business. Against this backdrop, KCS has endeavored to outgrow its old role as a unilateral decision maker and become a coordinator for diverse stakeholders and a provider of support and consulting services to companies exposed to intense competition. Enhancement of Transparency, Accountability and Responsiveness Fourth, establishing a performance management system of internal and external stakeholders to enhance the transparency, accountability and responsiveness of customs services. For an organization to develop, it needs to set mission-related strategic goals and performance targets and create and execute plans to deliver those goals and targets. It also needs to have a performance management system to evaluate achievements regularly and generate feedback. Therefore, KCS established a performance management system in 2006 to manage systematically the time consumed and related standard deviation for each stage of customs services by customs office, by department and by stakeholder. Thus it has increased the transparency, accountability and responsiveness of all the parties concerned.

c. What were the main obstacles encountered? How were they overcome? No more than 500 words
C1. KCS has pursued the following strategies so that its service innovations lead to practical and tangible results that can be recognized by clients: Client-oriented Service by Adopting 6-sigma Tool C2. First, realizing client-oriented customs administration that provides practical services clients actually need and are satisfied with, by adopting 6-sigma, a statistical quality control methodology, to create, execute and evaluate client-oriented solutions together with clients. To that end, KCS established procedures to gather and incorporate clients’ opinions and evaluations in a range of subjects from policy-making for innovation to feedback provision through customs-business workshops. Study and innovation taskforce teams comprising representatives of the industry, experts and KCS staffs reviewed clients’ opinions, and the results were incorporated in policy-making without fail. In the process, the 6-sigma methodology proved to be a very useful analytical tool in quality control to eliminate inconvenience and costs the trade community had to suffer due to the irregularity and unpredictability in cargo handling. Field-oriented Service for Higher Customer Satisfaction C3. Second, practicing field-oriented customs administration since its performance and success as an organization hinges not just on the evaluation of services and efficiency, but how it responds to clients’ needs and demands at the customs services delivery interface. To meet clients’ demands for responsible and timely processing on site in accordance with legal procedures, there should be the seamless sharing of information necessary for decision-making between related parties while allowing scope for some degree of autonomy and creativity. Thus, in 2003 the KCS replaced its EDI-driven system with an internet-based one to provide a one-stop timely service enhanced by add-on services, making it possible for counterparts to share information necessary for decision-making and taking actions to meet their needs. Performance-oriented Service Meeting Customer Needs C4. Third, moving away from the old-fashioned customs control, heightening self-regulation, responsibility and accountability of customs and trade community alike; thus establishing performance-based administrative practices that generate tangible outcomes. To that end, in December 2003 KCS drafted a blueprint to innovation in imports and exports logistics designed to eliminate red tape that had caused delays or discontinuity in logistics flows and to heighten the autonomy and accountability of the trade community. As a complementary measure, KCS introduced a performance management system for cargo handling so that the above-mentioned initiatives would result in more efficient logistics management rather than entailing negative side effects such as poor safety management or tax evasion. Consequently, members of the trade community have become strongly motivated to increase the efficiency of their own logistics.

d. What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
Reform of Organization and Business Process D1. KCS transformed its administrative organization to a business friendly organization and embarked on 36 projects to revitalize its import and export logistics services (2003~2005). As a result, excessive administrative formalities were eliminated and the customs procedures were integrated and streamlined from port arrival to release. Incalculable Benefits of CLIS D2. Additionally, KCS obtained the following outcomes by establishing CLIS, which promotes clients’ participation and enables the generation of useful statistical data about cargo processing: Reducing Cargo Processing Time and Saving Logistics Cost First, one remarkable and tangible achievement of CLIS is a dramatic reduction in the time required for the completion of customs procedures of imported cargoes. With CLIS, the average length of the customs process from port arrival to release shrank by 70% from 14.8 days in 1998 to 4.4 days at present. Standard deviations in cargo handling, whose tracking started in 2005, fell by 16% from 13.2 days in 2005 to 11.0 days in September 2006. Korea’s National Information Society Agency estimates related annual savings in logistics costs at KRW 2,370Bn (USD 2.47Bn). Motivating Stakeholders to Improve Service Quality Second, CLIS has encouraged customs administration and the trade community to strive themselves to improve their operational efficiency and achieve better quality management by utilizing performance indicators. Thus, customs offices and the trade community have accelerated their efforts to improve service quality for the speedier and more uniform customs procedures. Supporting Trade Community with Real-time Logistics Data Third, the trade community itself utilizes CLIS to improve its competitiveness and logistics management efficiency. CLIS is dubbed ‘logistics wizard’ by members of the Korean trade community for providing cargo tracking information and statistical data on the time consumed by logistics stage and by stakeholder. Thus, clients can identify and anticipate imported cargoes’ movements anywhere anytime using CLIS’ information service function called “Time Machine”, which provides historical, present and future information about imported cargoes. Enhancing Customer Satisfaction and Government Performance Fourth, as a result, clients’ satisfaction with KCS and outside institutes’ evaluation of it have improved greatly: A survey by the Korea Research Center on the “Time Machine” service newly provided by CLIS measured client satisfaction at 77.4% in November 2006 despite the fact that the system was launched only 3 months ago. Greatly valuing KCS’s efforts to improve customs services, the Korean government rated it first in national government innovation in 2004 and in government performance review and evaluation in 2005. Gaining Recognition at Home and Abroad D3. Since its development started in 2005, CLIS has gained recognition as best practice in public service innovation by many institutes at home and abroad. International organizations such as the World Customs Organization and APEC, nations including Kazakhstan, and foreign customs administrations highlighted CLIS as an outstanding innovation example. The Korean government selected CLIS as the best public service innovation from 117 candidates submitted by 47 national governmental agencies, presenting a presidential award in November 2006.

Is the initiative sustainable and transferable?
1. Sustainability Tailored Logistics Innovation System Shorter cargo handling times and prompt service delivery are sustained universal concerns in heightening competitiveness. To address these concerns, KCS implemented CLIS, providing clients with internet-driven tailored logistics information, delivering tangible results in the Korean trade community and honing its competitiveness. As a result, CLIS not only generates economic benefits but also accelerates improvements in customs services' transparency, accountability and responsiveness, drawing highly positive responses from the industries concerned. Evolving Service Delivery Mechanism CLIS is neither a band-aid nor a fixed, static system but one that is flexible and evolving, allowing tailored data input and output and achieving continuous improvement in client feedback. Additionally, CLIS provides an instrument for measuring time reduction performance since KCS believes that efficient infrastructure utilization, including increasing turnover by decreasing cargo-handling times, is critical to strengthening logistics competitiveness, given the infrastructural inadequacies. Therefore, we predict continuous evolution of CLIS-enabled services and functions, including the provision of cargo-tracking and cargo-handling time information plus tailored logistics target management and time requirement forecasting. 2. Transferability World First Logistics Information System of Customs Service So far, only Korea is known to provide the trade community with internet-driven, real-time access to cargo tracking information from arrival at ports to release from bonded warehouses along with statistical data on time consumed at each stage. Meanwhile, KCS implemented an internet-enabled cargo tracking and release time measurement system applicable to all import cargoes. New concepts of average time consumed and standard deviation were also employed so that the trade community can use CLIS to manage targets, quality and performance. Transferable to Other Countries Thus, it is now possible to assess the operational efficiency and service quality of diverse stakeholders and categories, that is, by customs, by industry, by product category, by plant and by customs broker. CLIS also allows evaluation of performance by the KCS organization and staff. This innovation experience KCS accumulated in developing, implementing and operating CLIS using ICT can be transferred to any nation that uses EDI or Internet for its customs administration to facilitate customs procedures, heighten operational efficiency of the customs organization, and enhance customs service quality. CLIS is judged highly transferable to other nations. In this context, CLIS was introduced at APEC’s Sub-Committee on Customs Procedures and related APEC workshops. KCS plans to provide consulting service to nations upon requests. Applicable to Private Sector and Other Public Services Furthermore, the service innovation model embodied in CLIS can be used in other governmental and private agencies. Currently many governmental agencies and delivery service providers furnish clients with status tracking information, but no example except CLIS is known that delivers clients statistical data on time consumed and standard deviation for each service stage and allows information mining to improve service quality. The public service model employed by CLIS is readily transferable and applicable to public services including policing, fire-fighting and initial response operations; administrative services upon civil requests; and customer services.

What are the impact of your initiative and the lessons learned?
ICT application is a key to public service innovation. 1. The combination of the Internet and ICT together with client-oriented techniques in public services offers to bring about powerful innovative synergies, leading to more active client involvement, higher operational efficiency, better service quality and improved transparency, accountability and responsiveness. Comprehensive reforms lead to greater effect. 2. In order to bring about thorough innovation that yields tangible outcomes as well as to help innovation take root and evolve continuously, multi-faceted reforms are required. So, it is crucial to carry out a complete makeover of the organization, policies, work processes and IT infrastructure simultaneously. Tangible benefits encourage the public participation. 3. In order to facilitate clients’ participation in public service innovation, clients should be able to experience practical economic benefits in doing so as well as ubiquitous and convenient access to the public services in question whenever this is required. The client’s information systems and Internet connectivity should also be taken into overall consideration. Performance measurement stimulates the efficiency of stakeholders. 4. However effective and useful an institution or information system is, stakeholders tend to be reluctant to use it. Thus, for institutional or system innovation to result in tangible improvement in organizational efficiency, economic benefits or service quality, performance management should be firmly in place. Statistic data of CLIS can be used as government performance indexes. 5. The UN and WTO are deeply involved with the facilitation of trade, but there are no objective criteria for the comparison and evaluation of trade facilitation performances across countries and customs administrations. Whereas, it is confidently predicted that CLIS-provided data on average cargo handling time per stage and total logistics process will serve in the composition of a ‘Trade Facilitation Index (TFI)’ to assess the degree of trade facilitation at each stage and the non-tariff trade barriers erected at national level. 6. What is more, there are no objective criteria for the comparison and evaluation of the operational efficiency and quality of customs services delivered by individual customs offices within a specific country. CLIS-generated average cargo handling times and standard deviations are generally anticipated to provide the basis for the composition of a ‘Clearance Quality Index (CQI)’ for the evaluation of operational efficiency and service quality of each nation’s customs administration.


Institution Name:		Korea Customs Service
Institution Type:		Government Agency
Contact Person:		Taekon Sung
Title:		Trade & Logistics Division
Telephone/ Fax:		82 - 42 - 481 - 7820
Institution's / Project's Website:		82 - 42 - 481 - 7829
E-mail:		tksung@customs.go.kr
Address:		Gov't Complex, Dunsan-dong 920, Seo-gu, Daejeon
Postal Code:		302-701
City:
State/Province:		Daejeon
Country:

The Problem

Solution and Key Benefits

Actors and Stakeholders

(a) Strategies

(b) Implementation

(c) Overcoming Obstacles

(d) Use of Resources

Sustainability and Transferability

Lessons Learned

Contact Information