WCO news n°94 | February 2021

Recovery Renewal Resilience

World Organization mag.wcoomd.org

HIGHLIGHTS WCO news n° 94 February 2021 3

16 DOSSIER Dematerialization 34 DOSSIER of Customs procedures: Feedback TradeTrust: from Moroccan Customs accelerating the digitalization of

38 DOSSIER Improving 50 PANORAMA Assessing Strategic Trade Detection the cargo release process: and Classification through shares its experience Machine Learning

74 FOCUS Food and feed safety: identifying missing links to unleash the full benefits of cooperation

4 TABLE OF CONTENTS

5 FLASH INFO 5 The WCO launches its new strategic planning cycle 6 Project TENTACLE: enhancing law enforcement capacity to tackle money laundering and terrorism financing 8 Environmental enforcement: overview of WCO latest and future activities 10 New documents added to the WCO E-Commerce Package 10 Data Analytics course available on CLiKC! 12 DOSSIER: RECOVERY, RENEWAL, RESILIENCE 13 A few words about the WCO theme for 2021 16 Dematerialization of Customs procedures: Feedback from Moroccan Customs 22 Digitization of ATA Carnets: overview of the ICC pilot project 26 How digital tools can improve compliance with SPS measures 30 What the example of ’s new pre-arrival processing capabilities tell us about Customs performance measurement 34 TradeTrust: accelerating the digitalization of international trade 38 Improving Strategic Trade Detection and Classification through Machine Learning 42 Improving data sharing with blockchain 46 Customs conducts online Factory Acceptance Test Editor / Writer Laure Tempier Publication Assistant Sylvie Degryse 47 PANORAMA Online subscriptions http://www.wcoomd.org/en/media/wco-news-magazine/subscriptions.aspx 47 Waste trafficking: suggestions to improve enforcement Advertising 49 Single Window and Service Level Agreements facilitate

cross border trade in Bernard Bessis [email protected] 50 Assessing the cargo release process: Brazil shares its Publisher World Customs Organization experience Rue du Marché, 30, B-1210 , Tel.: +32 (0)2 209 94 41 - Fax: +32 (0)2 209 92 62 55 POINT OF VIEW [email protected] www.wcoomd.org 55 Communications and collaboration tools: Editorial note understanding the risks and opportunities WCO News is distributed free of charge in English and in French to Customs administrations, international organizations, non-governmental organizations, the business 58 Harmonization of procedures is still work in progress community, and other interested readers. Opinions expressed in WCO News are those of the contributors and do not necessarily reflect the official views of the World Customs 62 Transforming Customs operations management teams Organization. Contributions in English or French are welcome, but should be submitted no later than 15 April 2021 for consideration. The WCO reserves the right to publish, into strategic players not to publish, or to edit articles to ensure their conformity with the magazine’s editorial policy and style. The WCO Communications Service is available to answer all requests for submission of contributions, subscriptions, and any other enquiries relating to WCO News. 64 FOCUS: PRODUCT QUALITY AND SAFETY Please email [email protected]. 66 Operation STOP: Achievements and future prospects Copyright © World Customs Organization All rights reserved. Requests and enquiries concerning translation, reproduction and 70 Controlling product safety and security in times of adaptation rights should be addressed to [email protected]. Acknowledgements The Editorial Team wishes to express its sincere thanks to all who COVID-19 contributed to this publication. Illustrations Our thanks also extend to all who provided photos, logos and drawings to 74 Food and feed safety: identifying missing links to illustrate this issue. unleash the full benefits of cooperation Photo cover © Paulo Paiva / AGIF Photo caption Containers carrying doses of one of the vaccines against COVID-19 are 78 : two agencies, one mission unloaded at Guararapes International Airport (Brazil) on 18 January 2021. Design www.inextremis.be 80 EVENTS 80 Technology in times of pandemic FLASH INFO WCO news n° 94 February 2021 5

The WCO launches its new strategic planning cycle

In December 2019, the WCO Policy Commission A WCO strategy clearly linked to the clearly expressed the need to strengthen the linkage global environment between the WCO Strategic Plan, a document that To implement this approach, a document presenting sets the objectives and concrete targets to be met a variety of potential scenarios and Customs’ by WCO Members over a three-year period, and response to each of them will be produced. It will the Environmental Scan, which offers an annual take the form of a new type of WCO Environmental view of the main global trends currently impacting Scan that will cover a three-year period and will feed Customs’ operations or which could affect them directly into the Strategic Plan to be established in the future. In addition, through various WCO for the period 2022-2025. WCO Members and working bodies, Members have sought the use the Secretariat will work together in drafting the of a forward-looking methodology to prepare document and will also consult with private sector more effectively for the upcoming challenges and representatives. To that end, in November 2020, opportunities facing the Organization. the WCO Secretariat held a first round of four virtual regional meetings, with two more planned for Strategic foresight the remaining regions in 2021. Separate meetings The future is difficult to predict, as clearly also took place between the WCO Secretariat’s demonstrated by the COVID-19 pandemic. management team and the members of the WCO However, this unpredictability is not an excuse to be Private Sector Consultative Group in January 2021. unprepared, especially now. Most observers agree that many managers and decision-makers from the The Strategic Plan 2022-2025 will be developed private and public sectors could have better prepared on this basis, with the aim of setting priorities and their organizations to respond to the current health targets for the Customs community. The WCO crisis and the myriad and complex issues it has raised. approach can be summarized as follows:

Although strategic foresight is still a relatively Environmental Scan Identification of priorities Strategic Plan unknown concept within Customs administrations, it could represent the way forward by ensuring that Developed the year Members' and staff Built on the outcomes of before the next triennial involvement in the Customs is equipped with the necessary regulatory the Environmental Scan and technical tools to respond adequately to a Strategic Plan process wide range of plausible futures. To quote the Organisation for Economic Co-operation and The next Environmental Scan and the Strategic Plan Development (OECD), “strategic foresight is a 2022-2025 will enable the WCO Secretariat and structured and systematic way of using ideas about WCO Members to commit jointly to specific shared the future to anticipate and better prepare for change. targets. The underlying objective is to reinvigorate It is about exploring different plausible futures that the Customs community and ensure that it moves could arise, and the opportunities and challenges they forward, in harmony, to meet anticipated and could present. We then use those ideas to make better unforeseen challenges. decisions and act now.”1 The new Environmental Scan will be presented for The strategic planning cycle which recently adoption to the June 2021 Policy Commission and commenced at the WCO has this very objective in Council. The Strategic Plan 2022-2025 is expected mind: using foresight methodologies that enable the to be endorsed one year later, at the June 2022 Organization to predict the future more accurately, Policy Commission and Council. thus ensuring that Customs and the WCO keep pace with the changing environment and continue More information to serve economic operators and governments. http://www.wcoomd.org

1 https://www.oecd.org/strategic-foresight FLASH INFO

6 Flash info

Project TENTACLE: enhancing law enforcement capacity to tackle money laundering and terrorism financing

By the AML-CTF Programme Team, WCO Secretariat

Project TENTACLE, led by the WCO Secretariat and funded by the U.S. Department of State - Bureau of International Narcotics and Law Enforcement Affairs (DoS INL) -, aims to raise awareness of money laundering activities and schemes in the Customs area, as well as to augment the enforcement capabilities of Customs, financial intelligence units (FIUs) and police services. A joint effort with the Egmont Group for FIUs and with , Project TENTACLE focuses its efforts on money laundering and terrorism financing in Asia, Latin America, Africa, Eastern Europe and the Middle East.

Background money laundering, the WCO established its The global movement of illicit proceeds and Anti-money Laundering and Counter-terrorism terrorism financing are a widespread and Financing (AML-CTF) Programme in 2018 The proliferating threat to global security and to AML-CTF Programme, which is the most recently the stability of the global financial system. The established law enforcement programme in the International Monetary Fund estimates that the Compliance and Enforcement Sub-Directorate, amount of money laundered on an annual basis is was created and designed to strengthen Members’ between USD 1.6 trillion and USD 4 trillion, which capacity to combat money laundering and illicit is equivalent to between 2 and 5 percent of global financial flows. domestic product. The global economic impact of terrorism is also alarming. From 2008 to 2018, the In January 2019, thanks to financial assistance yearly global economic impact of terrorism was from the Japanese Customs Service CCF Fund, approximately USD 58 billion1. the WCO AML-CTF Programme launched Operation TENTACLE at the WCO Asia/Pacific Transnational criminal organizations (TCOs) and Regional Workshop on Anti-money Laundering terrorist organizations (TOs) perennially exploit and Terrorism Financing in Kashiwa, . The Customs nodes for the movement and laundering Workshop was attended by representatives of 19 of illicit money generated by their illegal activities. Customs services, INTERPOL and the FIU Japan. Customs, as the first line of defense at external borders and inland ports of entry, have a crucial From 26 August to 6 October 2019, a subsequent mandate to identify and prevent the movement of Asia-Pacific operational effort was conducted with smuggled currency/currency equivalents, gems/ the support of the 19 Customs services concerned, precious metals and other items of monetary value and INTERPOL’s Financial Crimes Unit. This led to across international borders. the seizure and detention of over $5 million in a combination of currency and gold that were being Being cognizant of this growing threat, and the smuggled across international borders by bad primary role that Customs play in combatting

1 Global Terrorism Index, 2019. WCO news n° 94 February 2021 7

Available publications actors2. The operation also resulted in the arrest of • It highlights salient, 14 money launderers. non-nominal seizure WCO and the Egmont Group (2020). events connected to Customs – FIU Cooperation Handbook The success of Operation TENTACLE Asia-Pacific currency seizures, (available in English and French / led to the establishment of Project TENTACLE, a as well as seizures of Spanish, Arabic, Portuguese and Russian version in preparation). three (3)-year effort to combat money laundering currency equivalents, and terrorism financing in the Customs arena. coins, gems and FATF and OECD (2010). International Best precious metals, Practices: Detecting and Preventing the Project TENTACLE and any seizures Illicit Cross-Border Transportation of Project TENTACLE, the primary operational effort connected to TBML. Cash and Bearer Negotiable Instruments (English, Arabic, Spanish, French). of the AML/CTF Programme, is an initiative led by the WCO Secretariat and aimed at combating bulk Customs-FIU Asia/Pacific Group on Money Laundering cash smuggling and the smuggling of gems and Cooperation (2012). APG Typology Report on Trade precious metals. Additionally, Project TENTACLE Handbook (CFCH) Based Money Laundering. places emphasis on the advancement of money The WCO and the WCO (2008). Customs Enforcement laundering and terrorism financing investigations Egmont Group jointly Guidelines on Countering Money following border seizure events, as well as developed the CFCH Laundering and Terrorist Financing collaboration between Customs services and both to serve as a reference (English, Arabic). FIUs and police services. The WCO Secretariat for Customs services http://www.wcoomd.org/en/topics/ conducted its first Project TENTACLE AML-CTF and FIUs in combating enforcement-and-compliance/activities- Workshop for Africa in September 2020, and will money laundering and and-programmes/money-laundering- hold another one for Latin American countries in terrorism financing and-terrorist-financing.aspx collaboration with INTERPOL and the Egmont activities within the Group in January 2021. Customs arena. The WCO and Egmont Group simultaneously published Project TENTACLE improves regional security the CFCH online on 27 March 2020. by conducting capacity building, enforcement operations and intelligence-enhancing efforts The CFCH aims to enhance global joint targeting around the world. It not only aims to raise the of money laundering in the Customs sector, such capabilities of Customs delivering training in as bulk currency smuggling, gem/precious metals detection and investigative techniques, but also smuggling and TBML. Its objective is also to assist strengthens members’ capabilities in financial Customs services and FIUs around the world in crime intelligence and operational planning. The creating more robust and formalized structures to operational results of TENTACLE are tracked and combat money laundering and terrorism financing uploaded into the FinCRIME Online library. and develop better financial crime intelligence. The printed versions of the CFCH will be available in The FinCRIME Online Library the near future in English, French, Spanish, Arabic, The FinCRIME Online library is the new WCO Portuguese and Russian. Customs financial crime tool and intelligence platform, hosted within the WCO Customs Operation TENTACLE capacity building Enforcement Network (CEN). workshops Project TENTACLE utilizes AML and CTF experts • It serves as reference point for identified money to conduct training workshops designed to raise laundering schemes that touch upon the Customs the skillsets of front-line Customs officers and sector, such as the Black-market Peso Exchange, mid-level supervisors, as well as FIU analysts, in bulk currency smuggling, and trade-based money tackling currency smuggling, gems/precious metals laundering (TBML) schemes. smuggling and Trade Based Money Laundering (TBML). The Project also draws upon experts • It highlights new trends and mechanisms for from FIUs and INTERPOL to support its capacity money laundering in the Customs realm, as well building efforts. as concealment methods. Top Customs cases and alerts are also highlighted. More information [email protected]

2 Individual or entity with the prior criminal conviction, or who has been sanctioned by the court or regulator. 8 F lash info capacities tocapacities engage WCO with the Environment their enforcementwishing to strengthen aim is to Customs administrations encourage those The of future directions. provides overview an and of WCO latest and future activities Environmental overview enforcement: As part of the WCO of the Environment the part Programme, As Secretariat WCO team, Programme Environment the By 2 1 WCO Secretariat is working role to the solidify of undertaken Environment under the Programme Report_2020.pdf. http://www3.weforum.org/docs/WEF_Global_Risk_ 2020, November 15 viewed 2020, Report Risks Global The 2020, Forum. Economic World 2019. https://www.euronews.com/2019/12/02/live-un-leaders-anddelegates-arrive-in-madrid-for-the-climatechange-summit. 3December Euronews, Return.’” No of to aPoint Is ‘Close Planet Says Guterres Secretary-General UN 2019. S. Madrid: in S. “COP25 Manzanaro, Customs in environmental Customs matters. This article presents the latest activities activities latest the presents article This administrations are regularly reminded of the importance of implementing of the importance the technological risks).technological various environmental agreements agreements environmental various economic, geopolitical, societal and and societal geopolitical, economic, in force, existing training material material training existing force, in short and long-term risks long-term and (i.e.short is material updated new and to other categories of developed, exhaustive capacity capacity exhaustive developed, most pressing comparedmost building is and provided, issues dominated as the enforcement operations are are operations enforcement 2020 that environmental environmental that 2020 organized. its Global Riskits Report © AdobeStock Forum reported inForum reported and the World the and Economic But more stillBut to needs be done to ensure done be the change was in sight, in was change implementation of the of implementation no-return” on climate on no-return” 2019 that a“point of environmental various Guterres in warned AntónioGeneral Secretary- Nations Unitedagreements. 2 1

and opportunities for improvement. for opportunities and Programme team in order to discuss their needs seizures of wildlife and forestry products, withseizures of wildlife products, forestry and operation resulted The crimes. in over 2,000 saw 103 countries2020 rally against wildlife The joint WCO-INTERPOL Operation THUNDER activities. to progress discuss and the achieved, and future Nigeria to review and their experience meeting wasorganized with representatives of online An wrap-up 2020. in end an December to came Cooperation), International for Agency by GIZ (GermanNigeria funded and Vietnam, and Malawi, in practices risk management improving focusing Project on INAMA of the component The several other webinars awide range on of topics. also organized partners ICCWC Worldthe Bank. and UNODC the INTERPOL, Secretariat, CITES Crime (ICCWC), WCO, which comprises the the International Combating on Wildlife Consortium auspices the under ofspeaking the Africa administrations some for French in sub-Saharan additional organized was An COPES workshop todue COVID-19 the pandemic. organized have heldworkshops online been and WCOof the To COPES Programme. date, two training delivered and developed as part has been This evidence. preserving and collecting reporting, to storage the of seized includingoffence assets, an of identification the from range These fraud. training to used working combat the on methods to follow is legal,given have opportunity the been by ensuring that all in trade wild animals plants and wildlifetrafficking counter to capacity Customs’ which aims to enhance Project, in INAMA the participating administrations Customs American South and Asian, African, of sub-Saharan A number Trade Wildlife Illegal WCO news n° 94 February 2021 9

a total of 699 offenders apprehended. Seized Table 1 – Environment Programme Recent Activities contraband included over 1.3 tonnes of ivory, Event type Number of Countries Number of Officers over 1 tonne of pangolin scales (the equivalent represented participating of approximately 1,700 pangolins), 56.2 tonnes 3 COPES Workshops 10 (INAMA) + 5 (ICCWC) 25 (INAMA) + 18 (ICCWC) of marine products, 950 tonnes of timber (the equivalent of 87 truckloads), 15.9 tonnes of plants, INAMA-GIZ component 2 5 online wrap-up meeting and over 45,500 live animal and plant specimens. ICCWC Webinars 26 97 Illegal waste and substances controlled Operation THUNDER 103 116 National Contact under the Montreal Protocol 2020 Points Operation DEMETER, which dates back to Operation DEMETER VI 73 104 National Contact 2009, is perhaps the most well-known face of the Points efforts deployed by the Customs community to implement the provisions of the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, and the against illicit wildlife trade. Funding has been Montreal Protocol on Substances that Deplete received to provide assistance to the Customs the Ozone Layer, including the Kigali Amendment. administrations of Cameroon, , Nigeria, This amendment commits countries to phasing Uganda, , Lao PDR, Malaysia, Vietnam, down the production and consumption of Brazil, Colombia, Ecuador, Guyana and Peru; hydrofluorocarbons (HFCs), which contribute to global warming and climate change. • support the Basel Convention’s Plastic Waste Partnership5 which seeks to promote the Operation DEMETER VI saw the participation of environmentally sound management of plastic 73 enforcement agencies from 71 countries, joining waste by collecting and analysing information forces with regional and international partners. This on transboundary movements of plastic waste, concerted enforcement effort resulted in a total of among other things; 131 seizures, including more than 99,000 tonnes of waste and approximately 42 tonnes of substances • support the Environmental Network for controlled by the Montreal Protocol. Optimizing Regulatory Compliance on Illegal Traffic 6 A number of articles have been published in (ENFORCE) established by the Our Donors recent issues of the WCO News3 on illicit trade Parties to the Basel Convention. in waste, including one by the Secretariat of The WCO Secretariat became - The European the Basel Convention explaining the latest a full member of the Network in Commission’s Directorate General for International developments in the international rules governing 2020. Development and the transboundary movement of wastes, as well as Cooperation (DEVCO) the available support and activities.4 The issue was Get involved - The UK Government’s also discussed extensively at recent sessions of the Member administrations wishing Department for WCO Enforcement Committee. to receive support in the areas Environment, Food & Rural mentioned above are invited Affairs (DEFRA) The future to contact the Environment - The U.S. Department Throughout 2021, the WCO Secretariat plans Programme team. The team has of State’s Bureau of to expand its Environment Programme activities adapted its working methods and International Narcotics thanks to new funding. Among other things, it will: can provide support and training on and Law Enforcement a remote basis. Affairs • continue assisting countries with building their - GIZ (German Agency for International Cooperation) enforcement capacities related to the fight More information [email protected]

3 See in particular the article by the WCO Secretariat on the need to collect more data in order to obtain a clear picture of illicit international waste flows https://mag.wcoomd.org/magazine/wco-news-88/illegal-waste-trafficking-more-data-is-key-to-getting-a-better-grip-on-this-trade 4 https://mag.wcoomd.org/magazine/wco-news-91-february-2020/focus-on-the-transboundary-movements-of-wastes 5 http://www.basel.int/Implementation/Plasticwaste/PlasticWastePartnership/tabid/8096/Default.aspx 6 http://www.basel.int/Implementation/TechnicalAssistance/Partnerships/ENFORCE/Overview/tabid/4526/Default.aspx 10 ment-and-tools/frameworks-of-standards/ecommerce.aspx http://www.wcoomd.org/en/topics/facilitation/instru- More information Framework. of the Customs administrations to assess their level own of implementation which will and released enable in been 2020 Spring which had indicators key of Secretariat the by the and performance conducted Finally, building Council the note took capacity activities of the levels). minimis de (including facilitation, revenue electronic data, and safety, collection security administrations as such exchange issues, of address advance priority Customs of how examples 17 practical offering studies case includes which Case Studies of E-Commerce on Compendium of the edition first the and update/maintenanceStandards mechanism, Framework WCOof E-Commerce Council the The also endorsed place not any additionaldoes obligations stakeholders. on transparent cross-border predictable It and movement of goods. responsibilities stakeholders of to various ensure e-commerce Responsibilities” provides aclear description roles of the and and Roles Stakeholders: “E-Commerce on document The models. to of understanding provide existing abetter revenue collection aims and describes document Approaches” Collection “Revenue The shipments. small e-commerce identify and target track, implementing when to or Framework, effectively the project administrations are currently of a pilot either collecting, as part provides of which datasets Customs examples E-Commerce” Cross-Border for “Reference on Datasets document The Responsibilities”. Stakeholders: Collection Approaches”, Roles “E-Commerce and and “Revenue E-Commerce”, Cross-Border for Datasets “Reference entitled TechnicalSpecifications E-Commerce Cross-Border on to Framework the of are Standards three Annexes documents The Session. 2020 December Package at its WCO E-Commerce the missingfrom documents final the adopted Council WCO The Package to the WCO E-Commerce New documents added F lash info More information basics of machine learning models. programming the and data to and learn Python skills and knowledge acquire practical handling on comprehensive of adata knowledge to science, to Itlevel build is a data structured analysts. entry- become wish to who officials Customs for thanks to Korea is course the Customs funding, Developed inPlatform eLearning the section. available in English French and via WCO the CLiKC! training online dataAn is on analytics course now on CLiKC! available course Data Analytics https://clikc.wcoomd.org

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DOSSIER: Recovery Renewal Resilience © Angola Customs theme for 2021 for theme A few words about the WCO both productive and engaged. engaged. and productive both and meaning is duties, and in its purpose hashighfinds is morale, adaptable, emotionally), and (physically, mentally is healthy that is one resilient workforce therefore and resilient supported properly well-led, trained, A workforce. achieve their missions, Customs administrations well- aknowledgeable, need asset of organization an Toresilience. important is workforce. its most The remain of all of course, strategies heart must, at the at aimed buildingPeople controls. effective implementation the and ofand automated, fast might to merit indicate amore detailed inspection, technology which imports including years, for use of the all-digital clearance paperless methods, and which of wehave promoting major concepts been importance the shown COVID-19changing future-proof. to The -and be demand pandemic has to renewal bringapproach enabling about Customs to of adapt in face the technological solutions innovative an and cutting-edge we need e-commerce, challenges especially of new and In face the threats, rise give the and of intentions. and actions business conditions improve trade-related and policy about transparency agile to be of changing retain stakeholders, with in face our the capacity our procedures and jointlyexamine we how adapt fresh workflows perspective, crisis,the are way at goods the weshould cleared look at borders from a Building collaborative from our learned lessons during the on approach other chain supply and private the border stakeholders. agencies, sector in isolation done this be rather requires cannot but of all cooperation the that know We collection. revenue fair with basis fiscal a ensure crisis and current from the recovery economic willclearance processes help support Safeguarding of legitimate flows smooth by facilitating trade efficient Recovery, Renewal andResilience more sustainable recover help global and pandemic. the economy from the challengesaddress these will make Customs renew the system, chains supply to global by the Customs community collective efforts The in e-commerce. social distancing in daily digitization life, working from home, upsurge the and toand rebuilding backdrop new against the economy of greater the on focus finding away out of theongoing crisis generated by the COVID-19pandemic sustainable supply chain”. It invites Customs administrations to contribute to 2021for is “Customs bolstering Recovery, Resilience Renewal and a for slogan chosen The international partners. its and Customs community year,Each that is atheme WCO the relevant Secretariat chooses to the KunioBy Mikuriya, General WCO Secretary February n°94 2021 news WCO 13 14 Dossier

The top priority right now is to support the distribution of COVID-19 vaccines which has started being rolled out, with the process expected to last for many months to come.

Ensuring swift and reliable distribution As Customs is also called upon to verify the of COVID-19 vaccines across borders safety of imported products and protect The top priority right now is to support the citizens from counterfeit medical products, distribution of COVID-19 vaccines which has the WCO Secretariat organized webinars with started being rolled out, with the process expected vaccine suppliers, during which the latter shared to last for many months to come. Customs information about vaccine production and clearance of vaccines and related supplies and distribution processes, labelling and packaging equipment must be carried out pre-arrival and requirements, and how to authenticate genuine should follow the recommendations set out in the products. “Resolution on the Role of Customs in Facilitating the Cross-Border Movement of Situationally Last but not least, the Secretariat is organizing a Critical Medicines and Vaccines”, adopted in second edition of Operation STOP, targeting the December 2020 by the WCO Council. illicit trade in goods which are generally used to diagnose or treat COVID-19. You can consult an More guidance is provided in the joint statement article on the first edition of the Operation, as well I recently issued with the Secretary General of as several articles on product quality, conformity the International Civil Aviation Organization controls and cooperation between Customs and (ICAO), Dr. Fang Li, and which outlines a number market surveillance agencies in the “Focus” section of measures to be implemented by governments of this magazine. with the objective of expediting air cargo transport and distribution of COVID-19 vaccines. The WCO Dossier contents Secretariat has also published Harmonized System Let me now turn to the actual contents of this (HS) classification references for vaccines and Dossier. It starts with an article by Moroccan related supplies and equipment. Customs explaining the Administration’s modernization journey and how COVID-19 Tools and guidance materials issued by the WCO allowed it to take full stock of the changes Secretariat, partner international organizations introduced. and industry associations along with WCO Members’ practices have been brought together This is followed by an article by the International on a page on our website.1 Chamber of Commerce (ICC) on the digitalization

1 http://www.wcoomd.org/en/topics/facilitation/activities-and-programmes/natural-disaster/covid19-vaccines-distribution.aspx WCO news n° 94 February 2021 15

of ATA Carnet procedures. It explains how the ICC This is followed by an article introducing a ATA Carnet digital system operates, provides a methodology for using machine learning to identify general overview of its design and architecture, transactions involving strategic goods, though not and gives a summary of progress made towards declared as such. Given the data-dense nature full implementation of the system. of international trade transactions, Customs administrations are in an excellent position to Digitalization is also the subject of an article exploit advances in machine learning in order to highlighting the need to review the current improve risk analysis, enforcement and outreach. processes for implementation of the World I truly hope that this article will inspire Customs Trade Organization (WTO) Sanitary and management and analyst teams. Phytosanitary Agreement and explaining how adoption of information technology to enhance The Inter-American Development Bank then gives workflows would benefit both the import and us an update on CADENA, a project launched to export economies, as well as trading partners. It enable the automatic exchange of information on illustrates the fact that many digitization projects Authorized Economic Operators (AEO) between are an opportunity to review procedures in Customs administrations having entered into a place, enhance transparency and strengthen Mutual Recognition Agreement (MRA). It will be compliance. of special interest to those considering the use of blockchain, as the article draws some important The fourth article addresses impact assessment lessons from the CADENA experience. and is written by representatives of academia, the private sector and Customs. The authors The last article sheds light on the capacity of present Montenegro Customs’ pre-arrival Customs administrations to adapt to the current processing procedure for authorized express constraints facing them. It explains how Malaysia parcel operators and explain how they conducted Customs has conducted a Factory Acceptance an impact assessment using a stakeholder needs Test (FAT) of its newly procured scanners and analysis, from which key performance indicators radiation portal monitors (RPM) using virtual were derived. communication tools.

A groundbreaking initiative by I would like to bring my comments to a close by Infocomm Media Development Authority and sincerely thanking all the contributors to this Singapore Customs is then presented in an Dossier, along with all the other contributors to article on TradeTrust, a set of governance and the magazine. If we want to support governments legal frameworks, document standards and a set and citizens as they try to emerge from the of software components, all of which facilitate the current crisis and move towards a healthier, more interoperability of electronic trade documents resilient and sustainable economic model, we must and their exchange between different digital remain dynamic and strive for improvement. The ecosystems. varied initiatives and experiences featured in this magazine bear witness to the commitment by the Customs and trade community to do just that. 16 Dossier

Dematerialization of Customs procedures: Feedback from Moroccan Customs

By Moroccan Customs

With its focus fixed on the capacity consistently to improve the service it provides to its users, Moroccan Customs has long been counting recourse to the new information and communications technologies among its strategic options. Today, Customs Moroccan © the various projects undertaken to dematerialize its procedures have culminated in a fresh boost for . As of now, Customs clearance in is taking on a new dimension: simplicity of access and data use, speed, transparency, traceability and security of transactions, streamlining of control measures and reduction of archiving costs. Dematerialization has gone hand in hand with an alleviation of administrative formalities which, together, will allow operators to reduce the costs involved in processing Customs operations.

Approach adopted by Moroccan Complete dematerialization of the Customs Customs clearance circuit Dematerialization within Moroccan Customs was The launch of “paperless” Customs clearance was in its infancy back in 1978, when the Customs preceded by the gradual rollout of legal, procedural accounting system became computerized. and technical prerequisites, which called for a However, the measure did not really take off until commitment from all the Customs services. Some the introduction of the computerized Customs of the key objectives of the digital transformation declaration. The full rollout of this feature became strategy adopted include time and cost optimization, a reality in late 1991 when the Single Goods the streamlining of control measures, faster and Declaration (SGD) would replace the dozens simplified communication between stakeholders, of printed forms in use at the time. Business improved working conditions and complete processes gradually became automated. Then, transparency of clearance operations. 1998 formed the backdrop to a key stage in the automated Customs system: the introduction of In effect, the Customs clearance circuit of which automatic selectivity processes. For almost 30 the forms a part, regardless years, the computer system underpinning the of the nature of the Customs regime concerned, Customs clearance circuit continued to evolve, has been completely reengineered. Once signed ultimately embarking on a new era in 2019: the era electronically, the declaration together with any of complete dematerialization. Economic operators annexes required by the Customs authority are and government agencies overseeing international submitted online and registered automatically trade played their part in this transition. Since 1 in the Automated Customs Network Database January 2019, most of the stakeholders in the (BADR). The computer system sends registration foreign trade ecosystem have been involved confirmation to the declarant. The control phase in the gradual and evolving process of digital is subsequently initiated: the data from the transformation. declaration is analysed and cross-checked, litigation WCO news n° 94 February 2021 17

proceedings might be lodged, electronic payment those parties are well documented. Some of the is made and removal of the goods takes place. This services available online include consultation of phase is also activated in the case of occasional the declaration circuit, access to the cost estimate declarations. Those operations conducted on an for the Customs duties arising, notification of the occasional basis and formerly processed manually release issued and auditing of Customs procedures will henceforth be registered on the Customs with economic impact. information system. The online availability of these services has Gone are the days of queueing in person at facilitated: Customs counters. The agents responsible for manual processing no longer need to look for and • reduced contact with customers: procedures archive paper declaration records. Everything can governing declaration, control, payment and be found on the system. Operational managers release all take place remotely, except in the event can complete all their work activities from of physical verification; their screens: documentary checks, valuation control, payment of duties and , litigation • the easing of non-Customs formalities: initiation proceedings, etc. of non-Customs control measures is notified and their results shared electronically with the Inspectors have two screens at their disposal for authorities responsible for auditing, either from viewing all the information essential for inspection system to system or by means of the Virtual and payment purposes. They may call on the Single Window for Foreign Trade if the authority services of central and regional teams to assist them concerned is connected to it; in Customs clearance operations, including in the use of the hardware and software tools available • the availability of real-time information via the to them. mechanisms for logging histories, alerts and electronic notifications; A package of online services As regards external users, a number of meetings • the transformation, on an organizational level, were organized for the benefit of the forwarding of Customs clearance offices into remote agents and economic operators. The benefits for monitoring offices;

Figure 1: Dematerialized Customs clearance circuit

1. Removal of physical filing of AUTOMATIC SELECTIVITY declaration

DECLARANT Physical Admitted as visit compliant

BADR Automated Customs Network Database MULTI-CHANNEL PAYMENT PORTNET Data input Signature Data registration Filing

ISSUANCE OF Payment/ Accounting RELEASE security documents NON-CUSTOMS Computerization REGULATIONS of exit voucher

REMOVAL OF BANK COURT OF GENERAL GOODS AUDITORS TREASURY 18 Dossier

• the objective of minimizing human intervention: to facilitate better organization of work and a some tasks relating to data consistency reduction in the time needed for processing Economic verification, tasks involving assistance with operations; Customs officers have all the tools operators will be entering declarations and checks relating to they need for their work when they are equipped mandatory documentation or to the management with a tablet; able to monitor of Customs privileges and concessions are fully their Customs automated; • to establish a risk management approach based on effective systems for the collection activities and • the streamlining of control: the enforcement and analysis of information; one current study operations via a and inspection services have at their disposal, in is focusing on the prospect of fine-tuning this digital platform real time, all data and documentation relating to approach by incorporating predictive analysis Customs clearance operations. and additional data; known as “Diw@nati”. It will PORTNET National Single Window • to make available to the customers/users a provide access to Functioning as an electronic platform for integrating digital channel for submitting their complaints the information systems of all foreign trade and requests for information; this new method operations history, operators at national and regional level (Customs, of communication, which forms part of the to the electronic port authorities, port operators, shipping agents, governmental plan for a national claims portal, freight forwarding agents, importers/exporters, facilitates increased traceability and monitoring documents oversight bodies, banks, etc.), this Single Window of customers’/users’ queries and the responses associated with operates with a view to “going paperless” in foreign provided; those operations, trade operations. • for economic operators (business leaders to various Software tools interconnected with the initially) to monitor their Customs activities and online services, BADR Customs clearance system operations closely, on a daily basis and in real Software tools have been developed which, time, via a digital platform known as “Diw@nati”; to Customs together with the clearance system, shape an the platform will provide access to operations notifications, ecosystem in which it is possible: history, to the electronic documents associated and to a service with those operations (SGD, release, clearance • to provide Customs officers with all the devices certificate, authorization, receipt, etc.), to various for messaging a needed for mobile working, that is to say, for online services (settlement of Customs debts, Customs adviser. completing tasks outside the office, in order application for a particular authorization, filing

Figure 2: “PORTNET” Single Window

Filing of SGD and annexes scanned in DECLARANT electronic format National Single Window for Foreign Trade Ministry of Procedures Foreign Trade

Port Foreign authority exchange offices PORTNET

Local site managers Banks

Technical monitoring services WCO news n° 94 February 2021 19

of a complaint), to Customs notifications, and to a Figure 3: Multi-channel payment service for messaging a Customs adviser;

• to make available to the general public an application known as “Bayyan Liy@”, which E-BANKING gives consumers the opportunity to ascertain for themselves that certain products put up for BANK LOCAL sale are genuine by verifying a number of details SERVICES (for instance, the trade name, producer/importer, or the date of production/import); one particular bonus of this application is its effectiveness in combating smuggling and counterfeiting.

Multi-channel payment solutions ATM M-BANKING Customers/users can settle their outstanding Customs debts by various simple, swift and secure payment methods. In addition to the online method of payment by bank card, other methods Electronic signature are proposed, including payment by online banking An electronic signature solution, certification for (e-banking), by mobile phone (m-banking), by which is provided by the company Barid Al Maghrib, automated teller machine or even through bank ascribes to documents bearing an electronic branches and money transfer agencies (local signature on the online BADR clearance system service points). the same legal value as the equivalent physical documents signed by hand. Irrespective of the payment method chosen, the process remains the same: Using this solution makes it possible to guarantee:

• the operator selects the outstanding amounts • the identity of the signatory (identification/ that it wishes to pay and creates a shopping cart authentication of the signatory); to that end; • the non-repudiation of the signed document by • a payment code is automatically allocated to the the signatory (by this mechanism, challenges relevant shopping basket; regarding the effectiveness of dispatch of digitally • the code is used by the operator to proceed to signed documents can be avoided); payment; • the integrity of the signed document (impossible • as soon as the payment transaction has been to alter it). confirmed, notification of the release is issued; • on receipt of the debit notice from the bank Cessation of manual processing in account, the transaction is recorded; respect of temporary admission and • a receipt, generated automatically by the system, export declarations for hauliers’ is sent via e mail to the payer’s messaging address. vehicles Since 1 October 2019, an electronic procedure has Dematerialization of bank security replaced the paper-based system used for a long documentation time by hauliers to obtain simplified temporary The automated management of payments, rolled admission and export declarations for their out since October 2017, translates into a time commercial use vehicles (known as “D17”s and saving for economic operators relying on bank “D20”s). The paper versions of these declarations, security documents. At their request, banks input previously supplied exclusively by the Association the bank security directly into the BADR system Marocaine du Transport Routier International without the need to issue the operators with a (Moroccan Association of International Road document which would then be handed to the Transport), are therefore no longer in use. Customs services. 20 Dossier

Figure 4: Computerization of temporary admission and export declarations for TIR vehicles (triptychs)

D 20 MOROCCO OVERSEAS D 17

Efficient time Selectivity Tackling Automatic management informal clearance arrangements

Those simplified declarations can be used only by has resulted in better oversight as well as simpler those International Road Transport (TIR) operators formalities for travellers, whether they are that are established in Morocco in relation to their Moroccan nationals residing overseas or foreign operations involving: tourists.

• temporary export of their commercial use Computerized management of vehicles registered in Morocco; litigation proceedings • temporary admission of commercial use vehicles The process of litigation management, from the registered overseas and belonging to foreign initial lodging of proceedings to their definitive transport operators, on the basis of a partnership resolution (drafting of reports, settlements, contract. judicial proceedings, recovery proceedings and administrative proceedings), has also undergone They are still required to submit the relevant computerization. application (supported by an unsecured commitment) and obtain Customs approval. New data-related requirements As part of the drive to establish a global control The approved TIR operator is required to enter mechanism aimed at anticipating the Customs into and electronically sign these declarations for clearance of goods and thereby expediting their every operation involving temporary admission or exit from Customs premises, hauliers have been export of commercial use vehicles. Their decision required, since 1 October 2019, to give specific to participate in this arrangement is expedited details in their summary declarations, including the by the advantages presented by the process’ four-digit heading for the goods concerned. dematerialization in terms of cost, time and operational traceability. Moreover, Customs now has access to export declarations for goods from the countries Similarly, the computerization of the “D17” and signatories to the Agadir Agreement (namely, , “D20” declaration documents presents its share , and Morocco). It can, as a result, of advantages for the Customs services inasmuch enhance its management of risk by comparing the as it has made it easy for them to identify those data on the import and export declarations. road hauliers operating internationally, to have oversight of their fleet of vehicles and drivers as Dematerialization of certificates of well as of their movements, to ramp up checks origin through risk analysis, and ultimately to ensure In Morocco, certificates of origin are issued by greater compliance with the regulatory deadlines the Customs Administration. Exporters simply granted by Customs and better management of the apply for a certificate when drawing up the export discharging of declarations. declaration. The computer system then collects the data already entered on the declaration Vehicles registered overseas and requests that the exporter input only the Management of temporary admissions of outstanding information needed for it to process vehicles registered overseas has been completely the application. This process reduces the risk of overhauled. Its integration into the BADR system error. WCO news n° 94 February 2021 21

The electronic certificate created in this way is Customs clearance of goods that is appropriate for registered on the Internet portal of Moroccan all logistics arrangements. The essential focus is to Customs. Any administration seeking to verify the proceed with dematerialization and simplification authenticity of a certificate issued by Morocco of Customs procedures, thereby nurturing the therefore has only to consult the Customs website. emergence of multimodal transport solutions, that is to say, combining transport by land, sea and air. This procedure was phased in and completed in January 2021 against a backdrop of important Conclusion discussions and intense negotiations between In 2019, the key performance indicators highlighted the teams at Moroccan Customs and their a significant improvement in the performance counterparts in the other countries parties to of services. The revenues collected have, in bilateral or multilateral agreements. The objective particular, risen by 2.88% in comparison with 2018. has been to bring those partner countries on The current objective is to take advantage of the board this project and to remove any obstacle transformation to improve performance indicators to its successful conclusion (whether technical, in the areas of facilitation and control. procedural or agreement-related). At the same time, major IT-development work has commenced. It can already be stated that litigation management One application has been developed to facilitate capacity has broadly improved. One of the reasons the remote authentication of certificates of origin, for the increased pace of proceedings is the fact providing assurances to the operator that those that all stages of litigation proceedings are now certificates would not be rejected for reasons still registered on the Customs information system. connected with such authentication. The radical overhaul of the system by Moroccan Electronic commerce and blockchain Customs in terms of its dematerialization has also technology profoundly altered the relationship between the In 2020, Moroccan Customs launched a Customs officer and the economic operator or its cooperation project with DHL and the German representative. That relationship, which used to International Cooperation Agency (GIZ Morocco) be a physical one, has, to all intents and purposes, with a view to developing a platform relying on become a virtual one. These new management blockchain technology for collecting the data of methods have unburdened operators of any each party to an international transaction (traders, costly and needless trips, but have also provided express mail service, Customs, other stakeholders) the means for Customs officers to work in a and sharing it. Rooted in this ecosystem, procedures better environment. This does not mean that the will be open to simplification and risk management communication channels have been muted. On the will be enhanced, in particular as regards Customs contrary, they are stronger and more effective. valuation. COVID-19 has acted as a catalyst, increasing the Becoming an indispensable logistics pace of change of stakeholders’ procedures and hub for the region conduct in the international trade system. It has By means of the projects for dematerializing the also allowed us to take full stock of the changes foreign trade procedures, Morocco is setting its introduced. In the midst of a health crisis, Morocco sights on becoming an indispensable logistics has encountered no problems in continuing to hub for the region, especially as regards the source supplies of essential products and basic North-South flows of goods. In that connection, necessities (such as food products, healthcare a number of partnership agreements promoting products, medicines and hydrocarbons); and the the Kingdom’s maritime, air and land transport effective transition from a management of flows have been concluded between the main public and to a teleworking arrangement, facilitated by an private stakeholders concerned. efficient computing ecosystem, has had a significant and positive impact on the situation. As a key player in these projects, Moroccan Customs, in conjunction with professionals in the More information relevant sectors, has introduced a procedure for the [email protected] 22 Dossier © AdobeStock ©

Digitization of ATA Carnets: overview of the ICC pilot project

By Cyrille Bernard, Information System Architect, and Yuan Chai, ATA Carnet Manager, International Chamber of Commerce

The ATA1 Carnet is an international Customs (IAs) in each country to process Carnet applications. document that permits -free and -free Processing fees apply as well as a surety bond temporary admission of most goods for up to one which will be returned if the Carnet has been used year. It enables countries, businesses and border correctly. The International Chamber of Commerce agencies to expedite the Customs process by (ICC), the institutional representative of over 45 utilizing unified, ready-to-use declaration forms and million companies worldwide, is responsible for eliminating the lodging of a guarantee, bond or cash administering the global guarantee chain affiliated deposit in the country of temporary importation. with all NGAs. At the end of 2020, the ATA Carnet procedure has been implemented in 78 countries and Customs Going digital territories. In each one of them, the Customs The ATA Carnet is still today a paper-based authority appoints a National Guaranteeing document, although its digitization (turning the Association (NGA) which guarantees payment physical paper into an electronic file) and the of import duties and taxes in cooperation with digitalization of the Carnet-based temporary foreign NGAs around the world. Under the NGA’s admission process has been discussed for some umbrella, there can be multiple issuing associations years now. The fact is that, given the complicated

1 ATA is an acronym of the French and English terms “Admission Temporaire/Temporary Admission”. The ATA Carnet is established under the Customs Convention on the ATA Carnet for the temporary admission of goods (ATA Convention) and the Convention on Temporary Admission ( Convention) WCO news n° 94 February 2021 23

nature of temporary admission and the complexity Figure 1: The 6 components of the eATA digital environment of the data exchanges taking place among the various parties involved (ATA Carnet holders and representatives, issuing associations, national guaranteeing associations and Customs 6 3 authorities), the task has proven to be challenging. National Issuing ATA Carnet and Claims System The digitalization of the process must be done at an NICS international level in an organized and coordinated way. 2 ATA Carnet Proxies 4 1 ATA Carnet App With this in mind, the WCO took the initiative some ATA Carnet years ago to gather key stakeholders to discuss Core the creation of an electronic ATA Carnet (eATA) solution. ICC presented its eATA concept to the WCO back in 2016 and, with the support of the Organization, implemented an eATA pilot project 5 ATA Carnet in four countries, namely Belgium, , and Customs Portal . Once the test phase is finalized, the innovative ATA Carnet digital ecosystem that ICC has designed is expected to grow quickly as more The ATA Carnet App (Exhibit 4) is the mobile and more countries realize the benefits of moving application provided to Carnet users (holders/ from a paper-based process to a digital one. representatives). It is a secure wallet where users can store the eATA Carnets purchased from an IA/ How the eATA Carnet works NGA and prepare border crossing declarations via Let us take a look at the technicalities of the ATA the app. Each user has a profile and can therefore Carnet digital ecosystem. Figure 1 provides a access the system via any connected devices. When general overview of its design and architecture: the an eATA Carnet is issued, users receive instructions system per se is made up of five types of component on how to download it in the mobile application, (Exhibit 1-5), while a sixth component (Exhibit 6) and a QR code is created for each declaration. represents the national tool(s) developed by each When crossing borders, users simply need to show issuing/guaranteeing association. Customs the QR code.

The ATA Carnet Core (Exhibit 1) is the central IT The ATA Carnet Customs Portal (Exhibit 5) is the system that links the other parts together and component dedicated to Customs authorities. It ensures that the exchange mechanism is secure provides both an API and a standard user interface and robust. This component includes various to create and manage accounts for Customs offices monitoring, reporting, alerting and analytics tools and officers, manage border crossing operations developed to enable ICC to manage the eATA digital and follow the lifecycle of eATA Carnets. Customs environment. authorities can choose to use ICC’s standard user interface. Customs authorities also have the option ATA Carnet Proxies (Exhibit 2) strengthen the to process eATA Carnets using their own digital connection speed and enable each user to connect systems. To do so, they need to integrate their IT easily to the Core. ICC plans to deploy six proxies system with the ICC system, as IAs/NGAs do. In around the world. Each proxy will record a copy of both cases, Customs authorities can also request all the eATA Carnets issued and can back up the ICC to set up a dedicated instance of the portal, that other proxies in case of a technical failure. is a virtual computing environment dedicated to one organization and its workloads. The ATA Carnet NICS (Exhibit 3) provides an application programming interface (API) to enable Last but not least, the National Issuing and Claims each country to integrate its own national issuing System (Exhibit 6) represents the digital tool(s) and claims system (Exhibit 6) with the ATA Carnet developed by NGAs/IAs and to be integrated Core. Six API bases have been built to cover the with the ICC system. This component is not entire world. NGAs/IAs can either integrate their standardized, as each country has its own specific systems via one of the six API bases or be hosted and unique way of managing issuance and claims. separately. As a result of integration, data or information 24 Dossier

received from or sent to ICC’s ATA Carnet system Pilot results and way forward is standardized. The very first temporary admission operation using the eATA Carnet was carried out successfully in The tests Protecting information is critical Switzerland on 20 October 2019. Other operations demonstrated that To protect from the various threats and soon followed in Belgium, China and Russia. In the vulnerabilities associated with digital processes, four pilot countries, only selected Customs offices the eATA concept organizations must adopt safe and secure participated in the pilot phase. works well, and frameworks, methods, standards and best practices. ICC had to deal a wide variety of cyber The tests demonstrated that the eATA concept that the digital security challenges to ensure that the ATA Carnet works well, and that the digital tools developed tools developed digital ecosystem could operate while guaranteeing by ICC function as expected. To pave the way for by ICC function as data confidentiality, integrity and traceability. national Customs agencies to adopt eATA Carnets, a standardized notification template was approved by expected. ICC selected Microsoft Azure, a cloud platform the WCO ATA/Istanbul Administrative Committee that offers tremendous capabilities in terms of on 16 November 2020. The template sets clear both functionalities and security. Microsoft Azure guidelines for governments and national Customs datacenters are top-tier (Tier IV), which means that to activate the acceptance of eATA Carnets. they apply strict security and protection standards. To ensure data confidentiality and integrity, ICC A key challenge during any pilot project is to carry has implemented several encryption mechanisms. out a sufficient number of operations for the pilot Data is encrypted at rest and in transit to the best to be meaningful, the objective being to move with symmetric and asymmetric cryptographic standard. confidence to the full implementation phase. As Identification, authentication and authorization are international travel has been severely impacted managed via digital certificates, which are electronic by the COVID-19 pandemic, the volume of trade passwords that allow a person or an organization to operations using ATA Carnets has dropped by 60% exchange data securely over the Internet. Access to to 70%, and it has become difficult to find individuals the various web interfaces and mobile applications and companies wishing to test the eATA solution. is managed via multi-factor authentication (MFA), an authentication method that requires the user to It might therefore be necessary to continue the pilot provide two or more verification factors in order to project both with “real” Carnets (where the holder, gain access to a resource. goods and transaction exist) and “demo” Carnets (where the holder, goods and transaction are Managing such a complex digital environment fictitious). In this way, pilot countries could continue requires proper management, orchestration testing the system and gathering user experience and automation tools. That is why ICC is also and feedback, and still be fully prepared for the implementing DevOps, a method to structure the implementation phase. To boost real transaction deployment of fixes, optimizations, new functions volume, it would also be helpful if more Customs and so on. offices could participate in the project. Those suggestions and plans will be discussed at the next ICC has prepared a set of training materials for WCO eATA Working Group meeting which will take Carnet holders and national Customs authorities. place during the first half of 2021. A ticketing system was also set up in 2019 to support the deployment of the pilot project and its More information participants. https://iccwbo.org/resources-for-business/ata- carnet/e-ata-carnet-project/ [email protected] CARGO SCANNING & SOLUTIONS TO COMBAT TRADE FRAUD, SMUGGLING, & TERRORISM Secure your port of entry and enhance operational efficiencies. Our industry-leading cargo inspection technology helps to uncover threats and contraband while our data integration platform collects and combines information from your operation to automate processes, control workflows, and deliver actionable intelligence. With decades of experience in cargo scanning and solutions, we can define and deliver the ideal screening program for your mission.

rapiscan-ase.com 26 Dossier © US Customs and Border Protection

How digital tools can improve compliance with SPS measures

By Francis Lopez

Given increasing concerns about food security and food safety and the need to fight hunger and eliminate food waste, a review of the current processes for implementation of the (WTO) Sanitary and Phytosanitary Agreement and adoption of information technology to enhance workflows would benefit both the import and export economies, as well as trading partners.

SPS Agreement and certification guidelines and recommendations when developing process SPS measures. The aim of the WTO Sanitary and Phytosanitary Agreement (SPS Agreement) is for WTO Many importing countries require a Sanitary/ Members to exercise their right to “take sanitary Phytosanitary Certificate which is an official and phytosanitary measures necessary for the document issued by a competent authority of protection of human, animal or plant life or health” the exporting country to the exporter. It certifies without imposing unnecessary barriers to trade. It that the plants or plant products covered by the typically applies to trade in, or movement of, animal- Certificate have been inspected and are free from based and plant-based products within or between pest and diseases. Other steps include applying countries or Customs territories. Governments for an import permit, submitting other certificates are encouraged to use international standards, related to health and community safety, and WCO news n° 94 February 2021 27

presenting the commodities for quarantine Figure 1 - SPS certification workflow inspection before clearance for release.

The SPS governing bodies1, under the Food and Processing, Validation, Inspection and Inspection and Agriculture Organization, have standardized the Issuance of SPS Clearance of Import format and data contents of SPS certification on Certificate Shipment paper. The Certificate, based on the prescribed format and printed on paper, is issued to the Issuing Authority Recipient Authority exporter who then sends it to the importer for (Export) (Import) presentation to the competent authority of the importing country. The SPS Certificate workflow 1 2 4 5 Application Approved Submit SPS Goods from the export authority to the import authority for SPS SPS Certificate for Cleared is depicted in figure 1. Certificale Certificate quarantine clearance Digitization of document flows

The SPS governing bodies have developed 3 standards for digitization of SPS Certificates. Transmit SPS Certificate The IPPC has developed ePhyto Certificates to importer (ePhytos) and provides descriptions of the format Exporter Importer and contents of ePhytos, the mechanism for their exchange and guidance on harmonized codes and schemes. The OIE has also developed standards for electronic veterinary certification and the Codex addressing liability in the event of processing has done the same for food items. errors and for dispute resolution processes;

Many countries have managed the transition to • building a sustainable business model with a clear electronic SPS certification. All experts agree that revenue model; and before moving to a digital system, an effective paper-based certification system needs to be in • agreeing on an electronic data interchange (EDI) place with adequate institutional capacity and standard, namely communication protocols and clarity about roles and responsibilities. However, document structure standard, to ensure that IT many countries still only accept paper certificates systems cannot only issue electronic certificates at import, including some countries that are actually but also accept and read certificates issued by capable of producing e-certificates. In such cases, other authorities. a paper version of the certification will still be provided to the exporter for submission to the To address some of these issues, in 2018 the importer along with other documents. The importer IPPC embarked on implementation of the ePhyto will then, in turn, submit the paper SPS Certificate Hub Project to enable the exporting National to the import authorities. Plant Protection Organization (NPPO) to send phytosanitary certificates electronically to the As with all initiatives for implementing paperless central Hub, for retrieval by the recipient importing processes, the main challenges relate to: NPPO. Countries using the Hub do not have to establish bilateral agreements required for point to • agreeing on institutional arrangements between point systems. A generic national ePhyto system, i.e. parties involved in cross-border electronic GeNS, was similarly developed for countries which information exchange (voluntary versus binding do not have a system to produce ePhytos and send schemes/all agencies versus only identified them to the ePhyto Hub. agencies, etc.); Cross-border exchange • establishing a supporting legal framework that When regulatory border agencies all have access officially recognizes electronic transactions and to data through a national Single Window, Customs electronic forms of authentication, as well as authorities can view the import permits issued by the

1 Three international standard-setting organizations are recognized by the WTO SPS Agreement: the International Plant Protection Convention (IPPC) for phytosanitary standards; the Codex Alimentarius Commission for food safety standards (Codex); and the World Organisation for Animal Health (OIE) for animal health standards. 28 Dossier

quarantine authorities and, by the same token, the Import authorities sometimes ask the export quarantine authorities have access to manifests and authorities to replace the SPS Certificate. Reasons goods declaration data submitted by the importer. for rejection of the Certificate may be that it has Upon arrival of the goods, Customs and quarantine been tampered with, is a fake, has expired or is no officers both conduct verifications to prepare for longer valid due to a change in the SPS measures of clearance of goods. Customs officers focus on the the importing country. This may result in additional goods declaration data and on tariff classification storage charges for the importer. What is more, if for the purpose of collecting the corresponding the importer does not have proper storage facilities duties and taxes, while the quarantine officers focus then spoilage and/or wastage of goods is likely. on compliance of the import commodities with the prescribed SPS measures, and particularly with the As already stated, in an effort to facilitate controls SPS Certification issued by the export authorities. and eliminate unnecessary delays in the release of cargo, SPS issuing authorities are providing Interagency cooperation and data exchange at the quarantine authorities with electronic certificates, national level is well established in most countries. through direct exchange, by using platforms such Looking beyond the exchange of electronic as the ePhyto Hub or by providing access to their certificates, efficient cooperation processes are IT systems. However, the development of tools also required between authorities in the countries enabling enhanced exchange of information on of import and export. rules and certifications could further improve the trade in agrifood products.

Efficient management of supplier declarations and correct use of agreements – globally

There are already more than 400 ratified free trade agree- This is where MIC OCS supports you! It provides the necessary ments (FTAs) around the world to ease trade among the in- tools for the entire process of managing the origin of goods for volved countries and offering savings potentials to companies a multitude of FTAs: From automated obtaining of supplier’s with respect to customs duties, which results in competitive declarations using an innovative supplier web portal, to opti- advantages. mized calculation of the origin of goods based on multi-level bill of materials to the preparation of outbound supplier’s However, companies can leverage such savings potentials declarations. MIC OCS ensures that you will actually benefit and competitive advantages only by mandatory fulfilment of from the savings potentials offered by FTAs. several complex rules of origin of goods as well as their detailed documentation. You want to know more about MIC OCS? Please contact us:

This requires to establish a process for the calculation of MIC the origin of goods which conforms to the law and auditing Tel.: +43(0)732-778496, [email protected] requirements to avoid possible fines and unplanned costs in advance. www.mic-cust.com WCO news n° 94 February 2021 29

Enhancing transparency and Figure 2 – PAA SPS Exchange Model compliance Over and above facilitating exchange of information Collaborative SPS Exchange Model between authorities at the international level, there 1 is also a need to provide transparency on SPS e-SPS Import Permit/Clearance measures and, once again in this case, digital tools 2 could prove a game changer. e-SPS Certificate Import SPS Issuing 3 Quarantine Some private sector-led initiatives are worth Authority e-SIPS Compliance Status Authority mentioning. One of them is by the Pan Asian E-Commerce Alliance (PAA) which aims to 4 promote and provide secure, trusted, reliable e-SPS Replacement and value-adding IT infrastructure and facilities 5 to enhance seamless trade worldwide. The PPA e-SPS Utilization Status conceptualized a Collaborative Exchange Model to facilitate cross-border trade in agrifood products, whereby the SPS issuing authority and the import Figure 3 – PAA pilot workflow quarantine authority would share permit/clearance requirement data and SPS Certificate data. Export Workflow 5 Import Workflow Approved SPS/Phyto/Health In a pilot exercise between the respective Certificate (P) Exporter Importer Departments of Agriculture in the and , the import permit issued by the 2 3 6 1 4 Approved SPS Import/ Philippines was made available to the exporter Application Approved SPS/ SPS Import Approved SPS/ Clearance For Certificate Phyto/Health Clearance based in Australia to ensure the latter was aware Phyto/Health Wilh Permit Certificate with Application Certificate (P) of the type of authorization issued to the importer Ref No eRFI Application and of the specific certification and procedural BAI* SPS lssuing BFAR** requirements for importation (e.g. the validity of Authority BPI*** the import permit based on the must-ship-out 4 e-Certificate (SPS/Phyto/ date). In addition, the SPS Certificate issued by the Health) Cert Approval Quarantine Philippines included the import permit reference Process Clearance Process number to facilitate verification, possibly through automated matching of the permit and certificate data, and to ensure that the above-mentioned SPS * Bureau of Animal Industry Certificate was compliant. ** Bureau of Fisheries and Aquatic Resources *** Bureau of Plant Industry The process established during the pilot exercise enabled the exporter to eliminate risks of non- compliance of the goods with the import country’s SPS measures. It illustrates the fact that many digitization projects are an opportunity to review procedures in place, enhance transparency and strengthen compliance.

More information [email protected] 30 summary of findings. those summary PICARD WCO the Conferenceat provides 2020. abrief article This conducted from to April October 2020, were recently presented performance. findings The impact assessment, ensuing of the for Customs drawn be could of purpose the lessons assessing achieved.been They also wantedanywhether general to out find understanding of how improvements the in performance had project’sthe stakeholders success, wanted to gain adeeper to ofallowing it hour clear one parcels arrival. Inspired within by system MCA the enabled to improve significantly, capability its afew just cargo. months, this pre-arrival processing (PAP) Within pre-arrival data to fast-track Customs clearance of express implemented anew Customs clearance procedure uses that In 2019, June Montenegro the Customs Administration(MCA) Pope Steven and Sowinski Cezary Grainger, Andrew TanjaBy Karl Bartels, Maja Rackovic, Boskovic, Stojanka Milosevic, measurement performance capabilities tell us about Customs processing pre-arrival new theWhat example of Montenegro’s 1 Dossier The views expressed in this article are the authors’ own and do not necessarily represent those of their organisations their of those represent necessarily not do and own authors’ the are article this in expressed views The 1

© Dstudio Bcn on Unsplash WCO news n° 94 February 2021 31

The new PAP procedure Montenegro’s pre-arrival processing procedure was Highlights developed as a project with the German Alliance 1. The impact assessment identified several useful quantitative for Trade Facilitation and piloted in collaboration key performance indicators (KPIs). Apart from the faster with DHL (see Box 1). It currently allows authorized clearance rate, other useful KPIs analysed during the express parcel operators to submit an electronic assessment included efficiency gains and Customs’ import declaration in advance, prior to the arrival increased hit rate, as well as cost savings and the express of the aircraft. The data is declared in a consolidated operator’s ability to make improvements to its service format and is used by Customs for risk assessment guarantees to the benefit of shippers. and Customs clearance. At present, the PAP 2. The structured analysis of stakeholder needs yielded further procedure cannot be used to clear goods whose insights in terms of assessing individual stakeholders’ import requires licensing before or after arrival in strategic objectives and subsequent expectations regarding the country. the procedure being implemented. The methodology of the assessment consisted, to a large extent, in learning and Below is a step-by-step description of the in building trust among the key stakeholders, which in turn procedure: achieves a greater impact and helps ensure a positive trajectory for the future. • Prior to loading: 3. The new methodology developed during the assessment could potentially be applied to other trade facilitation - Company receives shipment instructions measures as well. Key elements include mapping (booking details) from its customers along with stakeholders’ needs, clustering these needs into main standard information about the goods. The themes and identifying corresponding KPIs. customer also provides additional documents 4. The assessment’s results and methodology could potentially necessary for import clearance (e.g. commercial make a contribution to the ongoing work on Customs invoice, proof of origin documents, etc.). performance measurement. - Supporting documents are scanned and stored electronically by the company. Copies of supporting documents are also affixed to the relevant parcels. - Company analyses all relevant data to make sure that the correct amount of import duties Box 1 - Main stakeholders is paid (thus avoiding any penalties or additional fees on behalf of its customers). • Montenegro Customs Authority (MCA): adopted the new PAP procedure • On or immediately after loading: • DHL: private-sector champion - Company prepares a consolidated electronic supporting the introduction of PAP manifest (e-manifest) that, in addition to • Fedex, TNT and UPS: other express standard master air waybill data, includes operators consulted by the MCA details about the Customs value and the • German Alliance for Trade requested Customs clearance procedure. Facilitation: public-private partnership promoting TF (www. • Prior to landing: tradefacilitation.de) • GIZ (Deutsche Gesellschaft für - Company notifies Customs and declares Internationale Zusammenarbeit the shipped goods by using the consolidated GmbH): Secretariat of the Alliance e-manifest. and MCA’s implementation partner - Customs draws on the information provided in the consolidated e-manifest to conduct a risk assessment. - Based on this assessment, Customs decides whether to ask for electronic copies of additional supporting documents, whether the parcels need to be inspected or whether they can be released upon arrival. 32 Dossier

• Upon landing Table 1: Identified themes and KPIs Themes Analysed key performance indicators (selected) - The company is responsible for ensuring Alignment with • KPI 1.1 – Compliance of output in line with international that goods do not leave its premises without international obligations for the implementation of PAP measures Customs clearance. With this responsibility practice • KPI 1.2 – Implementation of special comes a requirement for the company to procedures for air express cargo operators provide a financial guarantee. in line with international obligations Parcels not declared on the consolidated - Outcome and (i) • KPI 2.1 C – Reduction in the number of paper-based e-manifest (e.g. because they are subject impact on Customs declarations needing to be processed by to import licencing requirements or were operations: Customs loaded at the last minute without being added (i) Customs • KPI 2.2 C – Cost savings for Customs because to the consolidated e-manifest) must be (ii) express officers do not have to re-key data manually declared using: (a) a full Customs declaration; carriers (ii) • KPI 2.3 C – Improved compliance levels and lower or (b) a simplified declaration (under special (operators) inspection rates arrangements for authorized operators). • KPI 2.1 O – Improved clearance-on-arrival - Parcels that have been selected by Customs performance for inspection are presented to Customs. Upon • KPI 2.2 O – Reduced time in Customs storage satisfactory inspection, goods are released by Learning • KPI 3.1 – Collaborative partnership between Customs. the public and private sectors - Upon Customs release, the company delivers • KPI 3.2 – Learning from being able to the goods to their recipients. submit declarations electronically • KPI 3.5 – Shared learning experiences The implemented PAP procedure is a significant at international level departure from the pre-existing paper-based Outcome and • KPI 4.1 – Impact on the country’s control system. At the time of concluding the impact on economic development assessment, 7% of all of the country’s imports were economy and • KPI 4.2 – Economic benefits to consumers society handled using this procedure. Data from DHL show • KPI 4.3 – Economic benefits to businesses that the rate at which parcels are cleared within 1 hour of landing has improved from 25% in 2015 to 53% in 2019.2 • Inspection rate declined from 11% to 8%, and, in parallel, the hit rate rose from 1% to about 8.5%. Impact assessment The focus of the impact assessment was on • Customs had an efficiency gain of 212 person- analysing the various stakeholders’ needs and days per year. available data (both quantitative and qualitative) as well as identifying any useful performance • Reduction in express operator’s costs of about indicators that lend themselves particularly well for 10%. application elsewhere. It thus served a dual purpose: acquiring a broader and deeper understanding Insights into the MCA’s more strategic objectives of the results and developing a methodology that based on the four main themes identified can be could have other applications. Multiple iterative summarized as follows: evaluation cycles with key project partners revealed four main themes and a corresponding set of key 1. Alignment with international practice: Being performance indicators (Table 1). compliant with the WTO Trade Facilitation Agreement (Article 7.1 on Pre-arrival Processing Results of the impact assessment and Article 7.8 on Expedited Shipments3), The impact assessment identified additional meeting policy demands arising from European quantitative KPIs, in addition to the clearance-on- Union membership aspirations (Union Customs arrival rate, as follows: Code Article 171 entitled “Lodging a customs declaration prior to the presentation of the goods”4) and implementing the WCO’s Revised

2 MCA indicated a rate of 65% in 2019 (probably calculated by excluding goods subject to import requirements that are not eligible for the PAP procedure). 3 https://www.tfafacility.org/article-7 4 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32013R0952 WCO news n° 94 February 2021 33

Kyoto Convention pre-arrival standard (3.255) What was observed, however, was that the were highly relevant for setting MCA priorities demonstration and learning effects have an All key and developing motivation. Implementing the impact that reaches far beyond the new PAP stakeholders new PAP procedure does not yet enable the capabilities. The illustrative utility of such a MCA to implement all these provisions, but system encourages support for trade facilitation highlighted the is a significant step in the right direction. For efforts worldwide. The approach has already importance of DHL, motivation was largely driven by guiding been emulated by four countries in the region corporate social responsibility (CSR) ambitions and is being implemented on a larger scale learning as an and support for trade facilitation-related worldwide. outcome of the initiatives.6 project. For the Implications for Customs performance 2. Operational outcomes and impact: This theme measurement? MCA, it not only overlaps with the quantitative KPIs mentioned Drawing on a methodology first presented at helped to build 7 above. A key outcome for the MCA was that a PICARD 2017, the approach of the impact trust, it crucially significant volume of import declarations can assessment complements prevailing evaluation now be handled electronically without the methodologies in trade facilitation where the focus also demonstrated need to process paper documents manually. often tends to be limited to factors such as time and the value of For express operators, the procedure that costs8 or remain fixed on more extensive macro- has been implemented has led to a significant economic modelling.9 cooperation improvement in service capabilities. However, with the private there is still scope for further improvements. The results show that taking a closer look at sector and of The additional application of PAP to goods that the needs of stakeholders can yield additional are subject to import licencing requirements insights that may be used to inform the debate on digitizing Customs would, for example, yield substantial additional Customs performance measurement. Two related procedures. gains. considerations that could be explored further are:

3. Learning: All key stakeholders highlighted the 1. Selecting and calibrating the relevant sets of importance of learning as an outcome of the quantitative KPIs for Customs performance project. For the MCA, it not only helped to may benefit from a structured analysis of build trust, it crucially also demonstrated the stakeholder needs. value of cooperation with the private sector 2. Interpreting Customs performance in relation and of digitizing Customs procedures. For DHL, to sustainability and broader economic much of the motivation was about developing development may require subtle forms of an illustrative case study that could serve as a analysis. Results that are grounded in stakeholder successful model for other countries to follow. needs analysis may provide the “best possible” For GIZ, gaining insights into the effectiveness insights for this, particularly if quantitative data of the project approach was extremely valuable. are limited or largely confidential.

4. Outcome and impact on the economy and In the case of Montenegro, the iterative approach, society: There was some anecdotal evidence using stakeholder needs analysis from which to of benefits for consumers and businesses in derive KPIs and the dialogue that emerged as a Montenegro (e.g. the ability to deliver critical result of identifying these KPIs, was highly effective, spare parts without delay). Evidence of mainly due to the openness and supportiveness of economic benefits on a macro level could not the stakeholders involved. be found. Given that Montenegro’s economy is largely focused on services and tourism, and the More information country has a relatively low volume of imports [email protected] (one flight per day), this is hardly surprising. [email protected] [email protected]

5 http://www.wcoomd.org/en/topics/facilitation/instrument-and-tools/conventions/pf_revised_kyoto_conv/kyoto_new/gach3.aspx 6 DPDHL, Sustainability Report: “Connecting people, improving lives”. 2019, Deutsche Post DHL Group: Bonn. 7 Grainger, A. and D. Shaw, A method for measuring trade facilitation. WCO News, 2018(85): pp. 21-23, https://mag.wcoomd.org/magazine/ wco-news-85/method-measuring-trade-facilitation 8 For example: MCA, Montenegro Time Release Study 2016, Ministry of Finance and Customs Administration, 2016, Government of Montenegro. 9 For example: Sourdin, P. and R. Pomfret, Trade Facilitation: Defining, Measuring, Explaining and Reducing the Cost of International Trade. 2012, Cheltenham: Edward Elgar. 34 Dossier © AdobeStock ©

TradeTrust: accelerating the digitalization of international trade

By Infocomm Media Development Authority of Singapore and Singapore Customs

Singapore is spearheading the implementation of TradeTrust, which is a framework comprised of a set of globally accepted standards to facilitate the digitalization of documents used in international trade and logistics and their interoperability, and also a set of software components that connect to a blockchain backbone IT infrastructure. Economic operators and public and private institutions using TradeTrust will create a global network of trusted partners for the exchange and verification of digital trade documentation across borders. The ultimate objective is to enable a more seamless flow of goods between trading nations and reduce the inefficiencies and complexities generated by the use of paper-based documentation, making cross-border trade simpler and safer.

Measures taken to combat the COVID-19 pandemic have caused administrations, buyers, sellers and other actors involved in the disruption to businesses on an unprecedented scale. This global international supply chain. health crisis has demonstrated that digitalization is no longer just an option – it is a critical necessity for businesses to operate and For example, the Bill of Lading (BL)1 is still provided in hardcopy in survive. Although much progress has been made by Customs and many countries, creating inefficiencies. It requires time and money trade operators in terms of digitalizing processes, the truth is that to courier the BL document to destination ports of discharge, plus paper documents are still widely used between different border there are risks of the BL getting lost in transit, which may cause the trader to incur demurrage costs.

1 Document issued by a carrier to acknowledge receipt of cargo for shipment. A paper Bill of Lading has three functions: it serves as a receipt, it contains or constitutes evidence of the contract of carriage and it serves as a document of title. WCO news n° 94 February 2021 35

The reason why paper documents are still in use simply by dragging and dropping it into the Web is that in many cases there are many standards for interface. the electronic format of these documents, and no easy way to verify the provenance and authenticity TradeTrust consists of four components which of electronic documents that are presented to the work in concert to give the network’s participants authorities. trust and legal certainty with regard to the digital documents that are exchanged. The dematerialization of transferable documents (which confer the right to possession of an asset) 1. Legal harmonization to ensure the legal such as electronic BLs (eBLs), has proven to be validity of digital trade documents across particularly difficult. If eBLs are still not widely used various countries and jurisdictions in the international trade ecosystem, it is largely The adoption of a legislative framework for because of the lack of consistency with regard to Electronic Transferable Records in all countries legal recognition in different jurisdictions. This participating in TradeTrust is necessary to enable makes it difficult to recreate electronically their a shift towards a paperless trade environment. function as documents of title, passing rights and Singapore is currently amending its Electronic obligations along a trade chain. Even when the Transactions Act (ETA) to provide legal certainty parties use digital solutions to exchange BLs, they to electronic negotiable instruments like the eBL often have to convert the electronic documents and recognize them as valid title documents. back to hardcopies when they reach different The ETA will adopt the Model Law on Electronic jurisdictions. Transferable Records (MLETR)2 of the Commission on International Trade Law TradeTrust (UNCITRAL) - a legal framework that countries To address these challenges, Singapore’s Infocomm can harmonize their legislation to, that enables Media Development Authority (IMDA) came up the recognition of electronic equivalents of paper- with the idea of creating a set of governance and based transferable documents. The amendment legal frameworks, document standards and a set of the ETA was recently passed in the Singapore of software components, all of which facilitate the Parliament and is targeted to take effect in the first interoperability of electronic trade documents half of 2021. and their exchange between different digital ecosystems. 2. Development of international standards to facilitate the interoperability of digital This initiative, called TradeTrust, was developed in documents exchanged across different collaboration with, and through support from, local solutions and ecosystems and global partners. These range from governments TradeTrust standards for the creation of documents to international organizations (such as the are aligned to international standards developed for International Chamber of Commerce), technology digital trade documents e.g. United Nations Centre and solution providers, and industry (e.g. shipping for Trade Facilitation and Electronic Business (UN/ carriers, shippers and financial institutions). CEFACT) and the International Organization for Standardization (ISO). The foundation on which TradeTrust rests is the ability to trace the provenance of digitally- 3. Accreditation structure to provide a set issued documents and verify their integrity. of internationally accepted rules and This “notarization" foundation is provided by policies to certify solutions to meet the the OpenAttestation framework, which offers a requirements of the law method for documents issued to be considered The ETA sets out provisions for IT implementations cryptographically trustworthy and can be verified (including those that make use of TradeTrust independently. Once a file has been created, the standards) dealing with transferable records. fingerprint of the signed TradeTrust file is then Hence, an accreditation framework and structure committed to a Document Store smart contract, will be explored to accredit technical solutions which serves as an immutable ledger. This signed that deal with electronic negotiable documents TradeTrust file is then distributed to recipients, who such as eBLs to ensure that they meet the legal will be able to verify the file on https://tradetrust.io requirements.

2 https://uncitral.un.org/en/texts/ecommerce/modellaw/electronic_transferable_records 36 Dossier

4. Open-source software that can easily enable digital trade transactions. Some examples integrate backend solutions to the of practical implementation are described below. TradeTrust network TradeTrust currently connects to a public and Verifying the authenticity and provenance permissionless blockchain which can be consulted of government-issued trade administration via a web interface. Software has been developed, documents and is available under open-source licensing terms A trial was launched in November 2020 by the on GitHub (www.github.com/TradeTrust). The Australian Border Force and IMDA in order to test industry will be able to integrate the software into the exchange of TradeTrust standard electronic their platforms or digital solutions to connect to the certificates of origin where: TradeTrust public blockchain network. • electronic certificates were generated in Benefits of TradeTrust accordance with TradeTrust standards via the TradeTrust can bring several benefits to the global ABF-developed Intergovernmental Ledger (IGL) trade, finance and logistics community. Public and system private bodies using the TradeTrust standards • the electronic certificates were sent to Singapore via solutions connecting them to a public and businesses participating in the trial as well permissionless blockchain backend will be able to as Singapore Customs for their feedback on interoperate with the other network members and the multiple verification methods afforded by achieve: the TradeTrust framework ranging from QR code scanning to dragging and dropping of • increased efficiencies: all TradeTrust-standard the electronic certificates into both the IGL or documents can be verified on TradeTrust- TradeTrust Web interfaces. standard web interfaces, removing the need for repetitive checks by various parties to confirm These various verification methods allowed the legitimacy of documentation when received Singapore businesses as well as Singapore Customs through indirect channels; to be assured of the authenticity and provenance • reduced operation costs and time: the of the files, without all using a common platform. digitalization of paper documents reduces the friction, costs and time required for printing and Performing Title Transfers on eBLs transporting documents between parties. IMDA and the Maritime and Port Authority of • TradeTrust will also support the emergence Singapore (MPA) are currently leading the effort of new service offerings. As it works with the to conduct trials on eBLs with the support of existing ecosystem formed by various systems, Singapore Customs and industry partners. Two enabling them to interoperate as well as to ensure trials are of particular interest. the legal validity of the electronic instruments that they exchange, TradeTrust can: The first one is related to CamelONE , • support the convergence of physical, financial and Singapore’s one-stop multi-bank portal which document chains, making the automation of key enables businesses to submit a single, standard processes possible, such as automating payments application to various banks3 offering trade or releasing of funds through the use of smart services. The CamelONE portal is available via the contracts; and Networked Trade Platform (NTP), Singapore’s one- • enable operators to leverage the transparency stop trade and logistics ecosystem. It is connected and integrity of the transport chain. For example, to NTP’s secure repository, where all trade-related insurance providers could apply dynamic pricing documents can be safely stored, including BLs. This when risk is known. connection enables data reusability and optimizes the ease and speed of filling in multiple applications. Examples of use cases and applications Singapore’s Infocomm Media Development As explained, the challenge around eBLs is to Authority (IMDA) is working with local and digitally recreate their function as documents of international partners in applying TradeTrust to title, passing rights and obligations along a trade facilitate existing cross-border processes and chain. The aim of the trial is to use the TradeTrust blockchain to facilitate the verification of the chain

3 https://www.vcargocloud.com/our-solutions/camelone-trade-finance WCO news n° 94 February 2021 37

of endorsements and title transfer functionalities and hold non-fungible tokens. The transfer of for the banks and the clients. title is effected through the transfer of the non- fungible token to the wallet of the receiving Transferable documents carry with them the title party. The non-fungible token would ultimately pertaining to the physical assets; it is therefore be destroyed after the final recipient has taken imperative that the transfer of title from one party possession of the physical assets represented by to another in the physical world is similarly achieved the non-fungible token and there is no longer any in the digital world. To do this, the BL is tokenized use for it. The TradeTrust framework is developed as a non-fungible token on the blockchain and the to be flexible enough to support a variety of change of title ownership correctly reflected. For transferable documents used in various banking transfers of title, participating parties are required arrangements in Trade ranging from Letters of to create a cryptographic wallet to transfer, receive Credit to Documentary Collections.

Transferable documents 1 2 3 4 Document Type TradeTrust File Tokenisation Storage

PDF XLS DOC TOKEN

Digitised Transferable Transferable document The “title” of the TradeTrust file is stored Document (payload is encapsulated in asset pertaining to off chain agnostic) TradeTrust file transferable documents • Contains title and • Transferable will be tokenised into a entitle the owner document will have non-fungible token on to make claim a unique token that the public blockchain • Examples: represents the bill of lading, title of the physical warehouse receipt, asset indicated by promissory note the document

The second trial was one conducted between the How to get involved IMDA, MPA and the Port of Rotterdam Authority, The TradeTrust source code is distributed under which jointly organized a workshop in April 2019 an open source licence. Users may download and to explore potential use cases for eBLs and use it freely under the open source licensing terms. discuss implementation challenges. More than The current TradeTrust reference implementation 20 organizations, including government agencies, uses the Ethereum blockchain and there will be shipping lines, technology players, banks and a fee incurred when the fingerprint of the signed members of the Singapore Shipping Association, TradeTrust file is recorded at the Ethereum were represented at this workshop. They decided network, e.g. when the carrier issues an eBL. Parties to undertake a Proof of Concept (PoC) to simulate performing document verification, i.e. reading from the transfer of title for eBLs from a shipper to a the blockchain will not be charged. In the future, as consignee between Rotterdam and Singapore. TradeTrust develops, blockchain networks other This simulated transaction was carried out in March than Ethereum may be used. 2020. As a next step, the trial will demonstrate the practical use of eBLs by shadowing a live shipment Join the TradeTrust network and incorporate the along the Singapore to Rotterdam trade lane. TradeTrust source code into your applications or Change management is easier since the transmission systems (available at www.github.com/TradeTrust). or exchange of electronic trade documents or Contact us at [email protected] to co-create digital data do not take place primarily through the solutions and new use cases with us using blockchain but rather via traditional methods such TradeTrust. as through their internal system, e-mail, file transfer, or central storage. More information https://tradetrust.io 38 been intentionally or unintentionally misclassified misclassified unintentionally or intentionally been controlled identifying which havehigh, goods stakes the are of Although global trade. portion Tradereasons. in strategic small is goods avery endeavour an is challengingSuch various for obligations. security international and regulations national with compliance in involve strategic to goods ensure are they that transactions trade able to be identify must enforcement and agencies law perfect, may be not However,proceeds. traders’ compliance with the control trade with commerce obligations, and licences or aspermits required, comply proactively for apply traders system, In STC a well-functioning applications are goods. and called dual-use commoditiesof have these civil both military and in used theirbe development delivery. or Many may that equipment and technology materials, the and weapons, conventional (WMD), of mass comprisegoods destruction weapons allfor Customs administrations. Strategic controltrade (STC) is system key a requirement Ensuring enforcement the of anational strategic Nelson Christopher By Learning Machine Classification through Improving Strategic Trade Detection and Dossier hardly ever contain such specifications. descriptions code HS and technical documents, material byin technical specifications defined or equipment scientific and industrial dual-use ECCNs. Moreover, involve items controlled many could contain code multiple HTS an and codes, HTS of A strategic under a host shipped could be good relationships HTS-ECCN are rarely one-to-one. The task. difficult a is codes HTS their with ECCNs Harmonized System (HS). Attempting to link international the on is based which (HTSUS), States Harmonizedthe Tariff United of the Schedule Border Protection uses Customs US and goods. ECCNsThese predominantly contain strategic control regulations.that are to subject export classificationnumbers (ECCNs) tocategorize items of Commerce uses identifierscalled control export Department the UnitedIn example, the for States, correlate not do they objectives, fundamental well. is each designed with different As such goods. nomenclaturesare that primary the exist to classify main of the One reasons burdensome. extremely is hidden, otherwise or transshipment points, declared, not properly or through diverted

© Mike MacKenzie Image via www.vpnsrus.com WCO news n° 94 February 2021 39

The combination of these factors makes it a Methodology challenge for State authorities to detect potential 1. Set priority Screening illicit transfers of strategic goods. Screening This approach creates a machine learning model transactions transactions based on inexact, static correlation for a specific strategic good, based on its ECCN. tables between HS codes and codes used in control The process can be repeated to create a portfolio based on inexact, lists, or based on information on parties to the of models that can be used to classify transactions static correlation transactions, is not sufficient for a comprehensive involving many different strategic goods. The first STC system. step in the process is to identify the strategic good tables between HS for modelling, based on its ECCN. codes and codes The methodology proposed in this article suggests used in control utilizing the vast amounts of transaction data which 2. Data collection and HS-ECCN baskets every government collects, along with machine After the ECCN is selected, data for transactions lists, or based learning, i.e. the process of teaching a computer with this ECCN in the shipping documentation on information system how to make accurate predictions when would be pulled together for a specified timeframe. on parties to the fed data. A wide range of features can be selected to develop this model, including the HS code, exporters/ transactions, is Machine learning and international recipients, destination, weight, quantity, value, not sufficient for trade etc. Once this data is gathered, one would create a Identifying transactions involving strategic goods “basket” of the different combinations of the ECCN a comprehensive lends itself to solutions developed for a common and HS codes. This basket would show how often STC system. machine learning problem: outlier detection. Outlier a particular HS code is utilized by exporters for detection is used in a wide variety of applications, transactions involving the ECCN (i.e. 45 per cent such as credit card fraud, suspicious traffic in of transactions involving strategic goods classified cyber security, disease detection, and many other under ECCN X were shipped using HS code Y). This problems where the target is behaviour outside allows one to identify the HS codes that are actively the norm. Since strategic trade is such a small being used by exporters for transactions involving proportion of overall trade, transactions involving a strategic good, as opposed to a correlation table controlled goods can be considered outliers. Such that says what the HS code for a strategic good transactions are not only uncommon, but they are should be. also likely to stand out from others since the goods traded are generally technically sophisticated The HS-ECCN baskets will often contain HS codes materials and equipment. This can present itself that are used for a transaction at a very low rate. through higher unit values, lower quantities, specific To avoid the inclusion of too many edge cases in trading partners and other characteristics that the next step, a cutoff correlation percentage is distinguish strategic good transactions from others. designated to determine the most relevant HS codes in use for the particular strategic good. The following section outlines a basic approach for using machine learning to identify transactions Once the high correlation HS codes are identified, involving strategic goods but not declared as such. data would be pulled from all transactions with It uses historical on transactions of goods these HS codes without an ECCN for the same time with and without ECCNs. The models created as period from which one drew the transactions with an outcome of the process are then applied to new ECCNs. This assembles the universe from which transactions to provide a predicted probability one can model the characteristics of trade in the that they relate to a specific strategic good. This strategic good. is a supervised learning approach; one is training models on historical data where one already knows 3. Resampling the outcome – the shipment has an ECCN and The number of transactions involving strategic contains a strategic good or it does not have an goods is greatly outnumbered by those that do ECCN and does not contain a strategic good – and not. In other words, there is a majority class (those applying it to new cases1. A short summary of the that do not have an ECCN) and a minority class methodology is outlined below. For convenience, (transactions that have an ECCN). In machine the codes in the HTSUS are referred to as HS codes. learning, highly imbalanced data like this can

1 “Knows the outcome” is a generalization. This is based on the quality of the data collected, adherence to legal licensing procedures, and declarations of ECCNs on shipment documentation. There are intentional and unintentional errors resulting from this, but this model uses the correct declarations to create a model and then apply them to other transactions, which is designed to uncover these issues. 40 Dossier

Figure 1: Random Forest algorithm

Tree 1 Tree 2 Tree n

N Y N Y N Y N Y Y N Y N

Y N Y N

Different sub- Each Tree • Tree 1: Y Votes Data In Prediction: Y sets. attributes Predicts • Tree 2: Y Tallied for each tree • Tree N: N

have adverse effects on modelling and traditional the decision trees. Figure 1 presents a simplified measures of performance. To adjust for this, the representation of the Random Forest algorithm. transaction data should be resampled to bring the minority class more in balance with the majority 5. Performance measurement, adjustment, class. For this purpose, this methodology uses and iteration the Synthetic Minority Over-Sampling Technique The algorithm would be trained on a subset of (SMOTE)2, which identifies similar examples in data, and performance would be measured against the minority class and creates new instances by another subset reserved as a test set. Based on the combining the features of an existing case with results, parameters or features could be changed to features of its neighbours. Rather than duplicating increase performance. Once the approach has been transactions to oversample, this technique provides tested for a particular strategic good related to a new, synthetic examples of the minority class. specific ECCN, it can be used iteratively to create models for a broad portfolio of strategic goods and 4. Model training – Random Forest applied as new data arrives. Once prepared, the data is ready to be used to create a model. Here, Random Forest is used to Benefits and potential applications predict whether a transaction involves a strategic Given the data-dense nature of international trade good. This algorithm creates many decision trees transactions, State authorities around the world based on randomly selected features and data are in an excellent position to exploit advances samples to determine whether a transaction is in machine learning to improve risk analysis, classified as involving the strategic good or not. enforcement and outreach. As more transactions The outcome of each decision tree is then compiled are recorded every day, the models created to and, as one is dealing with a binary classification, the classify strategic goods can improve, be adjusted, final classification is that chosen by the majority of and reworked under the same methodological

2 For details on SMOTE, see Chawla et al., Journal of Artificial Intelligence Research, Vol. 16 (2002), pp. 321-357. WCO news n° 94 February 2021 41

construct. In addition, since this approach proposes Since the methodology uses a basket of HS codes, the use of State-centric data, the models will it could also be used to complement existing inherently be designed to identify strategic goods HS-ECCN correlation tables and improve these in the context of that State, taking into account correlations system-wide. First, the HS-ECCN geography, trading partners, and industrial baskets add “weight” to correlations based on capabilities. The recent expansion of distributed historical transactions involving strategic goods. It computing and cloud-based services allows for can identify which HS codes are used in practice State authorities to analyse and create models for and at what rate, adding a layer of detail to the a much larger portion of data than could be handled one-to-many or many-to-many static correlation even five to ten years ago. tables. Second, the HS-ECCN baskets would identify common correlations and misclassifications The methodology described in this article has of strategic goods that could be used for outreach a wide variety of useful applications. From an efforts or to propose future HS amendments to enforcement perspective, this approach would bring the HS and ECCNs closer together. allow for better profiling of transactions using real-world data and for optimizing inspections or As more data is collected and outreach and end-use checks. Moreover, modelling based on enforcement efforts become more targeted, the a select set of high priority strategic goods could machine learning models would be likely to increase enable Customs to enhance resource allocation in performance, creating a cycle of improvement. and provide data-based justifications for further Leveraging the large amount of data already scrutiny. This approach would also allow for States collected by States and machine learning models to better understand common trade flows for could improve STC systems. Focusing not only strategic goods and identify common end-use on enforcement, but also using this approach for destinations or transshipment points. outreach, could improve detection capacities and foster a more secure international trading system. In addition, the methodology could also support internal compliance programmes and be used More information to design outreach efforts that would improve [email protected] STC efficiencies. Indeed, a key challenge to the enforcement of export controls in many countries For further details on the methodology used, see the relates to outreach and raising awareness. The author’s article in the World Customs Journal (Volume private sector needs assistance in identifying, 14, Issue 2, September 2020) managing and mitigating risks associated with strategic goods, and in ensuring compliance with regulations. Based on the models trained through About the author existing data, it would be possible to identify transactions that fit the profile of a strategic good Christopher Nelson is a Senior Data Analyst at the New York but for which no licences were requested by the State Office of the Attorney General. He previously served importer or the exporter. Customs could then as a Safeguards Information Analyst for nuclear trade at the International Atomic Energy Agency and a Trade and Industry contact the entities involved in these transactions Analyst at the US Department of Commerce, Bureau of Industry to start a dialogue and propose training on export and Security. He holds a Bachelor’s degree in International control regulations. It could also identify common Studies and Mathematics from American University and a trade flows for these unlicensed transactions Master’s degree in War Studies from King’s College London. that meet the strategic good profiles, and initiate This article was prepared by Christopher Nelson in his personal international outreach and training. capacity. The views expressed in this article are the author’s own and do not reflect the views of the New York State Office of the Attorney General. © Inter American Development Bank 42 2 1 have entered into a Agreement Mutual Recognition Customs administrations between (AEO) which information on Authorized Economic Operators to enable automaticlaunched the exchange of This provides article update an aproject on technologies. of new adoption the digital its and transformationboosted processes crisis the and lessons, has of important number a has learned itself Customs operations. Customs Progress areas in will these crucial be to enhance in IT systems, including those of logistics providers. more for interoperability and transactions, trade more for traceability visibility and need the in highlighted has and managers supply-chain and COVID-19 immense pressure has put traders on Towards transformation digital a LACChain and Bank Development Inter-American Allende, Moreno, Marcos and Michelle Santamaría, Corcuera Sandra By blockchain Improving data sharing with https://blogs.iadb.org/integration-trade/en/blockchain-trade-safer/ Dossier recognition-arrangements-agreements/ https://mag.wcoomd.org/magazine/wco-news-87/cadena-a-blockchain-enabled-solution-for-the-implementation-of-mutual- and tecnologias https://publications.iadb.org/es/revista-integracion-comercio-ano-24-no-46-diciembre-2020-blockchain-y-comercio-internacional-nuevas- Inter-American Development Bank (IDB) Bank Development Inter-American of the support with Since the 2018, (MRA). exchange of data by protected being and secured each with protocol, according to agreed an agroup of Custom administrationsbetween enables to record share and informationCADENA implementation the under of MRAs. certificates management the for AEO of the offers technology tosolution, leverage that clear this advantages the design was as blockchain-based a CADENA Customs. to improve exchange the of information between an application developing have Customs been Peru and , specialists (IT) from Colombia, , Rica, Costa technology information and officers programme 2 called Cadena, designed specifically specifically designed Cadena, called 1 , AEO AEO , WCO news n° 94 February 2021 43

a secure channel and an immutable audit trail in Learning throughout the process a blockchain network. For the IT specialists, this According to ISO, there are three different types The LACChain represented a unique opportunity to learn about of blockchain networks: public permissionless, blockchain the implementation and use of the technology. public permissioned, and private permissioned. This taxonomy refers to who has the ability to be network is As the project has now reached maturity, with three a user of, or run a node on the blockchain (a node provided by the more Customs administrations (Bolivia, Ecuador, is a computer that shares a copy of the blockchain and Guatemala) joining at the beginning of 2021, it and is synchronized with the others). Each type of IDB Lab and its is a good time to share the lessons learned during blockchain places a different level of importance partners as a the process with the wider Customs community. on anonymity, immutability, efficiency, and public good for transparency. How it works Latin America and As soon as a company AEO certification is CADENA was implemented in two phases and has the Caribbean. approved, a Customs officer in country A uploads evolved over time as blockchain technology has The LACChain information on that company to CADENA. The progressed. The first version of CADENA was built application automatically sends a notification to on top of a private permissioned blockchain during team guarantees inform Customs in country B, with which Customs the first year of its implementation, from 2018 to the governance, in country A has signed an MRA. Customs officers 2019, proving to be successful in allowing the real- from country B can access the data related to time exchange of data between Customs. However, maintenance, this new AEO through CADENA. Alternatively, some challenges were soon identified. These data privacy, CADENA can be automatically populated via revolved mainly around some of the limitations of sustainability, APIs3 with data from an AEO certification module the technological infrastructure, which required in an automated Customs management system Customs to be responsible for its maintenance, and scalability or an Electronic Single Window. The application including technical troubleshooting, onboarding of of the network, could also interact directly with the Customs risk new entities, and financial sustainability. This had management system in country B via APIs. As the a high impact on the governance, maintenance, and that entities system has been instructed to consider AEOs to data privacy, sustainability, and further scalability using it can benefit represent a low risk in terms of security and fraud, of CADENA. from a reliable the company would immediately benefit from a lower level of inspection. Any change in the status Realizing the limitations that CADENA and other infrastructure of the AEO will be also notified through the same IDB projects were facing, in 2018 the IDB Lab on top of which 5 path. launched LACChain , the Global Alliance for the they can develop development of the blockchain ecosystem in Latin CADENA greatly facilitates the operational America and the Caribbean. LACChain developed any blockchain implementation of MRAs by ensuring that a a public permissioned blockchain infrastructure solution. company’s certification, as well as the suspension using Hyperledger Besu6 (an Ethereum client) that and cancellation of this status, are registered is compatible with other similar initiatives such as in real time and shared with all Customs the European Blockchain Service Infrastructure7 administrations which are signatories to an MRA. (EBSI) developed by the , The administrations with access to CADENA and ALASTRIA8 in . The LACChain blockchain now have a digitalized, automated, secured, and network is provided by the IDB Lab and its partners reliable mechanism for sharing information on AEO (both public and private) as a public good for certificates. Data integrity is optimized as access Latin America and the Caribbean. The LACChain to the data is protected and managed by granting team guarantees the governance, maintenance, different roles and permissions to users4. data privacy, sustainability, and scalability of the network, and that entities using it can benefit from a reliable infrastructure on top of which they can develop any blockchain solution.

3 Tools that specify ways in which software can interact with an application such that the data from the latter is available in the former. APIs interact with the target application exclusively through the back end. 4 W3C Decentralized Identifiers https://w3c-ccg.github.io/did-spec/; W3C Verifiable Credentials Data Model https://www.w3.org/TR/verifiable- claims-data-model/ ; The Decentralized Key Management System (DKMS) https://github.com/WebOfTrustInfo/rwot4-paris/blob/master/topics- and-advance-readings/dkms-decentralized-key-mgmt-system.md 5 www.LACChain.net 6 https://www.hyperledger.org/use/besu 7 https://ec.europa.eu/cefdigital/wiki/display/CEFDIGITAL/EBSI 8 https://alastria.io/en/ 44 Dossier

Table 1 - Main Features of CADENA using LACChain

• Public-permissioned blockchain network using Hyperledger Besu-Ethereum protocol.

• CADENA has decentralized infrastructure components, which are not dependent on a provider, and allows individual subscription of each country in the cloud of its preference or in a local server.

• CADENA is an autonomous application managed by each Custom administration.

• CADENA uses open-source smart contracts for easy inclusion of new Custom administrations.

• CADENA is a standard application with the possibility of being customized by each user.

• CADENA has authentication of users at the application and at the node level in the blockchain.

• CADENA has security and privacy at the application and at the blockchain level (self-sustaining - the role of a general administrator is not necessary).

• In CADENA, each Custom has the ownership of its node deployed in LACChain and permissions at blockchain level (execution of smart-contracts). Customs have the potential to deploy other blockchain applications through its node and interact with other nodes within the LACChain network.

• CADENA can scale easily and include other Customs.

• CADENA can interoperate within the network and potentially with other networks.

This was ideal for CADENA, and, in 2019, entering overloading CADENA. Customs therefore has a the second phase, the CADENA team opted to more secure real-time solution for the exchange use LACChain as the technological infrastructure. of information, and an immutable ledger that Custom administrations found in LACChain optimal guarantees the integrity of the data. autonomy and a sustainable infrastructure, as well as capabilities for further scalability to other LACChain also offers Customs the possibility users, and interoperability with other solutions and of deploying other blockchain applications and applications which might opt to be deployed on the connecting them with all of the applications LACChain network. LACChain main features are its developed by public or private entities also using openness, publicness and decentralized nature. It is the regional network. also low cost for the user because it is not based on transactions fees. It is not anonymous, not based Lessons learned on the use of cryptocurrencies and bonded to laws Customs administrations and other public and and regulations. Table 1 shows some of the main private entities which have a role in securing and features provided by LACChain to CADENA. facilitating the supply chain and are considering the use of blockchain can learn valuable lessons from the Each Customs administration deploying the CADENA project. In addition to the importance of CADENA application has ownership of its node, in using a technological infrastructure that facilitates other words its own access point to the LACChain simpler governance and maintenance, allows the blockchain network. Permissions exist at the node implementation of regulatory frameworks, and and LACChain level (execution of smart contracts). addresses data privacy and user authentication, Every time a Customs administration generates the project has shown how important it is to: information to be exchanged with other Customs administrations through CADENA, the application • use international standards such as the WCO connects to the LACChain platform and calls up a Data Model and the WCO Trader Identification smart contract that contains the logic showing Number (TIN) when developing all of the data which Customs administrations need to receive sets to be exchanged; the information. The data is then exchanged over a private and secure sidechain, and the cryptographic • use international standards such as W3C proofs are registered in the LACChain public Decentralized Identifiers to develop a digital ledger. This enables data to be processed without identity for users; WCO news n° 94 February 2021 45

• build onto national regulations, processes, and • be willing to be flexible and take some risk during international guidelines; the proof-of-concept phase. Technical solutions and services which are not foreseen at the • narrow the proof of concept (PoC) to a specific beginning of the project should be incorporated challenge that requires multi-stakeholder during the development phase as and when they interactions to test and validate the solution, become available; and only then add other functionalities and participants. In other words, start small; • develop a strategy to validate the cybersecurity of the application and its components. • adopt an inclusive co-creation process in which specialists from the business, technical and even Way ahead legal areas participate to guarantee regulatory CADENA has also been built with the capacity for alignment, functionality of the processes and the other government entities and even the private technological viability of the solution; sector to access specific data following a process of authorization and authentication. This opens up the • consider the proof-of-concept phase as a learning possibility to develop further functionalities within process and opportunity to develop knowledge the application. CADENA can also be integrated about the potential of blockchain technology with with legacy Customs systems and with other IT a view to scalability down the road; systems through an API.

• remain engaged in the global technical At the same time, other applications embedded in discussions, contribute and be generous. The different infrastructures and blockchain networks overall success of the technology depends on the are being developed, such as B-Connect (another level of adoption by others and on not making the solution for the exchange of AEO data same mistakes; developed by countries) and the European Blockchain Service About the Authors • iterate and establish milestones for functional and Infrastructure. Accordingly, ensuring integration tests while implementing the proof of interoperability will once more be at Michelle Moreno is concept to identify areas for improvement; the heart of the future developments Senior IT Specialist at of CADENA and LACChain. the IDB, Sandra Corcuera Santamaria a Senior • opt for open-source solutions and document Trade Specialist at the them in shared repositories (Githubs); More information IDB, and Marcos Allende https://www.iadb.org/en an IT Specialist at the IDB and Technical Leader of LACChain.

Technology for customs in the time of the pandemic 46 DOSSIER © Royal Malaysian Customs Department

Malaysia Customs conducts online Factory Acceptance Test

By Asha Menon, Royal Malaysian Customs Department

In Malaysia, the use of technology to support government agencies (Atomic Energy Licensing Customs operations has increased steadily over the Board, Ministry of Finance and local universities) last few years. As in many countries, the COVID-19 participating to make an informed decision. All the pandemic has catalyzed this trend and the use of parties involved were able to communicate and online communication tools and technology, such share real time data with almost no disruption. as non-intrusive inspection equipment, has become an imperative for the Royal Malaysian Customs The RMCD believes that it is important to keep Department (RMCD) for service continuity. an open mind and be flexible when faced with adversity. Online communication tools have The Department has recently used a video proven to be very useful in organising meetings, conference system to perform an online Factory training officers, and conducting capacity building Acceptance Test (FAT) of its newly procured remote missions. By conducting an online FAT, scanners and radiation portal monitors (RPM). Due the Department is confirming that quality remote to travel restriction, it was impossible to carry out testing is also possible. the FAT at the manufacturers’ sites or at the site where the scanner and the RPM are built. Thanks to technology, the RMCD is confident that it can continue with its modernization programme The FAT was supervised by the Deputy Director and meet the Government and the Ministry of General of Customs, Mr. Mohd Yunus Charlie Finance objectives even in times of crisis. The Charington. It took place over a week and was Administration stands ready to provide more carefully prepared with the manufacturers to information about the online FAT and other uses ensure a smooth process without compromising of technology. It encourages those who would like quality. All tests were carefully examined and to share similar experiences to get in touch. adapted with each process detailed and ordered to enable the RMCD to determine whether the More information equipment was functioning properly. The FAT was [email protected] a collaborative effort with experts from different PANORAMA

© Nick Fewings on Unsplash enforcement suggestions to improve Waste trafficking: reduction respectively. In 2020, the number of criminal number to the 217. dropped respectively.reduction cases In 2020, year-on-year 50.88% and year with a22.6% declinedThis year number after trafficking relating of a totalto the import of 761.8 thousand oftonnes waste. 2019, waste In initiated were for recyclable. criminal cases of 372 definition of materials dealingfor import with the government’s the that meet not do enforcement its capacities China Customs strengthened 2017 2020, and between periods time of duringSky, Blue specific Operation of part As years. Tackling illicit of infocus China trade the waste has been Customs many for (3.12 scraps million of metal Imports tonnes) by 41.5%. dropped (10.36of waste paper million by of 39.1%. which tonnes), dropped imports representing a39.8% of this Most up decline made was with 2018. compared there were 13.49 million into of solid tonnes China waste imported in 2019, following intoData entry show force adecline the ban: in of the waste imports seizures Fewer management,efficient be disposed of in the Statewhere theywere generated. as is as far other should, wastes compatible with environmentally and sound in terms of quantity and/or hazardous potential that and hazardous and wastes of their by such wastedangers is reduction generation the posed to minimum a way of environment protecting the human health and from the effective most This is in line preamble with the Basel of the Convention which provides that the lifestyles. carbon with initiatives low- green and waste and to of household promote sorting the governmentby the to improve waste recycling the was coupled and system deployed efforts of the part move was century. quarter past The the waste for recycling half handled which nearly had world’s processors of the recyclable country’s the for headed includingscrap, plastic scrap, e-waste metal waste and China 2018, of solid introduced 24 1January on ban a waste and On types usually are prohibited. non-Parties with movements Convention the 187 universal has near as transboundary application, Parties, requirements to Convention the which Parties may to decide introduce. With of Hazardous Wastes their and Disposal as well as with any additional national rules Basel set by the Convention Control the on of Transboundary Movements international level as long as commercial are in transactions compliance with the year.over of waste per 10 billion types at traded Waste of varying be tonnes can It is estimated that world population the has 7.4 surpassed billion, generating Customs by China February n°94 2021 news WCO 47 48 Panorama

China Customs also mobilized the international Lack of impact measurement Customs community by initiating Operation The third challenge is that there is little knowledge More quality DEMETER in 2009 with the support of the WCO of the impact of Customs enforcement on the waste data should be Secretariat. The Operation has since been organized industry. Have the entry into force of the ban and on a regular basis and benefits from the support effective enforcement contributed to improving the reported to the of the Secretariat of the Basel Convention and waste industry and building a recyclable economy? WCO CEN for a its Regional Centre in Beijing (China), INTERPOL, Answering this question would require Customs Europol, the Network for the to sit down with private sector representatives better grasp of Implementation and Enforcement of Environmental and environmental policymakers. The Secretariats the latest trends Law (IMPEL), and UN Environment's Asia and the of the WCO and the Basel Convention could join in the illicit waste Pacific Office. During Operation Demeter VI, forces and conduct more policy research on this in 2020, participating administrations reported issue. trade worldwide. 119 infringement cases connected to the illegal movement of waste, and 12 connected to the Way forward illegal movement of ozone-depleting substances Another DEMETER operation is due to take place in and hydrofluorocarbons (HFCs). 2021, and it is hoped that Customs administrations will once again join together to demonstrate their Challenges commitment to fighting illegal waste trafficking. Waste trafficking into China seems to have been curbed. Nevertheless, China Customs like other To optimize enforcement operations both at global Customs administrations is still encountering and domestic level, China Customs would like to a number of obstacles when it comes to waste offer the following suggestions: enforcement, which can only be solved by cooperation. 1. Cooperation mechanisms with police, environmental authorities, other law Repatriation of waste enforcement agencies, the private sector The first is repatriation of intercepted illegal and the public should be established. In waste shipments. The Customs Administrations China, under the National Anti-Smuggling of China, Indonesia, Malaysia, the Philippines and Programme, the Customs Administration has Vietnam have managed to repatriate several illegal set up communication mechanisms with other shipments to the source countries or regions. law enforcement agencies to ensure a whole-of- However, authorities often report a lack of support government approach and proper information from the importer and/or exporter of the waste as sharing. well as an absence of joint monitoring of the whole 2. Public awareness campaigns on the impact of repatriation process. waste should be developed. China Customs has organized public events highlighting the Lack of quality data problems posed by the illegal trade in waste. The second challenge is the lack of quality data 3. Cooperation with the private sector should be collected at international level. Illegal waste promoted, since business plays an important trafficking is a little-known business as countries role in disposing of and repatriating seized do not share enough information on seizures and waste. legal cases. Organizing operation DEMETER on a 4. Training on risk analysis and intelligence sharing regular basis has enabled the WCO to obtain seizure must be delivered at national and international reports from Customs administrations, which are level to enable law enforcement officers to work then fed into the WCO Customs Enforcement more efficiently. Network (CEN) database. However, the amount of 5. Information on regulations and procedures data collected during the course of an operation is must be provided to the waste management obviously not enough to gain a really good picture of industry to improve compliance. the trade, and merely provides a snapshot of what 6. More quality data should be reported to the is happening on the ground. WCO CEN for a better grasp of the latest trends in the illicit waste trade worldwide.

More information [email protected], [email protected] © AdobeStock in charge of issuing import and export permits and and permits in charge of export issuing and import Directorate of Customs wanted General parties The LevelService Agreements systemand to profilesmaintain and in the them. to had government enter risk agency its indicators to risk up set the Each managementneeded system. while others permits, export or to issue import how to understand needed some For example, training using on necessary system. with the the System wasto provide allconnected parties challenges of the One in implementing Bayan the Training • components: following consists of the Bayan system The System components goods. of release alsoto operators but economic to accelerate the to provided increase quality the services of the initiatives two enabled it only not These agencies. regulatory with level agreements service signed administration the While deploying system, the also licenses. and permits declarations, issue and import agencies to all process procedures and trade solution IT the by used border regulatory system, of working CustomsGeneral Bayan has the on been Directorate Oman the years, four past During the Customs Oman By facilitate cross border trade in Oman Single Window and Level Service Agreements e-Government Services”. e-Government Award Excellence for Qaboos in "Sultan the awarded in was 2018 system the withprovides, it facilities and services the of appreciation In • all Customs asecure network. procedures on containing applications handling for more than 30 an integrated Customs administration system Customs warehouses). Customs and clearance companies, operators, airport and handlingand commercial companies, port banks, shipping agencies, (government transaction trade all involved regulatory in parties agencies a and linking environment window single electronic an 2. 1. methods: notification and service deliver to taken time the to agencies stipulate indicators related performance signed with agreements border regulatoryThe 17 ministries. than more representing departments governmental to sign level with more than 48 agreements service release the on it agree or decided of consignments, specific time todecide on whether to issuea permit To pace. work up the speed have to adhered a them ensuring compliance regulations with specific to 7 days only. to hours few average time required to release went goods from the example, for seaport, of the In one achieved. was have thatsystem objective shown this very implementation of the measuring of the impact the required studies Several clearance of the goods. for time the shorten and that to it had reduce costs to while their respond keepingand needs in mind It managed tosystem. listen to involved all parties during development the Bayan of the capacity Customs to leadership had Oman demonstrate its Conclusion operator’s premise. storedto to be allow to at the occur inspection shipment the where charge is inspection of the will release indicate in and goods the agency the initiated, has been not inspection the system the this if time, After hours. two should exceed not time response the inspection, for is selected shipment a When inspection: an to conduct timeResponse of other regulatory authorities message. text phone and e-mail via notified is applicant permit automaticallysystem the and issues permit, the not exceeding this the 24 period, After hours. within respond period a and review request the has to competent authority the permit, export or import an for a request Bayan system the receivingIssuance Upon through of permits: February n°94 2021 news WCO 49 50 Panorama © Brazil Customs

Assessing the cargo release process: Brazil shares its experience

By Brazil Customs

At the Viracopos The WCO has long emphasized that the Time Release Study International Airport (TRS) is a useful tool with which a country can assess the performance of its Customs administration, border regulatory agencies, port authorities, trade operators and various service providers, in terms of the clearance process. In this article, Brazil Customs shares its experience on conducting its first TRS.

Undertaking a Time Release Study (TRS) is After undertaking two assessments using the an effective way to obtain a wide range of methodology, the Customs Administration finally information and insights related to the clearance turned to the WCO TRS. Previous attempts to process and the processing of trade transactions assess clearance performance had prepared by the various actors involved. Although the tool the ground, and decision-makers were already was developed by the WCO years ago, Brazil sensitized to the importance of collecting data Customs did not launch its first TRS until 2019. In on the time required for the release of goods. In fact, the Administration had been using another particular, they were aware of the importance of methodology to measure the time required to measuring performance against the target release release goods. That methodology, whilst sharing times set out in various projects, and of assessing some similarities with the TRS, was not satisfactory: the impact of statutory and administrative changes it focused on the Customs perspective only, and did on trade behaviour over time. not take into account all the entities involved in the import process (e.g. licensing agencies and private sector bodies). WCO news n° 94 February 2021 51

Figure 1

Average release Average release time Percentage of time per person in charge time according to the inspection channel 50% 7.06 days 47% 97.68%* 40% 5.8 days 38% 30% 27.24 days 0.51%* 20% 9.7 days 7.4 days

20.91 days 10% 1.82%* 9% 6% 2.3 days 0% * Percentage of total import Regulatory Customs Importer Depository declarations studied. agencies

Challenges data was collected at the two main points of entry of The Administration was faced with numerous goods, representing approximately half of the total challenges during the preparation and volume imported in this mode. The data relates implementation phases of the TRS: to the time taken from the arrival of the goods in the country to their actual physical exit from the • High-level support had to be secured, as bonded warehouse. It was collected for three conducting a TRS requires resources, as well modes of transport (sea, air and road) and four as the capacity to instruct other agencies and “inspection channels”. participants. Four main flows were identified and the import • There was a lack of personnel to run the Study, process of each flow was broken down into and the Administration had to release officers different stages in order to precisely identify from some of their existing duties to enable them those responsible for each of the procedures to focus on the TRS project. and, consequently, facilitate the identification of opportunities for improvement in processes and • Effective partnership had to be established with performance. the private sector representatives participating in the Study to ensure that they felt involved and Bearing in mind the degree of digitization of collected the required data. Brazil Customs and trade stakeholders, as well as the massive amount of data which needed to be • Modifications had to be made to the Customs IT collected and the number of entry points involved, system in order to have access to and extract all it was decided that all the data should be collected the required data. electronically. Data was collected from the Customs IT system and then shared with all the entities • Some agencies involved in the clearance of goods participating in the Study, who were asked to had difficulties in collecting the required data. supplement it. In total, data was collected on more than 300,000 declarations. Once adjustments • It is possible to run the Study in adverse situations; were made to reduce this volume of data, that figure however, Brazil Customs preferred to launch its fell to around 260,000 declarations. first TRS when the necessary conditions were all met. Findings The main findings of the Study in terms of release Methodology times are presented in Figure 1. The average time The Study was conducted at all border crossing for a cargo to be released is 7.4 days. Clearance points where clearance takes place. The exception times increase according to the inspection to this was the road mode of transport, for which channel (green, yellow or red). Import processes 52 Panorama

that present a higher Customs, sanitary and/or • The import procedure is still based upon a series phytosanitary risk have more complex import flows. of sequential steps, and this impacts negatively Diligent action The highest average release times were identified on the time required for clearance. The Single by importers in these processes, which represent less than 3% Window project team has mapped the existing of the sample. sequential process, and a procedural change is and/or their expected to be introduced as part of the project representatives The Customs clearance stage, where responsibility implementation. lies with the Customs Administration, accounts in carrying out for less than 10% of the total time measured. The • An imbalance has been identified in the procedures actions which are the responsibility of private distribution of workloads among Customs for registering agents, notably importers or their representatives units. There is a need to redistribute tasks (Customs brokers), international carriers and among national and regional teams. One of the declarations, depositories, represent more than half of the total constraints to take into account is the available delivering the goods time spent in all flows analysed. IT infrastructure, as some tasks require access after clearance to specific tools. It seems that many opportunities exist for the and handing of various private sector entities involved in the • There are gaps in terms of technological documents to Brazil importation process to speed up the release of infrastructure and IT services among cargos. Diligent action by importers and/or their public bodies. This will be resolved with Customs and other representatives in carrying out procedures for the implementation of the Single Window relevant agencies registering declarations, delivering the goods after environment. has the potential clearance and handing of documents to Brazil Customs and other relevant agencies has the Authorized Economic Operator to generate an potential to generate an average reduction of more A specific section of the TRS was dedicated to average reduction than 40% of total times. the time required to release consignments from importers who had received Authorized Economic of more than 40% Opportunities also exist to review performance Operator (AEO) status. Another section dealt of total times. indicators developed to assess the impact of with consignments for which regulation was the introducing future reforms and tools. For example, responsibility of the health authority and the the project team in charge of the development agriculture authority, and for which importation and implementation of Brazil’s Single Window required licensing before or after arrival in the Programme, the main tool for modernizing and country. reducing bureaucracy in Brazilian foreign trade, had set the objective of reducing the time required to The TRS shows that, while normal operations take release goods in the maritime sector from 17 days an average of 207.38 hours between cargo arrival (the average time being taken) to 10 days. The TRS and delivery, AEO operations flow 32.37% faster findings show that it takes 9.7 days meaning that on average in all modes (140.25 hours). One of the objective set could have been more ambitious. the benefits offered to certified AEO operators is “Clearance on Water”, a special clearance method Other key findings are: for the sea mode of transport that allows for advance registration of the import declaration. • The processing times for some procedures differ The Study proved that these sea mode operations from one Customs office to another. There is a achieved a significant time reduction of 72.47% on need to identify the reasons for such disparities average. However, the use of Clearance on Water and develop best practice in order to harmonize is limited to imports where no licensing is required, the way procedures are applied. or the licensing procedure is carried out before registration of the declaration. The Government’s • The time required by importers or their decision to involve other Government agencies representatives to register the import in the AEO certification process by implementing declaration, and the time required to deliver the “Integrated AEO Programme” is a window of the cargo to them, represents roughly 80% opportunity, as it will enable operators certified of the total average time required. In light of as Integrated AEOs (in terms of Customs and this evidence, Brazil Customs needs to start a the respective consenting body involved in the dialogue with the private sector to understand operation) to use Clearance on Water for imports the reasons for such processing times. subject to licensing. WCO news n° 94 February 2021 53

Representatives from the public and private entities involved in the TRS are preparing its implementation

Transparency should be shared, according to Article 7 (paragraph The results of a TRS and any other performance 6.2) of the WTO Trade Facilitation Agreement. measurement activity should be published. Standard 9.1 of the WCO Revised Kyoto In Brazil, the methodology and the results of the Convention provides: “The Customs shall ensure TRS were presented during an online event1 which that all relevant information of general application brought together high-level representatives from pertaining to Customs law is readily available to various domestic institutions, private sector entities any interested person.” This idea is reiterated and international organizations, including the WCO. in the WCO Transparency and Predictability As well as this event, a webinar was organized for Guidelines, which list the “results of performance those looking for more detailed information. Both measurements” among the information that were viewed by thousands of people. The TRS Customs is encouraged to publish. report, various presentations and the Study’s anonymized bulk dataset are available to the public Not only should results be made public, but on the internet2. Publicly communicating results can “experiences in measuring average release times, be a very effective motivation factor for all actors including methodologies used, bottlenecks involved in the process of clearing goods and enable identified, and any resulting effects on efficiency” accountability and transparency obligations to be met.

1 Brazil Customs Youtube channel www.youtube.com/watch?v=8e0nHfvepAk&t=979s. 2 https://receita.economia.gov.br/dados/resultados/aduana/estudos-e-analises/time-release-study-brasil. 54 Panorama

Indirect benefits The TRS results can be useful in many areas. © AdobeStock © Research The Study dataset could be of interest to academia. By analysing the anonymized bulk data, it would be possible to make new findings and even to refute some of the conclusions, or to come up with new recommendations.

Human resources Numbers are a universal language. They reflect an intelligible and neutral understanding about what is happening on the ground. The work of Customs officers is reflected in the TRS. With the data collected, it is possible for those at managerial and executive level to shed light on situations and practices that were previously only discussed hypothetically. The Study made it possible to establish a dialogue with the objective of building engagement and increasing a sense of ownership of projects. Issues and needs identified could be addressed by adapting procedures, providing tools or delivering training.

Customs-Business partnership The Study makes it clear that the actions and improvements of procedures by public agents are not enough, given that a large proportion of bottlenecks relates to private agents’ responsibilities. Since there is a common interest in making the release of goods more agile, public officers and private sector representatives should see this as an opportunity to build better relations and to collectively find answers to issues identified in the Study.

Bringing in tangible data in support of the policy debate The conclusions and recommendations from the TRS were included in the action plan of the National Committee on Trade Facilitation (NCTF). In this way, a technical study has entered the political sphere and will help shape reform.

In Brazil, besides the NCTF, there are Local Committees on Trade Facilitation (LCTF). These are managed by local Customs units and serve as a forum to discuss facilitation initiatives at the local level and to address local issues. They also have to report to the NCTF the questions which require decision or guidance from national level. Data collected during the TRS provides new insights into the local realities, and the Local Committees are expected to discuss measures to be taken to tackle issues identified in the Study and to monitor their implementation.

Conclusion Carrying out the TRS in Brazil was challenging, but the benefits it brought to the cross- border trade community, as well as to the country as a whole, were worth it.

The TRS is seen as an ongoing process and Brazil Customs is committed to conducting a TRS regularly. The main bottlenecks identified in the TRS have already been mapped and, as already said, for most of them, medium-term solutions are already being developed. Once they are implemented, it will be important to measure again the release process to assess the gains obtained. In other words, the TRS is expected to act as a trigger and baseline for the assessment of future developments. Hopefully, upcoming editions of the Study in Brazil will reflect these advances and improvements.

More information [email protected] [email protected] [email protected] POINT OF VIEW WCO news n° 94 February 2021 55

Communications and collaboration tools: understanding the risks and opportunities

By Eric Lebegue & Lilian Gaichies, Streamwide

As private and public entities are being forced by the coronavirus to move their communications and file sharing to online collaboration platforms, they should be aware of the potential security threats they face and of the need to use professional tools in order to ensure the security of their IT environment and compliance with data protection regulations. In addition to addressing security concerns, professional communications tools currently offer a wide range of functionalities which enable organizations not only to improve information flows but also to automate processes, keep control of their data, facilitate reporting and maintain visibility over their mobile workforce at all times.

The use of audio and video technology to communicate Another reason why private and public entities, especially with people who are not physically present in front of us is those for which collaboration is essential in view of their nothing new. In most countries, Customs frontline officers highly distributed and mobile workforce, should turn to have, for some time now, been using digital communications professional applications to secure their communications tools that enable them to talk to and exchange data, channels is that such tools currently offer a wide range of including audio, photos and videos, with their head office. functionalities which enable these organizations not only to This trend has accelerated since the COVID-19 pandemic improve information flows but also to optimize processes, began in early 2020. With governments requiring people to keep control of their data, facilitate reporting and maintain work from home wherever possible in order to prevent the visibility over their staff at all times. spread of the virus, virtual communications have become the norm. Main issues There are three majors problems related to the use of mass- Some of these communications tools provide customized market products as opposed to professional applications. and professional solutions, but employees have frequently been left with no other alternative than to rely on mass- 1. Security vulnerabilities: The IT security and privacy market applications. Given that employees, companies measures or certifications the service provider has and organizations are likely to continue these new in place may not be sufficiently robust to ensure that working practices, even once the pandemic is over, outsiders are prevented from accessing their systems. in view of the benefits they offer, it is crucial that the Popular consumer messaging apps, for example, security risks attendant with the use of these tools are do not contain the critical encryption and security fully understood. Mass-market applications are simply protocols required to lock down communications. not designed to be secure at user level, and their users risk This also applies to mass-market video-conferencing exposing themselves to serious cybersecurity and privacy tools. Meeting links can be intercepted, allowing compliance issues. unauthorized individuals to execute automated attacks, and, if no password is required to join a meeting, the Customs administrations using these kinds of tools could intruder will be instantly added to the call. Hackers can put themselves at risk in terms of, for example, data leakage impersonate legitimate business accounts, phish user or security breaches. Lone worker safety, confidentiality credentials, steal data and infect employees’ computers of negotiations, product and transportation safety, and with malware in a matter of minutes. operator trust and confidentiality are at stake where 2. Data sovereignty: This concept poses another unsecured telecommunications systems are in use. challenge, as data are subject to the laws of 56 Point of View

the country in which they are physically Such business applications should: stored. Messaging or video-conferencing applications collect, store and process data. • use advanced encrypted communications In general, organizations using mass-market and protocols preventing vulnerabilities and applications do not know exactly where protecting the data privacy of all users; their data is being processed or stored • provide secure URL links; or by whom, which might result in their • comply with regulatory transparency infringing data protection laws. For example, requirements and provide a clear, unambiguous, organizations established in the European permanently updated and easily accessible Union must comply with the GDPR1 which privacy policy; requires that all data collected on EU citizens • offer on-premises and SaaS (Software as a must be stored either in the EU or within a Service) solutions; jurisdiction that has similar levels of protection. • when delivered as SaaS, ideally store data on servers located within the customer’s own 3. Too many applications and systems: Most mass- jurisdiction, making him subject only to his market communications and collaboration domestic privacy laws; tools serve only one or two functions, and • replace multiple applications with a secure, all-in- organizations therefore often must subscribe to one business solution to enable the user to save multiple platforms to cover all their needs. The time and effort; use of different applications and tools is time- • allow sessions with no time limit. consuming and generates inefficiency, which ends up frustrating employees and increasing Functionalities the risk of errors. Employees spend more time In terms of functionalities, some tools enable teams managing applications than they do getting the located in different places both in and outside work done. In addition, most service providers a country to communicate easily using instant offer tools designed for personal use, with basic messaging, whiteboarding or call conferencing. Of subscription plans and very little support. There particular interest to Customs administrations are is often a limit on the number of licences, and the push-to-talk (PTT) communications which work pricing policy is generally not flexible enough similarly to classic radio communications devices. to adapt to operational needs. Such a situation PTT applications can turn any smartphone into a ultimately lends itself to less than adequate virtual radio device capable not only of mimicking security practices. Organizations must realize the use of a walkie-talkie, but also of interconnecting that they are taking risks by failing to adopt different radio networks. Users who are required a comprehensive approach towards their to switch to such networks can do so using their business communications and collaboration smartphone and do not need to carry additional technology strategy. radio equipment.

Solutions When using PPT, all you need to do is press a button Organizations, especially those with a highly in an app, and you can instantly talk to whomever distributed and mobile workforce, therefore need you want. There is no need to unlock your phone, to have a clear strategy in place and to provide enter your access code, scroll through your employees with professional tools in order to contacts, wait for the phone to connect and then combine collaboration, productivity, security and inevitably leave a voicemail for a colleague who does compliance. Use of a single secure and professional not answer, leaving you with no real confirmation communications and collaboration tool is that they will actually receive the message. preferable. It is possible to replace existing cloud- based and mass-market applications with a solution In addition to PTT, professional communications that is kept under the control and management of tools include all the functionalities officers need, the organization using it. whether they work at their desk or in the field: screen sharing on a mobile device or PC, chat groups, exchange of documents, photos, videos or any other content in real time, and video streaming

1 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation). WCO news n° 94 February 2021 57

from a variety of different sources (drone, camera, • Long Term Evolution (LTE) networks are generally Organizations, PC, etc.). built and operated by mobile network operators especially those (MNOs) and are largely aimed at serving a mass- Furthermore, the following functionalities are of market consumer subscriber base. MNOs deploy with a highly particular interest to organizations such as Customs their networks under a licensing agreement distributed and administrations with a mobile workforce: entered into with the government and provide a “best-effort” service designed to balance the mobile workforce, • Real-time localization and communications: business requirements of their shareholders to need to have a Officers working in a control centre should be maximize returns while still meeting their licence clear strategy able to see field officers’ locations in real time and obligations. These networks can be public or to identify which employees are the closest to a private. Entities other than MNOs can also install in place and to given address on a map. If a state of emergency is and operate a private LTE. provide employees declared, control centre officers should be able to with professional use a PTT app to contact employees or a mobile In the past, Customs administrations had to cope team who are near the scene of an incident, and with the limitations of each system. Nowadays, tools in order the team in the field should be able to transmit however, the mobile communications landscape to combine live video stream to the control centre. is changing. A new industrial standard for mission- critical push-to-talk communications is now collaboration, • Safe reporting process: When officers are on a shaping the future of public and private networks. productivity, mission abroad and are unable to use a private The cellular mobile phone standards specification security and network to communicate, they can use the body, the Third Generation Partnership Project Internet to connect from any device to a secure (3GPP), has been developing standards (known compliance. “mission platform” where they can prepare and as MCPTT standards) to introduce the unique share confidential reports and other information. attributes of mission-critical PMR technology into the 4G LTE standard and on into the 5G standard. • New telephony software: The latest telephony This will bring traditional PMR-type functionalities software can turn any electronic device into a into the mobile cellular domain, while ensuring fully-fledged, integrated system, bridging the that security requirements are met. For example, gap between smartphones, desktop phones, mission-critical push-to-talk technology over LTE computers and radio equipment. provides the same functionalities as over PMR with the same level of security. 3GPP standards Interoperability for mission-critical services (MCS) now cover video, In most countries, there are two types of data, messaging and location services. communications networks available to public entities: These standards help technology service providers to develop communications solutions • Legacy narrowband professional mobile radio that enable government agencies to use public (PMR) networks are mainly private networks cellular networks where available and their private reserved for government use. They are built to compatible networks where necessary, and allow meet the specific coverage area and capacity officers to use a single type of device covering all requirements of a particular business or their operational needs. organization. Organizations usually invest in PMR networks because communications are a business Conclusion or a mission-critical tool. Aside from public The ability to communicate from any place, safety agencies, which include law enforcement at any time and on any device is crucial for all agencies, this may apply to transportation, organizations. However, in deciding which solutions utilities, oil and gas, petrochemicals, mining, to use, they should give equal priority to security and logistics and industrial concerns. Such networks functionality. Fortunately, professional messaging are driven not just by coverage (including inside and collaboration solutions currently exist that buildings, basements and tunnels) and capacity, remove barriers to collaboration while offering but also by availability. An emergency alert or call secure and efficient workplace communication tools. simply must get through every time, so minimizing network downtime is paramount. More information http://www.streamwide.com [email protected] 58 Point of View

© AdobeStock establishing which Rules of Origin (RoO) apply to apply (RoO)Origin of Rulesestablishing which in importance therefore, is, goods utmost of the of Classification code. (HS) System Harmonized respective their according to identified are which categories product or individualfor products determiningspecified requirements for originare are closelyof goods, interlinked. Typically, the determination and classification of goods, origin of that the majorA fact from the problem comes work in progress in work Harmonization of procedures is still generous product-specific rules originof (PSR) generous product-specific are still hoping for, claim, and simpler more and that multilateralismto fact the they is hold, on now Whilst businesses have to had resign themselves workable in and practice. understandable to rules of origin have to manageable, be that is, provisionsthe agreement of atrade that relate In particular, to implement. use and exporters and importers for easy be should goods) certain for duties Customs of rates lower (e.g. benefits direct any provisions aimed at providing businesses with It businesses. followsfor logically, therefore, that are made arrangements Trade and agreements uncertainty for businesses and efforts unnecessary causes product-specific rules of origin (PSR) The lack of technical updates of implementation of AEO the Programme in . Customs registration in European the number Union; the and ofrules origin for agiven HS code; process the to obtain a preferential topicsof identifying are difficulty the addressed: Three rules. of implementation these toor non-harmonized the to due faced lack the by of businesses of harmonization rules, enforce, To legislation. illustrate, they explain of some issues the make,high both of on agenda the who those of and who those be should harmonization argue of that authors this article The Kormych Borys and Naujokė Enrika Gayk, Anna By 1 2

resource/blob/13358/accdb62998fda08ab985bd3c50a43a7f/concept-paper-for-modern-trade-agreements-data.pdf. https://www.dihk.de/ at: Available 2020. August Berlin, e.V. (DIHK)), Handelskammertag und Industrie- (Deutscher Industry and Commerce of Chambers German of Association Tariffs; Customs Preferential of Utilisation –Increasing Trade Agreements Modern for Paper DIHK-Concept European Commission, in: FOREIGN TRADE, 3/2020, p. 57ff., Mendel Verlag Mendel 57ff., p. 3/2020, TRADE, FOREIGN in: Commission, European Trade, DG Stepkowska, Maria Urszula and Emberger Geraldine with Interview ausgeschöpft? nicht noch Potenzial EU: der Handelsabkommen 1,2 . from then onwards. then from unaltered and fixed remain time in point particular a the latest one). Usually, however, the PSR agreed at shifted to a newer HS version (sometimes not even revision are of existing an and then agreement, are adaptation of or the updated in context the situationprobablePSR thatmore is A made. being areThere only rare of such transpositions examples not reproduced within are the PSR of trade agreements. amendments HS these rule, a As practice. trade ensure adapted tothat and currentto it remains up-to-date order in - years five every usually - changes numerous undergoes HS the that known wellis It used. to which version deduce are left is being exporters however, and importers and that is case, the not itself. incontained agreement text the Usually, explicitly is information this Sometimes, used. being whichversion decide Harmonized ofthe System is When drafting negotiators the PSR, must therefore production. inused its materials input the and product manufactured final the of classification correct requires which criterion a level, subheading chapter,or headingat (CTC) classification tariff in change a towill refer applied be to RoO the cases, manyMoreover, in good. a WCO news n° 94 February 2021 59

If updates of the RoO are not provided by the It would be a real gain if technical updates of PSR parties to the agreement, traders have to refer were provided for in trade agreements by default. It is astonishing to different editions of the HS for the purposes The current reluctance to update PSR might be that the majority of origin determination when intending to claim caused by the parties’ fear that this would re-open preferential treatment. This is important as, discussions on the agreed rules themselves. But of today’s trade following amendments to the HS, a product may that need not happen, and could be avoided if agreements do not not fall within the range of (sub)headings or the technical updates were jointly agreed beforehand chapter indicated in an FTA text as being eligible as a standard procedure. offer a solution for preferential tariff treatment, or it might fall to this serious under another origin criterion. The process can In 2015, the WCO published the Guide for the problem. It is an also impact on existing CTC rules. It is, of course, technical update of preferential rules of origin3. It was undisputed that the impact of an HS amendment updated in 2017 and complemented with tables issue that concerns varies depending on the granularity or level of detail correlating different editions of the HS, indicating not only economic of the agreed rules of origin: rules that refer to HS the necessity of, and applicable methods for, operators, but subheadings will be impacted to a greater extent technical updating, according to origin criteria. than those referring to HS chapters or headings. Unfortunately, the Guide has not been widely used also Customs so far. Today, companies and Customs authorities authorities when For traders who want to use an FTA, this poses a worldwide still have to undertake complex updating problem in terms of maintaining and updating their operations to ensure compliance with preferential conducting audits materials master data, which records all materials rules of origin. Such a situation is neither on preferential that they buy, procure, produce, and keep in stock. comprehensible nor sustainable from an efficiency origin. If the master data contains an identification code and compliance point of view. used to classify items for Customs purposes, every time the underlying nomenclature is amended, the Obtaining a Customs registration changes have to be reproduced in the master data. number in the EU However when claiming preferential treatment, the In most countries, to be able to engage with classification of the master data items will have to Customs, it is necessary for importers, exporters be aligned on whichever HS version is used in the and other actors in the supply chain to obtain a FTA invoked. If a new type of good covered in an Customs registration number. This is sometimes FTA is added to the master data, it will be necessary called, for instance, an Import Export Code (IEC), to check whether that good has to be classified as in , a Customs Registration Number (CR differently depending on the HS version used. Number), as in China, or an Economic Operators Registration and Identification (EORI) number, as Another possibility would be for the company to in the European Union. Usually, but not always, the prepare its own correlation between the product- number is quite simple to obtain (in some countries specific rules laid down in an FTA and the different the process may take only a few minutes). We HS versions. However, such a correlation would not propose here to take a look at the issues faced by constitute a legal text and would not be binding; this some companies which need to obtain the EORI exercise would therefore have to be performed at number in the European Union (EU). the company’s own risk. The legal definition of the EU EORI number is set out Both solutions require huge efforts, as well as staff in Article 1(18) of Commission Delegated Regulation who are well trained in classifying goods and who (EU) 2015/2446: “‘Economic Operators Registration have detailed knowledge of the HS and its different and Identification number’ (EORI number) means an versions. identification number, unique in the of the Union, assigned by a customs authority to an It is astonishing that the majority of today’s trade economic operator or to another person in order to agreements do not offer a solution to this serious register him for customs purposes”. problem. It is an issue that concerns not only economic operators, but also Customs authorities A company needs an EORI number to submit a when conducting audits on preferential origin. Customs declaration or when requiring a Customs Finding solutions would benefit everyone involved. decision in the EU. Economic operators established

3 Guide for the technical update of preferential rules of origin – How to update the existing Preferential Rules of Origin in relation to changes in the Harmonized System. Available at: http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/origin/instruments-and-tools/guidelines/guide- for-updating-the-preferential-rules-of-origin-en.pdf? 60 Point of View

in the Customs territory of the Union should • Applications must be completed in the local request the assignment of the EORI number to language only, but some countries accept English. the Customs authorities of the EU county in which • The time required for obtaining an EORI number they are established. Economic operators not varies from 10 days to a few minutes. established in the Customs territory of the Union • Economic operators not established in the will get this number from the Customs authority Customs territory of the Union can request an of the EU country responsible for the place where EORI number, but some countries will ask the they first lodge a declaration or apply for a decision. operator to prove the existence of activities in The EORI number is valid throughout the EU. It the Customs territory of the Union. makes Customs controls more effective by enabling trade operators to be identified through a single a There are still many non-harmonized procedures number, common to all EU Member States. in the which oblige businesses to constantly adapt to different legal and procedural The EORI number itself may be the same in all requirements. Will the situation change in the future? EU Member States. However, what about the application process? The answer to this question is In September 2020, the European Commission that application varies from country to country, and launched a new Customs Union Action Plan which companies need to undertake some research to find covers the period up to 2025 and includes a number out which country provides the most appropriate of initiatives in areas such as risk management, procedure. managing e-commerce, the promotion of compliance and “Customs authorities acting as one”. By “acting Let us imagine that a Swiss company plans to as one”, the Commission means only the rolling out supply raw materials to its processing sites located of modern and reliable Customs equipment and the across several EU countries. The company sees setting up of a new reflection group to help prepare an economic benefit in acting as the importer for future crises and challenges, such as unanticipated here, although it is not established in the Customs global developments and future business models. territory of the Union. When looking at the Nonetheless, we quite like the choice of words. It procedure to obtain the EORI number, it discovers could also set a new direction: in the future, businesses that there are differences among EU countries4,5: should expect the various Customs authorities to act the same way, as one Customs authority6. • In some EU Member States, the EORI number is assigned automatically when the first Customs AEO in Ukraine declaration is submitted. There is no need to The introduction of the AEO Programme in Ukraine complete and submit an application. In others, is used here to shed light on the significant gaps that submitting an application form is necessary. exist between the way standards are conceived • In some countries, in addition to the application at the international level, and their practical form, additional documents are required. The application at the national level. It illustrates the nature and number of documents required fact that the implementation of standards at varies. For example, a document certifying the the national level depends, to a great extent, on registration of a business is usually required, but the understanding of the standards by decision the requirement related to the legalization or makers, on national constraints and concerns, and certification (use of apostille) of this document on national governance principles. differs. • Member States that do not request additional Ukraine introduced the AEO status in its Customs documents usually ask the applicant to provide Code back in 2012. However, the AEO provisions various identification numbers in order to access of the Customs Code were never applied, and a law information stored in online databases. “On Amendments to the Customs Code of Ukraine • In some EU Member States, the EORI number with Regard to Certain Matters of Functioning of can be requested by telephone, in others, in paper Authorized Economic Operators” was passed in form, and in others only by electronic means. 2019. It provides for two types of authorization:

4 EORI National Implementation. Available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/eori_national_implementation.pdf. 5 “What you need to know about the EORI number and national differences in EU countries”, by Jovita Dobrovalskienė, in Customs Compliance & Risk Management Journal for Practitioners in Europe, Issue 2, April / May 2020. Available at: https://www.customsclearance.net/en/articles/ what-you-need-to-know-about-the-eori-number-and-national-differences-in-eu-countries. 6 https://ec.europa.eu/taxation_customs/sites/taxation/files/customs-action-plan-2020_en.pdf. WCO news n° 94 February 2021 61

About the authors • AEO with the Customs simplifications component of an applicant. In contrast to typical Anna Gayk is Managing (AEO-C); and/or procedural deadlines (which are framed in Partner of Mendel Verlag • AEO with the security and safety component terms of not exceeding a certain number GmbH & Co. KG, the leading (AEO-B). of days), the application review time is set European provider of global directly (i.e. it cannot be less or more than trade-related data content. AEO status can be granted to an entity established in a specific number of days). Accordingly, Enrika Naujokė is one of Ukraine and participating in an international supply the pre-review of an application is to take the founders of the www. chain (manufacturer, exporter, importer, Customs 30 days, and the assessment procedure customsclearance.net representative, carrier, freight forwarder, or Customs 120 days. Thus, an authorization can be platform, which uses an warehouse authorization holder). obtained in five months. innovative approach to building Customs expertise It is important to understand the motivations of the Such rules seem to act as a deterrent to online. main stakeholders involved in the 2019 revision of traders who are considering applying Prof. Borys Kormych is the the regulation. On the Government side, amending for AEO authorization. According to the Head of the Maritime and the AEO regulation was primarily motivated by the information published by the Customs Customs Law Department need to align it with the EU legislation7. During the Administration, at the time of writing at the National University discussions on the AEO Bill, if Members of Parliament (February 2021), only one application for Odessa Law Academy. He did talk about partnership, security and facilitation, AEO authorization has been submitted9. is also the Editor-in-Chief of they promptly shifted their attention to possible abuse the journal Lex Portus. of the law and to the protection of the State’s fiscal The introduction of the AEO Programme interests. In particular, they demanded the removal of impacts all traders, whether they are considering discretionary rules that could lead to abuse of powers obtaining AEO status or not. Currently, Article 259 by Customs, and called for provisions to secure of the Customs Code of Ukraine provides declarants against the possible flow of illegal imports or exports who meet certain criteria with the option of placing through AEOs8. Overall, they expressed a certain goods entering the Customs territory under a specific lack of confidence in the integrity of the Customs Customs procedure by lodging a preliminary Customs Administration and of traders. declaration (known as type EA). This allows them to take the goods to their premises directly, without having Once the new law was adopted, a Resolution was to present them to the Customs office. The same option drafted, detailing the procedural rules and the exists for export. The new AEO regulation provides that methodology for assessing the compliance of AEO this procedure will only be available to AEOs-C once the applicants with the AEO Programme’s criteria transitional period ends. Businesses benefiting from the and requirements, as well as the documents to be simplification, but which are not manufacturers, cannot provided. The AEO Programme came into being at apply for AEO status during the transitional period and the end of July 2020. will lose access to the procedure for five months.

This resulted in a very complex AEO authorization The value of international standards is not in question procedure and in the introduction of a three-year here. Rather, it is the possibility of harmonizing national transitional period during which access to the AEO-C regulations beyond a certain degree, when their Programme (Customs simplification) was limited to practical implementation at the national level reflects exporters or importers that “are manufacturers of the agenda and concerns of decision makers, as well as goods destined for export”. Moreover, the new law limits the level of resources of an administration. This calls the number of applications that can be simultaneously for more exchange between administrations on the under review to 10 for the first year, 20 for the second, challenges related to practical implementation, and and 30 for the third. The Customs Administration is to for the identification and promotion of best practices. publish on its website depersonalized information on the number of applications received and on the status More information of assessment procedures for each applicant. Finally, [email protected] during the transitional period, Customs is to respect [email protected] specific time frames when assessing the compliance [email protected]

7 Association Implementation Report on Ukraine. Joint Staff Working Document, European Commission, Brussels, 12.12.2019. SWD (2019) 433 final. p. 13. Available at: https://eeas.europa.eu/sites/eeas/files/swd_2019_433_f1_joint_staff_working_paper_en_v4_p1_1056243.pdf. 8 Ostrikova T. European instruments are good, but their good work requires a strong Customs service, 2019 [In Ukrainian]. Available at: https://samopomich. ua/ostrikova-yevropejski-instrumenty-dobri-ale-dlya-yih-dobroyi-roboty-potribna-sylna-mytna-sluzhba/. 9 Status of conformity assessment and number of registered applications of enterprises for authorization of an Authorized Economic Operator. State Customs Service of Ukraine. Available at: https://customs.gov.ua/deiaki-pitannia-funktsionuvannia-avtorizovanikh-ekonomichnikh-operatoriv. 62 companies truly need to remain trulycompanies need competitive. errors things -the that detect today’strends, and improvement, for room predict that would identify obtain or insights analytics companies to perform easily be data allowing can Structured searched, format. organizedbe stored or in apre-defined - meaning it must structured it be useful, must be However, operations. and in order data the for to of marketing,to optimize sales, effectiveness the It by business used is and analyzed owners then wesend. messages the and weuse, apps join, the websitesthe visit we programs we to loyalty the of lives. It our is wherever collected wego, from integral an of allData has become aspects part tradeand compliance processes. market to enable companies modernize that and their Customs tools and areunderstand solutions the that available on the is also ofit interest to want to who Customs administrations companies, addresses mainly this article decisions. Although value money and informing and time of data, saving strategic the Customs trade and harness and compliance processes they centralize could solutions, software their automate and slow totypically adopt new technology. Yet by adopting trade companies, teams Customs operations management are Within Customs4trade By teams into strategic players management operations Customs Transforming P oint of V iew full overview offull their overview operations. prohibitingmanagers back, from obtaining them a Historically, this has Customs operations held time and consuming.data collection cumbersome integrated, not are systems often makingThese systems. community port and providers, service Customs brokers, community Customs authorities, as well as across ancillary belonging systems to sprinkled across internalunstructured, systems compliance often data But is game. of the ahead required Customs for compliance, are you company, a As are you if in control data of the Customs data -are you in control?

© AdobeStock WCO news n° 94 February 2021 63

Structuring data through collection and In the realm of Customs, machine learning is an centralization is game-changing. Data can be excellent tool to detect anomalies and mistakes in While other analyzed to reveal insights into metrics and KPIs the data provided. It can be used to improve data departments that can enable growth and inform decisions on quality, increase accuracy and efficiency in the sales, procurement, the supply chain, operations, Customs declarations process, reduce human error, within a company and more. It can be fed back into other source detect significant differences in the value of goods, have been reaping systems, for example ERP1 systems or WMSs2, and suggest better classification codes to reduce making each system smarter. costs - and the more it is used, the smarter it gets. the benefits of data analysis While other departments within a company have Machine learning use cases for years, this is been reaping the benefits of data analysis for years, this is a new realm for Customs and trade. Detect significant differences in declared a new realm for Armed with these insights, Customs operations Customs values of similar articles Customs and trade. management teams have the opportunity to The Customs value of a given article in a declaration Armed with these increase their relevance, shifting their role from cost is based on its invoice value plus or minus certain center to strategic player. Imagine what you could adjustable cost elements. The expected behavior is insights, Customs do if you had insights into potential duty savings, that the invoice value or adjustable cost elements operations guarantee thresholds, stock levels, declaration may differ slightly due to changes in materials status, and exactly where each of your shipments costs but will not fluctuate significantly. However, management were in transit, all at the touch of a button. incorrect costs may be entered into the source teams have the system due to human error, resulting in substantial opportunity to Using machine learning to ensure data differences in value. These may get lost in the quality multitude of transactions, posing potential financial increase their Of course, the value of these insights is directly risks, including inflated duty and penalties for relevance, shifting related to the quality of your data, and when you incorrect valuation. Machine learning can detect are gathering data from multiple sources, quality these anomalies by comparing the Customs value of their role from cost poses a major hurdle. You need to trust the parties each unique item identifier, or item ID, to the value center to strategic providing the data as well as check and validate of that ID in recent similar flows. player. the data before it is fed into the centralized “single source of truth” system. Data should be verified Detect differences in classification behavior to ensure it is accurate, relevant, complete, for items current, and consistent. This is accomplished most In master data, item IDs may have a classification efficiently with machine learning. By gathering data code for a classification type, e.g., classification type from previous behaviors, machine learning builds TARIC with classification code 1511909900. The statistical models based on that data and generates expected behavior is that different item IDs with suggestions that become more and more targeted very similar item descriptions would mostly have as more data is gathered. the same classification code for a given classification type. With tens of thousands of items, however, While some may think of machine learning as a new it is challenging for a classifier to detect small technology, it was actually adopted by prominent differences. Machine learning can help standardize industries back in the early 1990s. It is relied on by the classification codes used for similar products the medical sector to extrapolate accurate dosages and suggest better classification codes to reduce for medication, by post offices to translate and costs. process handwritten addresses, and by our friends Siri, Alexa, Cortana, and Google Assistant for Prepare for changes with simulations speech recognition. Health organizations, scientists, As new formalities take effect, knowing the and think tanks around the world turned to machine implications in advance helps businesses prepare learning to fight the battle against COVID-19, using for necessary adjustments. Machine learning allows it to support forecasting models, contact tracing, companies to simulate declarations and other and drug development. procedures by applying proposed parameters. In the case of Brexit, machine learning can apply future

1 Enterprise resource planning (ERP) refers to a type of software that organizations use to standardize, streamline and integrate business processes across finance, human resources, procurement and other departments. 2 A warehouse management system (WMS) is a software application that helps control and manage the day-to-day operations in a warehouse. 64 POINT OF VIEW FOCUS

changes to Customs flows, revealing areas that pose the risk of non- compliance and associated delays. Simulations are also helpful in preparing for free trade agreements, for example calculating and estimating origin savings if a preferential rate were to be claimed.

Centralized data plus automation Adopting a software solution that houses all of their Customs data and allows them to automate Customs processes opens up a variety of opportunities to companies. When it comes to making a choice, companies naturally want to right-size the solution and pricing for their current needs but it is important to think globally to allow room for expansion. This means selecting a multi-country solution that serves as a centralized repository for all Customs data, allowing stakeholders from around the world role-based access in their native language. Solutions that take a modular approach allow companies to start with the features and functionality they most need, for example automating declarations, and add other capabilities, for example special procedures and analytics, as their capacities mature.

Customs automation can have a significant financial impact, providing a relatively rapid return on investment even for companies FOCUS: with limited trade. For example, a small-to-medium sized business handling an estimated 5,000 declarations a year across three different countries for direct filing can realize an annual savings of € 91,500 compared to using a Customs broker. Plus, Customs Product operations managers have the added benefit of regaining control of their data, opening even more doors for efficiency and growth. See the white paper Customs Brokers or Software Solution for further examples of cost savings. Quality and

What the future holds Customs operations management teams are typically slow to adopt Safety new technology; however, more and more are abandoning paper processes in favor of digital, catapulting the value of automation into the spotlight. Automation and machine learning provide efficiencies that are unmatched by manual processes and will therefore play a key role in the future management of Customs and trade processes, All countries have regulations to allowing all stakeholders involved to grow and operate more ensure that non-food products available on the market do not efficiently. endanger consumers and workers. In this section of the magazine, we In addition, harnessing the value of data is quickly becoming asked market surveillance authorities essential to remain competitive. By adopting a Customs system and Customs administrations to share that centralizes, standardizes, and consolidates data, companies their experience regarding controlling and Customs operations management teams can regain control of the compliance of imported products their Customs operations as well as analyze data via dashboards with safety and quality requirements. and reports in order to improve Customs-related processes, To introduce the topic and give an promote efficiencies, and open the door for growth. All of these overview of the different offences technological advances allow valuable resources to be allocated to observed, we start this section with an more strategic initiatives, providing greater value to the business. article on Operation STOP. This global Data-driven Customs solutions are already being used by market enforcement operation targeted illicit trade in medical products, especially leaders. This is the future of Customs for all. those generally used to diagnose or treat COVID-19. More information https://www.customs4trade.com/ WCO news n° 94 February 2021 65 ©Colombia Customs

Photo: An officer from Colombia Customs laboratories is conducting a test. 66 Focus © Kyle Glenn on Unsplash

Operation STOP: Achievements and future prospects

By the WCO Secretariat

In April 2020, the WCO Secretariat drew up a list Illicit medicines in general were regarded as of medical products which are generally used to targeted products. diagnose or treat COVID-19, with their respective HS codes. The aim was to help governments to Checks were carried out on all means of transport get an overall idea of trade in and stocks of these ensuring the import, export and transhipment of suddenly much sought-after products and to allow goods, and on all entry points, i.e. land borders, them to monitor and speed up their movement, ports, airports and dry ports, Customs warehouses whether on import or export, or in transit. and other approved premises, free zones and centres run by postal operators and express parcel The Secretariat was aware that high demand for services. these products would lead to the appearance on the market of new producers, exporters and importers As for any WCO operation, a preparatory stage who were not familiar with the conformity preceded the operational stage to enhance Customs arrangements and standards, leading to an upswing officers’ knowledge of the targeted products and in trade in counterfeit and non-compliant goods. It their supply chains. A dedicated training module therefore quickly called for Customs enforcement entitled “Identifying and combating exploitation services to take part in the Operation STOP during the crisis” was drawn up by the Container initiative. Control Programme management team. This provided an overview of current products and the A total of 99 administrations responded to this risk management techniques to be applied. Some appeal. Some participating countries already had 20 webinars were organized to train participants. Port Control Units (PCUs) and Air Cargo Control Units (ACCUs) established under the Container The pharmaceutical companies involved were Control Programme (CCP), run jointly by the WCO Novartis, Servier, Pfizer and Sanofi, as well as and the United Nations Office on Drugs and Crime UL (Underwriters Laboratories), a company (UNODC). Units located in countries participating responsible for security certification schemes for in the operation therefore naturally took part. products. These firms shared their expertise on how to distinguish medicines, precursors and authentic Preparation stage and certified medical products with over 1,000 An indicative list of targeted products and their Customs staff. Particular stress was placed on HS codes was drawn up. These were, in particular, checking the packaging of goods during unloading test kits, reagents and diagnostic test instruments, or during checks on warehouses or storage facilities. protective clothing, thermometers, medical devices, One of the companies represented also provided and drugs and precursors used to treat the illness. the risk indicators developed for certain medicines such as hydroxychloroquine and azithromycin, WCO news n° 94 February 2021 67

global demand for which has risen strongly during • over 307 million units of medicine, mainly the pandemic. antibiotics, anti-inflammatories, painkillers, The crisis has led antidiabetics and antimalarials; medicines to the emergence At national level, targeted product HS codes more specifically used to prevent or treat were forwarded to the risk management system COVID-19 were also seized or detained, such of many so that alerts on the arrival of consignments for as hydroxychloroquine, quinine sulphate, opportunistic documentary or physical checks were sent to azithromycin, dexamethasone and “Lianhua Customs and health agency personnel. In line with Qingwen Jiaonang”, a medicine patented by the intermediaries information shared via CENcomm, the analysts of National Health Commission of China that has who have no participating administrations were able to develop received marketing authorization in over 10 experience in the new risk indicators on the basis of the information countries and Customs unions; provided. The investigation agencies, meanwhile, medical supplies provided their colleagues on the frontline with • close to 50 million items of personal protective sector and little administrative, legal and operational support. equipment, including over 40 million masks of all knowledge of the kinds, nearly 7.5 million pairs of gloves, 94,909 Cooperation thermometers and 58,517 test kits; products they Given that product quality and conformity control resell. is the responsibility of organizations other than • almost 3,000,000 litres of sanitizer gel. Customs, particularly health agencies, it was essential to establish close cooperation between Many targeted products did not meet health the latter and national Customs administrations. authority regulations, a considerable number Participating administrations upstream of the being detained because they lacked marketing operation were therefore asked to ensure authorization, a declaration of conformity or a that mechanisms for exchanging the data and licence from the competent health authorities. information required for effective cooperation were in place. Many batches of medicines were also worded in a language foreign to the country of importation, Operational stage which is not authorized by most public health The operational stage lasted approximately two authorities. Other products did not bear the months. Thanks to the group created on the WCO required information. The Customs service of the CENcomm secure communication platform, , for example, detained 600 infrared participants were able to exchange real-time thermometers at Prague Airport which did not have information on seizures and detentions. a batch number or production date.

As usual, an Operational Coordination Unit (OCU) In such cases, according to the national legislation, monitored the work of the teams on the frontline goods could be returned to the dispatcher. and drew up fortnightly information bulletins to Exchange of information is therefore extremely provide participants with an overview of their important to ensure that goods rejected in one daily results. In cases arising out of suspected country is not dispatched to another country that infringements of intellectual property rights (IPRs), shares the same health standards. the OCU ensured that the Customs administration and the rights owner were in contact so that the Attempted smuggling and false declarations of procedure ran smoothly. goods or quantities were also recorded. Importers sought to gain from tax and duty exemptions Results on certain products and from the fact that their A total of 51 administrations carried out 1,683 Customs clearance was expedited. Other false seizures or detentions, with 12 administrations declarations were linked to restrictions imposed reporting the broad majority: , the United on the import and export of certain products. Kingdom, Peru, , China, Togo, the United Qatar Customs, for example, discovered that an States, , , Nigeria, Namibia and importer had knowingly declared an erroneous HS . code (3401.30 - Organic surface-active products and preparations for washing the skin) to avoid the The products seized or detained included the restrictions on imports of hand sanitizers based on following: a 70% solution of ethyl alcohol. 68 Focus

In certain countries, only authorized authorities can import goods such as test kits, a limitation avoided by some importers by the use of an erroneous HS code. At Pristina Airport, the Kosovo Customs, for Customs Benin © example, intercepted 500 test kits declared merely as “laboratory reagents”. Neither the commercial invoice nor the Customs declaration referred to their real commercial description as “SARS-COV-2 IgG/IgM kit”. The Kosovo Health Ministry is the only institution authorized to import COVID-19- related reagents, and therefore test kits.

Other interesting cases should also be noted:

• 75 COVID-19 test kits found in express mail by Customs in Argentina were declared as computer peripherals. official approval, were seized during export by Cameroon Customs. • Cocaine concealed between the fabric layers of face masks was discovered by Her Majesty’s • Six types of medicines, some of which had no Revenue and Customs (HMRC) in the United indication as to composition or dosage, were Kingdom in a package handled by a postal seized in the logistics centre of an express mail operator. company in China, concealed in a package from Australia that should have contained baby • 19,800 tablets of medicines used to treat COVID- formula. 19 were seized by Portuguese Customs in the port of Leixões in a shipment that was declared • Large undeclared quantities (214,613 units) of as LED lamps. tramadol, a synthetic opioid, and its substitute socomol were found by several African Customs • Dietary supplements declared as masks were services. seized at the airport by Namibian Customs. Offences relating to IPR infringements • 1,574 thermometers concealed in a car were A total of 107 cases of infringement of intellectual seized by Customs in Peru during a check at a property rights were reported for a total of 196,237 border crossing point. items. Certain products fell into the category of COVID-19-related products targeted during the • Various medicines were discovered at operation. Hungary, Japan, , the United Heathrow Airport in the , Kingdom and intercepted protective masks including controlled drugs (28 kg of amoxicillin, bearing registered trademark names or acronyms. 7 kg of paracetamol, 3 kg of omeprazole, 2 kg In the , where the UL conformity of hydrocortisone and 2 kg of gentamicin) that label is a registered trademark, cases of IPR-related were packed in bottles of Gaviscon and other infringements were also reported in relation to medical solutions, the export of which is not COVID-19 test kits. Customs reported subject to prior authorization. The dispatcher seizures of counterfeit medicines, while Saudi was a London company, while the addressee was Arabia Customs reported seizures of protective a pharmaceutical company in Somalia. The goods equipment bearing a registered trademark acronym were concealed in a batch of 11 items weighing or name. over 150 kg and declared as containing shampoo, hair vitamins and Regaxidil (an anti-alopecia, Need for information which is not on the list of medicines). Since Asia-Pacific region countries are the main producers of medicines, reagents and medical • Bottles of COVID-CURE medicine, developed supplies used in combating COVID-19, they by Archbishop Samuel Kleda but which lack represented the broad majority of countries of departure of goods seized or detained, mainly WCO news n° 94 February 2021 69

because of lack of authorization to enter the market qualified to certify medical products, while others or the failure of products to comply with the rules have produced false certificates that are passed off in force in destination countries. as originating from a certified company.

Because import formalities and national Conclusion standards for medicines and medical supplies The participants agree that the operation allowed vary considerably between countries, importers them to improve their targeting ability by facilitating who lack experience in the sector and who are the exchange of information between countries. It under time pressure have sometimes purchased also became clear, however, that certain countries products without knowing the supplier, without had to improve their ability to draw up reports, since verifying their conformity and without familiarizing the quality of information reported via CENcomm is themselves with the procedures to be followed. sometimes not good enough to be used by analysts Certain importers have also been misled and have and investigators. The operation also highlighted never received the goods purchased. the importance of rapid and effective cooperation between border agencies, particularly in times The lack of visibility of the supply chain is also of crisis. The WCO Secretariat will continue to problematic. The crisis has led to the emergence follow closely the seizures reported by Customs of many opportunistic intermediaries who have administrations and intends to develop a second no experience in the medical supplies sector and operation to stimulate the sharing of information. little knowledge of the products they resell. Some have even produced invalid conformity certificates, More information i.e. certificates issued by certification bodies not [email protected] 70 Focus © Customs

Controlling product safety and security in times of COVID-19

by Anna Abbinante, Anti-Fraud and Customs Controls Directorate, Italian Customs and Monopolies Agency

Market surveillance system compliance with quality and safety requirements, In Italy, responsibilities for market surveillance are is the Italian Customs and Monopolies Agency met by the Ministry of Economic Development (hereinafter referred to as Italian Customs). (hereinafter MISE), as well as by other sector- The latter can suspend the release of products specific agencies, such as the Ministry of Health, if it is suspected that these are unsafe and/or do which is in charge of assessing the conformity of not comply with the legislation, or do not fulfil medical devices, and the Italian Medicines Agency documentation and marking requirements. (AIFA) and Institute for Occupational Safety (INAIL), which are in charge of assessing the conformity of Where the release for free circulation is suspended, Personal Protective Equipment (PPE). Italian Customs must immediately notify the competent market surveillance agency, which is Market surveillance agencies must ensure that given three working days to perform a preliminary circulating products are regularly subject to investigation and to decide if the products can be controls, either through a review of product released or must be detained for further checks documentation and/or (where appropriate) through on their safety and conformity. The market physical checks and laboratory testing. However, surveillance agency’s final decision is then notified the authority responsible for controls on products to Customs, which releases, seizes or resends the entering the European Union, in terms of their goods accordingly. WCO news n° 94 February 2021 71

The Standard Operational Procedures (SOP) First, risk analysis of certain types of goods was Manual was updated in 2019 to ensure that all strengthened. The Customs Attaché at the Italian The Customs Customs offices apply the same procedures, and to Embassy in China was required to provide data and controls triggered guarantee uniform and high-quality border controls. information on companies authorized to produce The Manual provides Customs officers with detailed products related to COVID-19, as well as on further checks and instructions on how to carry out controls, including companies involved in fraudulent practices. To do investigations. on product safety and conformity requirements. so, the Attaché set up a direct line of communication with Chinese Customs and with the Chinese Raids were carried This operational set-up has forged strong Chamber of Commerce in Italy. Italian Customs also out at business cooperation between Italian Customs and the developed risk profiles on the basis of intelligence premises and market surveillance agencies, and in particular collected nationally, as well as from other countries, with MISE. A Customs officer is seconded at MISE the European Anti-Fraud Office (OLAF) and the warehouses as a liaison officer. Given the diversity of products WCO. likely to stock covered by safety and conformity requirements, substandard, assessing the compliance of a product can be Secondly, as a temporary measure, the list of a challenge. Specialized training sessions are mandatory documents accompanying Customs counterfeit and organized for Customs officers by various specialist declarations was supplemented for some products, other illegal agencies. MISE facilitates the work of Customs and additional certificates sometimes required, by sending appropriate information on high-risk with the aim of guaranteeing the high standard of products. product categories, high-risk economic operators or products intended to be used in public health and manufacturers, and any other relevant information by citizens. For example, a declaration related to that will facilitate the identification of suspected the final destination of the goods was required. This unsafe or non-compliant products at the border. enables Italian Customs to speed up controls on MISE staff also support inspection officers during importations intended for critical private and public physical controls, and provide advice and quick services, such as hospitals, retirement homes, civil responses on technical issues. This cooperation protection authorities and military bodies. has been formalized by an agreement between the two bodies. The other market surveillance Thirdly, specialized training sessions were provided agencies also work with Customs on the basis of for Customs officers in charge of clearing and similar agreements. In addition, associations of right inspecting the goods. Various services within Italian holders provide technical support to public bodies Customs were asked to provide exceptional support when needed. to field officers in order to speed up the control procedures. Teams within the market surveillance COVID-19 authorities (Ministry of Economic Development, When the COVID-19 pandemic hit Italy in early Ministry of Health and Institute for Occupational 2020, Italian Customs was required to strengthen Safety) seconded Customs officers to evaluate its controls on goods identified as critical in the conformity with EU and national standards as per fight against the virus, with the aim of stopping the normal procedure. The Customs Chemical the import of illegal, unauthorized and dangerous Laboratory also worked hard to increase its support products that could jeopardize public health. A new capacity, especially in order to assess the quality agreement was signed with MISE to boost Customs of facemasks, whose import volume increased controls on Personal Protective Equipment and exponentially. So too did right holders and private medical devices, as well as facemasks. To ensure bodies, which even helped assess the information enforcement efficiency, a series of measures were provided on documents and the goods themselves. adopted. 72 Focus

Fourthly, the number of checks on targeted goods Table 1 - Products seized from 1 January 2020 to was increased and, on a regular basis, specific 23 October 2020 instructions were provided to Customs officers Goods/products Seized units to boost the efficiency and effectiveness of Masks 12,844,213 document-based controls and physical inspections. Gloves 3,520,680 For instance, further instructions were provided regarding existing procedures for sending samples Sanitizing gels 100 to the agency in charge of providing technical Medical gowns 241,800 opinions/advice, for requesting technical support Protective glasses 145,600 from chemical laboratories, for the handling of Protective suits 1,152 goods, for the safe collection of samples, and for Face shields 9,000 reporting information and data for risk analysis Lung ventilation 1,840 purposes. devices Infrared thermometers 4,727 Fifthly, controls were also strengthened on the validity of the CE mark, and on declarations of The Customs controls triggered further checks and conformity. Such controls require the consultation investigations. Raids were carried out at business of “notified bodies” designated to perform specific premises and warehouses likely to stock sub- conformity assessment procedures and to grant CE standard, counterfeit and other illegal products. marking certificates1. The list of designated notified Several traders and companies were found to be bodies is available in the Commission’s NANDO unreliable operators, and their legal representatives information system. were reported to the competent judicial authorities as alleged perpetrators of crimes against public Sixthly, laboratory staff know-how, as well as health. Ongoing investigations are focusing on testing facilities, were made available to other organized crime involving the trade in illegal and European Union Member States needing to assess counterfeit products and medicines. the quality of facemasks but with little experience in this area. The existing mechanism for exchange Special attention was given to manufacturers of information between EU Member States is used and distributors who used false and forged EC to share the results of analysis (unless access to the certificates of conformity and fake compliance information is restricted by the judicial authority, in certificates, and who intentionally abused business which case a special authorization is needed). and public trust. Some companies have seen the increased demand for some products as an On another note, considering the emergency opportunity to make easy money, and it is important context, Customs also had to ensure the observance to ensure that they receive appropriate penalties. of temporary export control measures adopted by the Italian Government in order to ensure that all Way forward the necessary goods and products aimed at fighting The experience gained during the crisis will the spread of COVID-19 were available on the undoubtedly enable Italian Customs, as well as the national market. market surveillance authorities, to enhance their interventions against illegal products and to better Results protect citizens. We are strongly convinced that Table 1 lists the number of products seized from controls can be improved only through increased January to October 2020. Most of them were exchange of information and knowledge sharing. sub-standard and dangerous for users. In general, The development of a tool enabling the secure and forged EC certificates of conformity accompanied easy flow of information between all the parties the import declarations. involved in the certification and importation of products which are required to conform with health, safety, and environmental protection standards before they can be sold within the European Economic Area would enable enforcement authorities to greatly improve the way they work.

1 Once this assessment is done and certification received, manufacturers can add the CE mark to their products and lawfully place them on the EU market. Not all products are required to have CE marking. WCO news n° 94 February 2021 73

Market surveillance authorities and Customs Vaccines are another product which is being administrations should consider leveraging the carefully examined with the help of manufacturers benefits offered by blockchain technology when and distributors. The main risk is the sale of fake developing such a tool, especially to ensure the vaccines on the internet. The most efficient way authenticity and correctness of certificates and to combat such a phenomenon is to raise public conformity declarations. awareness on the vaccine distribution policy and on the danger of these products. Italian Customs has Although no COVID-19 test kits were ever seized, worked in the past on communication campaigns Italian Customs is looking into the supply chain of highlighting the danger of illegal toys and medicines. such products and is collecting intelligence from Such campaigns involved public figures, such as other countries and from the industry to strengthen singers and actors. A new campaign on fake vaccines risk indicators. It is worth nothing that there are no will soon be launched, and Italian Customs is also agreed standards regarding the composition of working with the Italian Medicines Agency (AIFA) such kits and that the authorities can therefore only and health professionals to spread the message. seize kits if they contain dangerous or prohibited products, or on the basis of labelling and packaging More information infringements. [email protected]

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Food and feed safety: identifying missing links to unleash the full benefits of cooperation

By Esther Enning, Senior Inspector, Food and Consumer Product Safety Authority (NVWA)

In the Netherlands, the Customs Administration of rules and legal requirements covering their supervises the flow of goods that enter or leave production, processing, storage, transport and sale. the European Union (EU) via the country’s external borders. “Supervision” is to be understood in a broad Among these market surveillance agencies is the sense, and includes all acts aimed at establishing Netherlands Food and Consumer Product Safety compliance with the wide range of legislation that Authority (NVWA), which monitors the safety of governs international trade in goods with the EU. food, feed and consumer products and enforces regulations related to animal welfare and nature. When it comes to ensuring the compliance of In the area of food and feed safety, supervision imported products with EU safety requirements – extends throughout the food and feed chain, from an activity known as “market surveillance” – Dutch farm to fork, and includes imports of agricultural Customs cooperates with several specialized raw commodities such as soy. Controlling imported agencies. For these market surveillance agencies, goods is a particular challenge for the NVWA, the supervision of imported goods is only one considering the volumes of non-EU goods that among many tasks. They must also ensure that enter the Netherlands daily, mainly via the Port of the goods available on the market, whether or not Rotterdam and Amsterdam Airport (Schiphol). they are imported, comply with the complex system WCO news n° 94 February 2021 75

Cooperation between the NVWA and Dutch the documentation for all consignments, and Customs is facilitated by covenants signed at a prescribed percentage of them will undergo Although controls ministerial level. Although enforcing regulations a physical inspection. If the Dutch Customs are organized to at the border is not the NVWA’s core business, we officers reviewing the documentation suspect would like, in this article, to open the discussion on non-compliance in the case of a consignment of be as seamless how to improve this cooperation, especially in the products subject to Type 1 controls, they will hand as possible for area of joint risk analysis, taking the example of food the case over to NVWA officers who are stationed and feed safety. next door, at the same location, in order for them to trade, the joint handle the consignment. risk assessment Mandatory versus risk-based controls process does The EU food and feed safety regulations distinguish Implementing Type 2 controls also requires close between two types of controls at the EU’s external cooperation, as the NVWA lacks information have scope for borders: about the consignments that enter the EU, but improvement. does have information about the risks posed by Even though • mandatory controls on goods from certain third certain products, countries of origin, exporters countries, due to a known or emerging risk or or importers, as well as information on seasonal they share a because there is evidence that serious non- patterns. Customs has information about the mutual ambition compliance with the relevant rules might be supply chain, and can identify anomalies in trade taking place. This type of control is referred to in flows. Establishing the risk management strategy to address risks this article as Type 1 controls. Products subject to is therefore a joint effort. By combining information, efficiently and Type 1 controls are listed in various regulations. both agencies can monitor and manage risks. Based effectively, The list of products and their designated origins is on the joint risk analysis, Customs knows which updated frequently.1 Examples of identified risks consignments to draw to the NVWA’s attention if Customs and the are pesticide residues in goji berries, salmonella they enter the EU. The NVWA is duly informed, and NVWA do not in black pepper, aflatoxins in peanuts, palm decides on the optimal moment for supervision in oil containing dye, or sulphites in dried order to have the minimum impact on trade flows – share the same apricots. this may be at the time of entry into the EU, during nomenclature transport or temporary storage awaiting the of goods or the • risk analysis-based controls to ascertain that definitive Customs procedure, during a Customs known risks are dealt with, and to shed light on procedure, or after release for free circulation in the same system new risks. This type of control is performed on internal EU market. of identifying 2 the basis of the National Control Plan and is companies. referred to in this article as Type 2 controls. A first step towards seamless supervision Cooperation mechanisms Until the early 2000s, the decision to inspect In the Netherlands all consignments must be consignments subject to Type 2 controls occurred presented to Customs, which carries out the after a Customs declaration for release for free risk assessment. Close cooperation has been circulation was lodged. Customs would suspend established between the NVWA and Customs the release for free circulation when it had reason in order to conduct Type 1 and Type 2 controls to believe that the consignment might present a risk, efficiently, in line with EU regulations which require awaiting instructions from the NVWA. This caused the implementation of “a common integrated unforeseeable delays and frustration to importers. system of official controls”.3 The NVWA started looking for a better way to Let’s take Type 1 “integrated (non-)veterinary proceed, and decided to change the timing of the control” as an example. The EU regulations decision to perform an inspection, so that it would stipulate that consignments of products subject occur before the goods arrived in the EU. Traders to Type 1 controls must be notified to the would be notified before the goods arrived. This competent authority prior to their arrival at the approach would enable them to anticipate a external EU border. The authority has to check foreseeable delay.

1 For example, Regulation (EU) No. 2019/1793, Regulation (EU) No. 284/2011. 2 Based on regulation (EU) No. 2017/625, Article 44(1), first sentence https://eur-lex.europa.eu/legal-content/EN/TXT/ HTML/?uri=CELEX:32017R0625&from=EN#d1e4939-1-1. 3 idem, (56). 76 Focus

Improving joint risk assessment Sometimes, reviewing the documentation Although controls are organized to be as seamless submitted with the Customs declaration will as possible for trade, the joint risk assessment be enough to clarify the matter, and determine process does have scope for improvement. Even whether an inspection should take place, but not though they share a mutual ambition to address always. This gives rise to uncertainties and divergent risks efficiently and effectively, Customs and the interpretations as to the nature of the goods being NVWA do not share the same nomenclature of imported, and sometimes leads to discussions about goods or the same system of identifying companies. which authority is competent.

Different nomenclatures Companies’ codes When classifying goods, the two authorities speak Customs and market surveillance authorities a different language. Customs uses the Combined also use different codes to identify companies. Nomenclature (CN), which is based on the WCO Businesses and people wishing to trade must Harmonized System and covers all goods. Other use the Economic Operators Registration and agencies use different coding systems targeting Identification (EORI) number as their identification a specific sector, or targeting goods with certain number in all Customs procedures when exchanging attributes. Most of the time, these classification information with Customs administrations. Market systems have different levels of granularity. surveillance authorities, as they focus mainly on the internal market, rely on their national identification Let’s take the example of feed additives. The EU system, which does not necessarily match the EORI lists in a publicly available register all the feed numbers. To overcome this difference for the additives that can be imported. The products vary purpose of joint risk analysis, other data elements from basic commodities (e.g. ferric oxide) to very (such as addresses) must be reconciled. However complex preparations (e.g. “preparation 6-phytase this does not always work: sometimes the chosen produced by Komagataella pastoris”). When data element is not available, e.g. because it is not comparing the 1,557 entries listed in the register mandatory to report it, and sometimes typing in July 2019, around half of the feed additives (48%) errors impede the matching of data. match a single CN code. The rest combine two or three products in the CN codes – for instance, one Enhancing cooperation with Customs is additive can be made of an oil, an essence and an worthwhile extract. In the most extreme example, one code Although practical obstacles exist, it goes without (2102.1090.10) represents 122 additives (they saying that for market surveillance authorities, close are all different enzymes). cooperation with Customs is worthwhile assuming that the legal preconditions for exchanging data are The same issue exists with wildlife commodities. A met. considerable proportion of these are classified into broad categories in the CN, instead of being placed Undertaking a joint risk analysis with Customs can in smaller, well-defined taxonomic units. This lack of provide insights into domains and risks that a market trade code granularity limits the ability to monitor surveillance agency would not gain by itself, based wildlife trade.4 solely on the analysis of its own data. For instance, Customs data can reveal that importers unknown to Also, the sphere of use of the goods is not always the surveillance agency are trading in risky products detailed in the goods description in the Customs which fall under its supervision. Equally, thanks to nomenclature. Sphere of use can sometimes be a joint risk analysis unnecessary controls can be classification criterion in the CN, but not always. avoided by showing that an importer does not trade Although such information is often not important in risky products. This results in an efficient use of to Customs, it can be critical to national authorities. resources and less hassle for traders. For example, in the Netherlands the intended use of facemasks – medical, professional or domestic – Inspections can therefore be better informed and determines which of the three national authorities tailored. The inspector knows what to look for, is in charge of controlling the product’s compliance. and what not to look for! Compliance can then be established in the least intrusive manner possible.

4 Chan, H., Fischer, G., Yang, F., & Zhang, H. (2015). Improve Customs Systems to monitor Global Wildlife Trade - Widely used trade codes lack taxonomic granularity. Science, Vol. 348 Issue 6232, 291-292: https://www.researchgate.net/ publication/275037458_Improve_customs_systems_to_monitor_global_wildlife_trade. WCO news n° 94 February 2021 77

Traders, who are also tax-payers, can see that public the environment, is one of the key goals of the resources are well-managed and that controls are Netherlands’ strategic Customs policy plan.7 well-prepared and justified. In practice, policies supporting the concept of Joint risk management also enables authorities to Coordinated Border Management have given detect fraud cases and new offenders. Research rise to initiatives such as the Dutch Single in the field of food safety has proven that simply Window for Trade and Transport. Nevertheless, performing a larger number of random inspections besides enabling the use of a legal framework is not effective in detecting fraud.5 By pooling data and technological tools, there is more to be done and expertise, agencies can identify inconsistencies to improve joint risk management. In particular, a and anomalies that may be indicative of fraudulent uniform system for the identification of goods and actions6 (Scherpenisse, Schram, & van Twist, 2017) companies should be developed. This would require which would otherwise remain unnoticed. efforts from both sides, and would necessitate the involvement of the WCO and relevant Conclusion EU institutions. This represents an ambitious The duty of cooperation is formally enshrined in the undertaking, but the expected benefits are huge EU regulations on the border controls performed in terms of enhanced supervision capacities and to ensure that imported products meet regulatory trade facilitation. Now that the work related to the requirements. For many years Customs has been implementation of new rules and procedures with given, and has played, a leading role in coordinating the United Kingdom has been completed, it may be the actions of regulatory agencies at the border. time to start looking into this matter. Improving cooperation between the agencies responsible for matters of safety and security, More information human and animal health, and the economy and [email protected]

About the author Esther Enning is a Senior Inspector at the Netherlands Food and Consumer Product Safety Authority (NVWA). For almost 20 years she has been project leader for many projects related to product and non-veterinary food and feed safety, which has involved working in close cooperation with the Customs Administration of the Netherlands. She has a Master’s degree in Customs & Supply Chain Compliance, and a Bachelor’s degree in Logistics & Economics, as well as in Environmental Science. In 2020, she obtained a Master’s degree in Customs and Supply Chain Compliance from Rotterdam School of Management. In her thesis entitled “Food and Feed Safety Supervision in the Netherlands for Internationally Traded Goods: Do Customs Data Matter?”, she explored the use of external data for supervision. A restricted version of the thesis report can be shared on request.

5 Gussow, K. (2020). Finding food fraud: Explaining the detection of food fraud in the Netherlands. Amsterdam: Vrije Universiteit Amsterdam. 6 Scherpenisse, J., Schram, J., and van Twist, M. (2017). Tijd, toezicht en techniek: Temporele uitdagingen van digitalisering voor de NVWA. Den Haag: NSOB. 7 Heijmann, Ensing, van’t Veld, and Neggers (2015). Coordinated border management in the Netherlands. WCO News 76. 78 F ocus between the NCS and NAFDAC has in set motion NAFDAC and NCS the between establishment workingThe of agood relationship products. regulated latter’sthe oversight, control surveillance and of however, by NAFDAC; done not replace it does work the supplements NCS other The things. many among of substandard goods, import the which is(NCS), also mandatedService to combat line of defenceAnother is Nigeria the Customs products. pharmaceutical and foods of processed both by manufacturers operated and well plants owned as at production land –as borders and seaports gateways –airports, at international products inspect officials NAFDAC Administration Drug and Control and (NAFDAC). Food for quality standards is National the Agency reachingor Nigeria’s prescribed shores meet water leaving packaged and detergents chemicals, devices, medical cosmetics, drugs, that foods, In Nigeria, responsible authority the ensuring for NAFDAC at Director Deputy Basiru, Aderemi Afolabi and Customs, of Comptroller Deputy Babandede, Mohammed By mission one agencies, two Nigeria: on time. well as perishable reach their goods destinations essential to COVID-19 combat the pandemic as controls is crucial to ensure that deemed goods quality product Nigeria’s to conduct of entry ports are working in alongside counterparts their NCS staff COVID-19 that NAFDAC fact The pandemic. especially in welcomed times of crisis, such as the environment. This the collaborationprotect is agenciesboth to safeguard human health and enabling processes control efficient and effective to application the risk develop engine, importer are requiredThey to updated input risk indicators Integrated Information Customs System (NICIS). data via Nigeria the - the Single platform Window regulationstrade export and have to access import cross-border of implementation ininvolved the agencies regulatory All approval. and certification that require NAFDAC products for processes clearance has effective developed NCS The Progress made

© Tin Can products to poor information communications to and poor products delivery. range from to limited test These capacity service hampered have that obstacles nevertheless are there benefits, tangible yielded has NAFDAC and NCS the between partnership the Although responses. emergency toand facilitate effective actions intoof cooperation effective tangible and to translate NAFDAC and concept NCS the of the initiativesAll these capacity the have strengthened Key obstacles • • • • inspections: expedite it has taken several for NAFDAC, measuresAs to examination goods. of the any other regulatory agencies participate in the that and NADFAC request it can inspection, an licensed company. to decides conduct NCS If the by aNAFDAC- imported such as vaccines, goods, prior to arrival the of perishable time-sensitive or is able to complete NCS the release formalities whileissue via platform, the permits electronic manage licencesmonitor transactions, trade and appropriate.when In this way, is able NAFDAC to share intelligenceriskand profiles other each with information. information. manpower,technical expertise, resources and collaborative on focused sharing of skill sets, quarterly, training bi-annual annual or joint staff established have agencies both addition, In access to laboratories. to access and devices technology with officers equipping forgeries; detect licensing, and in documents for ordersystems to andvalidation verification developing automated intoof goods Nigeria; completedto by all importation for be importers M”, document “Form on e-licences a mandatory theirReference on NAFDAC stated Code Approval the input to importers requiring Singlethe Window; processing issuance the of licences electronic via [email protected] [email protected] More information 7. 6. 5. 4. 3. 2. 1. listed below: significant obstacles are most The connectivity. (ICT)technology

difficult for officers to monitor. to for officers difficult which are borders, Porosity country’s of the outstanding achievements. for are being not commended as officers of motivation enforcement among Lack staff take days, to along sometimes time, exit ports. remain Lorries meaning congested. that ports builds roads, up the on traffic road network: especially dilapidated a infrastructure, Poor shipment. of origin of means country concealment, and criminals, such as variations of in mode employed by changes in tactics Constant received. is rather high given volume the of requests however, time required the to products test central in of Nigeria’s each laboratory states; 36 analysis: to enable product thereentry is one of onsite of Lack mobile or laboratories at ports process. time-consuming and is acumbersome manually, is out carried cargo inspection which and there are scanners currently functional no equipment: inspection non-intrusive of Lack crime groups. organized to belong many of whom declarants, ers and disgruntled import being by threatened is constantly safety officers’ life: toRisk - February n°94 2021 news WCO 79 © Nigeria Customs 80 EVENTS

Technology in times of pandemic

By Milena Budimirovic and Vyara Filipova, WCO Secretariat

WCO events went digital in 2020, including the accelerated since the beginning of the crisis, and WCO annual conference dedicated to technology, that a number of lessons could be drawn from the recently rebranded as the WCO TECH-CON. The previous few months. They echoed the conclusion theme of the 2020 edition1 was dictated by the of consulting firm McKinsey & Company, along circumstances, and the 50 speakers were asked with many others, who noted that “responses to to share their experience of how technology had COVID-19 have speeded up the adoption of digital helped them manage the new constraints and technology by several years and many of these challenges created by the COVID-19 pandemic. changes could be here for the long haul”2. Below are just some of the ideas gleaned from the event which attracted 1300 participants from 142 The pandemic has also provided an opportunity countries. to internalize the idea of digitization, which was always an option, but not necessarily a priority, Accelerating the use of technology for governments and their agencies. Customs Representing Customs, the private sector, administrations have used the opportunity international organizations and academia, all to advance digitalization initiatives that were speakers agreed that the use of technology had already underway, as well as to instigate new

1 The conference was held from 11 to 13 November 2020 2 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the- technology-tipping-point-and-transformed-business-forever WCO news n° 94 February 2021 81

validating and re-validating their status in a remote manner, and supporting implementation of Mutual Recognition Agreements/Arrangements (MRAs), thus facilitating cross-border trade.

Advance electronic information is key © Korea Customs Service to efficient clearance Systems enabling the reception and sharing of pre- arrival information are considered to be the main tools enabling Customs and other agencies to speed up clearance and provide priority passage for critical consignments.

The event highlighted the fact that small and medium-sized enterprises (SMEs) often do not provide Customs with advance electronic information. In some countries, it may be necessary to help SMEs identify ways of submitting information in advance and thus benefitting from faster clearance.

Technology is an interagency cooperation enabler The event recognized the role of single window solutions in facilitating interagency cooperation during the clearance process. It also pointed to the benefits of centralizing and sharing inspection data on a single platform.

Accepting electronic documents has technology projects to eliminate the use of hard been a game changer and should copies and cash, for example. It has proven to be continue a very transformative period. In some instances, Many administrations decided to allow the governments have made major changes and the submission of electronic certificates and permits private sector has struggled to keep up. during the pandemic, rather than the paper form. Some participants pointed out that scanned copies Keeping officers and clients safe could be challenging to process, as optical character The pandemic has called for solutions to ensure that recognition (OCR) or Artificial Intelligence officers not working remotely, and the people they technology was needed to extract digital data. come in contact with, such as drivers or declarants, Private sector representatives expressed the do not spread the virus. These solutions include need for Customs to continue maintaining such the use of infrared fever measuring equipment, practices even after the crisis, and to work towards protective shields, and safe passage booths. Some the digitization of all trade-related documents. The administrations have devised a regional driver need to build a proper legal framework and develop tracking system, allowing for COVID-19 test results international standards was also mentioned. performed on lorry drivers to be sent in advance of the arrival of the driver in the neighbouring Managing cross-border e-commerce country. Others have turned to remote monitoring transactions tools such as drones, cameras and other devices to The biggest challenges were encountered with data enable their officers to reduce physical movements availability to Customs and data quality, especially and contact. with the tremendous growth of e-commerce transactions where there are new and not yet It was also felt that there was an opportunity to clearly identified trading patterns requiring higher leverage technology for the benefit of Authorized sophistication and accuracy of data analytics Economic Operators (AEOs), including for techniques for improved risk management. 82 Events

Importance of data standards stressed Shift to teleworking once again Most administrations adapted quickly to the new Commercial operators should not be asked to circumstances, with the staff starting to work from use specific data formats and requirements every home. Members had to increase their bandwidth time they interacted with a public body, as this and reached out to providers for support in generates additional compliance costs. Participants obtaining collaborative on-line tools. Clear were reminded that, to respond to this issue, the benefits such as reduced commuting time, in many WCO Data Model (DM) had been developed as cases more efficiency, increased possibilities for a compilation of clearly structured, harmonized, participation in on-line trainings and events were standardized and reusable sets of data definitions observed. However, there was agreement that and electronic messages. It was intended to meet inability of inspection staff to telework, potential the operational and legal requirements of cross- security breaches, poor internet connection and border regulatory agencies, including Customs, lack of opportunities for informal discussions and which were responsible for border management. networking, was a clear disadvantage, especially for Devised jointly by Customs and the private sector, officers joining the administrations for the first time. the WCO Data Model is critical for successful data exchange at both the national, bilateral and Need to keep an open mind multilateral levels. Flexibility was a word that was heard a lot during the three days of the conference: when discussing Blockchain promising but pace of the platforms developed to collect and analyse adoption slow data, when reviewing processes and workflows in One of the prevailing topics of the WCO TECH- the event of incidents, and when looking at possible CON was the deployment of blockchain technology. measures to respond to a constraint, such as the It was widely agreed that this technology is very need to limit physical contacts while enabling safe useful and could help give life to the concept of a movements of goods and the people moving them. data pipeline, which would contribute to improved risk analyses and better controls, and ultimately The speakers supported a strong role for the greater trade facilitation. However, as one speaker WCO in continuing to be a platform for Customs noted, while big carriers are investing in and backing multilateral cooperation and sharing of experiences blockchain solutions for electronic documents of on digitization. There was also an expectation title and electronic trade finance, there is a need that Customs should take the lead in promoting for public blockchain platforms to onboard the digitization not only with public entities, but also small and medium stakeholders. Despite the with private sector stakeholders participating in opportunities it promised, only a limited number of international trade. Customs administrations have embarked on pilots, and even fewer on full deployment of platforms Technology makes it possible to recalibrate based on the technology. Harmonized regulatory procedures, training, and deployment of staff, frameworks and neutral blockchains were seen as among other things. With this in mind, the WCO conditions for the uptake of the technology. Secretariat will continue to stimulate the exchange of information on the various technologies used to Connecting systems should be a manage the flows of goods, people and conveyances priority across borders, and on progress made towards a The digital format of the information collected from digital supply chain. Most articles in this edition of various IT systems can differ. Regulatory bodies the WCO Magazine relate to the implementation of such as Customs authorities could theoretically technology, another testimony of the importance of have access to data-rich ecosystems managed by technology for the Customs and trade community. public and private entities, and be able to record the journey of a shipment along the supply chain. More information However, this goldmine of information is not as [email protected] valuable if there is no standardized and up-to-date means for Customs to collect and interpret this data. Total Trade Platform

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